**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549


______________




**FORM
      10-KSB**




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




For
      the
      fiscal year ended December 31, 2007




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




For
      the
      transition period from  to




Commission
      File No.:  333-130768




**ODYNE
      CORPORATION**


(Name
      of
      small business issuer in its charter)




**Delaware**
            
            **13-4050047**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer Identification No.)**89
                Cabot Court, Suite L**
              **Hauppauge,
                New York**
            
            **11788**(Address
                of principal executive offices)
            
            (Zip
                Code)




**(631)
      750-1010**


(Issuer’s
      telephone number, including area code)




Securities
      registered under Section 12(b) of the Exchange Act:




Title
                of Each Class
            
            Name
                of Each Exchange
              on
                Which RegisteredNone
            
            None





Securities
      registered under Section 12(g) of the Exchange Act: **** None




Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o




Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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 past 90 days.


x Yes o No




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. x




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




The
      issuer’s revenues for the fiscal year ended December 31, 2007 were
      $610,945.




The
      aggregate market value of the voting and non-voting common stock held by
      non-affiliates of the issuer was approximately $6,685,878 based on the closing
      price of $.50 per share on March 26, 2008, as quoted by the OTC Bulletin
      Board.




As
      of
      March 26, 2008, 22,101,448 shares of the issuer’s common stock were
      outstanding.




Transitional
      Small Business Disclosure Format (check one):  Yes o No x




**Documents
      Incorporated by Reference:** None













**ODYNE
      CORPORATION**




**2007
      FORM 10-KSB ANNUAL REPORT**




**TABLE
      OF CONTENTS**




Page**PART
                I**Item
                1.
            Description
                of Business
            1Item
                1A.
            Risk
                Factors
            11Item
                2.
            Description
                of Property
            16Item
                3.
            Legal
                Proceedings
            16Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            16**Part
                II**Item
                5.
            Market
                for Common Equity, Related Stockholder Matters and Small Business
                Issuer
                Purchase of Equity Securities
            17Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operation
            18Item
                7.
            Financial
                Statements
            22Item
                8.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            22Item
                8A(T).
            Controls
                and Procedures
            23Item
                8B.
            Other
                Information
            23**Part
                III**Item
                9.
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance with Section 16(a) of the Exchange Act
            24Item
                10.
            Executive
                Compensation
            27Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            30Item
                12.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            32Item
                13.
            Exhibits
            33Item
                14.
            Principal
                Accountant Fees and Services
            33










**PART
      I**




**ITEM
      1. DESCRIPTION OF BUSINESS.**




**Overview
      of Our Business**




We
      are a
      clean technology company that develops and manufactures propulsion systems
      for
      advanced Plug-in Hybrid Electric Vehicles for medium and heavy-duty trucks
      and
      buses by integrating our proprietary electric power conversion, electric power
      control and energy storage systems with a range of off-the-shelf components
      including electric motors and storage batteries. Our Plug-in Hybrid Electric
      Vehicle systems are either series or parallel configuration hybrids that are
      optimized for different applications. Our environmentally friendly and
      cost-effective Plug-in Hybrid Electric Vehicle systems allow vehicles to operate
      at lower costs and with lower vehicle emissions.




**Alternatively
      Fueled Vehicles**




**General**




We
      compete in the alternatively fueled vehicles market. Alternatively fueled
      vehicles include various types of vehicles that utilize electric and hybrid
      electric technology, hydrogen fuel cell technology, compressed natural gas,
      biodiesel, ethanol, propane and liquefied natural gas, or a combination of
      these
      technologies and fuels. There are more than 1,500,000 on-road alternatively
      fueled vehicles of all vehicle classes in use in the United States today,
      growing 9.3% per year since 1995. Each year in North America, an estimated
      500,000 new medium and heavy-duty trucks and buses are sold, each with an
      estimated average life of ten years.




**Electric
      and Hybrid Electric Vehicles**




Electric
      vehicles and hybrid electric vehicles have emerged as a revolutionary solution
      for improved fuel efficiency and reduced vehicle emissions. Electric vehicles
      operate solely on electric power. Hybrid electric vehicles are capable of
      operating on both electricity and a conventional or alternative power source.




**Plug-in
      Hybrid Electric Vehicles**




Plug-in
      Hybrid Electric Vehicles are powered both by battery power and a conventional
      or
      alternative fuel source and with energy taken from a power grid. This reduces
      the amount of conventional or alternative fuel required to operate a Plug-in
      Hybrid Electric Vehicle when compared to a hybrid electric vehicle. Our
      technology can be deployed in electric vehicles, hybrid electric vehicles and
      Plug-in Hybrid Electric Vehicles. Any vehicle, whether it operates on diesel,
      gasoline or an alternative fuel source, can be made a Plug-in Hybrid Electric
      Vehicle. Plug-in Hybrid Electric Vehicles are therefore known as being fuel
      agnostic. A Plug-in Hybrid Electric Vehicle consumes less fuel, requires less
      maintenance and typically has a longer lifespan than conventional gas-powered
      vehicles.





We
      estimate the addressable market for our Plug-in Hybrid Electric Vehicle systems
      in newly-manufactured vehicles, which excludes vehicles that may be retrofitted
      with our Plug-in Hybrid Electric Vehicle systems, to be approximately $1.8
      billion per year. This assumes modest growth in the number of medium and
      heavy-duty trucks and buses and 10% adoption of hybrid electric power at an
      estimated cost of $25,000 to $30,000 per vehicle. This cost target will not
      be
      achieved without substantial unit volume production of hybrid power trains.
      Several factors are driving accelerating demand in this market: (i) economic
      and
      political instability in many of the world’s largest oil producing countries
      placing increasing pressures on fuel costs, (ii) attempts to reduce the United
      States’ dependence on foreign oil by displacing imported petroleum with
      electricity generated from domestic fuels and (iii) increasingly stringent
      emissions standards. In addition, initiatives by the federal government,
      including the Energy Policy Act of 2005 and the Clean Efficient Automobiles
      Resulting from Advanced Technologies Act of 2003 support the development and
      use
      of clean technologies. Hybrid electric propulsion offers a highly attractive,
      affordable and user-friendly solution.




**Odyne’s
      Value Proposition**




Our
      Plug-in Hybrid Electric Vehicle solution offers several advantages to
      stand-alone alternatively fueled vehicles and vehicles powered by conventional
      internal combustion engines, including lower vehicle emissions and lower
      operating costs through greater fuel efficiency and lower maintenance costs.
      Our
      Plug-in Hybrid Electric Vehicle system integrates off-the-shelf products,
      advanced control systems and our modular, build-to-order propulsion system.
      This
      combination allows our Plug-in Hybrid Electric Vehicle system to be
      competitively priced while retaining the flexibility to build to customer
      specifications and enabling later modifications to extend the life of a vehicle
      and meet evolving customer needs. The Plug-in Hybrid Electric Vehicle can be
      recharged overnight by plugging into a high-capacity 220-volt electrical
      outlet.


1


To
      protect the value of our Plug-in Hybrid Electric Vehicle system, we have filed
      patent applications to cover our vehicular battery carriers and cooling systems,
      vehicle monitoring and control systems, battery management systems and vehicle
      charging system.




**Business
      and Growth Strategy**




We
      have
      developed a Plug-in Hybrid Electric Vehicle propulsion system for Class 6,
      7 and
      8 trucks and buses that encompasses proprietary battery and thermal management
      technology, unique system architecture and modular/scalable configuration.
      Class
      6, 7 and 8 are vehicle weight classifications for most semi-trucks, busses
      and
      trailers. Current and prospective customers for our Plug-in Hybrid Electric
      Vehicle systems include original equipment manufacturers (OEMs), municipalities
      and private fleet operators.





Through
      the end of 2007, we delivered five Plug-in Hybrid Electric Vehicles, consisting
      of two buses and three trucks, to five different customers. In the same
      timeframe, we also delivered five PHEV kits to two different customers, one
      being an OEM and the other a retrofitter.





We
      have
      developed strategic relationships and strategic partnerships to further our
      development, marketing, and manufacturing of Plug-in Hybrid Electric Vehicle
      systems for medium and heavy-duty vehicles. Long Island Power Authority (known
      as LIPA), the non-profit electric utility serving southeastern New York, has
      agreed to work with us to promote our Plug-in Hybrid Electric Vehicle technology
      and to collaborate with us on product demonstrations. ElDorado National, a
      subsidiary of Thor Industries, Inc., has agreed to supply bus gliders and bodies
      for the Odyne/LIPA demonstration program and future projects. General Electric
      supplies induction traction drive motors to us and has worked with us to select
      induction motors that can meet a range of requirements. Bosch Rexroth provides
      certain drive systems as well as electric motors/generators to us. EnerSys
      supplies the lead-acid batteries used in constructing our Plug-in Hybrid
      Electric Vehicle system. We are also a founding member (and the only founding
      member company that is not a public utility company) in the Plug-In Partners
      National Campaign (www.pluginpartners.org), a national grass-roots campaign
      created to demonstrate the existing market for flexible-fuel Plug-in Hybrid
      Electric Vehicles. Plug-In Partners members include 24 of the nation’s largest
      locally-owned and controlled power systems.





We
      have
      appointed FAB Industries as an exclusive agent within a defined geographic
      territory to sell, install and maintain our products into existing vehicles.
      We
      have also appointed Creative Bus Sales, Inc. of Chino, California as our
      exclusive sales agent in a specified territory with respect to the transit
      bus
      market. Our agreement with Creative Bus Sales is dependent upon our fielding
      of
      a bus to be tested and certified to California Air Resources Board (CARB)
      standards, which has not yet occurred. Additionally, we have entered into an
      agreement with Dueco, Inc., a Wisconsin-based manufacturer of aerial lift
      trucks, to provide proprietary hybrid drive systems optimized for that market.
      In December 2007, we received a purchase order from Dueco for 25 of our Plug-in
      Hybrid Electric Vehicle propulsion systems.





Our
      growth strategy is to continue to expand our range of Plug-in Hybrid Electric
      Vehicle propulsion systems by tailoring them for use in specific medium and
      heavy-duty truck and bus applications. We intend to sell Plug-in Hybrid Electric
      Vehicle power system components to medium and heavy-duty vehicle OEMs and
      vehicle retrofitters.




We
      are a
      Delaware corporation, incorporated under the laws of New York in 1999 and
      re-incorporated under the laws of Delaware in 2005, and we conduct all of our
      operations through our wholly-owned subsidiary, Odyne Corporation. Odyne
      Corporation, incorporated in the State of New York in 2001, is a clean
      technology company that develops and manufactures Plug-in Hybrid Electric
      Vehicle propulsion systems for medium and heavy-duty trucks and buses. We are
      located at 89 Cabot Court, Suite L, Hauppauge, New York 11788. Our telephone
      number is (631) 750-1010; our web site is www.odyne.com .




**Industry
      Background and Trends**




**Overview**




The
      United States faces major challenges in meeting the ever-increasing demand
      for
      transportation goods and services while striving to minimize adverse energy,
      environmental and economic impacts. More efficient vehicles are imperative
      to
      meeting these challenges.




New
      emissions standards are forcing current diesel engine and vehicle manufacturers
      to consider complete engine redesigns that utilize alternative transportation
      fuels. New legislation, coupled with rising fuel and labor costs, resulted
      in
      the accelerated development of the alternative fuel industry. The alternative
      fuel industry can be segmented by fuel type, application and vehicle class,
      as
      shown in the diagram below.


2




**Alternative
      Transportation Fuel Industry Segmentation**





**Alternative
                Transportation Fuels**
            
            **Applications**
            
            **Vehicles**Liquefied
                petroleum gas
              Compressed
                natural gas
              Alcohols
                in blends containing at least 85% alcohol
              Hydrogen
              Electricity
              100%
                biodiesel
            
            Alternatively
                fueled vehiclesuppliers
              Alternative
                transportation fuel suppliers
              Alternatively
                fueled vehicle technologies and components
            
            Automobiles
              Vans
                & minivans
              Light-duty
                trucks
              Medium-duty
                trucks
              Heavy-duty
                trucks
              Buses
              Other




We
      compete in the alternatively fueled vehicles market. Alternatively fueled
      vehicles include various types of vehicles that utilize electric and hybrid
      electric technology, hydrogen fuel cell technology, compressed natural gas,
      biodiesel, ethanol, propane and liquefied natural gas, or a combination of
      these
      technologies and fuels. According to publicly available industry sources, there
      are more than 1,500,000 on-road alternatively fueled vehicles in use in the
      United States today.




**Electric
      and Hybrid Electric Vehicles**




Electric
      vehicles and hybrid electric vehicles, or HEVs, have emerged as an appealing
      solution for improved fuel efficiency and reduced vehicle emissions. Electric
      vehicles operate solely on electric power. Hybrid electric vehicles are capable
      of operating on both electricity and a conventional or alternative power source,
      such as diesel fuel. According to estimates of the Energy Information
      Administration of the U.S. Department of Energy, automakers will sell
      approximately 1.1 million hybrid electric vehicles in 2015.




**Plug-in
      Hybrid Electric Vehicles**




Plug-in
      Hybrid Electric Vehicles, or PHEVs, are powered both by battery power and a
      conventional or alternative fuel source and with power taken from a power grid.
      Any vehicle, whether it operates on diesel, gasoline or an alternative fuel
      source, can be made a PHEV. PHEVs are therefore known as being fuel agnostic.
      By
“hybridizing” a vehicle, the fuel efficiency of that vehicle is improved. By
      requiring less fuel to perform the same tasks, operating costs and environmental
      emissions are reduced. Moreover, a PHEV vehicle requires less maintenance and
      typically has a longer lifespan than conventional gas-powered vehicles.




Several
      factors are driving accelerating demand in the alternatively fueled vehicle
      market: (i) economic and political instability in many of the world’s largest
      oil producing countries placing increasing pressures on fuel costs, (ii)
      attempts to reduce the United States’ dependence on foreign oil by displacing
      imported petroleum with electricity generated from domestic fuels and (iii)
      increasingly stringent emissions standards. In addition, initiatives by the
      United States federal government, including the Energy Policy Act of 2005 and
      the Clean Efficient Automobiles Resulting from Advanced Technologies Act
      (“CLEAR”) of 2003, support the development and use of clean technologies. Hybrid
      electric propulsion offers a highly attractive, affordable and user-friendly
      solution.




The
      propulsion system of a conventional vehicle consists of an internal combustion
      engine, a transmission and a differential that delivers power to the drive
      wheels. The drive wheels may be the front wheels, the rear wheels or both.
      The
      transmission changes the ratio of the revolutions per minute, or rpm, of the
      internal combustion engine to the rpm of the drive wheels in order to operate
      the internal combustion engine at its most efficient operating rpm. The internal
      combustion engine must be sized to be able to meet peak power requirements;
      the
      peak power requirement is considerably higher than the average power
      requirement. We design hybrid propulsion systems for medium-duty and heavy-duty
      trucks and buses where the peak power requirements are four to five times higher
      than the average power requirements.




The
      engine configuration and the braking system differentiate a PHEV propulsion
      system from conventional propulsion systems. In a PHEV propulsion system, the
      internal combustion engine operates in conjunction with an electric energy
      storage system and an electric motor to deliver power to the drive wheels.
      The
      efficiency of an electric motor at low rpm is superior to that of an internal
      combustion engine. To the extent that the electric motor is delivering power
      to
      the drive wheels at low speeds, this efficiency differential results in improved
      fuel efficiency.




The
      energy storage system also receives power from a PHEV’s braking system. The
      braking system of a conventional vehicle relies on friction between the brake
      elements to convert kinetic energy of the vehicle to heat, which then dissipates
      into the air and is wasted. The braking system in a PHEV operates the same
      as a
      conventional vehicle, but the electronics in a PHEV convert much of the kinetic
      energy back into electric power that is then stored for future use. This concept
      is called regenerative braking.




In
      most
      of the currently available HEVs, the internal combustion engine is the only
      source of power. In our PHEV configuration, the operator is able to supplement
      power from the internal combustion engine with electric power from a power
      grid
      by periodically plugging the vehicle in during times that it is not in use.
      This
“Plug-in HEV” capability allows the use of electric power that is considerably
      less expensive than diesel fuel per mile.


3




In
      the
      United States today, much of the vehicular fuel, gasoline or diesel oil is
      imported. Most electricity is generated from domestic fuels. Thus, supplementing
      the diesel fuel with “Plug-in HEV” electric power contributes to national energy
      independence. From a systemic emissions perspective, the use of this “grid fuel”
is cleaner than using the liquid fuel carried in the vehicle.




**PHEV
      Advantages**




We
      believe hybrid propulsion lowers the operating costs of vehicles because
      of:




**Greater
      Fuel Efficiency/Lower Emissions** .
      PHEVs
      are more fuel efficient than conventional internal combustion engine vehicles,
      as well as any stand-alone alternatively fueled vehicle. The result is that
      a
      PHEV uses less fuel with lower vehicle emissions. Improvements in fuel
      efficiency and vehicle emissions will vary based on the application; however,
      we
      estimate that when the power system in a typical transit bus application is
      changed from conventional diesel to HEV, fuel consumption and vehicle emissions
      will be reduced 30% to 50%.




PHEVs
      enhance the efficiency of vehicles regardless of the type of internal combustion
      engine or type of fuel used, which we believe makes them more advantageous
      than
      other alternatively fueled vehicles without a hybrid system. A PHEV system
      can
      be coupled with an engine operating on gasoline, diesel fuel or any alternative
      fuel. For fleet operators who have already adopted some form of alternatively
      fueled vehicle, we believe a hybrid electric system will further enhance the
      fuel efficiency of that alternatively fueled vehicle and lower its operating
      costs.




Moreover,
      the fuel efficiency of a PHEV can be further enhanced by recharging the energy
      storage battery from utility power when the vehicle is not in operation, thereby
      substituting power from an electric grid for fuel and reducing the overall
      fuel
      consumption of the vehicle.




**Less
      Maintenance** .
      We
      believe a PHEV has lower operating costs, and requires less maintenance than
      a
      conventional vehicle. Any HEV, whether it has a series or parallel architecture,
      requires less brake maintenance due to regenerative braking. When the brakes
      are
      applied in a conventional vehicle, the kinetic energy of the vehicle is
      converted to thermal energy (heat) as the temperature of the brake pads is
      raised. This wasted energy raises the operating temperature of the brakes,
      accelerating their wear-out and increasing the associated maintenance costs.
      In
      a PHEV, much of the kinetic energy of the vehicle is converted back into
      electricity and stored in the energy storage battery. This saves both brake
      maintenance and fuel. We believe that the more braking there is in the
      particular application, the greater the potential savings. Further, in a series
      PHEV, there is no transmission, thus saving the costs to maintain and service
      this component in a conventional vehicle.




**The
      Odyne Solution**




Our
      PHEV
      solution offers the advantages of a typical hybrid propulsion system, including
      lower vehicle emissions and lower operating costs through greater fuel
      efficiency and lower maintenance requirements. Our system provides additional
      benefits that are not achieved with the use of other hybrid electric bus and
      truck propulsion systems.




·
            **Lower
                costs*****.***Our system is designed with a larger battery storage device, which
                allows
                for a smaller engine that is less expensive. Also, the engine in
                our
                series PHEV operates over a rpm range, which enhances the vehicle’s
                efficiency and resiliency.




·
            **Electric-only
                operation*****.***We
                offer a series hybrid propulsion system architecture, which enables
                operation in electric-only mode as well as in hybrid-electric mode.
                Operating in electric-only mode lowers vehicle emissions further
                and
                enables operation in compliance with a “zero emission” standard where
                mandated or desirable.




·
            **Plug-in
                capability*****.***The “Plug-in HEV” capability of our system allows operators to use grid
                electric power as a supplement to the normal vehicle fuel. Grid electric
                power is significantly less expensive per mile than diesel fuel and
                is
                primarily generated from domestic
                fuels.




We
      integrate off-the-shelf products, advanced control systems and our modular,
      build-to-order propulsion system to build our PHEV system. Our modular
      configuration can be optimized and modified to meet a customer’s changing needs
      over time. This modular configuration utilizes off-the-shelf components (such
      as
      electric motors, batteries, bus bodies, and chassis), proprietary technologies
      and components procured through strategic alliances. Accordingly, our PHEV
      system can be:




·
            optimized
                to meet specific customer requirements,




·
            easily
                modified as requirements change to extend the life of the
                vehicle,




·
            rapidly
                serviced because individual sub-systems or major individual components
                can
                be swapped out,




·
            highly
                scalable because the same components work with most types of engines,
                regardless of their fuel source, and


4




·
            flexibly
                configured to maximize energy storage and power production with the
                smallest number of components.




**Business
      and Growth Strategy**




**Products**




We
      provide series and parallel propulsion systems consisting of a control area
      network, appropriate driver interface controls and a selection of other major
      components.




**Series
      Versus Parallel Architecture**




HEVs
      are
      currently designed with either series or parallel architectures. A series system
      configuration is better suited to operate in an “all-electric-mode.” Parallel
      hybrid technology is successfully being deployed in smaller passenger vehicles
      and heavy-duty vehicles (such as long-haul buses and trucks) where a larger
      percentage of travel may be highway driving.




In
      a
      series device, there is no direct connection between the internal combustion
      engine and the drive wheels. The internal combustion engine drives a
      generator-charger system to keep the energy storage system charged to the
      appropriate levels. The electric motor is connected directly to the rear wheels
      through the differential. There is no transmission. In a parallel system, the
      internal combustion engine is connected through a transmission to the drive
      wheels; the electric motor is also connected to the drive wheels through a
      parallel transmission.




**Comparison
      of HEV Architecture**




Series
                Architecture
            
            Parallel
                ArchitectureCapacity
                of Electric Motor
            
            Peak
                Drive Requirement
            
            LowerTransmission
            
            None
            
            ComplexInternal
                Combustion Engine rpm
            
            Fixed
            
            VariableAll-Electric
                Operation
            
            Yes
            
            No




**Modular
      Configuration**




Our
      propulsion system consists of both proprietary Odyne designed and manufactured
      modules, and commercial off-the-shelf products. The ability to “mix and match”
these components allows a system to be optimized for a particular driving
      profile and to be modified to meet a customer’s changing needs over time. In
      addition, the component/modular configuration allows for scalable manufacturing
      and purchasing of components to achieve attractive gross margins.




**Fuel
      Agnostic**




Our
      configurable and scalable propulsion system products are available for a variety
      of heavy-duty bus and truck fleet operations in either all-electric
      configurations producing zero emissions, or in hybrid-electric configurations
      with very low emissions. During the vehicle’s usable life, the fleet operator
      can reconfigure the vehicle to all-electric or hybrid operation at any time.
      Since our hybrid propulsion system is fuel agnostic, Odyne-powered hybrid
      vehicles are able to use any fuel by simply selecting the appropriate generator
      module.




**Growth
      Strategy**




Our
      growth strategy is to continue to expand our range of Plug-in Hybrid Electric
      Vehicle propulsion systems by tailoring them for use in specific medium and
      heavy-duty truck and bus applications. We intend to sell Plug-in Hybrid Electric
      Vehicle power system components to medium and heavy-duty vehicle OEMs and
      vehicle retrofitters. We spent approximately $1,575,594 in 2007 and $755,429
      in
      2006 on research and development activities.




**Strategic
      Partnerships and Strategic Relationships**




We
      have
      developed strategic relationships and strategic partnerships to further the
      development and manufacturing of our PHEV system for medium and heavy-duty
      vehicles.




**Long
      Island Power Authority.** Long
      Island Power Authority, the electric utility serving southeastern New York,
      has
      agreed to work with us to promote our PHEV technology and to collaborate with
      us
      on product demonstrations. Long Island Power Authority has a history of vehicle
      demonstrations programs, which involves the loan of vehicles to various private
      and public organizations and companies for the purpose of having a typical
      operator evaluate and validate electric vehicle and PHEV technology, and to
      familiarize users with the practical applications of electric vehicles. Long
      Island Power Authority is currently in discussions with Long Island
      Bus/Metropolitan Transportation Authority (MTA) to provide it with an
      Odyne-equipped PHEV transit bus, which will be demonstrated on the streets
      of
      Nassau County on a daily basis in regular service.


5




Through
      the Electric Power Research Institute, Long Island Power Authority is
      participating in the Global Grid Connected Vehicle Project, as well as a variety
      of other electric vehicle programs. In addition, Long Island Power Authority
      has
      played an important role by supporting the Ford TH!NK Program in the Long Island
      counties of Suffolk and Nassau. Long Island Power Authority is a founding member
      of the Plug-In Partners National Campaign.




**ElDorado
      National.** ElDorado
      National, a subsidiary of Thor Industries, Inc., has verbally agreed to supply
      bus gliders and bodies for a Long Island Power Authority/Odyne pre-production
      demonstration program and future projects. After the successful demonstration
      of
      our PHEV hybrid bus, we intend to develop a long-term relationship with
      ElDorado, initially for the supply of bus gliders and bodies by ElDorado to
      us
      and subsequently for the purchase of our propulsion components by ElDorado
      for
      its continued/ongoing bus production.




**General
      Electric.** General
      Electric supplies us with AC induction traction drive motors. General Electric
      has worked with us to select induction motors that can meet the requirements
      of
      a range of vehicles in a wide variety of applications and terrain. The motors
      selected by us and General Electric have extensive use in industrial and
      traction applications worldwide.




**Bosch
      Rexroth Corporation.** Bosch
      supplies us with generators, motors and drives that are used in a range of
      vehicles that are currently being deployed. In 2007, we entered into an
      agreement with Bosch Rexroth providing for us to purchase certain motors from
      Bosch at a price to be maintained for one year. In addition, the agreement
      provides for engineering and marketing cooperation.




**Plug-In
      Partners National Campaign.** We
      are a
      founding member (and the only founding member that is not a public utility
      company) in the Plug-In Partners National Campaign ( www.pluginpartners.org ),
      a
      national grass-roots campaign created to demonstrate the existing market for
      flexible-fuel PHEVs. Plug-In Partners includes 24 of the nation’s largest
      locally-owned and controlled power systems. ****




**New
      York State Energy Research and Development Authority.** The
      New
      York State Energy Research and Development Authority is a public benefit
      corporation created in 1975 by the New York State Legislature. Approximately
      400
      New York State Energy Research and Development Authority research projects
      help
      the State of New York’s businesses and municipalities with their energy and
      environmental problems. Since 1990, the New York State Energy Research and
      Development Authority has successfully developed and brought into use more
      than
      170 innovative, energy-efficient and environmentally beneficial products,
      processes and services. We have received funding to offset some of the research
      and development costs incurred in the development of a PHEV propulsion system
      for a mid-size bus. We intend to continue to work with New York State Energy
      Research and Development Authority to further develop and refine our
      technology.




**EnerSys.** EnerSys
      currently supplies a majority of the advanced lead-acid batteries used in
      constructing our PHEV system.




**Sales
      and Marketing**




**Sales**




Through
      the end of 2007, we delivered five Plug-in Hybrid Electric Vehicles, consisting
      of two buses and three trucks, to five different customers. In the same
      timeframe, we also delivered five PHEV kits to two different customers, one
      being an OEM and the other a retrofitter. We have an agreement with Dueco Inc.,
      a Wisconsin-based manufacturer of aerial “bucket” trucks used by utilities and
      telecom companies, to supply them with PHEV systems optimized for this
      application. In December, we received an order from Dueco for twenty-five of
      these systems to be delivered before the end of 2008.




**Marketing**




There
      is
      currently demand from municipal fleet managers for fuel-efficient HEVs. However,
      based on initial demand and corresponding production costs, PHEVs are likely
      to
      cost almost twice the amount of conventional vehicles. As a result, to induce
      municipal fleet managers and other potential PHEV purchasers to convert to
      PHEVs, the U.S. government has created funding programs that provide purchasers
      with incentives to cover up to 80% of the incremental costs associated with
      the
      procurement of PHEVs.





We
      are
      implementing a two-step sales and marketing strategy for our PHEV systems.
      First, we plan to directly target municipal fleet owners for the sale of PHEV
      trucks and buses, which will be developed in conjunction with strategic
      partners. Longer-term, however, we plan to focus on becoming a leading provider
      of PHEV power system components to medium and heavy-duty truck and bus original
      equipment manufacturers.




The
      long-term sales strategy for the power system components will be to sell PHEV
      propulsion kits that consist of Odyne designed and manufactured components
      and
      standard components manufactured by others directly to vehicle manufacturers
      and
      integrators. The components manufactured by others include storage batteries,
      electric drive motors and the engine and generator in the auxiliary power unit.
      Our components and software will be matched to these external components and
      the
      vehicle driving profile to achieve optimum performance.


6




Sales
      efforts will be focused on two areas. First, our management will interface
      with
      fleet managers, both municipal and private, to increase their awareness of
      the
      benefits and availability of our PHEV technology. These efforts will be focused
      in the Northeast, because that is where our offices are located, and California,
      because of the state’s aggressive posture toward environmental issues.




Second,
      we will use direct sales resources as well as vehicle power train distributors
      to sell original equipment manufacturer PHEV power trains to vehicle
      manufacturers and up-fitters. Resources will be required to fund the application
      support, sales personnel, advertising and documentation required for our sales
      initiative.




**Intellectual
      Property**




We
      depend
      on our ability to develop and maintain the proprietary aspects of our technology
      to distinguish our products from our competitors’ products.  To protect our
      proprietary technology, we rely primarily on a combination of confidentiality
      procedures, copyright, trademark and patent laws.  It is our policy to
      require employees and consultants to execute confidentiality agreements and
      invention assignment agreements upon the commencement of their relationship
      with
      us.  These agreements provide that confidential information developed or
      made known during the course of a relationship with us must be kept confidential
      and not disclosed to third parties except in specific circumstances and for
      the assignment to us of intellectual property rights developed within the scope
      of the employment relationship.




We
      have
      filed four utility patent applications with the U.S. Patent & Trademark
      Office, or PTO, related to our technology. One application, relating to an
      air-cooled battery enclosure, was approved by the PTO and U.S. Patent No.
      7,323,272 was issued on January 29, 2008. One patent application is currently
      being reviewed by the PTO. The other two utility patent applications have not
      yet been reviewed by the PTO. We
      cannot
      assure you that
      patents will issue from the PTO on any of these patent applications that are
      in
      process to be reviewed by the PTO.





**Competition**




We
      are
      targeting our product development for use in Class 6, 7 and 8 medium and
      heavy-duty trucks and buses. Competition in the hybrid power sector remains
      somewhat fragmented, with three different classes of competitors participating
      in this space: vehicle manufacturers, component suppliers and systems companies.
      Nonetheless, competition has increased recently, and we expect this trend to
      continue as the demand for these products increases. We are a systems company
      offering a full range of components required for hybrid-electric vehicles.
      We
      believe we are the only company offering PHEV technology within our target
      market. Below is a brief summary of some of the other companies active in the
      industry.




Several
      vehicle manufactures have announced their intention to produce new HEV passenger
      cars and light trucks including Toyota, Honda, Ford, Chrysler and General
      Motors. Most of these producers are focusing on the automotive retail market
      and
      the broader passenger vehicle platforms that it includes. Some of these
      producers, including General Motors, are also large vehicle manufacturers and
      are focusing on heavy-duty transit bus applications. Most vehicle manufacturers
      are not in direct competition with our PHEV technology.




In
      addition to vehicle manufacturers, there are several competitors that offer
      either hybrid systems or hybrid system components to original equipment
      manufacturers. Among those competitors are public companies such as Eaton
      Corporation, Azure Dynamics Inc. and Enova Systems Inc. as well as ISE Research
      Corporation, a private company.




We
      believe that we are distinct in our approach of offering original equipment
      manufacturers a comprehensive plug-in hybrid system comprised of energy storage,
      control/power electronics, electric motors and generators and advanced control
      algorithms. Due to significant use of commercial off-the-shelf components,
      which
      keeps costs competitive and provides a wide range of flexibility in application
      and format, our PHEV systems have potential applications for a wide range of
      bus
      or truck manufacturers, up-fitters and specialty vehicle producers.




**Government
      Regulation**




The
      Environmental Protection Agency and California Air Research Board currently
      regulate the emissions of heavy-duty vehicles such as trucks and buses having
      a
      gross vehicle weight between 8,500 pounds and 33,000 pounds under Environmental
      Protection Agency regulations, and 14,000 pounds and 33,000 pounds under the
      California Air Research Board. These vehicles fall within Classes 6, 7 and
      8.




The
      emissions of these vehicles are determined by testing the engine under Transient
      Federal Test Procedure via an engine dynamometer test cycle and the Supplemental
      Emissions Test, which simulates steady state or highway driving. This differs
      from the methodology used to certify passenger vehicles. Passenger vehicles
      are
      tested and certified for emission compliance whereas heavy-duty vehicle engines
      are certified for compliance.




The
      overall allowable emission levels decreased each year over the ten-year period
      starting in 1988. From 1998 to present (and going into 2010), emissions
      reductions have been mandated to further reduce airborne pollutants by lowering
      the allowable limits for specific by-products, measuring new pollutants (not
      measured before) and by regulating and eventually outlawing the sulfur in diesel
      fuel.


7


A
      very
      challenging component of the new emissions standards that started in 2007 is
      the
      drastic reduction (75% less in some cases) of nitrogen oxide, non-methane
      hydrocarbons and particulate matter. New engine “add-on” technology such as
      particulate traps, fuel filters and computerized fuel injection control have
      been created in an attempt to meet the mandates, but more work is required.
      To
      meet the stringent 2007 standards completely, vehicle and engine manufacturers
      are rethinking their current engine and propulsion technology. Major (and
      expensive) redesigns of diesel engine technology, the abandonment of diesel
      for
      gasoline and the use of advanced propulsion systems all represent potential
      alternatives to meeting the new standards.




**Employees**




As
      of
      March 26, 2008,  we
      employed 19 full-time employees and 4 part-time employees.  None
      of
      our employees are represented by a collective bargaining unit. All employees
      sign standard employment agreements that specify they are all “at will”
employees.




**Organizational
      History**




Odyne
      Corporation was originally formed as a Subchapter S Corporation in the State
      of
      New York on August 3, 2001.




Pursuant
      to an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”),
      Technology Integration Group, Inc. (“TIG”), through a newly-formed acquisition
      subsidiary, acquired all of our outstanding common stock on October 17, 2006.
      TIG, in exchange for our common stock, issued 12,000,000 of its common stock
      directly to our stockholders (the “Share Exchange Transaction”). Following the
      Share Exchange Transaction, the existing stockholders of TIG retained 6,000,000
      shares of the TIG’s outstanding common stock and our stockholders became the
      majority owners of TIG.





Prior
      the
      Share Exchange Transaction, TIG was a publicly-traded corporation with nominal
      operations. TIG, immediately following the Share Exchange Transaction, changed
      its name to Odyne Corporation and continued to carry on the operations our
      company. The Share Exchange Transaction has been accounted for as a reverse
      merger and recapitalization transaction in which the original Odyne is
      deemed to be the accounting acquirer.




**Reverse
      Merger and Recapitalization.** On
      October 17, 2006, we completed a “reverse merger” transaction, in which we
      caused PHEV Acquisition Corp., a New York corporation and our newly-created,
      wholly-owned subsidiary (“Merger Sub”), to be merged with and into Odyne
      Corporation, a New York corporation (“Odyne”). As a result of the merger, Odyne
      became our wholly-owned subsidiary, with Odyne’s former shareholders acquiring a
      majority of the outstanding shares of our common stock. The reverse merger
      was
      consummated under New York law and pursuant to an Agreement of Merger and Plan
      of Reorganization, dated October 17, 2006 (the “Merger Agreement”), as discussed
      below. Concurrently with the closing of the merger, we also completed a private
      placement to accredited investors, and received gross proceeds of $3,033,000
      (including the issuance of 304 units in exchange for our convertible debentures
      that we issued in a previous bridge loan financing transaction and 79 units
      issued in exchange for a release of certain trade accounts payable balances)
      at
      the closing of the private placement. In subsequent closings, additional
      proceeds were received raising the total amount to $5,750,000.





**Merger
      Agreement.** Pursuant
      to the Merger Agreement, at closing, we issued 12,000,000 shares of our common
      stock to the former shareholders of Odyne, representing 46.7% of our outstanding
      common stock following the merger and private placement, in exchange for 100%
      of
      the outstanding shares of Odyne common stock.





In
      connection with the merger, we repurchased a total of 87,831,270 shares of
      our
      common stock owned by Cosimo J. Patti and Gerald Wisz for aggregate
      consideration of $100 and then cancelled those shares at the closing of the
      merger. Giving effect to the cancellation of these stockholders’ shares, there
      were 6,000,000 shares of our common stock outstanding before giving effect
      to
      the stock issuances in the merger and private placement.





Under
      Delaware law, we did not need the approval of our stockholders to complete
      the
      merger, as the constituent corporations in the merger were Merger Sub and Odyne,
      each of which is or was a New York corporation. We were not a constituent
      corporation in the merger. The merger and its related transactions were approved
      by the holders of a requisite number of shares of Odyne common stock by written
      consent in lieu of a meeting on October 12, 2006.




**Expansion
      of Board of Directors; Management.** In
      connection with the merger, we amended our by-laws to increase the size of
      our
      board of directors to five members.




Pursuant
      to the Merger Agreement, at the closing of the merger, Roger M. Slotkin and
      Joshua A. Hauser, former directors of Odyne, as well as independent directors
      Bruce E. Humenik, Stanley W. Struble and S. Charles Tabak, were appointed to
      our
      board of directors. In connection with the appointment of these five directors,
      at the closing of the merger, Cosimo J. Patti and Gerald Wisz, the directors
      of
      Technology Integration Group prior to the merger, resigned as directors. At
      the
      closing of the merger, the board of directors appointed Mr. Slotkin as Chief
      Executive Officer, Mr. Hauser as President and Chief Operating Officer, Joseph
      M. Ambrosio as Executive Vice President - Engineering and Chief Technology
      Officer, and Konstantinos Sfakianos as Executive Vice President - Operations,
      each of whom served in a similar position with Odyne. In addition, Daniel
      Bartley was appointed to be our Chief Financial Officer. On September 19, 2007
      Roger Slotkin was replaced in his capacity as our Chief Executive Officer and
      as
      a member of the board of directors by Alan Tannenbuam.


8





Following
      the closing of the merger and private placement, the board approved the grant
      of
      stock options to purchase a total of 505,000 shares of our common stock,
      including initial grants of stock options to purchase 50,000 shares of common
      stock to each of the independent directors, Messrs. Humenik, Struble and Tabak,
      for serving on the board of directors. The board also approved the grant of
      stock options to purchase 150,000 shares of our common stock to Mr. Bartley
      for
      serving as our Chief Financial Officer. All of the foregoing stock options
      vest
      in three equal increments on each of October 17, 2008, 2009 and
      2010.




**Accounting
      Treatment; Change of Control.** The
      merger is being accounted for as a reverse merger and recapitalization since
      the
      shareholders of Odyne own a majority of the outstanding shares of our common
      stock immediately following the merger. Odyne is deemed to be the accounting
      acquirer in the merger and, consequently the transaction is treated as a
      recapitalization of Odyne NY. Accordingly, the assets and liabilities and the
      historical operations that are reflected in the financial statements are those
      of Odyne and will be recorded at the historical cost basis of Odyne. Except
      as
      described in the previous paragraphs, no arrangements or understandings exist
      among present or former controlling stockholders with respect to the election
      of
      members of our board of directors and, to our knowledge, no other arrangements
      exist that might result in a change of control of our company. Further, as
      a
      result of the issuance of the 12,000,000 shares of our common stock in the
      merger, and cancellation of other shares, a change in control of our company
      occurred on the date of the consummation of the merger. We will continue to
      be a
“small business issuer,” as defined under the Securities Exchange Act of 1934,
      following the merger.




**Private
      Placement.** In
      connection with the merger, we completed the closing of a private placement
      of a
      total of 5,750 units, each unit consisting of one share of our series A
      convertible preferred stock, par value $.001 per share, and a detachable,
      transferable warrant to purchase shares of common stock, at a purchase price
      of
      $1,000 per unit, to purchasers that qualified as accredited investors, as
      defined in Regulation D, pursuant to the terms of a Confidential Private
      Placement Memorandum dated July 27, 2006, as supplemented by the First
      Supplement thereto dated October 6, 2006. Each share of series A convertible
      preferred stock is initially convertible into 1,334 shares of common stock
      at
      any time. Each warrant entitles the holder to purchase 667 shares of common
      stock at an exercise price of $1.00 per share through October 16, 2010, subject
      to redemption provisions based on the trading price of our common
      stock.





**Lock-Up
      Agreements.** In
      connection with the private placement, former Odyne shareholders who now hold
      in
      the aggregate 12,000,000 shares of our common stock, entered into “lock-up”
agreements with us. The lock-up agreements provide that their shares may not
      be,
      directly or indirectly, publicly sold, subject to a contract for sale or
      otherwise transferred for a period of 12 months after the closing of the merger.
      After 12 months from the merger closing date, and at three-month intervals
      thereafter, the stockholders will be permitted to sell 12.5% of their initial
      holdings for each three-month period, provided that our common stock maintains
      a
      minimum trailing 30-day average trading price of $2.50 per share or more. After
      24 months from the merger closing date, and at three-month intervals thereafter,
      the stockholders will each be permitted to sell up to 12.5% of their initial
      holdings per three-month period, regardless of the trading price. All lock-up
      provisions expire 36 months from the merger closing date.





**October
      2007 Private Placement**




On
      October 26, 2007, we completed a private placement to five accredited investors,
      pursuant to the terms of a subscription agreement. The securities were offered
      and sold in units, with each unit consisting of $100,000 principal amount of
      10%
      senior secured convertible debentures and warrants to purchase shares of common
      stock at an exercise price of $.75 per share.





The
      debentures bear interest at 10% per year, payable quarterly in cash or
      freely-tradable common stock, at our option, and mature on the earlier of 18
      months after the original issuance date or the completion by us of one or a
      series of related debt or equity financing transactions for minimum gross
      proceeds of $5,000,000, exclusive of any financing transaction by a factor
      or
      commercial bank (referred to as a Subsequent Financing). The warrants are
      exercisable at any time and expire three years from issuance.




Pursuant
      to the subscription agreements with the investors, we sold debentures with
      an
      aggregate face value of $3,200,000 and received gross proceeds of $3,200,000.
      The debentures rank senior to all other indebtedness of ours. Pursuant to the
      terms of a security agreement with the investors, the debentures are secured
      by
      the grant by us and our subsidiary to a collateral agent of collateral that
      consists of a first priority security interest in all of our and our
      subsidiary’s assets. The outstanding balance of the debentures may be converted
      at the option of the holder, in whole or in part, at the earlier of 12 months
      after the original issuance date, into shares of our common stock at a
      conversion price equal to 70% of the then market price per share of common
      stock, or upon the completion by us of a Subsequent Financing, into the
      securities being sold in such Subsequent Financing at an effective conversion
      price equal to 80% of the purchase price of those securities. Notwithstanding
      the foregoing, the minimum conversion price will be no less than $.25 per share.
      Partial conversions by the investors are permitted.




As
      part
      of the transaction, we issued to the investors warrants to purchase an aggregate
      of up to 4,266,670 shares of our common stock at an exercise price of $.75
      per
      share. The warrants are exercisable for three years, contain customary change
      of
      control buy-out provisions and are not redeemable. The warrants also contain
      anti-dilution provisions (including “full-ratchet” price protection from the
      future issuance of stock, exclusive of the conversion of the debentures and
      certain other excluded stock issuances, or securities convertible or exercisable
      for shares of common stock below $.75 per share), provided that the exercise
      price of the warrants may not be adjusted to less than $.25 per share as a
      result of the full-ratchet price protection.


9




Pursuant
      to the terms of a registration rights agreement with the investors, we agreed
      to
      file a registration statement with the U.S. Securities and Exchange Commission
      as soon as possible for purposes of registering the resale of the shares of
      our
      common stock issuable upon the conversion of the debentures and exercise of
      the
      warrants sold in the private placement. In the event the registration statement
      is not declared effective within 180 calendar days following the closing, we
      will pay the investors 2% in cash or stock of the face amount of the debentures
      for every 30-day period, or portion thereof, that the registration statement
      is
      not declared effective for a maximum of six months, subject to the ability
      of
      the investors to sell the underlying shares pursuant to Rule 144. The liquidated
      damages can be paid in cash or freely-tradable common stock, at our option.
      We
      have also agreed that we will not file a registration statement for any
      additional shares of common stock until 75 days after the effective date of
      the
      registration statement.




Matrix
      U.S.A., LLC acted as placement agent in the transaction. The placement agent
      received $320,000 in cash placement fees and warrants to purchase 1,000,000
      shares of common stock in the transaction.





The
      debentures and warrants issued in the private placement were exempt from
      registration under Section 4(2) of the Securities Act of 1933 as a sale by
      an
      issuer not involving a public offering or under Regulation D promulgated
      pursuant to the Securities Act of 1933. None of the debentures or warrants,
      or
      shares of our common stock underlying such debentures and warrants, were
      registered under the Securities Act, or the securities laws of any state, and
      were offered and sold in reliance on the exemption from registration afforded
      by
      Section 4(2) and Regulation D (Rule 506) under the Securities Act and
      corresponding provisions of state securities laws, which exempts transactions
      by
      an issuer not involving any public offering. Such securities may not be offered
      or sold in the United States absent registration or an applicable exemption
      from
      the registration requirements and certificates evidencing such shares contain
      a
      legend stating the same.





After
      the
      closing of the October 2007 private placement, we had 21,027,578 shares of
      common stock outstanding, not including 4,924,620 shares of common stock
      issuable upon conversion, at any time, of shares of our series A convertible
      preferred stock and a maximum of 12,800,000 shares of common stock issuable
      upon
      conversion, at any time, of our 10% senior secured convertible debentures.
      We
      also had outstanding, warrants to purchase 9,586,350 shares of common stock,
      inclusive of the investor warrants and placement agent warrants issued in the
      October 2007 private placement, and stock options to purchase 4,270,000 shares
      of common stock.




**March
      2008 Private Placement**




On
      March
      27, 2008, we completed a private placement to institutional accredited
      investors, pursuant to the terms of a securities purchase agreement. Under
      the
      terms of the agreement, we sold 11,666,667 shares of our common stock at $.60
      per share. As part of this transaction, the investors also received warrants
      to
      purchase 11,666,667 shares of our common stock at $.72 per share. The
      warrants are exercisable for five years, contain customary change of control
      buy-out provisions and are not redeemable. The warrants also contain
      anti-dilution provisions (including “full-ratchet” price protection from the
      future issuance of stock, exclusive of certain issuances, or securities
      convertible or exercisable for shares of common stock below $.72 per share),
      provided that the exercise price of the warrants may not be adjusted to less
      than $.60 per share as a result of the full-ratchet price protection. We
      received $7,000,000 in gross proceeds in connection with this private placement.





vFinance
      Investments, Inc. acted as placement agent in the transaction. The placement
      agent received $630,000 in cash placement fees and warrants to purchase
      1,050,000 shares of common stock in the transaction. The placement agent will
      also receive a warrant exercise fee in the amount of 2% of the exercise price
      of
      the warrants paid upon exercise.





The
      shares of common stock and warrants issued in the private placement were exempt
      from registration under Section 4(2) of the Securities Act of 1933 as a sale
      by
      an issuer not involving a public offering or under Regulation D promulgated
      pursuant to the Securities Act of 1933. None of the shares of common stock
      or
      warrants, or shares of our common stock underlying such warrants, were
      registered under the Securities Act, or the securities laws of any state, and
      were offered and sold in reliance on the exemption from registration afforded
      by
      Section 4(2) and Regulation D (Rule 506) under the Securities Act and
      corresponding provisions of state securities laws, which exempts transactions
      by
      an issuer not involving any public offering. Such securities may not be offered
      or sold in the United States absent registration or an applicable exemption
      from
      the registration requirements and certificates evidencing such shares contain
      a
      legend stating the same.





After
      the
      closing of the March 2008 private placement, we had 33,768,115 shares of common
      stock outstanding, not including 4,811,032 shares of common stock issuable
      upon
      conversion, at any time, of shares of our series A convertible preferred stock
      and a maximum of 12,800,000 shares of common stock issuable upon conversion,
      at
      any time, of our 10% senior secured convertible debentures. We also had
      outstanding warrants to purchase 23,303,014 shares of common stock, inclusive
      of
      the investor warrants and placement agent warrants issued in the March 2008
      private placement, and stock options to purchase 2,115,000 shares of common
      stock.


10





**ITEM
      1A. RISK FACTORS.**





*An
      investment in our common stock involves a high degree of risk. You should
      carefully consider the following material risks, together with the other
      information contained in this prospectus, before you decide to buy our common
      stock. If any of the following risks actually occur, our business, results
      of
      operations and financial condition would likely suffer. In these circumstances,
      the market price of our common stock could decline, and you may lose all or
      part
      of your investment.*




**Risks
      Related to Our Business and Industry**




**We
      are still in an early stage of development and have earned limited revenues
      to
      date.**





We
      are
      still an early-stage company. Since our inception, we have engaged primarily
      in
      research and product development, testing, the establishment of strategic
      alliances and marketing. Our products are at various stages in the development
      cycle. We have earned limited revenues to date and have supported our operations
      primarily through cash flow from product sales, engineering services,
      development grants and cost-sharing programs and debt and private equity
      investment. Our operations are subject to all of the risks inherent in the
      establishment of a new business enterprise. Our likelihood of success must
      be
      considered in light of the problems, expenses and delays frequently encountered
      in connection with a new business and the development of new products and new
      technology.





**We
      have a limited operating history, which limits the information available to
      you
      to evaluate our business, and have a history of operating losses and uncertain
      future profitability.**





We
      were
      formed in August 2001 and have generated $2,076,787 in revenue, including
      research and development grants, from inception through December 31, 2007,
      while
      incurring a net operating loss of $7,424,310 during that period. There is
      limited operating and financial information to evaluate our historical
      performance and our future prospects. We face the risks and difficulties of
      an
      early-stage company including the uncertainties of market acceptance,
      competition, cost increases and delays in achieving business objectives. There
      can be no assurance that we will succeed in addressing any or all of these
      risks
      or that our efforts will generate significant revenue or achieve future
      profitability. The failure to do so would have an adverse effect on our
      business, financial condition and operating results.




**We
      have no experience manufacturing our products on a large-scale commercial basis
      and may be unable to do so.**





To
      date,
      we have focused primarily on research, development and low volume manufacturing
      and have no experience manufacturing our products on a large-scale commercial
      basis. Through the end of 2007, we delivered five Plug-in Hybrid Electric
      Vehicles, consisting of two buses and three trucks, to five different customers.
      In the same timeframe, we also delivered five PHEV kits to two different
      customers, one being an OEM and the other a retrofitter. We do not know whether
      or when we will be able to develop efficient, low-cost manufacturing
      capabilities and processes that will enable us to manufacture our products
      in
      commercial quantities while meeting the quality, price, engineering, design
      and
      production standards required to successfully market our products. Our failure
      to develop such manufacturing processes and capabilities could have an adverse
      effect on our business, financial condition and results of operations. Even
      if
      we are successful in developing our manufacturing capabilities and processes,
      we
      do not know whether we will do so in time to meet the requirements of our
      customers.




**Because
      hybrid technology is new and evolving, its future growth or ultimate market
      size
      is difficult to predict. Our business will not grow or may grow less rapidly
      if
      the use of hybrid technology does not continue to grow.**





Our
      industry is in the early stages of market acceptance of products and related
      services and is subject to rapid and significant technological change. Because
      of the new and evolving nature of hybrid technology, it is difficult to predict
      the size of the market, the rate at which the market for our products and
      services will grow or be accepted, if at all, or whether emerging technologies
      will render our services less competitive or obsolete. If the market for our
      products and services fails to develop or grows less rapidly than anticipated,
      our business would be significantly impacted.




**If
      our products and services do not achieve market acceptance, we may not achieve
      our revenue and earnings goals in the time projected, or at all.**





If
      we are
      unable to operate our business as contemplated by our business model or if
      the
      assumptions underlying our business model prove to be unfounded, we could fail
      to achieve our revenue and earnings goals within the time we have projected,
      or
      at all, which would have a detrimental effect on our business. As a result,
      the
      value of your investment could be significantly reduced or completely lost.




**Failure
      of our Plug-in Hybrid Electric Vehicle demonstrations could negatively impact
      demand for our products.**




We
      are
      currently demonstrating our Plug-in Hybrid Electric Vehicle system. We may
      encounter problems and delays during these demonstrations for a number of
      reasons, including the failure of our technology or the technology of third
      parties. Many of these potential problems and delays are beyond our control.
      Any
      problem or perceived problem with our demonstrations could harm our reputation
      and impair market acceptance of, and demand for, our products.


11


**Our
      operating results will be harmed if we are unable to manage and sustain our
      growth.**





Our
      business is unproven on a large scale and actual operating margins may be less
      than expected. If we are unable to scale capacity efficiently, we may fail
      to
      achieve expected operating margins, which would have an adverse effect on our
      operating results.




**Delays
      in the development of our Plug-in Hybrid Electric Vehicle technology would
      have
      a material impact on our commercialization schedule.**




If
      we
      experience delays in meeting our development goals or if our products exhibit
      technical defects or fail to meet cost or performance goals, our
      commercialization schedule will be delayed. In this event, potential users
      of
      our Plug-in Hybrid Electric Vehicle system may resort to alternative
      technologies. Delays could allow our competitors to gain market advantages.
      Despite our efforts, we cannot assure you that we will meet our
      commercialization schedule.




**We
      may need to secure additional funding to complete our product development and
      commercialization plans, as well as maintain our current operating structure,
      and we may be unable to raise additional capital.**




Our
      cash
      requirements depend on numerous factors, including the extent of future research
      and development activities, our ability to commercialize our products and market
      acceptance of our products. We expect to devote substantial capital resources
      to
      further our research and development initiatives, develop a manufacturing
      infrastructure, develop manufacturing processes and maintain our current
      operating structure. We also expect to devote substantial capital resources
      to
      expand our marketing and sales activities. Additional funds may be required
      to
      achieve commercialization of our Plug-in Hybrid Electric Vehicle system. We
      may
      be unable to secure additional funding, or funding on acceptable terms, to
      pursue our commercialization plans. If adequate funds are unavailable to satisfy
      either short-term or long-term capital requirements, we may be required to
      limit
      our operations in a manner inconsistent with our business plan, which could
      adversely affect operations in future periods.




**If
      we are unable to obtain grants from the federal government to fund current
      and
      future projects, we may not be able to fund research and development or
      production, which could materially harm our operating results.**




We
      have
      received non-refundable development funding from various governmental and/or
      energy-related agencies, including Long Island Power Authority, the Electric
      Power Research Institute and the Greater Long Island Clean Cities Coalition.
      In
      2006, we received $12,500 from grants. Several of our current and proposed
      projects for certain municipalities have been, or are expected to be, funded
      by
      such programs. We cannot assure you that we will be able to obtain grants funded
      by government programs in the future. The loss of existing grants or the failure
      to earn new grants would harm our ability to fund future research and
      development and production, which would have an adverse effect on our operating
      results.




**Our
      products and services may become obsolete if we do not effectively respond
      to
      rapid technological change on a timely basis.**





Our
      products and services are new and our business model is evolving. Our products
      and services depend on the needs of our customers and their desire to utilize
      hybrid technology. Since the hybrid industry is characterized by evolving
      technologies, uncertain technology and limited availability of standards, we
      must respond quickly to new research findings and technological changes
      affecting our customers. We may not be successful in developing and marketing
      on
      a timely and cost-effective basis new or modified products that respond to
      technological changes, evolving customer requirements and
      competition.




**We
      may have difficulty managing change in our operations as a result of limited
      management personnel and resources.**




We
      continue to undergo rapid change in the scope and breadth of our operations
      as
      the development of our Plug-in Hybrid Electric Vehicle system advances. Such
      rapid change is likely to place a significant strain on our senior management
      team and other resources. We will be required to make significant investments
      in
      our engineering, logistics, financial and management information systems and
      to
      motivate and effectively manage our employees. Our business, prospects, results
      of operations and financial condition could be harmed if we encounter
      difficulties in effectively managing the process of implementing such
      changes.




**If
      we fail to recruit and retain qualified senior management and other key
      personnel, we will not be able to execute our business
      plan.**





Our
      business plan requires us to hire a number of qualified personnel, as well
      as
      retain our current key management employees. We must attract leading talent
      to
      be able to execute our business strategy. Presently, our senior executive
      officers are Alan Tannenbaum, Chief Executive Officer, Joshua A. Hauser,
      President and Chief Operating Officer, Daniel Bartley, Chief Financial Officer,
      Joseph M. Ambrosio, Executive Vice President – Engineering and Chief
      Technology Officer, and Konstantinos Sfakianos, our Executive Vice President
–
Operations. The loss of the services of one or more of our senior executives
      or
      our inability to find the additional managers we require for any reason could
      impair our ability to execute our business plan.


12


**If
      we fail to protect our intellectual property, our current competitive strengths
      could be eroded and we could lose customers, market share and
      revenues.**





Our
      viability will depend on our ability to develop and maintain the proprietary
      aspects of our technology to distinguish our products and services from our
      competitors’ products and services. To protect our proprietary technology, we
      rely primarily on a combination of confidentiality procedures, copyright,
      trademark and patent laws.




The
      process of seeking patent, industrial design and trademark protection can be
      time consuming and expensive. We
      cannot
      assure you that
      patents, industrial design registrations or trademark registrations will issue
      from currently pending or future applications or any new patents, industrial
      design registrations or trademark registrations that may be issued will be
      sufficient in scope or strength to provide meaningful protection or any
      commercial advantage to us. We
      cannot
      assure you that
      any
      pending or future patent, industrial design or trademark applications will
      be
      granted in respect of our technology and business, or that any pending or future
      patents, industrial design registrations or trademark registrations will not
      be
      challenged, invalidated, ignored, circumvented or otherwise rendered
      unenforceable, or that the rights granted under such patents, industrial design
      registrations or trademark registrations will provide meaningful protection
      or
      competitive advantages to us.





Similarly, we
      cannot
      assure you that
      common law trademark rights, copyright, trade secret and non-disclosure
      agreements and other contractual provisions will provide meaningful protection
      or any commercial advantage to us, or that our existing or future common law
      trademark rights, copyrights, trade secrets and non-disclosure agreements and
      other contractual provisions will not be challenged, invalidated, ignored,
      circumvented or otherwise rendered unenforceable, or that the rights arising
      under our existing or future common law trademark
      rights, copyrights, trade secrets and non-disclosure agreements and other
      contractual provisions will provide meaningful protection or any commercial
      advantage to us.





Despite
      our efforts to protect our proprietary rights, unauthorized parties may attempt
      to copy aspects of our products and services or obtain and use information
      that
      we regard as proprietary. Unauthorized use of our proprietary technology could
      harm our business. Litigation to protect our intellectual property rights can
      be
      costly and time-consuming to prosecute, and we cannot assure you that we will
      be
      able to enforce our rights or prevent other parties from developing similar
      technology or designing around our intellectual property.




**Although
      we believe that our products and services do not and will not infringe upon
      the
      patents or violate the proprietary rights of others, it is possible such
      infringement or violation has occurred or may occur which could have a material
      adverse effect on our business.**





In
      the
      event that products and services we sell are deemed to infringe upon the patents
      or proprietary rights of others, we could be required to modify our products
      and
      services or obtain a license for the manufacture and/or sale of such products
      and services. In such event, we cannot assure you that we would be able to
      do so
      in a timely manner, upon acceptable terms and conditions, or at all, and the
      failure to do any of the foregoing could have a material adverse effect upon
      our
      business. Moreover, we cannot assure you that we will have the financial or
      other resources necessary to enforce or defend a patent infringement or
      proprietary rights violation action. In addition, if our products and services
      or proposed products and services are deemed to infringe or likely to infringe
      upon the patents or proprietary rights of others, we could be subject to
      injunctive relief and, under certain circumstances, become liable for damages,
      which could also have an adverse effect on our business.




**We
      face competition from other companies developing hybrid
      technology.**





There
      are
      other companies in the hybrid electric area developing technologies. The major
      automotive manufacturers are targeting passenger vehicles and light-duty
      vehicles and their technology could potentially be applied to medium-duty and
      heavy-duty commercial vehicles as well. We
      cannot
      assure you that
      our
      competitors will not be able to duplicate our technology or provide products
      and services
      similar to ours more efficiently. Many of the potential competitors in the
      market are also organizations with access to significant resources that may
      be
      applied to research and development of hybrid electric vehicle and PHEV technologies. Other clean vehicle technologies are also progressing and their
      arrival may change the relative economics of the technology solutions. Although
      hybrid technology can potentially improve the efficiency of all technologies
      in
      the area, we
      cannot
      assure you that
      we
      will have a role in new technologies that emerge.





**Our
      business plan includes dependence upon products developed by third parties
      and
      our inability to successfully integrate our technology with third parties’
products or secure resources from third parties could adversely affect our
      business.**





To
      be
      commercially useful, our technology for hybrid electric vehicles and Plug-in
      Hybrid Electric Vehicles must, to a certain extent, be integrated into products
      manufactured by third parties. There are no guarantees that third parties will
      continue to manufacture appropriate products or, if they do manufacture such
      products, that they, or the customers who purchase such products, will choose
      to
      use our technology. Any integration, design, manufacturing or marketing problems
      encountered by third parties could adversely affect the market for our control
      systems technology and our financial results.


13


Our
      strategy is to effectively utilize the resources that exist in the automotive
      sector and, accordingly, our internal resources are focused on core product
      development and related activities. We substantially depend upon third parties
      for several critical elements of our business plan, including, but not limited
      to, product and component manufacturing and assembly, technological development
      and testing. We
      cannot
      assure you that
      such
      third parties
      resources will continue to be suitable, available and affordable or in a
      position to assist us in achieving our objectives. While
      we
      have entered into relationships with suppliers of some key components for our
      products, we do not know when or whether we will secure supply relationships
      for
      all required components and subsystems for our Plug-in
      Hybrid Electric Vehicle system,
      or whether such relationships will be on terms that will allow us to achieve
      our
      objectives. Our business, prospects, results of operations and financial
      condition could be harmed if we fail to secure relationships with entities
      that
      can develop or supply the required components for our products and provide
      the
      required distribution and servicing support.





**We
      use a variety of components in our businesses, and significant shortages or
      price increases could increase operating costs and adversely affect the
      competitive position of our products.**





The
      major
      component requirements for our Plug-in Hybrid Electric Vehicle system include
      batteries, semiconductors and electric drive motors. We utilize off-the-shelf
      components for each of our major requirements and are not significantly
      dependent on any one or a few suppliers. Significant shortages of such
      components could affect the prices we pay for such components, which could
      adversely affect our results of operations.





**Changes
      in government policies and regulation, including environmental policies, could
      affect our business.**





To
      date,
      the markets targeted by us have been influenced by government regulation,
      including environmental laws, regulations and policies emerging in various
      parts
      of the United States. There can be no guarantee that these laws, regulations
      and
      policies will not change. Changes in these laws, regulations and policies could
      result in decreased interest and demand in our target markets for hybrid
      electric vehicles and Plug-in Hybrid Electric Vehicles. In addition, we
      cannot
      assure you that
      changes in these laws, regulations and policies or their application will not
      require further expenditures by us to further develop our
      technology.





**A
      malfunction of our product could subject us to product liability or tort
      claims.**





A
      malfunction or the inadequate design of our products could result in product
      liability or other tort claims. Accidents involving our products could lead
      to
      personal injury or physical damage. Any liability for damages resulting from
      malfunctions could be substantial and could materially adversely affect our
      business and results of operations. In addition, a well-publicized actual or
      perceived problem could adversely affect the market’s perception of our
      products. This could result in a decline in demand for our products, which
      would
      adversely affect our financial condition and results of operations.





**We
      may engage in additional financing that could lead to dilution of existing
      investors.**





We
      have
      relied on equity financing, debt financing and governmental funding to carry
      on
      our business to date, which has consisted primarily of internal and
      customer-related product development, the negotiation of strategic alliances
      and
      marketing activities. Any future financings by us may result in substantial
      dilution of the holdings of existing stockholders and could have a negative
      impact on the market price of our common stock. Furthermore, we cannot assure
      you that such future financings will be possible.





**Risks
      Related to Our Common Stock**




**Our
      common stock may be considered a “penny stock” and may be difficult to
      sell.**




The
      SEC
      has adopted regulations which generally define “penny stock” to be an equity
      security that has a market or exercise price of less than $5.00 per share,
      subject to specific exemptions. The market price of our common stock may be
      below $5.00 per share and therefore may be designated as a “penny stock”
according to SEC rules. This designation requires any broker or dealer selling
      these securities to disclose certain information concerning the transaction,
      obtain a written agreement from the purchaser and determine that the purchaser
      is reasonably suitable to purchase the securities. These rules may restrict
      the
      ability of brokers or dealers to sell our common stock and may affect the
      ability of our stockholders to sell their shares. In addition, since our common
      stock is currently quoted on the OTC Bulletin Board, our stockholders may find
      it difficult to obtain accurate quotations of our common stock and may find
      few
      buyers to purchase the stock or a lack of market makers to support the stock
      price.




**A
      significant number of the shares of our common stock are eligible for sale,
      and
      their sale could depress the market price of our common
      stock.**





Sales
      of
      a significant number of shares of common stock in the public market could harm
      the market price of our common stock. As of December 31, 2007, 3,890,770 shares
      of our Common stock are issuable upon the conversion of our Series A Convertible
      Preferred Stock. Up to 12,800,000 shares of common stock will be issuable upon
      conversion of our 10% senior secured convertible debentures and 10,586,346
      shares of common stock are issuable upon exercise of warrants to purchase common
      stock. Sales of common stock, including those that may be sold pursuant to
      Rule
      144, are likely to have a depressive effect on the market for our common stock.


14


**Our
      officers and directors have significant voting power and may take actions that
      may not be in the best interests of other stockholders.**





Our
      executive officers and directors control in excess of 34% of our outstanding
      voting securities. If these stockholders act together, they will be able to
      exert significant control over our management and affairs requiring stockholder
      approval, including approval of significant corporate transactions. This
      concentration of ownership may have the effect of delaying or preventing a
      change in control and might adversely affect the market price of our common
      stock. This concentration of ownership may not be in the best interests of
      all
      of our stockholders.




**We
      do not anticipate paying dividends in the foreseeable future; you should not
      buy
      our stock if you expect dividends.**





We
      currently intend to retain our future earnings to support operations and to
      finance expansion and, therefore, we do not anticipate paying any cash dividends
      on our capital stock in the foreseeable future. You should not buy our stock
      if
      you are expecting to receive cash dividends.





**Cautionary
      Language Regarding Forward-Looking Statements and Industry
      Data**




This
      report contains “forward-looking statements” within the meaning of the Private
      Securities Litigation Reform Act of 1995 that involve risks and uncertainties,
      many of which are beyond our control. Our actual results could differ materially
      and adversely from those anticipated in such forward-looking statements as
      a
      result of certain factors, including those set forth in this report. Important
      factors that may cause actual results to differ from projections include, but
      are not limited to, for example:





**•**
            adverse
                economic conditions,




**•**
            inability
                to raise sufficient additional capital to operate our
                business,




**•**
            unexpected
                costs, lower than expected sales and revenues, and operating
                defects,




**•**
            adverse
                results of any legal proceedings,




**•**
            the
                volatility of our operating results and financial
                condition,




**•**
            inability
                to attract or retain qualified senior management personnel,
                and




**•**
            other
                specific risks that may be referred to in this
                report.




All
      statements, other than statements of historical facts, included in this report
      regarding our strategy, future operations, financial position, estimated revenue
      or losses, projected costs, prospects and plans and objectives of management
      are
      forward-looking statements. When used in this report, the words “will,” “may,”
“believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “plan” and
      similar expressions are intended to identify forward-looking statements,
      although not all forward-looking statements contain such identifying words.
      All
      forward-looking statements speak only as of the date of this report. We
      undertake no obligation to update any forward-looking statements or other
      information contained herein. Stockholders and potential investors should not
      place undue reliance on these forward-looking statements. Although we believe
      that our plans, intentions and expectations reflected in or suggested by the
      forward-looking statements in this report are reasonable, we cannot assure
      stockholders and potential investors that these plans, intentions or
      expectations will be achieved. We disclose important factors that could cause
      our actual results to differ materially from our expectations under “Risk
      Factors” and elsewhere in this report. These cautionary statements qualify all
      forward-looking statements attributable to us or persons acting on our
      behalf.




Information
      regarding market and industry statistics contained in this report is included
      based on information available to us that we believe is accurate. It is
      generally based on academic and other publications that are not produced for
      purposes of securities offerings or economic analysis. Forecasts and other
      forward-looking information obtained from these sources are subject to the
      same
      qualifications and the additional uncertainties accompanying any estimates
      of
      future market size, revenue and market acceptance of products and services.
      We
      have no obligation to update forward-looking information to reflect actual
      results or changes in assumptions or other factors that could affect those
      statements. See “Risk Factors” for a more detailed discussion of uncertainties
      and risks that may have an impact on our future results.




We
      undertake no obligation to publicly update forward-looking statements. You
      are
      advised to carefully read the “Risk Factors” set forth above in this report and
      any further disclosures we make on related in our Form 10-QSB and 8-K reports
      to
      the SEC, and our press releases. You should understand that it is not possible
      to predict or identify all factors that may affect future results. Consequently,
      you should not consider the “Risk Factors” set forth in Part II of this 2007
      Form 10-KSB to be a complete discussion of all potential risks or
      uncertainties *.*


15




**ITEM
      2. DESCRIPTION OF PROPERTY.**




We
      currently have a lease for approximately 10,000 rentable square feet of office
      and manufacturing space at our corporate headquarters in Hauppauge, New York.
      The lease provides for monthly rental payments of approximately $7,000 and
      increases approximately 3% per year on July 1 of each year. The lease expires
      in
      June 2009. We believe our leased space is adequate for us at this
      time.




**ITEM
      3.  LEGAL PROCEEDINGS.**




On
      January 16, 2008, Amity Truck Service Corp. commenced an action against Odyne
      Corporation and others in the Supreme Court, Suffolk County seeking to recover
      damages based on alleged facts concerning our commercial relationship with
      the plaintiff in the latter part of 2006 and the early part of 2007 which
      culminated in an Exclusive Sales and Marketing Agreement, whereby the plaintiff
      agreed to serve as the exclusive retrofitting installer of our plug-in
      hybrid electric propulsion systems for medium and heavy trucks and as the
      exclusive distributor of such vehicles in the New York metropolitan area. It
      is
      our opinion that the alleged facts, even if true, do not provide a legal basis
      for recovery, and we have filed a motion to dismiss the litigation on the
      grounds that the complaint fails to state any viable cause of action. The motion
      was submitted to the court on February 27, 2008 and is presently
      pending. Our management believes that we have a reasonable chance of
      succeeding in dismissing the action, although we cannot predict the outcome
      of
      the motion and the action.




Apart
      from the legal proceeding noted in the previous paragraph, we are not party
      to
      any legal proceedings, nor are we aware of any contemplated or pending legal
      proceedings against us.





**ITEM
      4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS.**




We
      did
      not submit any matters to a vote of security holders in the fourth quarter
      of
      the fiscal year ended December 31, 2007.


16


**PART
      II**





**ITEM
      5.  MARKET FOR COMMON EQUITY , RELATED STOCKHOLDER
      MATTERS****AND
      SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES****.**




**Market
      Information**




Our
      shares of common stock are quoted and listed for trading on the OTC Bulletin
      Board under the symbol ODYC. Our symbol prior to the closing of our reverse
      merger transaction on October 17, 2006, was TING; however, there was no trading
      of our stock prior to the closing of such transaction.





The
      following table sets forth the high and low closing prices for our common stock
      for the periods indicated as reported by the OTC Bulletin Board:




Year
                ended December 31,Quarter
            
            2007
            
            2006High
            
            Low
            
            High
            
            LowFirst
            
            
            2.40
            
            
            1.63
            
            
            —
            
            
            —Second
            
            
            1.95
            
            
            .28
            
            
            —
            
            
            —Third
            
            
            .40
            
            
            .15
            
            
            —
            
            
            —Fourth
            
            
            .70
            
            
            .23
            
            
            —
            
            
            —Fourth
                (October 18 to December 31, 2006)
            
            $
            
            
            
            
            
            
            2.85
            
            
            1.60





On
      March
      26, 2008, the closing price of our common stock, as reported by the OTC Bulletin
      Board, was $.50 per share. The high and low closing prices for our common stock,
      as reported by the OTC Bulletin Board, since January 1, 2008 were $.75 and
      $.40,
      respectively.




The
      market information for the year ended December 31, 2006 begins on October 17,
      2006 following the closing date of our reverse merger transaction. Prior to
      such
      time, pricing information related only to Technology Integration Group,
      Inc.




These
      bid
      prices represent prices quoted by broker-dealers on the OTC Bulletin Board.
      The
      quotations reflect inter-dealer prices, without retail mark-up, mark-down or
      commissions, and may not represent actual transactions.




As
      of
      March 26, 2008, there were approximately 60 holders of record of our common
      stock. However, we believe that there are significantly more beneficial holders
      of our common stock as many beneficial holders hold their stock in “street
      name.”




**Dividend
      Policy**




We
      do not
      expect to pay a dividend on our common stock in the foreseeable future.
 The payment of dividends on our common stock is within the discretion of
      our board of directors , subject to our certificate of incorporation . We intend
      to retain any earnings for use in our operations and the expansion of our
      business. Payment of dividends in the future will depend on our future earnings,
      future capital needs and our operating and financial condition, among other
      factors.




**Recent
      Sales of Unregistered Securities**





In
      December 2007, we issued a warrant to UEHC, Inc. to purchase an aggregate of
      up
      to 1,000,000 shares of our common stock at an exercise price of $1.00 per share.
      The warrant is exercisable for three years, contains customary change of control
      buy-out provisions and is not redeemable. The warrant was not registered under
      the Securities Act of 1933 in reliance upon the exemption from registration
      provided by Section 4(2) of that Act and Regulation D promulgated under that
      section, which exempts transactions by an issuer not involving any public
      offering. This security may not be offered or sold in the United States absent
      registration or an applicable exemption from the registration requirements.
      The
      warrant contains a legend stating the same.





Other
      than the warrant issuance noted in the previous paragraph, there were no sales
      of unregistered securities other than as reported in prior reports on Form
      10-KSB, 10-QSB or 8-K. In addition, see Item 1, Description of Business -
      Organizational History, for information concerning our October 2007 and October
      2006 private placement transactions and reverse merger.





**Purchases
      of Equity Securities by the Small Business Issuer and Affiliated
      Purchasers**





We
      did
      not repurchase any shares of our common stock in the fourth quarter of the
      year
      ended December 31, 2007.


17





**ITEM
      6.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION.**





*The
      following discussion of our financial condition and results of operations should
      be read in conjunction with our financial statements and related notes included
      in this report. This discussion includes forward-looking statements that involve
      risks and uncertainties. As a result of many factors, our actual results may
      differ materially from those anticipated in these forward-looking statements.*




**Overview**





We
      completed a reverse merger transaction on October 17, 2006, in which we caused
      PHEV Acquisition Corp., a New York corporation and our newly-created,
      wholly-owned subsidiary, to be merged with and into Odyne Corporation, a New
      York corporation (Odyne New York). Until the merger, we engaged in the business
      of providing marketing, communications and technical integration advice to
      small
      and medium-sized businesses , which we discontinued following the merger and
      succeeded to the business of Odyne New York. The directors and management of
      Odyne New York thereupon became our directors and management. On October 17,
      2006, we changed our corporate name from Technology Integration Group Inc.
      to
      Odyne Corporation.




Since
      our
      future business will be that of Odyne New York only, the information in this
      Annual Report is that of Odyne New York as if Odyne New York had been the
      registrant for all the periods presented in this report. Management’s Discussion
      and Analysis or Plan of Operation presented in this Item 6 and the audited
      consolidated financial statements presented in Item 7 of this report include
      those of Odyne New York prior to the reverse merger, as these provide the most
      relevant information for us on a continuing basis.




For
      accounting purposes, Odyne New York was the acquirer in the reverse merger
      transaction, and consequently the transaction is treated as a recapitalization
      of that company. Odyne New York’s financial statements are our historical
      financial statements.




The
      following discussion of our financial condition and results of operations should
      be read in conjunction with our financial statements and related notes included
      under Item 7 of this report.





**Results
      of Operations - Year Ended December 31, 2007 Compared to December 31,
      2006**





**Revenues**




We
      engage
      in two primary sources of revenue generating activities, revenues from
      fixed-price contracts and revenue from time and material contracts. Total
      revenues were $610,945 and $242,945 for the years ended December 31, 2007 and
      2006, respectively, an increase of $368,000, or 151%. During the year ended
      December 31 2007, we delivered our first commercialized OEM PHEV production
      system.




**Cost
      of Revenues**





Cost
      of
      revenues for the years ended December 31, 2007 and 2006 were $1,207,080 and
      $410,213, respectively, an increase of $796,867, or 194%. We had a gross loss
      on
      revenues of $596,135 compared to gross loss on revenues of $167,268 for the
      years ended December 31, 2007 and 2006, respectively. Cost of revenues for
      the
      year ended December 31, 2007 included direct costs in the amount of $895,964,
      other costs, including allocated general and administrative expenses, of
      $268,116 and the establishment of warranty reserves of $43,000. Cost of revenues
      for the year ended December 31, 2006 included direct costs in the amount of
      $370,361 and other costs, including allocated general and administrative
      expenses, of $39,852. We did not record any reserve for warranty during the
      year
      ended December 31, 2006.





**Research
      and Development Expense**




Research
      and development expenses were $1,573,594 and $755,429 for the years ended
      December 31, 2007 and 2006, respectively, an increase of $818,165, or 108%.
      This
      increased spending, primarily labor and material cost, was incurred to further
      develop our PHEV technology that is incorporated into our products. This
      increase represents a planned application of private placement funds.





**General
      and Administrative Expenses**





General
      and administrative expenses for the years ended December 31, 2007 and 2006
      were
      $1,922,244 and $758,283, respectively, an increase of $1,163,961, or 153%.
      This
      includes the following increases: $445,366 in professional fees associated
      with
      becoming a publicly traded company, $169,603 in salaries associated with the
      hiring of additional staff, $144,187 in sales, marketing and promotional
      activities, $140,000 in allowances for uncollectible accounts, $93,930 in
      payroll benefits including option grants, $57,410 in depreciation expense,
      $17,342 in insurance associated with increased general liability and directors
      and officers coverage and $96,123 of other cost associated with our expanded
      operational activities.


18


**Other
      Income and Expense**




Interest
      income was $62,878 and $14,610 the years ended December 31, 2007 and 2006,
      respectively. This increase resulted from interest earned on the funds we
      received in connection with our two private placements. Interest expense was
      $232,995 and $343,598 for the years ended December 31, 2007 and 2006,
      respectively.





**Liquidity
      and Capital Resources**




Our
      net
      loss amounted to $4,262,090 and $2,009,968 for the years ended December 31,
      2007
      and 2006, respectively. Our accumulated deficit amounted to $8,103,167 and
      $3,841,077 at December 31, 2007 and 2006, respectively. We used $3,732,075
      to
      fund our operating activities during the year ended December 31, 2007 and
      $1,237,106 to fund operations during the year ended December 31, 2006. As of
      December 31, 2007 and 2006, we had $1,829,467 and $2,969,858, respectively,
      of
      working capital available to fund our ongoing operations.





On
      October 26, 2007, we completed a private placement of 10% senior secured
      convertible debentures and warrants to purchase common stock, and received
      gross
      proceeds in the amount of $3.2 million. The net proceeds of the private
      placement of approximately $2.8 million are being used by us for our working
      capital and capital expenditure requirements and to repay a $250,000 bridge
      note
      we received from Alan Tannenbaum, our Chief Executive Officer. The debentures
      are due on April 24, 2009, bear interest at 10% per year, payable in cash or
      freely-tradable common stock, at our option.




On
      March
      27, 2008, we completed a private placement of shares of common stock and
      warrants to purchase common stock, and received gross proceeds in the amount
      of
      $7,000,000. The net proceeds of the private placement of $6,354,996 are being
      used by us for our working capital and capital expenditure
      requirements.





We
      believe that the proceeds we received in connection with our March 2008 private
      placement improved our overall liquidity. However, we will still be required
      to
      devote all of our capital resources to pursuing our research and development
      initiatives, developing our manufacturing infrastructure and penetrating
      possible markets Plug-in Hybrid Electric Vehicle system. We will need to raise
      substantial additional funds to achieve commercialization of our Plug-in Hybrid
      Electric Vehicle system and continue the pursuit of our business
      plan.





We
      have
      taken certain measures to conserve our liquidity while we continue the effort
      to
      develop our technology. Our management believes that our current level of
      capital resources is sufficient to sustain our business through December 31,
      2008. However, we cannot assure you that we will be successful in our
      efforts to fully commercialize our Plug-in Hybrid Electric Vehicle system or
      that the commercialization of this technology will actually improve our
      operating results. Additionally, we cannot assure you that unforeseen
      circumstances will not have a material affect on our business that could require
      us to raise additional capital or take other measures to sustain operations
      in
      the event that outside sources of capital are not available. We have not secured
      any commitments for new financing at this time nor can we assure you that new
      capital will be available to us on acceptable terms, if at all. We also
      cannot assure you that even if we are successful in our efforts to raise
      additional capital, that the proceeds of any such financing transaction will
      enable us to develop our business to a level in which it is actually generating
      operating profits and positive cash flows.




*Net
      Cash Used in Operating Activities:* Net cash
      used in operating activities totaled $ 3,732,015 for the year ended December
      31,
      2007 as compared to cash flow used in operating activities of $1,237,106 for
      the
      year ended December 31, 2006. During the year ended December 31, 2007, the
      major
      components of cash used in operations included our net loss from operations
      of
      $4,262,090, an increase in our level of inventory of $194,830, an increase
      in
      our accounts receivable of $274,243 and a reduction of our billings in excess
      of
      cost of $57,500. Items that had a favorable impact on cash used in operating
      activities during the year ended December 31, 2007 included the use of
      restricted cash for investor relations activities of $227,583 and an increase
      in
      the amount of customer deposits in hand of $87,089. During the year ended
      December 31, 2006, cash used in operating activities included our net loss
      from
      operations of $1,237,106, an increase in our inventory of $127,593 and an
      increase in the amount of our pre paid expenses, primarily insurance, by
      $103,482. Items that had a favorable impact on cash used in operating activities
      included an increase in accounts payable of $182,018, an increase in accrued
      expenses and other liabilities of $113,248 and an increase in customer deposits
      on hand in the amount of $150,000.




*Net
      cash used in Investing activities:* We
      invested $78,632 in property and equipment during the year ended December 31,
      2007 as compared to $95,572 invested in property and equipment during the year
      ended December 31, 2006.




*Net
      Cash Provided by Financing Activities:* Net cash
      provided by financing activities during the year ended December 31, 2007
      included $2,765,624 of net proceeds we received from the issuance of our
      convertible debentures, receipt and repayment of a loan from our Chief Executive
      Officer in the amount of $250,000, the sale of a warrant for $55,115 and the
      payment of capital lease obligations in the amount of $6,817.





Net
      cash
      provided from financing activities during the year ended December 31, 2006
      included $4,355,319 of net proceeds from our issuance of series A convertible
      preferred stock, proceeds from convertible debentures of $250,000 and loans
      from
      officers in the amount of $73,000. We used cash in financing activities to
      pay
      down officer’s loans in the amount of $139,725, capital lease obligations of
      $6,644 and pay net credit line activity in the amount of $115,830.


19





On
      March
      29, 2007, we signed a Research and Development Contract Extension with NYSERDA
      to develop and install a PHEV system into a refuse vehicle provided by a third
      party. Our obligation under this agreement is to design and install the system
      and to provide NYSERDA with regular status reports. NYSERDA will provide funding
      up to an additional $161,046 for this effort. As of December 31, 2007, we
      had not obtained a refuse vehicle from the third party and have not incurred
      any
      costs related to this contract extension.





We
      have
      no commitments to invest in capital improvements.





**Impact
      of Inflation**




We
      expect
      to be able to pass inflationary increases for raw materials and other costs
      on
      to our customers through price increases, as required, and do not expect
      inflation to be a significant factor in our business.




**Seasonality**




Although
      our operating history is limited, we do not believe our products are
      seasonal.




**Off-Balance
      Sheet Arrangements**




There
      are
      no off-balance sheet arrangements between us and any other entity that have,
      or
      are reasonably likely to have, a current or future effect on our financial
      condition, changes in financial condition, revenues or expenses, results of
      operations, liquidity, capital expenditures or capital resources that is
      material to stockholders.




**Critical
      Accounting Policies and Estimates**




The
      preparation of our consolidated financial statements in conformity with
      accounting principles generally accepted in the United States of America
      requires our management to exercise its judgment. We exercise considerable
      judgment with respect to establishing sound accounting polices and in making
      estimates and assumptions that affect the reported amounts of our assets and
      liabilities, our recognition of revenues and expenses, and disclosures of
      commitments and contingencies at the date of the financial
      statements.





On
      an
      ongoing basis, we evaluate our estimates and judgments. Areas in which we
      exercise significant judgment include, but are not necessarily limited to,
      recording revenue and cost and cost of sales under production contracts using
      the percentage of completion method, establishing loss reserves of contracts
      in
      progress when necessary, equity transactions (compensatory and financing),
      and
      allocating costs among different cost centers and departments within our
      company. We have adopted certain polices with respect to our recognition of
      revenue that we believe are consistent with the guidance provided under
      Securities and Exchange Commission Staff Accounting Bulletin No.
      104.





We
      base
      our estimates and judgments on a variety factors including our historical
      experience, knowledge of our business and industry, current and expected
      economic conditions, the composition of our products and the regulatory
      environment. We periodically re-evaluate our estimates and assumptions with
      respect to these judgments and modify our approach when circumstances indicate
      that modifications are necessary.





While
      we
      believe that the factors we evaluate provide us with a meaningful basis for
      establishing and applying sound accounting policies, we cannot guarantee that
      the results will always be accurate. Since the determination of these estimates
      requires the exercise of judgment, actual results could differ from such
      estimates.





A
      description of significant accounting polices that require us to make estimates
      and assumptions in the preparation of our consolidated financial statements
      are
      as follows:




**Revenue
      Recognition.** We
      derive a significant portion of our revenues from production contracts that
      we
      account for using the percentage of completion method. Accordingly, we make
      estimates of costs to complete these contracts that we us a basis for recording
      revenue.





We
      apply
      the revenue recognition principles set forth under AICPA Statement of Position
      (“SOP”) 81-2 “Accounting for Production Type Contracts” and Securities and
      Exchange Commission Staff Accounting Bulletin (“SAB”) 104 “Revenue Recognition”
with respect to our revenue.




**Income
      Taxes** .
      We are
      required to determine the aggregate amount of income tax expense or loss based
      upon tax statutes in jurisdictions in which we conduct business. In making
      these
      estimates, we adjust our results determined in accordance with generally
      accepted accounting principles for items that are treated differently by the
      applicable taxing authorities. Deferred tax assets and liabilities, as a result
      of these differences, are reflected on our balance sheet for temporary
      differences, loss and credit carry forwards that will reverse in subsequent
      years. We also establish a valuation allowance against deferred tax assets
      when
      it is more likely than not that some or all of the deferred tax assets will
      not
      be realized. Valuation allowances are based, in part, on predictions that our
      management must make as to our results in future periods. The outcome of events
      could differ over time which would require us to make changes in our valuation
      allowance.


20




**Stock-Based
      Compensation** We
      have
      adopted SFAS No. 123(R) “Share Based Payment” (“SFAS 123(R)”).
      This statement is a revision of SFAS Statement No. 123, and supersedes
      APB Opinion No. 25, and its related implementation guidance.
      SFAS 123(R) addresses all forms of share based payment (“SBP”) awards
      including shares issued under employee stock purchase plans, stock options,
      restricted stock and stock appreciation rights. Under SFAS 123(R), SBP
      awards are measured at fair value on the awards’ grant date, based on the
      estimated number of awards that are expected to vest and results in a charge
      to
      operations.





We
      are
      also required to apply complex accounting principles with respect to accounting
      for financing transactions that we have consummated in order to finance the
      growth of our business. These transactions, which generally consist of
      convertible debt and equity instruments, require us to use significant judgment
      in order to assess the fair values of these instruments at their dates of
      issuance, which is critical to making a reasonable presentation of our financing
      costs and how we finance our business.





**Recently-issued
      Accounting Pronouncements**




In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value
      Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework
      for measuring fair value in generally accepted accounting principles and expands
      disclosures about fair value measurements. SFAS 157 is effective for financial
      statements issued for fiscal years beginning after November 15, 2007 and interim
      periods within those fiscal years. The adoption of this pronouncement did not
      have an effect on our consolidated financial statements.




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 provides
      companies with an option to report selected financial assets and liabilities
      at
      fair value and establishes presentation and disclosure requirements designed
      to
      facilitate comparisons between companies that choose different measurement
      attributes for similar types of assets and liabilities. SFAS 159 is effective
      for fiscal years beginning after November 15, 2007. We are in the process
      of evaluating the impact of the adoption of this statement on our results of
      operations and financial condition.





In
      June
      2007, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue
      No. 06-11, “Accounting for Income Tax Benefits on Dividends on Share-Based
      Payment Awards” (“EITF 06-11”) effective for reporting periods after December
      15, 2007.  EITF 06-11 addresses share-based payment arrangements with
      dividend protection features that entitle employees to receive (a) dividends
      on
      equity-classified non-vested shares, (b) dividend equivalents on
      equity-classified non-vested share units, or (c) payments equal to the dividends
      paid on the underlying shares while an equity-classified share option is
      outstanding, when those dividends or dividend equivalents are charged to
      retained earnings under Statement 123(R) and result in an income tax deduction
      for the employer.  A realized income tax benefit from dividends or dividend
      equivalents that are charged to retained earnings are paid to employees for
      equity-classified non-vested shares, non-vested equity share units, and
      outstanding equity share options should be recognized as an increase in
      additional paid in capital.  The amount recognized in additional paid-in
      capital for the realized income tax benefit from dividends on those awards
      should be included in the pool of excess tax benefits available to absorb
      potential future tax deficiencies on share-based payments.  We do not
      expect the adoption of this pronouncement to have a material impact on our
      financial position, results of operation and cash flows.





In
      December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS
      141R”), which establishes principles and requirements for how the acquirer
      recognizes and measures in its financial statements the identifiable assets
      acquired, the liabilities assumed, and any noncontrolling interest in the
      acquiree, goodwill acquired in the business combination or a gain from a bargain
      purchase. SFAS 141R is effective for business combinations with an acquisition
      date on or after the beginning of the first annual reporting period beginning
      on
      or after December 15, 2008. We expect SFAS 141R to have an impact on the
      accounting for any future business acquisitions as of the effective date.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”).
      SFAS 160 establishes accounting and reporting standards for the noncontrolling
      interest (minority interest) in a subsidiary and for the deconsolidation of
      a
      subsidiary. SFAS 160 requires (a) the ownership interest in the subsidiary
      held
      by parties other than the parent to be clearly identified and presented in
      the
      consolidated balance sheet within equity, but separate from the parent’s equity,
      (b) the amount of consolidated net income attributable to the parent and to
      the
      noncontrolling interest to be clearly identified and presented on the face
      of
      the consolidated statement of operations and (c) changes in a parent’s ownership
      interest while the parent retains its controlling financial interest in its
      subsidiary to be accounted for consistently. Entities must provide sufficient
      disclosures that clearly identify and distinguish between the interests of
      the
      parent and the interests of the noncontrolling owners. SFAS 160 is effective
      for
      financial statements issued for fiscal years beginning on or after December
      15,
      2008, and interim periods within those fiscal years. We are currently assessing
      the impact of SFAS 160 on our consolidated financial statements.


21


**ITEM
      7.  FINANCIAL STATEMENTS.**




Our
      audited financial statements for the years ended December 31, 2007 and 2006
      are
      included as a separate section of this report beginning on page
      F-1.





**ITEM
      8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE**  **.**




On
      September 10, 2007, we dismissed Marcum & Kliegman LLP (“Marcum”), as our
      independent registered public accounting firm. The reports of Marcum on our
      financial statements as of and for the fiscal year ended December 31, 2006
      did
      not contain an adverse opinion or disclaimer of opinion, nor were they qualified
      or modified as to uncertainty, audit scope or accounting principles.




Simultaneously
      with the dismissal of Marcum, we engaged Holtz Rubenstein Reminick LLP (“Holtz
      Rubenstein”) to act as our independent registered public accounting firm as
      successor to Marcum. Holtz Rubenstein is located at 125 Baylis Road, Melville,
      New York 11747.




The
      audit
      committee of our board of directors approved the dismissal of Marcum and this
      action was ratified by our board of directors. The audit committee
      simultaneously approved the appointment of Holtz Rubenstein as our independent
      registered public accounting firm and this action was ratified by our board
      of
      directors.





During
      our two most recent fiscal years, and the subsequent interim period prior to
      September 10, 2007, we did not consult Holtz Rubenstein regarding either: (i)
      the application of accounting principles to a specified transaction, completed
      or proposed, or the type of audit opinion that might be rendered on our
      financial statements, or (ii) any matter that was either the subject of a
      disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable
      event as described in Item 304(a)(1)(v) of Regulation S-K.




As
      of June 30, 2006, Marcum had advised us that it
      identified certain deficiencies in our internal controls over financial
      reporting that constitute a “material weakness.” The material
      weakness principally relates to our having limited segregation of
      duties within our accounting department and the need for us to strengthen our
      expertise with respect to the application of complex accounting principles
      involving equity transactions and SEC reporting rules. These control
      deficiencies have not resulted in any misstatements in our financial
      statements.  Our management has attempted to remedy these
      deficiencies by engaging outside consultants with the appropriate
      skills to address our ongoing accounting and finance needs.  We have
      authorized Marcum to respond fully to any inquiries of Holtz
      Rubenstein concerning the material weakness described above.




During
      Marcum’s engagement with us (i) there were no disagreements between us and
      Marcum on any matter of accounting principles or practices, financial statement
      disclosure or auditing scope or procedure which, if not resolved to the
      satisfaction of Marcum, would have caused Marcum to make reference to the
      subject matter of the disagreement in connection with its reports and (ii)
      there
      were no “reportable events,” as described in Item 304(a)(1)(iv) of Regulation
      S-B of the Securities Exchange Act of 1934, as amended, or the Exchange Act.
      The
      decision to replace Marcum was not the result of any disagreement between us
      and
      Marcum on any matter of accounting principle or practice, financial statement
      disclosure or audit procedure. Our board of directors deemed it in our best
      interest to change independent auditors.





On
      November 20, 2006, we terminated Most & Company, LLP (“ Most”) as our
      independent registered public accounting firm. Most audited our financial
      statements for the fiscal year ended June 30, 2006. The reason for the
      replacement of Most was that, following the merger, the former shareholders
      of
      Odyne own a majority of the outstanding shares of our common stock. Odyne is
      our
      primary business unit, and the independent registered public accountants of
      Odyne was the firm of Marcum & Kliegman LLP. We therefore retained Marcum as
      our independent registered public accounting firm effective as of November
      20,
      2006. Marcum is located at 655 Third Avenue, 16th Floor, New York, New York
      10017.




The
      appointment of Marcum was recommended and approved by our board of directors.
      During our two most recent fiscal years, and the subsequent interim period
      prior
      to November 20, 2006, we did not consult Marcum regarding either: (i) the
      application of accounting principles to a specified transaction, completed
      or
      proposed, or the type of audit opinion that might be rendered on Odyne’s
      financial statements, or (ii) any matter that was either the subject of a
      disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable
      event as described in Item 304(a)(1)(v) of Regulation S-K.




Most’s
      report on our financial statements for each of the past two fiscal years ended
      June 30, 2005 and 2006, did not contain any adverse opinion or disclaimer of
      opinion and was not qualified as audit scope or accounting principles.




During
      the two most recent fiscal years ended June 30, 2005 and 2006, and the interim
      period from the date of the last audited financial statements to November 20,
      2006, (i) there were no disagreements between us and Most on any matter of
      accounting principles or practices, financial statement disclosure or auditing
      scope or procedure which, if not resolved to the satisfaction of Most, would
      have caused Most to make reference to the subject matter of the disagreement
      in
      connection with its reports and (ii) there were no “reportable events,” as
      described in Item 304(a)(1)(iv) of Regulation S-B of the Securities Exchange
      Act
      of 1934, as amended, or the Exchange Act. The decision to replace Most was
      not
      the result of any disagreement between us and Most on any matter of accounting
      principle or practice, financial statement disclosure or audit procedure. Our
      board of directors deemed it in our best interest to change independent auditors
      following the closing of the merger transaction.


22


**ITEM
      8A(T). CONTROLS AND PROCEDURES.**





Our
      management, including our Chief Executive Officer and Chief Financial Officer,
      has evaluated the effectiveness of the design and operation of our disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
      15d-15(e)) as of the end of the period covered by this report. Based upon that
      evaluation, our Chief Executive Officer and Chief Financial Officer have
      concluded that the disclosure controls and procedures as of December 31, 2007
      are effective to ensure that information required to be disclosed in the reports
      we file or submit under the Exchange Act is recorded, processed, summarized
      and
      reported within the time periods specified in the Securities and Exchange
      Commission’s rules and forms and that such information is accumulated and
      communicated to our management, including our Chief Executive Officer and Chief
      Financial Officer, to allow timely decisions regarding disclosure.





**Management’s
      Annual Report on Internal Control Over Financial Reporting**





Our
      management is responsible for establishing and maintaining an adequate system
      of
      internal control over financial reporting. Our internal control over financial
      reporting includes those policies and procedures that:





·
            pertain
                to the maintenance of records that, in reasonable detail, accurately
                and
                fairly reflect the transactions and dispositions of our
                assets;





·
            provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of our financial statements in accordance with generally
                accepted accounting principles in the United States, and that our
                receipts
                and expenditures are being made only in accordance with authorizations
                of
                our management and directors; and





·
            provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of our assets that could
                have
                a material effect on the financial
                statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Projections of any evaluation of effectiveness
      to future periods are subject to the risk that controls may become inadequate
      because of changes in conditions, or that the degree of compliance with the
      policies or procedures may deteriorate. All internal control systems, no matter
      how well designed, have inherent limitations. Therefore, even those systems
      determined to be effective can provide only reasonable assurance with respect
      to
      financial statement preparation and presentation. Because of the inherent
      limitations of internal control, there is a risk that material misstatements
      may
      not be prevented or detected on a timely basis by internal control over
      financial reporting. However, these inherent limitations are known features
      of
      the financial reporting process. Therefore, it is possible to design into the
      process safeguards to reduce, though not eliminate, this risk.




Our
      management assessed the effectiveness of our system of internal control over
      financial reporting as of December 31, 2007. In making this assessment, our
      management used the framework in *Internal
      Control — Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission
      (“COSO”). Based on our assessment and the criteria set forth by COSO, our
      management believes that we did maintain effective internal control over
      financial reporting as of December 31, 2007.





This
      annual report does not include an attestation report of our registered public
      accounting firm regarding internal control over financial reporting. Our
      management’s report was not subject to attestation by our registered public
      accounting firm pursuant to temporary rules of the Securities and Exchange
      Commission that permit us to provide only our management’s report in this annual
      report.





There
      have been no significant changes in our internal control over financial
      reporting identified in connection with the evaluation that occurred during
      our
      last fiscal quarter that have materially affected, or that are reasonably likely
      to materially affect, our internal controls over financial
      reporting.





**ITEM
      8B. OTHER INFORMATION.**




None.




23





**PART
      III**




**ITEM
      9.****DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
      COMPLIANCE WITH SECTION 16****(a)
      OF THE EXCHANGE ACT.**




**Executive
      Officers and Directors**




The
      following table shows the positions held by our board of directors and executive
      officers, and their ages as of March 26, 2008:




**Name**
            
            **Age**
            
            **Position**Alan
                Tannenbaum
            
            40
            
            Chief
                Executive Officer and DirectorJoshua
                A. Hauser
            
            62
            
            President,
                Chief Operating Officer and DirectorJoseph
                M. Ambrosio
            
            38
            
            Executive
                Vice President-Engineering and Chief Technology OfficerKonstantinos
                Sfakianos
            
            38
            
            Executive
                Vice President-OperationsDaniel
                Bartley
            
            47
            
            Chief
                Financial OfficerBruce
                E. Humenik
            
            59
            
            DirectorStanley
                W. Struble
            
            62
            
            DirectorS.
                Charles Tabak
            
            75
            
            Director





The
      principal occupations for the past five years (and, in some instances, for
      prior
      years) of each of our directors and executive officers are as
      follows:




***Alan
      Tannenbaum*** has
      served as our Chief Executive Officer and as a member of our board of directors
      since September 2007. Immediately prior to joining our company, Mr. Tannenbaum
      was an independent investor and consultant. From 1998 to May 2006, he had been
      a
      Managing Director of Lehman Brothers Inc., a leading investment banking firm.
      At
      Lehman Brothers, he served as the Head of Institutional Equity Sales from 2002
      to 2006, where he was responsible for sales production of more than $300 million
      and managed a team of 85 senior sales people in nine offices around the world,
      leading his group to a number one institutional sales ranking on Wall Street.
      Mr. Tannenbaum also served at Lehman Brothers as the Head of European Equity
      Capital Markets in London in 2001 and 2002, and Head of Telecom and Media Equity
      Capital Markets from 1998 to 2000. Mr. Tannenbaum received a B.A. degree from
      the University of Michigan.




***Joshua
      A. Hauser*** has
      served as our President and Chief Operating Officer and as a member of our
      board
      of directors since October 2006, and joined Odyne in July 2004 as Senior Vice
      President, Business Development and Finance and as a director and in June 2006
      became its President and Chief Operating Officer. He brings over 30 years
      experience in industrial and military electronics. From 1967 to 1984, he held
      various positions, including Vice President of Manufacturing, Vice President
      of
      Operations and General Manager at Lambda Electronics, a division of Veeco
      Instruments Inc. Veeco Instruments designed and manufactured electronic power
      supplies and instrumentation used primarily in semiconductor processing. From
      1984 to 1989, he was Executive Vice President and Director of Veeco Instruments
      Inc., a New York Stock Exchange listed company; from 1989 to 1996, he was
      Managing Director of Unitech plc, a London Stock Exchange listed company that
      manufactured and designed electronic power supplies and control system
      components; and from 1996 to 1999, he was President of Siebe Power Controls,
      a
      division of Siebe plc, a London Stock Exchange listed company. Siebe plc was
      a
      diversified manufacturer of environmental and process control systems, control
      system components and other electronic subsystems including electronic power
      supplies. Mr. Hauser has previously served on the board of directors of Veeco
      Instruments Inc., NEMICLambda KK, a Japanese manufacturer of electronic power
      supplies (Tokyo Stock Exchange listed), and Unitech plc. Since leaving Siebe
      plc
      in April 1999, Mr. Hauser has managed a successful management consulting
      business. He is currently also the Chairman of the Board of Transistor Devices,
      Inc., a manufacturer of electronic power supplies and power systems. Mr. Hauser
      received B.S. and M.S. degrees in Electrical Engineering from Columbia
      University. He is presently a member of the Board of Visitors of the School
      of
      Engineering at Columbia University.


24


***Joseph
      M. Ambrosio*** has
      served as our Executive Vice President - Engineering, Chief Technology Officer
      since October 2006, and in similar positions with Odyne, of which he was
      co-founder, since August 2001. Mr. Ambrosio has over 12 years of experience
      in
      the alternative fuel transportation industry and substantial experience in
      printed circuit board production, quality control and industrial engineering.
      He
      co-founded Neocon Technologies in 1995 (which ceased operations in 2000) and
      Odyne Corporation in August 2001 with Konstantinos Sfakianos. Mr. Ambrosio’s
      experience in the alternative-fuel transportation industry includes design,
      development, and integration of a variety of liquid and gaseous fuel systems,
      battery energy and thermal management, auxiliary power unit systems for PHEVs
      (fuel cell, micro turbine, internal combustion engine), and testing procedures.
      He has authored six technical reports published by the Electric Power Research
      Institute on battery energy and thermal management for heavy and light duty
      electric vehicles. In addition to EV/PHEV system integration and research and
      development, Mr. Ambrosio has worked closely with electric utilities such as
      LILCO, Con Edison, NYPA and NYSEG, along with organizations such as the Electric
      Power Research Institute in alternative fuel vehicle development and drive
      system development and support programs. Mr. Ambrosio currently serves as
      Treasurer of the Greater Long Island Clean Cities Coalition. He received a
      B.S.
      degree in Mechanical Engineering from New York Institute of Technology and
      has
      been an active member of the Society of Automotive Engineers for 10
      years.




***Konstantinos
      (Gus) Sfakianos*** has
      served as our Executive Vice President - Operations since October 2006, and
      in a
      similar position with Odyne, of which he was co-founder, since August 2001.
      Mr.
      Sfakianos has over 10 years of experience in the alternative fuel transportation
      industry, specifically EVs and HEVs and battery energy storage systems. He
      co-founded Neocon Technologies in 1995 and Odyne Corporation in August 2001
      with
      Mr. Ambrosio. Mr. Sfakianos has worked with organizations such as Blue Bird
      Corporation, Westinghouse/Northrop Grumman, Solectria, TDM (Ford subcontractor),
      Chrysler, Exide Europe, Baker Electric, GNB, Ovonics, HPower and many more.
      Some
      of his technical accomplishments include the development of several unique
      and
      application specific battery energy storage systems, charging algorithms, and
      EV/PHEV systems control design. As co-founder of Neocon Technologies, he was
      responsible for all EV field service, in house production of energy storage
      systems and general operations. At Odyne, Mr. Sfakianos is responsible for
      all
      product regulatory standards and certifications. Mr. Sfakianos received a B.S.
      degree in Mechanical Engineering, with a concentration in Energy Systems, from
      New York Institute of Technology.




***Daniel
      Bartley*** has
      served as our Chief Financial Officer since October 2006. Mr. Bartley has over
      22 years of consulting and financial accounting experience. From June 2004
      through April 2006, Mr. Bartley served as Vice President-Controller of Levitz
      Home Furnishings, Inc., a specialty retailer of home furnishings. From 1992
      through May 2004, Mr. Bartley served as President of Bartley & Associates,
      Ltd., a financial consulting firm that specialized in advising businesses in
      asset purchase transactions, financial advisory services and financial reporting
      systems. From 1989 through 1992, Mr. Bartley served as Controller of General
      Utilities, Inc., a company that operated in the fuel industry and home security
      industries. From 1984 through 1989, Mr. Bartley served as a Supervising
      Consultant for the Emerging Business Department of Deloitte, LLP where he was
      responsible for financial statement audits and advisory services for early
      stage
      companies. Mr. Bartley received a B.S. degree in accounting from Long Island
      University and M.A. in Theology from the Seminary of the Immaculate Conception.
      Mr. Bartley is a Certified Public Accountant.




***Bruce
      E. Humenik*** has
      served as a member of our board of directors since October 2006. Mr. Humenik
      has
      more than 30 years of management experience in the electric and gas utility
      industry, including, corporate planning, finance, marketing, research and
      development and customer service. Since 1995, Mr. Humenik has been a Senior
      Vice
      President at Applied Energy Group, Inc., a provider of consulting services
      to
      energy companies. During his time with Applied Energy Group, Inc., Mr. Humenik
      has worked on consulting projects with the Long Island Power Authority, Keyspan,
      El Paso Electric Company and Bermuda Electric Light Company, Ltd., among others.
      From 1970 until 1995, Mr. Humenik worked for Long Island Lighting Company,
      where
      he served as a Manager of Conservation Services. Mr. Humenik received a B.S.
      degree in Electrical Engineering from Manhattan College and an M.B.A. from
      Long
      Island University.




***Stanley
      W. Struble*** has
      served as a member of our board of directors since October 2006. Mr. Struble
      has
      37 years of experience in sales and marketing with Snap-on Tools Company, a
      manufacturer and marketer of tools, diagnostics and equipment solutions for
      professional tool users. Mr. Struble has held a number of positions with Snap-On
      Tools Company including Eastern Division Vice President (2004 to 2006), Eastern
      Regional Manager (1999 to 2004) and Northeast Regional Manager (1992 to 1998).
      Mr. Struble received a B.S. degree in Business Administration from New England
      College.




***S.
      Charles Tabak*** has
      served as a member of our board of directors since October 2006. Mr. Tabak
      has
      more than 50 years of business experience in varying positions. From 1991 to
      August 2004, Mr. Tabak served as Chief Executive Officer and General Counsel
      for
      Arc Medical & Professional Personnel, Inc., a privately owned and operated
      staffing company that provided temporary and permanent medical personnel
      placements as well as DNA genetic testing services. From 1969 to 1990, Mr.
      Tabak
      served as a principal and as Executive Vice President and General Counsel to
      Channel Home Centers Inc., a multi state retailer of home improvement products.
      From 1964 to 1969, Mr. Tabak served as Director of Finance for the JJ Newberry
      Co., which owned and operated over 1,000 retail stores and restaurants. From
      1959 to 1964, Mr. Tabak served as assistant in-house counsel, Director of
      Internal audit- Expense Controller and Director of Accounts for Bloomingdale’s,
      a division of Federated department stores that owned and operated retail
      department stores. From 1957 to 1959, Mr. Tabak served as a Senior staff Auditor
      for Ernst & Ernst, then a Big 8 worldwide accounting firm. Mr. Tabak
      received a B.S. degree in accounting, as well as a J.D. degree from New York
      University. Mr. Tabak is admitted to practice law in the State of New York
      and
      before the U.S. Supreme Court.


25


All
      directors hold office until the next annual meeting of stockholders and the
      election and qualification of their successors. Officers are elected annually
      by
      the board of directors and serve at the discretion of the board.




**Board
      Committees**




On
      October 17, 2006, the board of directors authorized the creation of an audit
      committee, compensation committee, and nominations and governance committee.




***Audit
      Committee*** *.* We
      established an audit committee of the board of directors, which is chaired
      by
      Mr. Tabak, who is considered an independent director with the financial
      sophistication to hold such position, and includes Messrs. Humenik and Struble.
      The audit committee’s duties are to recommend to the board of directors the
      engagement of independent auditors to audit our financial statements and to
      review our accounting and auditing principles. The audit committee reviews
      the
      scope, timing and fees for the annual audit and the results of audit
      examinations performed by the internal auditors and independent public
      accountants, including their recommendations to improve the system of accounting
      and internal controls. The audit committee is at all times to be composed
      exclusively of directors who are, in the opinion of the board of directors,
      free
      from any relationship which would interfere with the exercise of independent
      judgment as a committee member and who possess an understanding of financial
      statements and generally accepted accounting principles.




***Compensation
      Committee*** *.* We
      established a compensation committee of the board of directors, which is chaired
      by Mr. Humenik, and includes Messrs. Struble and Tabak. The compensation
      committee reviews and approves our salary and benefits policies, including
      compensation of executive officers. The compensation committee also administers
      our stock option plans, and recommends and approves grants of stock options
      under that plan.




***Nominations
      and Governance Committee*** . **** We
      established a nominations and governance committee of the board of directors,
      which is chaired by Mr. Struble, and includes Messrs. Humenik and Tabak. The
      purpose of the nominations and governance committee is to select, or recommend
      for our entire board’s selection, the individuals to stand for election as
      directors at the annual meeting of stockholders and to oversee the selection
      and
      composition of committees of our board. The nominations and governance
      committee’s duties also include considering the adequacy of our corporate
      governance and overseeing and approving management continuity planning
      processes.




**Indebtedness
      of Directors and Executive Officers**




None
      of
      our directors or executive officers or their respective associates or affiliates
      is indebted to us.




**Family
      Relationships**




There
      are
      no family relationships among our directors and executive officers.




**Legal
      Proceedings**




As
      of the
      date of this report, there is no material proceeding to which any of our
      directors, executive officers, affiliates or stockholders is a party adverse
      to
      us.




**2006
      Equity Incentive Plan**




The
      purpose of our 2006 Equity Incentive Plan, formerly the 2005 Non-Statutory
      Stock
      Option Plan (the “2006 Plan”), is to enable us to attract, retain and motivate
      key employees, directors and, on occasion, consultants, by providing them with
      stock options. Awards granted under the 2006 Plan may be either incentive stock
      options, as defined in Section 422A of the Internal Revenue Code of 1986,
      non-qualified stock options, performance shares, stock appreciation rights,
      restricted stock, restricted stock units, bonus shares or dividend equivalents.
      Pursuant to the 2006 Plan, awards to purchase an aggregate of 3,000,000 shares
      of common stock may be granted under the 2006 Plan and, on December 31, 2007,
      stock options to purchase 1,975,000 shares of common stock were outstanding:
      505,000 stock options with an exercise price of $.75 per share, 20,000 stock
      options with an exercise price of $1.65 per share, 20,000 stock options with
      an
      exercise price of $.65 per share, 705,000 stock options with an exercise price
      of $.395 per share, 300,000 stock options with an exercise price of $.47 per
      share, 125,000 stock options with an exercise price of $.53 per share and
      300,000 stock options with an exercise price of $.71 per share. The $.75 options
      vest and become exercisable in three equal increments on each of October 17,
      2008, 2009 and 2010. The $1.65 options vest and become exercisable in three
      equal increments on each of March 1, 2009, 2010 and 2011. The $.65 options
      vest
      and become exercisable in three equal increments on each of May 29, 2009, 2010
      and 2011. The $.395 options vest and become exercisable in three equal
      increments on each of October 23, 2009, 2010 and 2011. The $.47 options vest
      and
      become exercisable in three equal increments on each of September 19, 2009,
      2010
      and 2011. The $.53 options vest and become exercisable in three equal increments
      on each of December 12, 2009, 2010 and 2011. The $.71 options vest and become
      exercisable in three equal increments on each of September 19, 2009, 2010 and
      2011 The aggregate number of shares of common stock subject to stock options,
      stock appreciation rights, performance stock and bonus shares granted to any
      one
      employee during any calendar year, may not exceed 300,000 shares. The aggregate
      fair market value of common stock with respect to incentive stock options that
      are exercisable for the first time by any employee may not exceed $100,000
      during any calendar year.


26


The
      2006
      Plan is administered by the compensation committee of the board of directors,
      or
      by the board of directors as a whole. The board of directors has the power
      to
      determine the terms of any award granted under the 2006 Plan, including the
      exercise price, the number of shares subject to the award and conditions of
      exercise. Stock options granted under the 2006 Plan are generally not
      transferable, and each stock option is generally exercisable during the lifetime
      of the optionee only by such optionee. The exercise price of all incentive
      stock
      options granted under the 2006 Plan must be at least equal to the fair market
      value of the shares of common stock on the date of the grant. With respect
      to
      any participant who owns stock possessing more than 10% of the voting power
      of
      all classes of our stock, the exercise price of any incentive stock option
      granted must be equal to at least 110% of the fair market value on the grant
      date. The term of all incentive stock options under the 2006 Plan may not exceed
      ten years, or five years in the case of 10% owners. The board of directors,
      pursuant to an authorizing resolution, has the power to terminate the 2006
      Plan
      at any time and for any reason.




**Section 16(a)
      Beneficial Ownership Reporting Compliance**




We
      do not
      have securities registered under Section 12 of the Exchange Act and,
      accordingly, our directors, officers and affiliates are not required to file
      reports under Section 16(a) of the Exchange Act.




**Code
      of Ethics**




Our
      board
      of directors has adopted a code of ethics, which applies to all our directors,
      officers and employees. Our code of ethics is intended to comply with the
      requirements of Item 406 of Regulation S-B.





Our
      code
      of ethics is posted on our Internet website at www.odyne.com. We will provide
      our code of ethics in print without charge to any stockholder who makes a
      written request to: Chief Financial Officer, Odyne Corporation, 89 Cabot Court,
      Suite L, Hauppauge, New York 11788. Any waivers of the application, and any
      amendments to, our code of ethics must be made by our board of directors. Any
      waivers of, and any amendments to, our code of ethics will be disclosed promptly
      on our Internet website, www.odyne.com.





**ITEM
      10.  EXECUTIVE COMPENSATION.**




The
      following table sets forth, for the most recent fiscal year, all cash
      compensation paid, distributed or accrued, including salary and bonus amounts,
      for services rendered to us by our Chief Executive Officer and four other
      executive officers in such year who received or are entitled to receive
      remuneration in excess of $100,000 during the stated period and any individuals
      for whom disclosure would have been made in this table but for the fact that
      the
      individual was not serving as an executive officer as at December 31,
      2007:




**Summary
      Compensation Table**





Name
                and
              Principal Position
            
            Year
            
            Salary
              ($)
            
            Bonus
              ($)
            
            Stock
              Awards
              ($)
            
            Option
              Awards
              ($)
            
            Non-Equity
              Incentive
              Plan
              Compensa-tion
              (4)
            
            Nonqualified
              Deferred
              Compen-sation
              Earnings
              ($)
            
            AllOther
              Compe-nsation ($)
            
            Total
              ($)(a)
            
            (b)
            
            (c)
            
            (d)
            
            (e)
            
            (f)
            
            (g)
            
            (h)
            
            (i)
            
            (j)Alan
                Tannenbaum
              Chief
                Executive Officer
            
            
            2007
              
              
              2006
            
            
            —
              
              
              —
            
            
            —
            
            
            —
            
            
            7,431
            
            
            —
            
            
            —
            
            
            —
            
            
            7,431
              
              
              —Joshua
                A. Hauser
              President
                and Chief Operating Officer
            
            
            2007
              
              
              2006
            
            
            140,269
              
              
              40,923
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            140,269
              
              
              40,923Joseph
                M. Ambrosio
              Executive
                Vice President - Engineering and
              Chief
                Technology Officer
            
            
            2007
              
              
              2006
            
            
            141,885
              
              
              59,323
            
            
            10,000
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            151,885
              
              
              59,323Konstantinos
                Sfakianos
              Executive
                Vice President - Operations
            
            
            2007
              
              
              2006
            
            
            141,866
              
              
              59,323
            
            
            10,000
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            151,866
              
              
              59,323Daniel
                Bartley
              Chief
                Financial Officer(2)
            
            
            2007
              
              
              2006
            
            
            135,462
              
              
              22,230
            
            
            10,000
            
            
            —
            
            
            14,279
              
              
              3,500
            
            
            —
            
            
            —
            
            
            —
            
            
            159,741
              
              
              25,730Roger
                M. Slotkin,former
              Chief
                Executive Officer (3)
            
            
            2007
              
              
              2006
            
            
            105,135
              
              
              40,923
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            46,288
            
            
            151,423
              
              
              40,923




27




(1)  Mr.
      Tannenbaum joined our company in September 2007. Assumptions used for the
      valuation of options are contained in the Notes to the accompanying financial
      statements.




(2)  Mr.
      Bartley joined our company in October 2006. Assumptions used for the valuation
      of options are contained in the Notes to the accompanying financial statements.




(3)  Mr.
      Slotkin left our company in August 2007. Other compensation represents payments
      made under a Separation Agreement




**Outstanding
      Equity Awards at Fiscal Year-End**




Option
                Awards
            
            Stock
                AwardsName
            
            Number of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Exercisable
            
            Number of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Unexercisable
            
            Equity
              Incentive
              Plan
              Awards:
              Number of
              Securities
              Underlying
              Unexercised
              Unearned
              Options
              (#)
            
            Option
              Exercise
              Price
              ($)
            
            Option
              Expiration
              Date
            
            Number
              of
              Shares
              orUnits
              ofStock
              That
              Have
              Not
              Vested
              (#)
            
            Market
              Value of Shares or
              Units of
              Stock
              That
              Have Not
              Vested
              ($)
            
            Equity
              Incentive
              Plan
              Awards:
              Number of
              Unearned
              Shares,
              Units or
              Other
              Rights
              That Have
              Not Vested
              (#)
            
            Equity
              Incentive
              Plan
              Awards:
              Market or
              Payout
              Value of
              Unearned
              Shares,
              Units or
              Other
              Rights
              That
              Have
              Not
              Vested
              ($)AlanTannenbaum
            
            
            0
            
            
            300,000
            (1)
            
            
            
            
            .47
            
            
            Sept.20170
            
            
            300,000
            (2)
            
            
            
            
            .71
            
            
            Jan.2018Daniel
                Bartley
            
            
            0
            
            
            150,000
            (3)
            
            —
            
            
            .75
            
            
            Oct.
                2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —0
            
            
            250,000
            (4)
            
            
            
            
            .395
            
            
            Oct.
                2017Bruce
                E.Humenik
            
            
            0
            
            
            50,000
            (3)
            
            —
            
            
            .75
            
            
            Oct.
                2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —0
            
            
            80,000
            (4)
            
            
            
            
            .395
            
            
            Oct.
                2017Stanley
                W.Struble
            
            
            0
            
            
            50,000
            (3)
            
            —
            
            
            .75
            
            
            Oct.
                2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —0
            
            
            80,000
            (4)
            
            
            
            
            .395
            
            
            Oct.
                2017S.
                CharlesTabak
            
            
            0
            
            
            50,000
            (3)
            
            —
            
            
            .75
            
            
            Oct.
                2016
            
            
            —
            
            
            —
            
            
            —
            
            
            —0
            
            
            80,000
            (4)
            
            
            
            
            .395
            
            
            Oct.
                2017





(1)
            These
                options vest and become exercisable in three equal increments on
                each of
                September 19, 2009, 2010 and 2011. The fair market value of the options
                is
                $.16 per share.


(2)
            These
                options vest and become exercisable in three equal increments on
                each of
                January 2, 2010, 2011 and 2012. The fair market value of the options
                is
                $24 per share.


(3)
            These
                options vest and become exercisable in three equal increments on
                each of
                October 17, 2008, 2009 and 2010. The fair market value of the options
                is
                $.43 per share.


(4)
            These
                options vest and become exercisable in three equal increments on
                each of
                October 23, 2009, 2010 and 2011. The fair market value of the options
                is
                $.13 per share.


28





**Compensation
      of Directors**




Directors
      are expected to timely and fully participate in all regular and special board
      meetings, and all meetings of committees that they serve on. We currently
      compensate non-management directors through stock options granted under our
      stock option plan and a cash stipend for each meeting attended.




During
      the years ended December 31, 2007 and 2006, respectively, each of our
      non-management directors, Messrs. Humenik, Struble and Tabak, received grants
      of
      stock options to purchase 80,00 and 50,000 shares of our common stock for
      serving on our board of directors. The 2007 stock options vest and become
      exercisable in three equal increments on each of October 23, 2009, 2010 and
      2011. The 2006 stock options vest and become exercisable in three equal
      increments on each of October 17, 2008, 2009 and 2010. Messrs. Tannenbaum and
      Hauser, as members of management, do not receive separate compensation for
      serving as directors.




The
      table
      below summarizes the compensation that we paid to non-management directors
      for
      the fiscal year ended December 31, 2007 and 2006.




**Director
      Compensation**




Name
            
            Year
            
            Fees
              Earned or
              Paid in
              Cash ($)
            
            Stock
              Awards
              ($)
            
            Option
              Awards
              ($)
            
            Non-Equity
              Incentive
              Plan Compen
              -sation
              (4)
            
            Nonqualified
              Deferred
              Compen-
              sation
              Earnings
              ($)
            
            All Other
              Compen-
              sation ($)
            
            Total ($)Bruce
                E. Humenik
            
            
            2007
              
              
              2006
            
            
            7,000
              
              
              1,000
            
            
            —
            
            
            4,741
              
              
              1,167
            
            
            —
            
            
            —
            
            
            —
            
            
            11,741
              
              
              2,167Stanley
                W. Struble
            
            
            2007
              
              
              2006
            
            
            7,000
              
              
              1,000
            
            
            —
            
            
            4,741
              
              
              1,167
            
            
            —
            
            
            —
            
            
            —
            
            
            11,741
              
              
              2,167S.
                Charles Tabak
            
            
            2007
              
              
              2006
            
            
            7,000
              
              
              1,000
            
            
            —
            
            
            4,741
              
              
              1,167
            
            
            —
            
            
            —
            
            
            —
            
            
            11,741
              
              
              2,167




**Employment
      Agreements**




We
      have
      employment agreements with Joseph M. Ambrosio and Konstantinos Sfakianos. The
      employment agreements require each of the executives to devote all of their
      time
      and attention during normal business hours to our business as our Executive
      Vice
      President - Engineering and Chief Technology Officer, and Executive Vice
      President - Operations, respectively. The employment agreements for Messrs.
      Ambrosio and Sfakianos have an amended term of three years from October 26,
      2007. The employment agreements provide that each executive will receive an
      annual salary of $140,000 during the first year of the term with increases
      equal
      to 5% of such salary on each anniversary of the effective date of the employment
      agreement. In addition, each executive is entitled to (a) receive a cash bonus
      in an amount determined by the compensation committee of the board of directors
      if we meet or exceed certain mutually agreed upon performance goals and (b)
      participate in our stock option plan.





On
      September 19, 2007, we entered into an employment agreement with Alan
      Tannenbaum. The employment agreement has a term expiring one year from October
      26, 2007, and requires Mr. Tannenbaum to devote all of his time and attention
      during normal business hours to the business of our company as Chief Executive
      Officer. So long as he serves as Chief Executive Officer, he will also be
      nominated as a director. The employment agreement provides that Mr. Tannenbaum
      will receive a base salary at the annual rate of $145,000, starting on January
      1, 2008. In addition, Mr. Tannenbaum is entitled to (a) receive a cash bonus
      in
      an amount determined by the compensation committee of the board of directors
      based on our company meeting or exceeding certain mutually agreed upon
      performance goals and (b) participate in our employee benefit
      plans.





Under
      Mr.
      Tannenbaum’s employment agreement, we agreed to grant stock options to him to
      purchase an aggregate of 3,000,000 shares of our common stock. Of such stock
      options, options to purchase 300,000 shares have an exercise price equal to
      $.47
      per share (the closing market price of our common stock on October 26, 2007),
      options to purchase 2,400,000 shares have an exercise price equal to $.32 per
      share (the average closing market price of our common stock on the 30
      consecutive trading days on and prior to October 26, 2007), and options to
      purchase 300,000 shares have an exercise price equal to $.71 per share (the
      closing market price of our common stock on January 2, 2008). Each stock option
      will vest in three equal installments on the second, third and fourth
      anniversaries of the grant date and expires ten years after it is granted.
      We
      have agreed to adopt a new incentive compensation plan or amend our existing
      plan to increase the number of available options that we may grant in order
      to
      satisfy our obligation to Mr. Tannenbaum.


29




The
      employment agreements provide for termination of an executive’s employment
      without any further obligation on our part upon the death or disability of
      the
      executive or for cause. In the event that an executive’s employment is
      terminated without cause or for good reason, we are obligated to pay such
      executive his salary for the remainder of the term. Termination for cause means
      termination as a result of (w) willful and material malfeasance, dishonesty
      or
      habitual drug or alcohol abuse by the executive related to or affecting the
      performance of his duties, (x) continuing and intentional breach,
      non-performance or non-observance of any of the terms or provisions of the
      employment agreement, but only after the failure of the executive to cure the
      breach within ten days of receipt of notice from us, (y) conduct which the
      board
      determines could reasonably be expected to have a material adverse effect on
      us,
      but only after the failure of the executive to cease such conduct within ten
      days of receipt of notice from us, or (z) the executive’s conviction of a
      felony, any crime involving moral turpitude related to or affecting the
      performance of the executive’s duties or any act of fraud, embezzlement, theft
      or willful breach of fiduciary duty against us. Good reason means (i) material
      breach of our obligations under the employment agreement, (ii) any decrease
      in
      the executive’s salary during the term of the executive’s employment (except for
      decreases that are in conjunction with decreases in executive salaries
      generally), or (iii) (a) in the case of Mr. Tannenbaum a reduction in his duties
      or authority inconsistent with the duties and authority of an executive officer
      and (b) in the case of Messrs. Ambrosio and Sfakianos, any material reduction
      in
      their duties or authority.





The
      employment agreements also contain covenants (a) restricting the executive
      from
      engaging in any activity competitive with our business during the term of the
      employment agreement and in the event of termination for cause or without good
      reason, for a period of one year thereafter, (b) prohibiting the executive
      from
      disclosing confidential information regarding us, and (c) soliciting our
      employees, customers and prospective customers during the term of the employment
      agreement and for a period of one year thereafter.





**ITEM
      11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
      RELATED STOCKHOLDER MATTERS.**




The
      following table sets forth information regarding the number of shares of our
      common stock beneficially owned on March
      26,
      2008  by:




**•**
            each
                person who is known by us to beneficially own 5% or more of our common
                stock,


**•**
            each
                of our directors and executive officers, and


**•**
            all
                of our directors and executive officers as a group.




Beneficial
      ownership is determined in accordance with the rules of the SEC and generally
      includes voting or investment power with respect to securities.  Shares of
      our common stock which may be acquired upon exercise of stock options or
      warrants which are currently exercisable or which become exercisable within
      60
      days after the date indicated in the table are deemed beneficially owned by
      the
      optionees.  Subject to any applicable community property laws, the persons
      or entities named in the table above have sole voting and investment power
      with
      respect to all shares indicated as beneficially owned by them.




30





**Name
                and Address of**
              **Beneficial Owner****(1)**
            
            **Shares**
              **Beneficially**
              **Owned**
            
            **Percentage
                of**
              **Common
                Stock**(2)**5%
                or Greater Holders:**Roger
                M. Slotkin(3)
            
            
            3,528,310
            
            
            16.0
            %**Directors
                and Executive Officers:**Alan
                Tannenbaum(4)
            
            
            583,333
            
            
            2.6
            %Joshua
                A. Hauser
            
            
            1,842,259
            
            
            8.3
            %Joseph
                M. Ambrosio
            
            
            3,231,194
            
            
            14.6
            %Konstantinos
                Sfakianos
            
            
            3,378,740
            
            
            15.3
            %Daniel
                Bartley(5)
            
            
            —
            
            
            *Stanley
                W. Struble(6)
            
            
            27,500
            
            
            *Bruce
                E. Humenik(6)(7)
            
            
            40,020
            
            
            *S.
                Charles Tabak(6)(8)
            
            
            48,024
            
            
            *All
                directors and executive officers as a group (8 persons)
            
            
            8,817,737
            
            
            39.8
            %





*Represents
      less than 1%.





(1)
            The
                address of each person is c/o Odyne Corporation, 89 Cabot Court,
                Suite L,
                Hauppauge, New York 11788.





(2)
            The
                calculation in this column is based upon 22,101,448 shares of common
                stock
                outstanding on March 26, 2008. Does not include 3,890,770 shares
                issuable
                upon conversion of our outstanding series A convertible preferred
                stock
                and a maximum of 12,800,000 shares issuable upon conversion of our
                10%
                senior secured convertible debentures. The shares issuable under
                stock
                options, warrants and other derivative securities to acquire our
                common
                stock that are exercisable or convertible currently or within 60
                days
                after March 26, 2008 are treated as if outstanding for computing
                the
                percentage ownership of the person holding these securities, but
                are not
                treated as outstanding for purposes of computing the percentage ownership
                of any other person. Unless otherwise indicated, also includes shares
                owned by a spouse, minor children, by relatives sharing the same
                home, and
                entities owned or controlled by the named
                person.





(3)
            Includes
                33,350 shares of common stock issuable upon the exercise of warrants.
                Mr.
                Slotkin previously served as an officer and director of our
                company.





(4)
            Includes
                333,334 shares of common stock issuable upon the exercise of warrants
                held
                by AT Holdings I, LLC, an entity controlled by Mr. Tannenbaum. Excludes
                1,000,000 shares of common stock issuable upon the conversion of
                $250,000
                principal amount of 10% senior secured convertible debentures. Excludes
                3,000,000 stock options to purchase 3,000,000 shares of common stock
                in
                amounts and at exercise prices as follows: 300,000 at an exercise
                price
                $.47 per share, 2,400,000 at an exercise price of $.32 per share
                and
                300,000 at an exercise price per share equal to $.71. The $.47 and
                $.32
                options vest in three equal increments on each of October 26, 2009,
                2010
                and 2011. The $.71 options will vest in three equal increments on
                each of
                January 2, 2010, 2011 and 2012.





(5)
            Excludes
                stock options to purchase 150,000 shares of common stock at an exercise
                price of $.75 per share, vesting in three equal increments on each
                of
                October 17, 2008, 2009 and 2010, and stock options to purchase 250,000
                shares of common stock at an exercise price of $.395 per share, vesting
                in
                three equal increments on each of October 23, 2009, 2010 and 2011.





(6)
            Excludes
                stock options to purchase 50,000 shares of common stock at an exercise
                price of $.75 per share, vesting in three equal increments on each
                of
                October 17, 2008, 2009 and 2010, and stock options to purchase 80,000
                shares of common stock at an exercise price of $.395 per share, vesting
                in
                three equal increments on each of October 23, 2009, 2010 and 2011.


31





(7)
            Represents
                26,680 shares of common stock issuable upon the conversion of 20
                shares of
                series A convertible preferred stock and 13,340 shares of common
                stock
                issuable upon the exercise of
                warrants.





(8)
            Represents
                32,016 shares of common stock issuable upon the conversion of 24
                shares of
                series A convertible preferred stock and 16,008 shares of common
                stock
                issuable upon the exercise of
                warrants.





**Change
      in Control**




There
      are
      no arrangements currently in effect which may result in our “change in control,”
as that term is defined by the provisions of Item 403(c) of Regulation S-B.




**Equity
      Compensation Plan Information**




Our
      2006
      Equity Incentive Plan, formerly known as the 2005 Non-Statutory Stock Option
      Plan, was approved by a written consent of the holders of a majority of our
      outstanding common stock. In connection with our reverse merger transaction,
      the
      2005 Non-statutory Stock Option Plan was amended and restated on October 17,
      2006 to, among other things, change the name of the plan and increase the number
      of shares reserved for awards pursuant to the plan. There are 3,000,000 shares
      reserved for issuance under the Plan. Based on our common stock outstanding
      as
      of  March
      26,
      2008,  2,115,000
      stock options are available for issuance under our 2006 Equity Incentive
      Plan and, as of March , 2008, there are outstanding stock options to purchase
      885,000 shares of our common stock.




The
      following table provides information as of December 31, 2007 with respect to
      the
      shares of common stock that may have been issued under our existing equity
      compensation plan.





**Equity
      Compensation Plan Information**





Plan
                category
            
            Number of shares of common
              stock to be issued upon exercise of
              outstanding options, warrants and
              rights
              (a)
            
            Weighted-average exercise price
              of outstanding options, warrants
              and rights
              (b)
            
            Number of securities remaining
              available for future issuance under
              equity compensation plans
              (excluding securities reflected in
              column (a))
              (c)Equity
                compensation plans approved by security holders
            
            
            1,975,000
            
            $
            0.56
            
            
            1,025,000Equity
                compensation plans not approved by security holders
            
            
            2,400,000
            
            $
            0.32
            
            
            —Total
            
            
            4,375,000
            
            $
            0.43
            
            
            1,025,000





**ITEM
      12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS****,
      AND DIRECTOR INDEPENDENCE.**




**Related
      Party Transactions**





Prior
      to
      the closing of our reverse public offering, we had a total of approximately
      $281,000 in principal amount of unsecured loans outstanding from Roger M.
      Slotkin, our former Chief Executive Officer ($102,300), Joshua A. Hauser
      ($82,600), Konstantinos Sfakianos ($62,400) and Joseph M. Ambrosio ($33,400).
      Interest accrued on these loans at a rate of 8% per annum, compounded monthly
      based on a 360-day year. On October 17, 2006, accrued interest in the amount
      of
      $43,559 was forgiven, $140,000 of principal amount of the unsecured loans was
      converted to our equity and $139,725 was repaid from the proceeds of the 2006
      private placement.




We
      had a
      total of approximately $624,000 of deferred compensation due to Roger M.
      Slotkin, our former Chief Executive Officer ($167,000), Joshua A. Hauser
      ($167,000), Konstantinos Sfakianos ($145,000) and Joseph M. Ambrosio ($145,000),
      which was forgiven on October 17, 2006.




We
      had
      outstanding bank and credit card debt of approximately $181,000, which was
      personally guaranteed by Messrs. Sfakianos and Ambrosio. We repaid this debt
      from the proceeds of the 2006 private placement and the personal guarantees
      were
      released. Mr. Slotkin, our former chief executive officer, purchased 50 shares
      of series A convertible preferred stock and associated warrants in the 2006
      private placement, on the same terms as other investors. In March 2007, Mr.
      Slotkin converted his preferred shares into common stock in accordance with
      the
      terms of such preferred stock. Mr. Tabak participated in the convertible note
      financing and purchased approximately 24 shares of series A convertible
      preferred stock and associated warrants in the private placement on the same
      terms as other investors. Mr. Humenik purchased 20 shares of series A
      convertible preferred stock and associated warrants in the 2006 private
      placement, on the same terms as other investors.


32





In
      October 2007, Alan Tannenbaum, our Chief Executive Officer, lent us $250,000
      in
      the form of a short term bridge note. Later that month, Mr. Tannenbaum purchased
      $250,000 principal amount of 10% senior secured convertible debentures and
      associated warrants in our October 2007 private placement, on the same terms
      as
      other investors, the proceeds from which we used at closing to repay his bridge
      note.




It
      is our
      policy that all related party transactions must be approved by a majority of
      the
      independent and disinterested members of our board of directors, outside the
      presence of any interested director and, to the extent deemed necessary or
      appropriate by the board of directors, we will obtain fairness opinions or
      stockholder approval in connection with any such transaction.




**Director
      Independence**





Each
      of
      Bruce E. Humenik, Stanley W. Struble and S. Charles Tabak is an “independent”
director, as such term is defined in Rule 10A-3(b)(1) under the Securities
      Exchange Act of 1934, and serves on each of our Audit, Compensation and
      Nominations and Governance Committees. See Item 9, Directors, Executive
      Officers, Promoters, Control Persons and Corporate Governance; Compliance with
      Section 16(a) of the Exchange Act - Board Committees, for more information
      on
      the independence of our directors.




**ITEM
      13.  EXHIBITS.**




(a)**Exhibits.**




The
      exhibits listed in the following Exhibit Index are filed as part of this Annual
      Report.




Exhibit
      Number and Description





21.1
            Subsidiaries
                of Odyne Corporation31.1
            Certification
                of Chief Executive Officer required by Rule 13(a)-14(a).31.2
            Certification
                of Chief Financial Officer required by Rule 13(a)-14(a).32.1
            Certifications
                pursuant to Sec. 906.




**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.**




Holtz
      Rubenstein Reminick LLP served as our independent auditor for the year ended
      December 31, 2007. Services were approved by the Board of Directors.




Marcum
      & Kliegman LLP served as our independent auditor for the year ended December
      31, 2006. Services were approved by the Board of Directors.




**Audit
      Fees**




Audit
      fees are those fees billed for professional services rendered for the audit
      of
      the annual financial statements and review of the financial statements included
      in Form 10-QSB.





For
      the
      year ended December 31, 2007, we incurred audit fees totaling $14,645 payable
      to
      Holtz Rubenstein Reminick LLP, our independent registered public accounting
      firm.





For
      the
      years ended December 31, 2007 and 2006, we incurred audit fees totaling $130,773
      and $105,000 respectively, payable to Marcum & Kliegman LLP, our former
      independent registered public accounting firm.





For
      the
      year ended December 31, 2006, we incurred audit fees totaling $4,784 to Most
      & Company, LLP, our former independent registered public accounting
      firm.


33




**Audit-related
      Fees**




Audit
      related fees are fees billed for professional services other than the audit
      of
      our financial statements. No audit related fees were billed by Holtz Rubenstein
      Reminick LLP or Most & Company, LLP for
      the
      years ended December 31, 2007 and 2006 .
      Marcum
& Kliegman LLP billed $76,157 and -0- for
      such
      services for the years ended December 31, 2007 and 2006 .




**Tax
      Fees**




Tax
      fees
      are those fees billed for professional services rendered for tax compliance,
      including preparation of corporate federal and state income tax returns, tax
      advice and tax planning.




No
      tax
      fees were billed by Holtz Rubenstein Reminick LLP for
      the
      years ended December 31, 2007 and 2006 .




No
      tax
      fees were billed by Marcum & Kliegman LLP for
      the
      years ended December 31, 2007 and 2006 .




For
      the
      years ended December 31, 2007 and 2006, we incurred tax fees payable to Most
      & Company, LLP, in the amount of $13,429 and $0, respectively.




**All
      Other Fees**




No
      other
      fees were billed by our independent auditors for
      the
      years ended December 31, 2007 and 2006 .




**Policy
      for Pre-Approval of Audit and Non-Audit Services**





Our
      audit
      committee has adopted policies for the pre-approval of audit and non-audit
      services for the purpose of maintaining the independence of our independent
      auditors. We may not engage our independent auditors to render any audit or
      non-audit service unless either the service is approved in advance by the audit
      committee or the engagement to render the service is entered into pursuant
      to
      the audit committee’s pre-approval policies and procedures.


34





**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
      the
      Registrant caused this Report to be signed on its behalf by the undersigned,
      thereunto duly authorized.




Dated:March
                27, 2008
            ODYNE
                CORPORATIONBy:
            /s/
                Alan TannenbaumAlan
                Tannenbaum
              Chairman
                and Chief Executive Officer
              (principal
                executive officer)




By:
            /s/ Daniel
                BartleyDaniel
                Bartley
              Chief
                Financial Officer
              (principal
                financial and accounting officer)




In
      accordance with the Exchange Act, this Report has been signed below by the
      following persons on behalf of the Registrant and in the capacities and on
      the
      dates indicated.





**Name**
            
            **Title**
            
            **Date**/s/
                Alan Tannenbaum
            
            Chairman
                and Chief Executive Officer
            
            March
                27, 2008Alan
                Tannenbaum
            
            (principal
                executive officer)/s/
                Joshua A. Hauser
            
            President,
                Chief Operating Officer and Director
            
            March
                27, 2008Joshua
                A. Hauser/s/
                Daniel Bartley
            
            Chief
                Financial Officer
            
            March
                27, 2008Daniel
                Bartley
            
            (principal
                financial and accounting officer)/s/
                Bruce E. Humenik
            
            Director
            
            March
                27, 2008Bruce
                E. Humenik/s/
                Stanley W. Struble
            
            Director
            
            March
                27, 2008Stanley
                W. Struble/s/
                S. Charles Tabak
            
            Director
            
            March
                27, 2008S.
                Charles Tabak




35






**ODYNE
      CORPORATION AND SUBSIDIARY**




**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**Page**Reports
                of Independent Registered Public Accounting Firms
            
            
            F-2Consolidated
                Balance Sheets as of December 31, 2007 and 2006
            
            
            F-4Consolidated
                Statements of Operations for the years ended December 31, 2007 and
                2006
            
            
            F-5Consolidated
                Statements of Stockholders’ (Deficit) for the years ended December 31,
                2007 and 2006
            
            
            F-6Consolidated
                Statements of Cash Flows for the years ended December 31, 2007 and
                2006
            
            
            F-7Notes
                to Consolidated Financial Statements
            
            
            F-8


F-1




[ Holtz
      Rubenstein Reminick LLP Letterhead]




REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




Board
      of
      Directors


Odyne
      Corporation


And
      Subsidiary


Hauppauge,
      New York





We
      have
      audited the accompanying consolidated balance sheet of Odyne Corporation and
      Subsidiary as of December 31, 2007, and the related consolidated statements
      of operations, stockholders’ equity and cash flows for the year then ended. The
      consolidated financial statements are the responsibility of the Company’s
      management. Our responsibility is to express an opinion on the consolidated
      financial statements based on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. The Company
      is not required to have, nor were we engaged to perform, an audit of its
      internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion. An audit
      includes examining on a test basis, evidence supporting the amounts and
      disclosures in the consolidated financial statements. An audit also includes
      assessing the accounting principles used and significant estimates made by
      management as well as evaluating the overall consolidated financial statement
      presentation. We believe that our audit provides a reasonable basis for our
      opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Odyne
      Corporation and Subsidiary as of December 31, 2007, and the results of their
      operations and their cash flows for the year then ended, in conformity with
      accounting principles generally accepted in the United States of
      America.





/s/
      Holtz
      Rubenstein Reminick LLP





Melville,
      New York


March
      27,
      2008


F-2




[Marcum
      & Kliegman LLP Letterhead]





REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To
      the
      Audit Committee of the


Board
      of
      Directors and Stockholders


of
      Odyne
      Corporation and Subsidiary





We
      have
      audited the accompanying consolidated balance sheet of Odyne Corporation and
      Subsidiary (the “Company”) as of December 31, 2006, and the related consolidated
      statements of operations **,** changes
      in stockholders’ (deficiency) equity and cash flows for each of the two years in
      the period ended December 31, 2006. These consolidated financial statements
      are
      the responsibility of the Company’s management. Our responsibility is to express
      an opinion on these consolidated financial statements based on our
      audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States).  Those standards require that
      we plan and perform the audit to obtain reasonable assurance about whether
      the
      consolidated financial statements are free of material misstatement.  The
      Company is not required to have, nor were we engaged to perform, an audit of
      its
      internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion.   An
      audit also includes examining, on a test basis, evidence supporting the amounts
      and disclosures in the consolidated financial statements, assessing the
      accounting principles used and significant estimates made by management, as
      well
      as evaluating the overall financial statement presentation.  We believe
      that our audits provide a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Odyne
      Corporation and Subsidiary as of December 31, 2006, and the consolidated results
      of their operations and their cash flows for each of the two years in the
      period ended December 31, 2006 in conformity with United States generally
      accepted accounting principles.





/s/
      Marcum & Kliegman LLP


New
      York,
      New York


April
      4,
      2007


F-3


**ODYNE
      CORPORATION AND SUBSIDIARY**


**CONSOLIDATED
      BALANCE SHEETS**





December 31,2007
            
            2006ASSETSCURRENT
                ASSETSCash
            
            $
            2,087,217
            
            $
            3,083,942Cash
                - restricted
            
            
            -
            
            
            227,583Accounts
                receivable, net of reserves of $ 143,000 and $ 3,000,
                respectively
            
            
            158,333
            
            
            24,090Inventory,
                net of reserves of $ 90,000 and $ 0, respectively
            
            
            237,423
            
            
            132,593Prepaid
                insurance
            
            
            103,168
            
            
            111,535Total
                current assets
            
            
            2,586,141
            
            
            3,579,743Property
                and equipment, net
            
            
            120,019
            
            
            98,797Deferred
                financing costs, net
            
            
            386,130
            
            
            -Intangible
                assets - patents
            
            
            14,000
            
            
            14,000Other
                assets
            
            
            10,000
            
            
            10,000TOTAL
                ASSETS
            
            $
            3,116,290
            
            $
            3,702,540LIABILITIES
                AND STOCKHOLDERS' (DEFICIENCY) EQUITYCURRENT
                LIABILITIESAccounts
                payable
            
            $
            270,538
            
            $
            249,254Accrued
                payroll and other operating expenses
            
            
            206,464
            
            
            119,375Customer
                deposits
            
            
            171,487
            
            
            150,000Billings
                in excess of costs incurred on contracts progress
            
            
            -
            
            
            57,500Accrued
                losses on contracts in progress
            
            
            3,016
            
            
            26,939Reserve
                for warranty
            
            
            43,000
            
            
            -Accrued
                interest on convertible debentures
            
            
            57,863
            
            
            -Current
                maturities of capital lease obligations
            
            
            4,306
            
            
            6,817Total
                current liabilities
            
            
            756,674
            
            
            609,885Capital
                lease obligations, net of current maturities
            
            
            656
            
            
            4,962Development
                funding subject to repayment
            
            
            238,948
            
            
            240,894Convertible
                debentures, net
            
            
            2,433,633
            
            
            -TOTAL
                LIABILITIES
            
            
            3,429,911
            
            
            855,741COMMITMENTS
                AND CONTINGENCIESSTOCKHOLDERS'
                (DEFICIENCY) EQUITYPreferred
                stock, $0.001 par value, 4,994,000 shares authorized, no shares issued
                and
                outstanding
            
            
            -
            
            
            -Series
                A Convertible Preferred Stock, $0.001 par value; 6,000 authorized;
                2,917
                and 5,750 shares issued and outstanding respectively, liquidation
                rights $
                1,000 per share
            
            
            3
            
            
            6Common
                stock, $0.001 par value per share; 95,000,000 shares authorized;
                22,061,428 and 18,000,000 shares issued and outstanding respectively
            
            
            22,061
            
            
            18,000Additional
                paid-in-capital
            
            
            7,767,482
            
            
            6,669,870Accumulated
                deficit
            
            
            (8,103,167
            )
            
            (3,841,077
            )TOTAL
                STOCKHOLDERS' (DEFICIENCY) EQUITY
            
            
            (313,621
            )
            
            2,846,799TOTAL
                LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
            
            $
            3,116,290
            
            $
            3,702,540




*The
      accompanying footnotes are an integral part of these consolidated financial
      statements.*


F-4


**ODYNE
      CORPORATION AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**





For the Years Ended December 31,2007
            
            2006SALES
            
            $
            610,945
            
            $
            242,945COST
                OF SALES
            
            
            1,207,080
            
            
            410,213GROSS
                LOSS
            
            
            (596,135
            )
            
            (167,268
            )OPERATING
                EXPENSESResearch
                and development
            
            
            1,573,594
            
            
            755,429General
                and administrative
            
            
            1,922,244
            
            
            758,283TOTAL
                OPERATING EXPENSES
            
            
            3,495,838
            
            
            1,513,712LOSS
                FROM OPERATIONS
            
            
            (4,091,973
            )
            
            (1,680,980
            )OTHER
                INCOME (EXPENSE)Interest
                income
            
            
            62,878
            
            
            14,610Interest
                expense
            
            
            (232,995
            )
            
            (343,598
            )TOTAL
                OTHER EXPENSE
            
            
            (170,117
            )
            
            (328,988
            )NET
                LOSS
            
            
            (4,262,090
            )
            
            (2,009,968
            )Deemed
                dividends
            
            
            -
            
            
            (3,230,791
            )NET
                LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
            
            $
            (4,262,090
            )
            $
            (5,240,759
            )NET
                LOSS PER COMMON SHARE - BASIC AND DILUTED
            
            $
            (0.21
            )
            $
            (0.40
            )WEIGHTED
                  AVERAGE NUMBER OF COMMON SHARES OUTSTANDING- BASIC AND
                  DILUTED
            
            
            20,143,062
            
            
            13,250,000




*The
      accompanying footnotes are an integral part of these consolidated financial
      statements.*


F-5




**ODYNE
      CORPORATION AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ (DEFICIENCY) EQUITY**


**For
      the Years Ended December 31, 2007 and 2006.**


Convertible
                    Preferred Stock
                Series
                  A
              
              Common
                  StockShares
              
              Amount
              
              Shares
              
              Amount
              
              Additional
                Paid-inCapital
              
              Excess of
                Liabilities
                  over Assets
              
              Accumulated
                  Deficit
              
              TotalBalance
                  at December 31, 2005
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              $
              -
              
              $
              (2,729,748
              )
              $
              -
              
              $
              (2,729,748
              )**Share
                  Exchange Transaction and Recapitalization:**Beneficial
                  conversion feature of convertible debentures
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              250,000
              
              
              
              
              
              
              
              
              250,000Contribution
                  of loans payable to officers upon completion ofshare
                  exchange transaction
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              183,559
              
              
              
              
              
              
              
              
              183,559Cancellation
                  of liability, reinstatement of shares subject to mandatory redemption
              
              
              
              
              
              
              
              
              12,000,000
              
              
              12,000
              
              
              1,766,496
              
              
              (12,000
              )
              
              
              
              
              1,766,496Reclassification
                  of S Corp accumulated deficit and excess of liabilities over assets
                  to
                  additional paid-in capital upon shareexchange
                  transaction
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (4,141,430
              )
              
              2,741,748
              
              
              1,399,682
              
              
              -Shares
                  outstanding
              
              
              
              
              
              
              
              
              6,000,000
              
              
              6,000
              
              
              (6,000
              )
              
              
              
              
              
              
              
              -Contribution
                  of compensation payable to officers upon completion ofshare
                  exchange transaction
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              623,314
              
              
              
              
              
              
              
              
              623,314**Private
                  Placements Transactions:**Series
                  A convertible preferred stock issued in private placement for cash,
                  net of
                  offering costs of $998,676
              
              
              5,354
              
              
              6
              
              
              
              
              
              
              
              
              4,355,313
              
              
              
              
              
              
              
              
              4,355,319Series
                  A Convertible Preferred stock exchanged for convertible
                  debentures
              
              
              304
              
              
              -
              
              
              
              
              
              
              
              
              303,570
              
              
              
              
              
              
              
              
              303,570Series
                  A Convertible Preferred stock issued in settlement of accounts
                  payable
              
              
              13
              
              
              -
              
              
              
              
              
              
              
              
              13,475
              
              
              
              
              
              
              
              
              13,475Series
                  A Convertible Preferred stock issued for services
              
              
              79
              
              
              -
              
              
              
              
              
              
              
              
              79,000
              
              
              
              
              
              
              
              
              79,000Deemed
                  dividend relating to beneficial conversion feature embedded in
                  Series A
                  Convertible Preferred stock
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,230,791
              
              
              
              
              
              (3,230,791
              )
              
              -**Changes
                  resulting from ongoing operations:**Share
                  based payments
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              11,782
              
              
              
              
              
              
              
              
              11,782Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (2,009,968
              )
              
              (2,009,968
              )Balance
                  at December 31, 2006
              
              
              5,750
              
              $
              6
              
              
              18,000,000
              
              $
              18,000
              
              $
              6,669,870
              
              
              
              
              $
              (3,841,077
              )
              $
              2,846,799Share
                  based payments
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              107,884
              
              
              
              
              
              
              
              
              107,884Cashless
                  exercises of warrants
              
              
              
              
              
              
              
              
              281,657
              
              
              282
              
              
              (282
              )
              
              
              
              
              -
              
              
              -Conversions
                  of Series A Convertible Preferred Stock to Common Shares, including
                  66,700
                  for shares converted by an officer of the company
              
              
              (2,833
              )
              
              (3
              )
              
              3,779,771
              
              
              3,779
              
              
              (3,776
              )
              
              
              
              
              -
              
              
              -Discount
                  on convertible debentures
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              938,671
              
              
              
              
              
              
              
              
              938,671Sale
                  of warrants
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              55,115
              
              
              
              
              
              
              
              
              55,115Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (4,262,090
              )
              
              (4,262,090
              )Balance
                  at December 31, 2007
              
              
              2,917
              
              $
              3
              
              
              22,061,428
              
              $
              22,061
              
              $
              7,767,482
              
              
              
              
              $
              (8,103,167
              )
              $
              (313,621
              )




*The
      accompanying footnotes are an integral part of these consolidated financial
      statements.*


F-6





**ODYNE
      CORPORATION AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





For the Years Ended December 31,2007
            
            2006CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                loss
            
            $
            (4,262,090
            )
            $
            (2,009,968
            )Adjustments
                to reconcile net loss to net cash used in operating
                activitiesDepreciation
                and amortization
            
            
            105,656
            
            
            19,103Provision
                for bad debts
            
            
            140,000
            
            
            -Provision
                for obsolete inventory
            
            
            90,000
            
            
            -Non
                -cash interest
            
            
            172,304
            
            
            303,570Share
                based payments
            
            
            107,884
            
            
            11,782Series
                A Convertible Preferred Stock issued for services
            
            
            -
            
            
            79,000Deferred
                rent
            
            
            -
            
            
            (1,732
            )Changes
                in operating assets and liabilities:Cash
                - Restricted
            
            
            227,583
            
            
            (227,583
            )Accounts
                receivable
            
            
            (274,243
            )
            
            66,574Inventory
            
            
            (194,830
            )
            
            (127,593
            )Prepaid
                expenses and other current assets
            
            
            8,367
            
            
            (103,482
            )Accounts
                payable
            
            
            21,284
            
            
            182,018Accrued
                payroll and other operating expenses
            
            
            87,089
            
            
            113,248Customer
                deposits
            
            
            21,487
            
            
            150,000Billings
                in excess of costs incurred on contracts in progress
            
            
            (57,500
            )
            
            (8,725
            )Accrued
                losses on contracts in progress
            
            
            (23,923
            )
            
            26,939Deferred
                compensation payable to officers
            
            
            -
            
            
            231,995Reserve
                for warranty
            
            
            43,000
            
            
            -Accrued
                interest on convertible debentures
            
            
            57,863
            
            
            -Development
                funding subject to repayment
            
            
            (1,946
            )
            
            57,748NET
                CASH USED IN OPERATING ACTIVITIES
            
            
            (3,732,015
            )
            
            (1,237,106
            )CASH
                FLOWS FROM INVESTING ACTIVITIESPurchases
                of property and equipment
            
            
            (78,632
            )
            
            (95,572
            )NET
                CASH USED IN INVESTING ACTIVITIES
            
            
            (78,632
            )
            
            (95,572
            )CASH
                FLOWS FROM FINANCING ACTIVITIESNet
                proceeds from issuances of Series A Convertible Preferred
                Stock
            
            
            -
            
            
            4,355,319Net
                proceeds from issuances of Convertible Debentures
            
            
            2,765,624
            
            
            250,000Proceeds
                of loans made to the Company by officers
            
            
            250,000
            
            
            73,000Repayment
                of loans payable to officers
            
            
            (250,000
            )
            
            (139,725
            )Capital
                lease payments
            
            
            (6,817
            )
            
            (6,644
            )Proceeds
                on sale of warrants
            
            
            55,115
            
            
            -Net
                repayment under lines of credit
            
            
            -
            
            
            (115,830
            )NET
                CASH PROVIDED BY FINANCING ACTIVITIES
            
            
            2,813,922
            
            
            4,416,120NET
                (DECREASE) INCREASE IN CASH
            
            
            (996,725
            )
            
            3,083,442CASH–
                beginning of year
            
            
            3,083,942
            
            
            500CASH–
                end of year
            
            $
            2,087,217
            
            $
            3,083,942SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATIONCash
                paid during the year for:Interest
            
            $
            2,828
            
            $
            10,397Non-cash
                investing and financing activities:Equipment
                financed under capital lease obligations
            
            
            -
            
            
            11,906Series
                A Convertible Preferred Stock exchanged for convertible debentures
            
            
            -
            
            
            303,570Contribution
                of loans payable to officers upon completion of share exchange
                transaction
            
            
            -
            
            
            183,559Contribution
                of compensation payable to officers upon completion of share exchange
                transaction
            
            
            -
            
            
            623,314Recapitalization
                of excess of liabilities over assets into stockholders equity concurrent
                with share exchange transaction
            
            
            -
            
            
            2,729,748Series
                A Convertible Preferred Stock exchanged for accounts payable
            
            
            -
            
            
            13,475





*The
      accompanying footnotes are an integral part of these consolidated financial
      statements.*


F-7




**ODYNE
      CORPORATION AND SUBSIDIARY**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**









**NOTE
      1 –** **The
      Company**




Organization




The
      accompanying consolidated financial statements presented are those of Odyne
      Corporation (the “Company” or “Odyne”), which was originally formed as a
      Subchapter S Corporation in the State of New York on August 3, 2001, and its
      wholly-owned subsidiary. All significant intercompany balances and transactions
      have been eliminated. The Company designs, develops, manufactures and installs
      Plug-in Hybrid Electric Vehicle (“PHEV”) propulsion systems for medium and heavy
      duty trucks and buses using its proprietary technology.





Merger
      of Technology Integration Group , Inc. and Odyne Corporation




Pursuant
      to an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”),
      Technology Integration Group, Inc. (“TIG”), through a newly-formed acquisition
      subsidiary, acquired all of the outstanding common stock of the Company on
      October 17, 2006. TIG, in exchange for the Company’s stock, issued 12,000,000
      shares of its common stock directly to the Company’s stockholders (the “Share
      Exchange Transaction”). Following the Share Exchange Transaction, the existing
      stockholders of TIG retained 6,000,000 shares of TIG’s outstanding common stock
      and the Company’s stockholders became the majority owners of TIG. TIG was
      incorporated in the State of Delaware on February 3, 1999.




Prior
      the
      Share Exchange Transaction, TIG was a publicly-traded corporation with
      nominal operations of its own. TIG, immediately following the Share Exchange
      Transaction, changed its name to Odyne Corporation and continued to carry on
      the
      operations of the Company. The Share Exchange Transaction has been accounted
      for
      as a reverse merger and recapitalization transaction in which the original
      Odyne
      is deemed to be the accounting acquirer. Accordingly, the accompanying
      consolidated financial statements present the historical financial position,
      results of operations and cash flows of Odyne, adjusted to give retroactive
      effect to the recapitalization of Odyne into TIG.




**NOTE
      2 –****Summary
      of Significant Accounting Policies**




Principles
      of Consolidation




The
      consolidated financial statements of the Company include the accounts of the
      Company and its wholly-owned subsidiary. All significant inter-company balances
      and transactions have been eliminated.





Use
      of
      Estimates




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those estimates.
      These estimates and assumptions include revenue recognition reserves and
      write-downs related to receivables and inventories, the recoverability of
      long-term assets, deferred taxes and related valuation allowances and valuation
      of equity instruments.





Cash
      and Cash Equivalents


The
      Company considers all highly liquid investments purchased with an original
      maturity of three months or less to be cash equivalents. Cash equivalents may
      be
      invested in money market funds, commercial paper, and certificates of deposits.
      Cash equivalents are carried at cost, which approximates fair
      value.


F-8





Concentration
      of Credit Risk


Financial
      instruments that potentially subject the Company to significant concentrations
      of credit risk consist of cash, cash equivalents and accounts receivable. The
      Company maintains its cash accounts at high quality financial institutions
      with
      balances, at times, in excess of federally insured limits. The Company had
      cash
      balances in excess of federally insures limits of approximately $1,987,000
      and
      $3,112,000 at December 31, 2007 and 2006,respectively. Management believes
      that
      the financial institutions that hold the Company’s deposits are financially
      sound and have minimal credit risk.




Accounts
      Receivable


The
      Company has a policy of reserving for uncollectible accounts based on its best
      estimate of the amount of probable credit losses on its existing accounts
      receivable. Account balances deemed to be uncollectible are charged to the
      allowance for doubtful accounts after all means of collection have been
      exhausted and the potential for recovery is considered remote. The Company’s
      customers include vehicle manufacturers, vehicle retrofitters, municipal
      governments, public utilities and not-for-profit organizations.





Inventory


Inventories
      include raw material and assembled parts. Inventories are stated at the lower
      of
      cost, determined by the first-in first out (“FIFO”) method, or market.





Revenue
      and Cost Recognition





·
            Fixed
                Price Production Contracts


Revenues
      from fixed-price production contracts are recognized on the
      percentage-of-completion method, measured by the percentage of costs incurred
      to
      date to estimated total costs for each contract. The Company considers expended
      cost to be the best available measure of progress on these contracts. Cost
      of
      revenues earned on fixed-price contracts includes direct contract costs such
      as
      materials, labor, subcontract labor, payroll, payroll taxes, insurance and
      other
      sundry direct costs, and indirect contract costs such as travel and supplies.
      Provisions for estimated losses on contracts in progress are made in the period
      in which such losses are determined. The Company’s provision for estimated
      losses was $3,016 and $26,939 for the years ended December 31, 2007 and 2006,
      respectively .





·
            Completed
                - Contract Method


Under
      the
      completed contract method, revenue and cost of individual contracts are included
      in operations in the year during which they are completed. Losses expected
      to be
      incurred on contracts in progress are charged to operations in the period such
      losses are determined. The aggregate of cost of uncompleted contracts in excess
      of related billings is included in inventory, and the aggregate of billings
      on
      uncompleted on uncompleted contracts in excess of related cost is shown as
      a
      liability. The Company adopted this accounting method effective January 1,
      2007
      in order to account for short term fixed price contracts. No revenue was
      recognized using this method during the year ended December 31,
      2007.





·
            Time
                and Materials Contracts


Revenues
      from time and materials contracts are billed, including profits, as incurred
      based on a fixed labor rate plus materials. No revenues were generated from
      time
      and materials contracts for the year ended December 31, 2007. Revenues generated
      from time and materials contracts amounted to $3,426 for the year ended December
      31, 2006. Cost of revenues from time and materials contracts includes labor
      and
      materials.




Product
      Warranty Reserves




Product
      warranty reserves are established in the same period that revenue from the
      sale
      of the related products is recognized. The amounts of those reserves are based
      on the Company’s best estimate of the amounts necessary to settle future and
      existing claims on products sold as of the balance sheet date. During the year
      ended December 31, 2007, the Company established a warranty reserve for
      delivered systems in the amount of $43,000.




F-9


Research
      and Development




Research
      and development expenses include costs incurred for the experimentation, design
      and testing of the Company’s PHEV technology. Such costs are expensed as
      incurred. Research and development cost includes direct costs such as materials,
      labor, subcontract labor, payroll, payroll taxes, insurance and other sundry
      direct costs, and indirect costs such as travel, supplies, repairs and
      depreciation.





The
      Company has received non-refundable development funding from various
      governmental and/or energy related agencies, including Long Island Power
      Authority, the Electric Power Research Institute and the Greater Long Island
      Clean Cities Coalition. These research projects are funded, in part, by third
      parties and expensed as incurred. The Company records non refundable development
      funds as a reduction of research and development cost.





Research
      and development expenses, net of non-refundable development funding, for the
      years ended December 31, 2007 and 2006 were as follows:




2007
            
            2006Total
                research and development expense
            
            $
            1,620,844
            
            $
            767,929Less:
                reimbursements
            
            
            (47,250
            )
            
            (12,500
            )Net
                Research and Development Expense
            
            $
            1,573,594
            
            $
            755,429




Intangible
      Assets - Patents




Costs
      incurred to obtain patents are amortized over the remaining legal life of the
      patent or its economic useful life, if shorter. Patent costs are reviewed for
      impairment annually or whenever events or changes in business circumstance
      indicate the carrying value of the assets may not be recoverable. Impairment
      losses are recognized if future cash flows of the related assets are less than
      their carrying values.





Income
      Taxes





The
      Company accounts for income taxes under Statement of Financial Accounting
      Standard No. 109, “Accounting for Income Taxes,” (“SFAS 109”). SFAS No. 109
      requires the recognition of deferred tax assets and liabilities for both the
      expected impact of differences between the financial statements and tax basis
      of
      assets and liabilities and for the expected future tax benefit to be derived
      from tax loss and tax credit carry forwards. SFAS No. 109 additionally requires
      the establishment of a valuation allowance be established when it is more likely
      than not that all or a portion of deferred tax assets will not be realized.
      Furthermore, SFAS No. 109 provides that it is difficult to conclude
      that a valuation allowance is not needed when there is negative evidence such
      as
      cumulative losses in recent years. Therefore, cumulative losses weigh heavily
      in
      the overall assessment. Accordingly the Company has recorded a full
      valuation allowance against its net deferred tax assets. In
      addition, the Company expects to provide a full valuation allowance on
      future tax benefits until it can sustain a level of profitability that
      demonstrates its ability to utilize the assets, or other significant
      positive evidence arises that suggests its ability to utilize such assets.
      The future realization of a portion of the reserved deferred tax assets
      related to tax benefits associated with the exercise of stock options, if and
      when realized, will not result in a tax benefit in the consolidated statement
      of
      operations, but rather will result in an increase in additional paid in
      capital. The Company will continue to re-assess reserves on deferred
      income tax assets in future periods on a quarterly basis.




The
      Company has adopted the provisions of Financial Accounting Standards Board
      (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income
      Taxes—an interpretation of FASB Statement No. 109”(“FIN 48”), on
      January 1, 2007. FIN 48 clarifies the accounting for uncertainty in
      income taxes recognized in an enterprise’s financial statements in accordance
      with SFAS No. 109, “Accounting for Income Taxes,” and prescribes a
      recognition threshold and measurement process for financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a
      tax return. FIN 48 also provides guidance on derecognition, classification,
      interest and penalties, accounting in interim period, disclosure and transition.
      The Company believes that its income tax positions and deductions would be
      sustained on audit and does not anticipate any adjustments that would result
      in
      a material change to its financial position. In addition, the company did not
      record a cumulative effect adjustment related to the adoption of FIN 48.
      The Company does not expect its unrecognized tax benefit position to change
      during the next twelve months. Management is currently unaware of any issues
      under review that could result in significant payments, accruals or material
      deviations from its position.




F-10


Prior
      to
      the aforementioned Share Exchange Transaction which occurred on October 17,
      2006, the Company’s stockholders elected for the Company to be treated as an “S”
corporation under subchapter “S” of the Internal Revenue Code and as a small
      business corporation under similar provisions of the New York State income
      tax
      code applicable to corporations. Accordingly, no income tax provision had been
      recorded prior to the Share Exchange Transaction as any income earned or losses
      incurred and any tax credits were reported by the stockholders in their
      individual federal and state income tax returns.





Stock-Based
      Compensation




The
      Company has adopted SFAS No. 123(R) “Share Based Payment”
(“SFAS 123(R)”). This statement is a revision of SFAS Statement
      No. 123, and supersedes APB Opinion No. 25, and its related
      implementation guidance. SFAS 123(R) addresses all forms of share based
      payment (“SBP”) awards including shares issued under employee stock purchase
      plans, stock options, restricted stock and stock appreciation rights.Under
      SFAS 123(R), SBP awards are measured at fair value on the awards’
grant date, based on the estimated number of awards that are expected to vest
      and results in a charge to operations.





Non-Employee
      Stock Based Compensation




The
      Company accounts for equity instruments issued to non-employees in accordance
      with the provisions of SFAS No. 123(R) and Emerging Issues Task Force
      (“EITF”) Issue No. 96-18, “Accounting for Equity Instruments That are
      Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
      Goods or Services,” (“EITF 96-18”) which requires that such equity instruments
      be recorded at their fair value on the measurement date. The measurement of
      stock-based compensation is subject to periodic adjustment as the underlying
      equity instrument vests. Non-employee stock-based compensation charges are
      being
      amortized over the term of the related service period.





Net
      Loss Per Share




Net
      loss
      per share is presented in accordance with SFAS No. 128 “Earnings Per Share.”
(“SFAS 128”) Under SFAS 128, basic net loss per share is computed by dividing
      net loss per share available to common stockholders by the weighted average
      shares of common stock outstanding for the period and excludes any potentially
      dilutive securities. Diluted earnings per share reflects the potential dilution
      that would occur upon the exercise or conversion of all dilutive securities
      into
      common stock. The computation of loss per share for the year ended December
      31,
      2007 and 2006 excludes potentially dilutive securities because their inclusion
      would be anti-dilutive. Loss per share retroactively includes 12,000,000 shares
      of common stock issued to the former stockholders of the Company in the Share
      Exchange Transaction, as if these shares were outstanding for all periods
      presented.





Shares
      of
      common stock issuable upon conversion or exercise of potentially dilutive
      securities at December 31 2007 and 2006 are as follows;




2007
            
            2006Series
                A Convertible Preferred Stock
            
            
            3,890,770
            
            
            7,670,500Convertible
                Debentures
            
            
            12,800,000
            
            
            -Warrants
            
            
            10,586,346
            
            
            4,648,893Options
            
            
            1,975,000
            
            
            505,000Total
            
            
            29,252,116
            
            
            12,824,393




F-11


Recently
      Issued Accounting Standards




In
      September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS
      157”). This Standard defines fair value, establishes a framework for measuring
      fair value in generally accepted accounting principles and expands disclosures
      about fair value measurements. SFAS 157 is effective for financial statements
      issued for fiscal years beginning after November 15, 2007 and interim periods
      within those fiscal years. The adoption of this pronouncement did not have
      an
      effect on the accompanying consolidated financial statements.




In
      February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 provides companies
      with an option to report selected financial assets and liabilities at fair
      value
      and establishes presentation and disclosure requirements designed to facilitate
      comparisons between companies that choose different measurement attributes
      for
      similar types of assets and liabilities. SFAS 159 is effective for fiscal years
      beginning after November 15, 2007. The Company is in the process of
      evaluating the impact of the adoption of this statement on the Company’s results
      of operations and financial condition.





In
      June
      2007, the EITF reached a consensus on EITF Issue No. 06-11, “ *Accounting
      for Income Tax Benefits on Dividends on Share-Based Payment
      Awards* ”
(“EITF
      06-11”) effective for reporting periods after December 15, 2007.  EITF
      06-11 addresses share-based payment arrangements with dividend protection
      features that entitle employees to receive (a) dividends on equity-classified
      non-vested shares, (b) dividend equivalents on equity-classified non-vested
      share units, or (c) payments equal to the dividends paid on the underlying
      shares while an equity-classified share option is outstanding, when those
      dividends or dividend equivalents are charged to retained earnings under
      Statement 123(R) and result in an income tax deduction for the employer.  A
      realized income tax benefit from dividends or dividend equivalents that are
      charged to retained earnings are paid to employees for equity-classified
      non-vested shares, non-vested equity share units, and outstanding equity share
      options should be recognized as an increase in additional paid in capital.
       The amount recognized in additional paid-in capital for the realized
      income tax benefit from dividends on those awards should be included in the
      pool
      of excess tax benefits available to absorb potential future tax deficiencies
      on
      share-based payments.  The Company does not expect the adoption of this
      pronouncement to have a material impact on its financial position, results
      of
      operation and cash flows.





In
      December 2007, the FASB issued SFAS No. 141R (“SFAS 141R”),
      “Business Combinations”, which establishes principles and requirements for how
      the acquirer recognizes and measures in its financial statements the
      identifiable assets acquired, the liabilities assumed, and any noncontrolling
      interest in the acquiree, goodwill acquired in the business combination or
      a
      gain from a bargain purchase. SFAS 141R
      is
      effective for business combinations with an acquisition date on or after the
      beginning of the first annual reporting period beginning on or after December
      15, 2008. The Company expects SFAS 141R
      to
      have an impact on the accounting for any future business acquisitions as of
      the
      effective date.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”).
      SFAS 160 establishes accounting and reporting standards for the noncontrolling
      interest (minority interest) in a subsidiary and for the deconsolidation of a
      subsidiary. SFAS 160 requires a) the ownership interest in the subsidiary held
      by parties other than the parent to be clearly identified and presented in
      the
      consolidated balance sheet within equity, but separate from the parent’s equity,
      b) the amount of consolidated net income attributable to the parent and to
      the
      noncontrolling interest to be clearly identified and presented on the face
      of
      the consolidated statement of operations and c) changes in a parent’s ownership
      interest while the parent retains its controlling financial interest in its
      subsidiary to be accounted for consistently. Entities must provide sufficient
      disclosures that clearly identify and distinguish between the interests of
      the
      parent and the interests of the noncontrolling owners. SFAS 160 is effective
      for
      financial statements issued for fiscal years beginning on or after December
      15,
      2008, and interim periods within those fiscal years. The Company is currently
      assessing the impact of SFAS 160 on its consolidated financial statements.





Other
      accounting standards that have been issued or proposed by the FASB or other
      standards-setting bodies that do not require adoption until a future date are
      not expected to have a material impact on the financial statements upon
      adoption.


F-12





**NOTE
      3 –**  **Cash**





Cash
      -
      Restricted




The
      terms
      of the October 2006 Private Placement Agreement required that the Company use
      $250,000 of the proceeds of this transaction during the twelve months following
      the closing toward establishing a comprehensive capital markets initiative.
      The
      balance of the restricted cash account was $-0- and $227,583 as of December
      31
      2007 and 2006, respectively . Should one or a series of related warrant
      exercises result in additional proceeds to the Company of at least $1,500,000,
      the Company would be required to deposit an additional $200,000, to be held
      in
      trust and used exclusively for additional capital markets initiatives during
      the
      twelve months following the warrant exercise. Through December 31, 2007, the
      Company has received no such warrant exercise proceeds.





**NOTE
      4 –**  **Property
      and Equipment**





Property
      and equipment consist of the following as of December 31 2007 and
      2006;





2007
            
            2006Equipment
            
            $
            152,847
            
            $
            89,181Furniture
                and fixtures
            
            
            43,359
            
            
            28,393Leasehold
                improvements
            
            
            26,398
            
            
            26,398222,604
            
            
            143,972Less:
                accumulated depreciation and amortization
            
            
            (102,585
            )
            
            (45,175
            )Property
                and Equipment, Net
            
            $
            120,019
            
            $
            98,797





Property
      and equipment includes $22,000 of assets financed under capital lease
      obligations. Depreciation amounted to $57,410 and $19,103 for the years ended
      December 31, 2007 and 2006, respectively.





**NOTE
      5–** **Deferred
      Financing Costs**





In
      connection with the issuance of the Company’s 10% convertible debentures (see
      Note 8) the company incurred $434,376 of professional fees and other related
      cost associated with closing the transaction. Such costs were recorded as
      Deferred financing costs and are shown net of $48,246 of amortization on the
      accompanying consolidated balance sheet. Such costs are being amortized over
      the
      term the debentures. ****





**NOTE
      6 –**  **Capital
      Lease Obligations**





The
      Company leases equipment under capital leases in which the present value of
      the
      minimum lease payments was calculated using discount rates ranging from 9%
      to
      18% over three-year terms. A summary of capital lease obligations that remain
      at
      December 31 2007 and 2006 are as follows:




2007
            
            2006Total
                obligations under capital leases
            
            $
            4,962
            
            $
            11,779Less:
                current portion of lease obligations
            
            
            4,306
            
            
            6,817$
            656
            
            $
            4,962




F-13




Minimum
      lease payments due in years subsequent to December 31 2007:




For
                Years Ending December 31,
            
            Amount2008
            
            
            4,5572009
            
            
            679Total
                minimum lease payments
            
            
            5,236Less:
                amount representing interest
            
            
            274Present
                Value of Minimum Lease Payments
            
            $
            4,962





**NOTE
      7 –**  **Development
      Funding Subject to Repayment**





The
      Company entered into a contract in which it received development funding from
      the New York State Energy Research & Development Authority in the amount of
      3,642 and $80,428 during the years ended December 31, 2007 and 2006
      respectively. Funding received under the terms of this agreement is subject
      to
      repayment based on a percentage of sales of the related invention or discovery
      as defined under the terms of the agreement. Funding due to be repaid under
      this
      agreement was $ 5,587 and $ -0- at December 31 2007 and 2006, respectively,
      and
      is included in accrued payroll and other operating expenses on the accompanying
      consolidated balance sheets. The obligation terminates upon the earlier of
      fifteen (15) years from the date of the first sale or upon repayment of the
      amount of funds received under the agreement. Development funding subject to
      repayment amounts to $238,948 and $240,894 at December 31, 2007 and 2006,
      respectively and is presented as a liability in the accompanying balance sheets.
      This contract was recently amended as described in Note 11.





**NOTE
      8 –**  **Convertible
      Debentures**





On
      October 26, 2007, the Company completed a private placement to five accredited
      investors (the “Investors”) resulting in gross proceeds of $3,200,000, pursuant
      to the terms of a Subscription Agreement (the “Subscription Agreement”). The
      securities were offered and sold in Units , consisting of $100,000 principal
      amount of 10% senior secured convertible debentures (“Debentures”) and a
      warrant, expiring October 26, 2010, to purchase 133,333 shares of common stock
      at an exercise price of $.75 per share (“Warrants”).





The
      Company allocated the proceeds of $3,200,000 between the Debentures and the
      Warrants based on the relative fair value-based method. The proceeds were
      allocated to the value of Warrants of $938,671 as debt discount, which is being
      amortized over the eighteen-month life of the Debentures as additional interest
      expense. The warrants, including 4,266,667 issued as part of the Units sold
      to
      investors and 1,000,000 warrants issued to the placement agents in this
      transaction, were valued by utilizing the Black-Scholes option-pricing model
      with the following assumptions:  fair
      value per share of common stock $.47, volatility rate 29.95%, risk free
      interest rate 3.79%, expected term three years, dividend yield 0. Amortization
      of the discount resulted in interest expense in the amount of $172,304 for
      the
      year ended December 31, 2007. The unamortized debt discount at December 31,
      2007
      in the amount of $766,367 has been accounted for as a reduction of the
      Debentures. Accrued interest payable on the Debentures of $57,863 as of December
      31, 2007 is reflected on the accompanying balance sheet.





The
      Debentures bear interest at 10% per year, payable quarterly in cash or
      freely-tradable common stock, at the Company’s option, and mature on the earlier
      of 18 months after the original issuance date or the completion of one or a
      series of related debt or equity financing transactions for minimum aggregate
      gross proceeds of $5,000,000. This does not include any financing transaction
      by
      a factor or commercial bank (a “Subsequent Financing”).





The
      Debentures are collateralized by a first priority security interest in all
      of
      the Company’s and its subsidiary’s assets. The outstanding balance of the
      Debentures may be converted, at the option of the holder, in whole or in part,
      at the earlier of 12 months after the original issuance date, into shares of
      Company common stock at a conversion price equal to 70% of the then market
      price
      per share of common stock, or upon the completion of a Subsequent Financing,
      into the securities being sold in such Subsequent Financing at an effective
      conversion price equal to 80% of the purchase price of those securities included
      in the Subsequent Financing. Notwithstanding the foregoing, the minimum
      conversion price will be no less than $.25 per share. Partial conversions by
      the
      Investors are permitted.


F-14




The
      Warrants are exercisable at any time for three years from the date of their
      issuance, contain customary change of control buy-out provisions and are not
      redeemable. The Warrants also contain anti-dilution provisions (including
“full-ratchet” price protection from the future issuance of stock, exclusive of
      the conversion of the Debentures and certain other excluded stock issuances,
      or
      securities convertible or exercisable for shares of common stock below $.75
      per
      share), provided that the exercise price of the Warrants may not be adjusted
      to
      less than $.25 per share as a result of the full-ratchet price
      protection.





Pursuant
      to the terms of a related Registration Rights Agreement (the “Registration
      Rights Agreement”), the Company agreed to file a registration statement with the
      U.S. Securities and Exchange Commission as soon as possible for purposes of
      registering the resale of the shares of Company common stock issuable upon
      the
      conversion of the Debentures and exercise of the Warrants sold in the private
      placement. As required, the Company filed a registration statement in December
      2007 within 60 calendar days following the closing. In the event that this
      registration statement is not declared effective within 120 calendar days
      following the closing, the Company is obligated to pay the Investors 2% in
      cash
      or stock of the face amount of the Debentures for every 30-day period, or
      portion thereof, that the registration statement is not declared effective
      for a
      maximum of six months, subject to the ability of the Investors to sell the
      underlying shares pursuant to Rule 144. Liquidated damages, should there be
      any,
      can be paid in cash or freely-tradable common stock, at the Company’s option.
      The Company also agreed not to file a registration statement for any additional
      shares of common stock until 75 days after the effective date of the
      aforementioned registration statement.





The
      securities sold in the private placement have not been registered under the
      Securities Act of 1933, as amended (the “Securities Act”), and were issued and
      sold in reliance upon the exemption from registration contained in Section
      4(2)
      of the Securities Act and Regulation D promulgated there under.





**NOTE
      9 –**  **Related
      Parties**





On
      February 19, 2007, an officer holding 50 shares of Series A Convertible
      Preferred stock exercised the conversion option which resulted in the issuance
      of 66,700 shares of the Company’s Common Stock to this individual (see note
      8).




On
      June
      11, 2007, an officer of the Company purchased 5,000 shares of the Company’s
      Common Stock at $.45 per share.





On
      July
      26, 2007, a director of the Company purchased 27,500 shares of the Company’s
      Common Stock at $.27 per share.





In
      July
      2007, in order to conserve liquidity, the President of the Company began
      deferring all of his salary and the Chief Executive Officer began deferring
      25%
      of his salary. The President’s deferred salary, in the amount of $ 43,046, was
      repaid on November 8, 2007. The former Chief Executive Officer’s deferred
      salary, in the amount of $ 4,038, was repaid in accordance with the terms and
      conditions of his Separation Agreement on September 13, 2007.





Pursuant
      to an agreement between the Company and Roger M. Slotkin, our
      former Chief Executive Officer, effective September 8, 2007, Mr. Slotkin
      resigned from the Company’s board of directors.





On
      October 12, 2007, the Company received $250,000 in proceeds of a Bridge
      Promissory Note (“Bridge Note”) to its Chief Executive Officer. The Bridge Note
      included interest at 10% per annum. The Bridge Note, including interest in
      the
      amount of $1,233 was repaid in connection with the company’s October 26, 2007
      Private Placement.





On
      October 26, 2007, AT Holdings I, LLC, an entity controlled by the company’s
      Chief Executive Officer, purchased $250,000 of the Company’s 10% senior secured
      convertible debentures.


F-15


**NOTE
      10 – Commitments** **and
      Contingencies**





Operating
      Lease




The
      Company conducts its operations from a single facility, under a non-cancelable
      operating lease expiring in June 2009 requiring minimum monthly payments that
      increase from $5,544 to $7,708 over the term of the lease.





Future
      minimum rental payments under the above non-cancelable operating lease are
      as
      follows:





For
                the Year Ending December 31,
            
            Amount2008
            
            $
            90,9412009
            
            
            46,252$
            137,193





Rent
      expense amounted to approximately $87,243 and $45,932 for the years ended
      December 31, 2007 and 2006, respectively. Rent expense includes ($707) and
      $5,312 for the years ended December 31, 2007 and 2006 respectively, for the
      effects of recording rent expense on a straight line basis over the term of
      the
      lease.





Litigation





On
      January 16, 2008, a subcontractor commenced an action against Odyne Corporation
      and others in the Supreme Court, Suffolk County seeking to recover damages
      based
      on alleged facts concerning our commercial relationship with the plaintiff
      in the latter part of 2006 and the early part of 2007 which culminated in an
      Exclusive Sales and Marketing Agreement, whereby the plaintiff agreed to serve
      as the exclusive retrofitting installer of our plug-in hybrid electric
      propulsion systems for medium and heavy trucks and as the exclusive distributor
      of such vehicles in the New York metropolitan area. It is our opinion that
      the
      alleged facts, even if true, do not provide a legal basis for recovery, and
      we
      have filed a motion to dismiss the litigation on the grounds that the complaint
      fails to state any viable cause of action. The motion was submitted to the
      Supreme Court in Suffolk County on February 27, 2008 and is presently
      pending. Our management believes that we have a reasonable chance of
      succeeding in dismissing the action, although we cannot predict the outcome
      of
      the motion and the action.





Employment
      Agreements


In
      October of 2006, the Company entered into employment agreements with its Chief
      Operating Officer, Executive Vice President - Engineering and Chief Technology
      Officer, and Executive Vice President - Operations, respectively. The employment
      agreements have a term of three years. The employment agreements provide that
      each executive will receive an annual salary of $140,000 during the first year
      of the term with increases equal to 5% of such salary on each anniversary of
      the
      effective date of the employment agreement. In addition, each executive is
      entitled to (a) receive a cash bonus in an amount determined by the compensation
      committee of the board of directors if the Company meets or exceeds certain
      mutually agreed upon performance goals and (b) participate in the company’s
      stock option plan.





The
      employment agreements provide for termination of an executive’s employment
      without any further obligation upon the death or disability of the executive
      or
      for cause. In the event that an executive’s employment is terminated without
      cause or for good reason, the Company is obligated to pay such executive his
      salary for the remainder of the term.




On
      September 19, 2007, the Company entered into an employment agreement with Alan
      Tannenbaum as its new Chief Executive Officer and a member of the Board of
      Directors. The employment agreement has a term expiring one year after the
      initial closing of the Company’s financing transaction which took place on
      October 25, 2007. The term may be extended for additional terms of one year
      provided the Company gives Mr. Tannenbaum 30 days prior written notice and
      the
      Mr. Tannenbaum accepts. The employment agreement provides for a base salary
      at
      the annual rate of $145,000, starting on January 1, 2008.


F-16





Under
      the
      employment agreement, the Company agreed to grant Mr. Tannenbaum stock options
      to purchase an aggregate of 3,000,000 shares of the Company’s common stock. Of
      such stock options, options to purchase 300,000 shares were granted on October
      25, 2007 at an exercise price of $.395, the closing market price on that date.
      The stock based compensation expense associated with these options is included
      in the amounts disclosed in Note12 hereunder. Options to purchase 300,000 shares
      will be granted on January 2, 2008, based on an exercise price equal to the
      closing market price of the common stock on such date. Each stock option will
      vest in three equal installments on the second, third and fourth anniversaries
      of the grant date and expire ten years after it is granted.





Options
      to purchase 2,400,000 shares will be granted at $.317 per share, based on the
      average closing market price of the common stock on the 30 consecutive trading
      days on and prior to the initial closing date of the private placement described
      in Note 8. These options are pursuant to a separate plan requiring shareholder
      approval, which has not yet been received and which approval is not assured.
      Consequently the no stock based compensation expense associated with these
      options has been reflected in the accompanying financial statements. Upon the
      date of receipt of shareholder approval, the stock based compensation expense
      associated with these options will be recorded as appropriate. These options
      will also vest in three equal installments on the second, third and fourth
      anniversaries of the grant date and expire ten years after it is
      granted.




Consulting
      and Royalty Agreements




In
      October 2006, the Company entered into an agreement with one of its outside
      engineering labor providers whereby it committed to paying for a minimum of
      100
      hours per month through December 2008. Hourly rates charged under the contract
      are $80 per hour in 2007 and $85 per hour in 2008. In May 2005, the Company
      entered into a royalty agreement with the same party that requires the Company
      to pay royalties for sales of systems containing certain proprietary source
      code
      used in the Company’s PHEV system. Royalty fees range from approximately $75 per
      vehicle to $850 per vehicle depending on cumulative volume. The Company can
      purchase these source codes for $165,000 in 2007 and $181,500 in 2008. For
      the
      years ended December 31, 2007 and 2006, the Company recorded $2,700 and $-0-
      respectively, of royalty expense under this agreement.





Research
      and Development Arrangements




On
      March
      30, 2006, the Company signed a Research and Development Contract Amendment
      to
      its NYSERDA agreement to also develop and install a PHEV system into a refuse
      vehicle provided by a third party. The Company’s obligation under this amendment
      is to design and install the system and to provide NYSERDA with regular status
      reports. NYSERDA will provide up to $161,046 of funding for this effort. NYSERDA
      is entitled to a 1.5 % royalty on future sales of PHEV systems used in vehicles
      weighing up to 33,000 pounds that utilize the Company’s PHEV propulsion system.
      The maximum royalty obligation that is payable under this agreement is limited
      to the amount of funding received, which amount will be recorded as a liability
      at the time such funding is received. Total funding received through December
      31, 2007 amounted to $244,536.




Exclusive
      Retrofitting and Sales Arrangements




On
      March
      28, 2007, the Company entered into a Sales and Marketing Agreement with a
      company that repairs, reconditions and retrofits medium and heavy duty trucks
      and buses in the western United States (“Retrofit Installer”). Under the terms
      of the agreement, the Company granted to the Retrofit Installer an exclusive
      right to retrofit vehicles (other than buses) using its PHEV system in
      California, Nevada and Arizona. The exclusivity granted to the Retrofit
      Installer is subject to certain performance requirements and other limitations
      contained in the agreement. Additionally, subject to certain terms and
      conditions contained in the agreement, the Company agreed to pay the Retrofit
      Installer a sales commission ranging from 2.0% to 5.0% of sales of its PHEV
      systems in the territory to original equipment manufacturers that do not use
      the
      Retrofit Installer as the installing company.





On
      April
      24, 2007, the Company entered into a Memorandum of Understanding with a company
      that manufactures and sells vehicles that are used for aerial truck
      applications. Under the terms of the agreement, the Company granted the vehicle
      distributor an exclusive right to sell vehicles with aerial truck applications
      using the PHEV system. The exclusivity granted to the distributor is subject
      to
      certain performance requirements and other limitations contained in the
      agreement.


F-17




On
      April
      25, 2007, the Company entered into a Strategic Partnership Agreement with a
      company that sells buses in the western United States (“Distributor”). Under the
      terms of the agreement, the Company granted to the Distributor an exclusive
      right to sell retrofitted buses (excluding school buses) using its PHEV system
      in California and Nevada. The exclusivity granted to the Distributor is subject
      to certain performance requirements and other limitations contained in the
      agreement.





Under
      the
      terms of the agreement, the Company and the Distributor will build a
      demonstration vehicle. The Distributor will supply a vehicle in which the
      Company will install its PHEV system and charge the Distributor for its material
      cost. Additionally, subject to certain terms and conditions contained in the
      agreement, the Company agreed to pay the Distributor a royalty fee ranging
      from
      3.5% to 5.0%, based on volume of bus sales, other than school buses, containing
      the PHEV system, by other manufacturers and Distributors in its territory.
      No
      amounts are due under this arrangement as of December 31, 2007.





**NOTE
      11 –**  **Stockholders’
      Equity**





Description
      of Common Stock


Each
      share of common stock has the right to one vote. The holders of common stock
      are
      entitled to dividends when funds are legally available and when declared by
      the
      Board of Directors.





Description
      of Preferred Stock


The
      Company is authorized to issue up 5,000,000 shares of “blank check” Preferred
      Stock, par value $.001 per share, of which 6,000 shares have been designated
      as
      Series A Convertible Preferred Stock





Description
      of Series A Convertible Preferred Stock





Holders
      of the Series A Convertible Preferred stock are entitled, at any time, to
      convert their shares of Series A Convertible Preferred stock into common stock,
      without any further payment. Each share of Series A Convertible Preferred stock
      is initially convertible into 1,334 shares of common stock. The number of shares
      of common stock issuable upon conversion of the Series A Convertible Preferred
      stock is subject to adjustment upon the occurrence of certain events, including,
      among others, a stock split, reverse stock split or combination of the Company’s
      common stock, an issuance of common stock or other securities as a dividend
      or
      distribution on the common stock, a reclassification, exchange or substitution
      of the common stock or a capital reorganization. In the event of a subsequent
      issue of common stock for cash consideration at a price less than $.75 per
      share, the conversion rate will be that number of shares of common stock equal
      to $1,000 divided by the price per share at which the common stock is
      issued.





Upon
      a
      merger or consolidation of the Company with or into another Company, or any
      transfer, sale or lease by the Company of its common stock or assets, the Series
      A Convertible Preferred stock will be treated as common stock for all purposes,
      including the determination of any assets, property or stock to which holders
      of
      the Series A Convertible Preferred stock are entitled to receive, or into which
      the Series A Convertible Preferred stock is converted, by reason of the
      consummation of such merger, consolidation, sale or lease.





Holders
      of Series A Convertible Preferred stock are entitled to vote their shares on
      an
      as-converted to common stock basis, and shall vote together with the holders
      of
      the common stock, and not as a separate class.





In
      the
      event of voluntary or involuntary liquidation, dissolution or winding-up of
      the
      Company, holders of Series A Convertible Preferred stock will be entitled to
      receive out of the Company’s assets available for distribution to its
      stockholders, before any distribution is made to holders of Company common
      stock, liquidating distributions in an amount equal to $1,000 per share. After
      payment of the full amount of the liquidating distributions to which the holders
      of the Series A Convertible Preferred stock are entitled, holders of the Series
      A Convertible Preferred stock will receive liquidating distributions pro rata
      with holders of common stock, based on the number of shares of common stock
      into
      which the Series A Convertible Preferred stock is convertible at the conversion
      rate then in effect. The Series A Convertible Preferred Stock holders do not
      have redemption rights.


F-18





Holders
      of the Series A Convertible Preferred stock will not be entitled to receive
      dividends except to the extent that dividends are declared on the common stock.
      Holders of the Series A Convertible Preferred stock are entitled to receive
      dividends paid on the common stock based on the number of shares of common
      stock
      into which the Series A Convertible Preferred stock are convertible on the
      record date of such dividend.





If
      the
      closing bid price of the Company’s common stock is above $5.00 per share for a
      period of thirty consecutive trading days, then each share of the Series A
      Convertible Preferred stock automatically converts into the number of shares
      of
      common stock at the conversion rate then in effect.





Share
      Exchange Transaction


As
      described in Note 1 the Company completed a Share Exchange Transaction on
      October 17, 2006. Prior to the completion of the Share Exchange Transaction,
      the
      Company’s four principal stockholders owned, in the aggregate 10,588 shares of
      the Company’s stock which, under the terms of a stockholders agreement dated
      January 1, 2004, was subject to mandatory redemption upon the death of any
      such
      stockholder at a redemption price of $167 per share. In accordance with SFAS
      150, the Company presented these shares in its balance sheet as an excess of
      liabilities over assets since such shares were subject to a mandatory redemption
      requirement. The stockholders agreement was terminated upon the completion
      of
      the Share Exchange Transaction. Accordingly, upon completion of the Share
      Exchange Transaction, the excess of liabilities over assets was reclassified
      as
      permanent capital to reflect their recapitalization into TIG common stock.
      In
      addition, the Company reclassified the amount of its accumulated deficit, which
      represents losses incurred in periods in which the Company maintained its status
      as a Subchapter S Corporation, into additional paid in capital.





The
      Share
      Exchange Transaction was treated as a recapitalization for accounting purposes
      since the Company was deemed to be the accounting acquirer in this transaction.
      TIG had 6,000,000 shares of common stock outstanding at the time of the Share
      Exchange Transaction.





Private
      Placement of Series A Convertible Preferred Stock





Pursuant
      to a Confidential Private Placement Memorandum dated July 27, 2006, the Company
      initiated a proposed $5,000,000 Private Placement which would, for each $1,000
      Unit purchased, result in the issuance of (i) one share of Series A Convertible
      Preferred Stock and (ii) warrants (“Investor Warrants”) to purchase 667 shares
      of the Company’s common stock with a contractual terms of four years. The
      minimum amount of the Series A Convertible Preferred Financing was $3,500,000
      (“Minimum Amount”) and the maximum amount was $5,000,000. As described in Note
      11, the Convertible Debenture holders were mandatory obligated to exchange
      their
      Convertible Debentures for such number of units that would result in a 120%
      exchange premium over the principal value of the Convertible
      Debentures.





The
      Company has agreed to file a registration statement with the Securities and
      Exchange Commission on or before 180 days after each closing date. The
      registration rights stipulated in the investor subscription agreements provide
      the payment of liquidated damages payable in such number of shares of common
      stock equal to 2% of the registerable shares up to a maximum of 20%





As
      a
      component of the Series A Convertible Preferred stock, holders were issued
      Investor Warrants to purchase a total of 3,835,271 shares of common stock at
      an
      exercise price of $1.00 per share expiring on October 16, 2010. The Company
      determined that the preferred stock was issued with an effective beneficial
      conversion feature for which it recorded a deemed dividend of $3,230,791an
      allocation of the proceeds to the relative fair values of the preferred stock
      and the warrants.





The
      Investor Warrants may be redeemed in whole or in part by the Company upon 30
      days written notice, at a price of $.05 per share, provided (i) the average
      closing price of the common stock exceeds $3.00 per share for a period of 20
      consecutive trading days ending within 15 days prior to the date on which the
      notice of redemption is given and the registration statement to be filed by
      the
      Company registering the common stock issued pursuant to the private placement
      is
      then effective or (ii) that the Company reports revenues in accordance with
      generally accepted accounting principles of at least $3.0 million for the four
      full reporting quarters subsequent to the closing and the resale registration
      statement to be filed by the Company registering the common stock issued in
      the
      private placement is then effective.


F-19




The
      Investor Warrants contain provisions that protect the holders against dilution
      by adjustment of the purchase price in certain events, such as stock dividends,
      stock splits, and other similar events. Prior to exercise, the Investor Warrants
      do not confer upon holders any voting or any other rights as a stockholder.
      All
      of the Investor Warrants issued in these transactions are exercisable by the
      holders at any time.





The
      Company evaluated whether in accordance with the provisions of SFAS 150 and
      EITF
      Topic D-98, the Series A Convertible Preferred contained any features that
      permit the holder to settle such for shares for cash. The Company determined,
      based on the rights and privileges specified in the certificate of designation
      that there are currently no provisions that would permit the holders to redeem
      these shares for cash that are not solely with the Company’s control. The
      Company performs a classification assessment at each reporting date to determine
      whether a reclassification of these shares may be necessary.





The
      Company also evaluated the conversion option embedded in the Series A
      Convertible Preferred stock to determine whether, in accordance with SFAS 133
      such conversion option should be bifurcated from its host instrument and
      accounted for as free standing derivative financial instrument. The Company
      determined that the conversion option meets the clearly and closely related
      criteria provide for in paragraph 61(l) of the implementation guidance in
      Appendix A to SFAS 133. Accordingly, the conversion feature was accounted for
      as
      an embedded conversion option.





Commencing
      October 17, 2006 through December 13, 2006, the Company issued 5,750 Units
      to
      investors including (i) 5,354 Units issued for cash in three separate closings,
      (ii) 304 issued to the Convertible Debenture holders as described in Note 11,
      (iii) 13 issued in settlement of certain trade accounts payable, and (iv) 70
      issued to a non-employee for corporate finance advisory services.





The
      Company completed its first closing of 3,033 Units on October 17, 2006. This
      closing included 2,651 units issued for gross proceeds amounting to $2,650,500
      (net proceeds of $2,148,375 after the payment of transaction expenses amounting
      to $502,125). This closing resulted in the issuance of 3,033 shares of Series
      A
      Convertible Preferred stock convertible into 4,046,022 share of common stock
      plus Investor Warrants to purchase up to 2,023,011 shares of common stock at
      an
      exercise price of $1.00 per share.





The
      Company also issued at the time of this closing 303.57 Units in exchange for
      the
      Convertible Debentures described in Note 11. This exchange resulted in the
      issuance of 303,570 shares of Series A Convertible Preferred stock convertible
      into 404,962 shares of common stock plus Investor Warrants to purchase up to
      202,481 shares of common stock at an exercise price of $1.00 per
      share.





The
      fair
      value of Investor Warrants issued in this closing amounted to $ 2,023,011 using
      the Black-Scholes option-pricing model with the following assumptions: fair
      value per share of common stock $ .75, term of 4 years, volatility of 65.36%,
      risk-free interest rate of 4.73 %, and dividend yield of 0.





The
      Company determined, based upon an allocation of the proceeds to the fair values
      of the Series A Preferred Stock and Investor Warrants in this closing, that
      the
      effective conversion price embedded in the Series A Convertible Preferred Shares
      amounts to $.35 per share. Accordingly, the Company recorded a deemed dividend
      in the amount of $513,821 based upon the effective conversion price embedded
      in
      the preferred shares times the number of shares issuable upon
      conversion.


F-20


On
      October 17, 2006, the Company also issued 79 Units with a fair volume of 79,000
      as stock based compensation to a non-employee for corporate finance advisory
      services. The Units were fully vested and non-forfeitable at the date of
      issuance





The
      Company completed its second closing of 2,366.97 Units on October December
      6,
      2006. This closing included 2,355 units issued for gross proceeds amounting
      to $2,366,970 (net proceeds of $2,095,560 after the payment of transaction
      expenses amounting to $ 259,910). This closing resulted in the issuance of
      2,366,970 shares of Series A Convertible Preferred stock convertible into
      3,157,538 share of common stock plus Investor Warrants to purchase up to
      1,587,768 shares of common stock at an exercise price of $1.00 per
      share.





The
      Company also issued at the time of this closing 11.5 Units in settlement of
      $11,500 of trade accounts payable. This exchange resulted in the issuance of
      11,500 shares of Series A Convertible Preferred stock convertible into 15,341
      shares of common stock plus Investor Warrants to purchase up to 7,670 shares
      of
      common stock at an exercise price of $1.00 per share.




The
      fair
      value of Investor Warrants issued in this closing amounted to $ 2,934,561 using
      the Black-Scholes option-pricing model with the following assumptions: fair
      value per share of common stock $2.50, term of 4 years, volatility of 66.64%
      risk-free interest rate of 4.44%, and dividend yield of 0.





The
      Company determined, based upon an allocation of the proceeds to the fair values
      of the Series A Preferred Stock and Investor Warrants in this closing, that
      the
      effective conversion price embedded in the Series A Convertible Preferred Shares
      amounts $1.86 per share. Accordingly, the Company recorded a deemed dividend
      in
      the amount of $2,366,970 based upon the effective conversion price embedded
      in
      the preferred shares times the number of shares issuable upon
      conversion.





The
      Company completed its third closing of 350 Units on October December 13, 2006.
      This closing included 348 units for gross proceeds amount to $ 348,025 (net
      proceeds of $320,025 after the payment of transaction expenses amounting to
      $
      28,000). This closing resulted in the issuance of 350,000 shares of Series
      A
      Convertible Preferred stock convertible into 466,900 shares of common stock
      plus
      Investor Warrants to purchase up to 223,450 shares of common stock at an
      exercise price of $1.00 per share.





The
      Company also issued at the time of this closing 1.98 Units in settlement of
      $1,980 of trade accounts payable. This exchange resulted in the issuance of
      1,980 shares of Series A Convertible Preferred stock convertible into 2,641
      shares of common stock plus Investor Warrants to purchase up to 13,206 shares
      of
      common stock at an exercise price of $1.00 per share.





The
      fair
      value of Investor Warrants issued in this closing amounted to $295,631 using
      the
      Black-Scholes option-pricing model with the following assumptions: fair value
      per share of common stock $1.85, term of 4 years, volatility of 66.82%,
      risk-free interest rate of 4.50%, and dividend yield of 0.





The
      Company determined, based upon an allocation of the proceeds to the fair values
      of the Series A Preferred Stock and Investor Warrants in this closing, that
      the
      effective conversion price embedded in the Series A Convertible Preferred Shares
      amounts $ 1.27 per share. Accordingly, the Company recorded a deemed dividend
      in
      the amount of $350,000 based upon the effective conversion price embedded in
      the
      preferred shares times the number of shares issuable upon
      conversion.




The
      placement agents received warrants to purchase an aggregate of 512,958 shares
      of
      common stock at an exercise price of $.75 per share expiring on October 16,
      2010. In connection with the transaction, the Company also issued four-year
      warrants to purchase 234,019 shares of the Company’s common stock to consultants
      at an exercise price of $.75 per share. The fair value of these warrants was
      $183,340 which was treated as a cost of the private placement. Additional
      expenses incurred in connection with these closings amounted to an aggregate
      of
      $208,641. These expenses were accounted for as a reduction of the offering
      proceeds by recording a charge to additional paid in capital.


F-21




Conversions
      of Series A Convertible Preferred Stock





During
      the year ended December 31, 2007, holders of 2,833 shares of Series A
      Convertible Preferred stock elected to convert their preferred shares into
      4,061,428 shares of common stock. These exercises included, on February 19,
      2007, an officer holding 50 shares of Series A Convertible Preferred stock
      exercising the conversion option which resulted in the issuance of 66,700 shares
      of the Company’s Common Stock to this individual (Note 9).





Common
      Stock Purchase Warrants




A
      summary
      of the status of the Company’s outstanding common stock purchase warrants is as
      follows:




Number
                of
              options
            
            Weighted
              average
              exercise
              priceOutstanding
                at January 1, 2006
            
            
            0
            
            $
            0Granted
            
            
            4,648,915
            
            $
            0.96Exercised
            
            
            0
            
            $
            0Outstanding
                at December 31,2006
            
            
            4,648,915
            
            $
            0.96Granted
            
            
            6,371,667
            
            $
            0.81Exercised
            
            
            (434,236
            )
            $
            0.75Outstanding
                at December 31, 2007
            
            
            10,586,346
            
            $
            0.87




Warrants
      issued





During
      the year ended December 31, 2006 the company did not issue any warrants for
      non – employee services. During the year ended December 31, 2007, the
      Company issued 105,000 common stock purchase warrants to non-employees for
      services with exercise prices ranging from $1.60 to 1.99 per share for
      consulting services as follows:





Grant
                Date
            
            Number of
                Shares
            
            Exercise
              Price
            
            Expiration
              Date
            
            Unit Fair
              Value
            
            Total Fair
              Value1/25/2007
            
            
            50,000
            
            $
            1.60
            
            
            1/25/2009
            
            $
            1.23
            
            $
            61,9872/5/2007
            
            
            25,000
            
            $
            1.99
            
            
            2/5/2011
            
            $
            .78
            
            $
            19,5244/18/07
            
            
            30,000
            
            $
            1.70
            
            
            4/18/2012
            
            $
            1.00
            
            $
            30,283





The
      fair
      value of these awards was estimated at the date of grant using the Black-Scholes
      option pricing model with the following weighted average assumptions: fair
      value
      of common stock $1.06; volatility rate 65.36%; risk free interest rate
      4.77%; expected term 2 years; dividend yield 0.





Warrants
      sold





On
      December 18. 2007 the company sold a warrant to purchase 1,000,000 shares of
      Odyne common stock for $55,115 to one of its customers. The warrants have an
      exercise price of $1.00 per share and expire December 18, 2010.




Warrants
      exercised




During
      the year ended December 31, 2007 placement agents involved in the Private
      Placement (Note 8) exercised the cashless exercise provision with respect to
      400,902 warrants and received 267,268 shares of common stock of the
      Company.


F-22


During
      the year ended December 31, 2007 individuals that received warrants in
      connection with the issuance of convertible debentures in October of 2006
      exercised the cashless exercise provision with respect to 33,334 warrants and
      received 14,389 shares of common stock of the Company.




**NOTE
      12 –**  **2006
      Equity Incentive Plan**





The
      2006
      Equity Incentive Plan (the “Plan”) was adopted by the Company’s Board of
      Directors on October 16, 2006 and approved by the Company’s stockholders on
      October 17, 2006. Awards to purchase an aggregate of 3,000,000 shares of common
      stock may be granted under the Plan to employees, consultants and non-employee
      directors. Under the Plan, the Company is authorized to issue Incentive Stock
      Options intended to qualify under Section 422 of the Code, non-qualified
      options, SARS, restricted stock, bonus shares and dividend
      equivalents.





On
      March
      1, 2007, the Company issued 20,000 stock options to a newly hired employee
      at an
      exercise price of $1.65 per share, The fair value of this award was estimated
      to
      be $15,800 at the date of grant using the Black-Scholes option pricing model
      with the following weighed average assumptions: fair value of common stock
      $1.65
      volatility rate 65.36 %; risk free interest rate 4.77%; expected term 4
      years; dividend yield 0.





On
      May 29
      2007, the Company issued 20,000 stock options to a newly hired employee at
      an
      exercise price of $.65 per share, The fair value of this award was estimated
      to
      be $7,541 at the date of grant using the Black-Scholes option pricing model
      with
      the following weighed average assumptions: fair value of common stock $.65
      volatility rate 73.21 %; risk free interest rate 4.82%; expected term 4
      years; dividend yield 0.





On
      September 19 2007, the Company granted 600,000 stock options to its Chief
      Executive Officer; (a) 300,000 stock options at an exercise price of $.47 per
      share. The fair value of this award was estimated to be $47,190 at the date
      of
      grant using the Black-Scholes option pricing model with the following weighed
      average assumptions: fair value of common stock $.47 volatility rate 35.42
      %;
      risk free interest rate 3.915%; expected term 4 years; dividend yield 0 and
      (b) 300,000 stock options at an exercise price of $.71 per share, The fair
      value
      of this award was estimated to be $71,700 at the date of grant using the
      Black-Scholes option pricing model with the following weighed average
      assumptions: fair value of common stock $.71 volatility rate 37.50 %;
      risk free interest rate 3. 85%; expected term 4 years; dividend yield 0 and
      .




On
      October 23 2007, the Company issued 725,000 stock options to key employees
      and
      directors at an exercise price of $.395 per share, The fair value of this award
      was estimated to be $95,990 at the date of grant using the Black-Scholes option
      pricing model with the following weighed average assumptions: fair value per
      share of common stock $.395 volatility rate 35.42 %; risk free interest
      rate 3.96%; expected term 4 years; dividend yield 0.





On
      December 12 2007, the Company granted 135,000 stock options to key employee
      and
      a consultant at an exercise price of $.53 per share, The fair value of this
      award was estimated to be $27,733 at the date of grant using the Black-Scholes
      option pricing model with the following weighed average assumptions: fair value
      per share of common stock $.53 volatility rate 36.41 %; risk free interest
      rate 3.265%; expected term 4 years; dividend yield 0.





The
      volatility rate used for December 31, 2007 transactions was based upon the
      rates
      obtained from the Dow Jones Select Micro-Cap Index for appropriate historical
      periods upon which to develop a more reasonable estimate of volatility for
      the
      Company’s stock. Management believes that this result is more indicative of the
      Company’s actual volatility. The volatility rate used for December 31, 2006
      ransactions was developed based on rates obtained from a similar company whose
      shares are publicly traded and have sufficient trading history upon which to
      develop a reasonable estimate. The Company has limited historical data upon
      which to base an expected term. Accordingly, the expected term of four years
      represents management’s best estimate of the period of time in which grantees
      would likely hold their options until realizing the benefit through their
      exercise. The Company has estimated that based upon assumed employee retention,
      80% of the options granted entitled to vest by their terms, will actually vest
      annually. It believes that this rate is reasonable until such time as it
      develops reliable historical data.


F-23





A
      summary
      of option activity for the years ended December 31, 2007 and 2006 is as
      follows:


Options
              
              Shares
              
              Weighted
                  -
                Average
                Exercise
                Price
              
              Weighted
                  -
                Average
                Remaining
                Contractual
                Term
                  in YearsOutstanding
                  January 1, 2006
              
              
              -0-
              
              $
              0Granted
              
              
              505,000
              
              
              0.75
              
              
              8.8Exercised
              
              
              -Forfeited
                  or expired
              
              
              -Outstanding
                  December 31, 2006
              
              
              505,000
              
              $
              0.75
              
              
              8.8Exercisable
                  at December 31, 2006
              
              
              -Granted
              
              
              1,500,000
              
              
              0.49
              
              
              9.8Exercised
              
              
              -Forfeited
                  or expired
              
              
              (30,000
              )
              
              0.40Outstanding
                  December 31, 2007
              
              
              1,975,000
              
              $
              0.56
              
              
              9.6Exercisable
                  at December 31, 2007
              
              
              -





These
      options, which include 1,800,000 shares granted to employees and directors
      and
      175,000 shares to non-employees pursuant to the terms of certain consulting
      agreements, vest over four years and feature a contractual term of ten
      years.





Options
            
            Shares
            
            Weighted
                -
              Average
              Fair
              ValueOutstanding
                January 1, 2006
            
            
            -0-
            
            $
            -0-Granted
            
            
            505,000
            
            
            212,150Exercised
            
            
            -Forfeited
                or expired
            
            
            -December
                31, 2006
            
            
            505,000
            
            $
            212,150Granted
            
            
            1,500,000
            
            
            261,954Exercised
            
            
            -Forfeited
                or expired
            
            
            (30,000
            )
            
            (3,960
            )December
                31, 2007
            
            
            1,975,000
            
            $
            470,144





At
      December 31, 2007, the aggregate intrinsic value of options outstanding, based
      on the December 31, 2007 closing price of the Company’s common stock ($.70 per
      share) amounted to $280,175. At December 31, 2006, the aggregate intrinsic
      value
      of options outstanding, based on the December 29, 2006 closing price of the
      Company’s common stock ($1.61 per share) amounted to $434,000. There were no
      options exercisable at December 31, 2007 and 2006. As described above, the
      Company has estimated that based upon assumed employee retention, 80% of the
      options granted entitled to vest by their terms, will actually vest annually.
      There were no options exercisable at December 31, 2006. As described above
      the
      company expects eighty percent of these stock options to vest
      annually.





As
      of
      December 31, 2007 and 2006 there was $397,833 and $ 200,368 of unrecognized
      compensation cost related to non-vested share-based compensation arrangements,
      respectively. These costs are expected to be recognized over a weighted-average
      period of 3.5 years. These amounts exclude the stock compensation expense
      associated with the issuance of the 2,400,000 stock options pursuant to the
      employment agreement with the CEO of the Company (Note 10).


F-24





**NOTE
      13 –**  **Income
      Taxes**




As
      describe in Note 3, the Company adopted FIN 48 effective January 1, 2007.
      FIN 48 requires companies to recognize in their financial statements, the impact
      of a tax position, if that position is more likely than not of being sustained
      on audit, based on the technical merits of the position.  FIN 48 prescribes
      a recognition threshold and measurement attribute for the financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a
      tax return. FIN 48 also provides guidance on derecognition, classification,
      interest and penalties, accounting in interim periods, and
      disclosure.




The
      Company and its subsidiary intend to file consolidated
      federal and state income tax returns. The consolidated group for this
      purpose includes TIG and the subsidiary it formed to acquire the
      stock of Odyne through the Share Exchange Transaction completed on October
      17, 2006.  TIG, previous to the Share Exchange Transaction, had
      nominal operations and a net operating loss of approximately $50,000.  The
      initial period of tax reporting with respect to the subsidiary is for
      the period of October 17, 2006 through December 31,
      2006. TIG (previous to the Share Exchange Transaction) filed
      Federal and State income tax returns for the years ended December 31, 2003,
      2004,and 2005 that have not been examined by the applicable Federal and State
      tax authorities.




Management
      does not believe that the Company has any material uncertain tax position
      requiring recognition or measurement in accordance with the provisions of FIN
      48. Accordingly, the adoption of FIN 48 did not have a material effect on the
      Company financial statements. The Company’s policy is to classify penalties and
      interest associated with uncertain tax positions, if required as a component
      of
      its income tax provision.





At
      December 31, 2007, the Company has federal and state net operating loss
      carryforwards available to offset future taxable income, if any, of
      approximately $4.6 million expiring at various times through 2027. The Company’s
      determination of the amount of its net operating loss carryforwards
      (“NOL’s”) includes approximately $50,000 associated with TIG that arose
      prior to the completion of the share exchange transaction. These NOL’s may
      be subject to a substantial limitation under the “Change of Ownership”
provisions under Section 382 of the Internal Revenue Code and similar state
      provisions. Such limitations are likely to result in the expiration of these
      net
      operating losses prior to their utilization.





The
      tax
      effects of significant temporary differences which give rise to the Company’s
      deferred tax assets and liabilities at December 31, 2007 and 2006 are as
      follows:





2007
            
            2006Net
                Operating Losses
            
            $
            1,776,000
            
            $
            210,000Accounts
                receivable
            
            
            56,000Inventories
            
            
            35,000
            
            
            -Accrued
                Expenses and reserves
            
            
            21,000
            
            
            18,000Stock
                Based Compensation
            
            
            47,000
            
            
            5,0001,935,000
            
            
            233,000Valuation
                Allowance
            
            
            (1,935,000
            )
            
            (233,000
            )Net
                Deferred Tax Asset
            
            
            -
            
            
            -


F-25





The
      Company’s recorded income benefit, net of the change in the valuation allowance
      for the each of the years ended December 31, 2007 and 2006 are as
      follows:





2007
            
            2006CurrentFederal
            
            $
            -
            
            $
            -State
            
            
            -
            
            
            --
            
            
            -DeferredFederal
            
            
            (
                1,484,000
            )
            
            (183,000
            )State
            
            
            (
                218,000
            )
            
            (30,000
            )(
                1,702,000
            )
            
            (213,000
            )Change
                in valuation allowance
            
            
            1,702,000
            
            
            213,000$
            -
            
            $
            -





Pursuant
      to SFAS No. 109 “Accounting for Income Taxes,” management has evaluated the
      recoverability of the deferred income tax assets and the level of the valuation
      allowance required with respect to such deferred income tax assets. After
      considering all available facts, the Company fully reserved for its deferred
      tax
      assets because it is more likely than not that their benefit will not be
      realized in future periods. The Company will continue to evaluate its deferred
      tax assets to determine whether any changes in circumstances could affect the
      realization of their future benefit. If it is determined in future periods
      that
      portions of the Company’s deferred income tax assets satisfies the realization
      standard of SFAS No. 109, the valuation allowance will be reduced accordingly.
      A
      reconciliation of the expected Federal statutory rate of 34% to the Company’s
      actual rate as reported for each of the years ended December 31, 2007 and 2009
      is as follows:





2007
            
            2006Expected
                statutory rate
            
            
            (34
            )%
            
            (34
            )%State
                income tax rate, net of Federal benefit
            
            
            (5
            )%
            
            (5
            )%Permanent
                Differences:S
                Corporation losses
            
            
            -
            %
            
            27
            %Non-cash
                interest charges
            
            
            -
            %
            
            1
            %(39
            )%
            
            (11
            )%Valuation
                allowance
            
            
            39
            %
            
            11
            %-
            %
            
            -
            %





**NOTE
      14 –****Employee
      Benefit Plan**





Effective
      April 1, 2007, the Company established the Odyne Corporation 401(k) Profit
      Sharing Plan (the “Plan”) pursuant to Internal Revenue Service rules and
      regulations, under which eligible employees may choose to make salary reduction
      contributions. The Company may make a matching voluntary contribution in the
      amount determined by a uniform percentage of each employee’s contribution that
      does not exceed a Company specified percentage of defined total employee’s
      compensation for the year or a fixed dollar amount and a discretionary
      contribution that would be allocated equally as a percentage of that year’s 401k
      plan employee deferrals, excluding highly compensated employees, as
      defined.





In
      order
      to be eligible for the Plan, an employee must be 21 years of age. In order
      to
      qualify for matching contributions, an employee must have 1000 hours of service
      in the year and be employed on the last day of the calendar year. An individual
      employee vests in the employer’s voluntary matching contribution 25% after one
      year of service, 50% after two years of service, 75% after three years of
      service and 100% after four years of service.





The
      Company made no contributions to the Plan for the year ended December 31,
      2007.


F-26


**NOTE
      15 –**  **Subsequent
      Events**





Between
      January 1, 2008 and March 27, 2008, 30 shares of Series A Convertible Preferred
      stock were converted into 40,020 shares of the Company’s common stock.





On
      March
      27, 2008, the Company completed a private placement to institutional accredited
      investors, pursuant to the terms of a securities purchase agreement. Under
      the
      terms of the agreement, the Company sold 11,666,667 shares of its common stock
      at $.60 per share. As part of this transaction, the investors also received
      warrants to purchase 11,666,667 shares of the Company’s common stock at $.72 per
      share. The warrants are exercisable for five years, contain customary
      change of control buy-out provisions and are not redeemable. The warrants also
      contain anti-dilution provisions (including “full-ratchet” price protection from
      the future issuance of stock, exclusive of certain issuances, or securities
      convertible or exercisable for shares of common stock below $.72 per share),
      provided that the exercise price of the warrants may not be adjusted to less
      than $.60 per share as a result of the full-ratchet price protection. The
      company received $7,000,000 in gross proceeds in connection with this private
      placement.


F-27