Table of Contents

 

 

 

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

| **x**                               | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**                                                                                                                                                                                                                                                                   |
|-------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **SECURITIES EXCHANGE ACT OF 1934** |
|                                |                                                                                                                                                                                                                                                                                                                                     |
|                                | **For the  quarterly period ended January 31, 2009**                                                                                                                                                                                                                                                                                |
|                                |                                                                                                                                                                                                                                                                                                                                     |
| **OR**                              |
|                                |                                                                                                                                                                                                                                                                                                                                     |
| **o**                               | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**                                                                                                                                                                                                                                                                  |
| **SECURITIES EXCHANGE ACT OF 1934** |
|                                |                                                                                                                                                                                                                                                                                                                                     |
|                                | **For the  transition period  from                          to                        ** |

 

**Commission File Number 001-32239**

 

**Commerce Energy Group, Inc.**

(Exact name of registrant as specified in itscharter)

 

| **Delaware**                             | ** ** | **20-0501090**      |
|------------------------------------------|------------|---------------------|
| (State or other jurisdiction             |       | (I.R.S. Employer    |
| of incorporation or organization)        |       | Identification No.) |
|                                     |       |                |
| **600 Anton Boulevard, Suite 2000** |       |                |
| **Costa Mesa, California**               | ** ** | **92626**           |
| (Address of principal executive offices) |       | (Zip code)          |

 

**(714) 259-2500**

(Registrant’s telephone number, includingarea code)

 

**Not Applicable**

(Former name, former address and former fiscalyear, if changed since last report)

 

Indicateby check mark whether the registrant: (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.

 

Yes x No o

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. :

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

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).

 

 Yes x  No o

 

 As of March 13,2009, 31,762,118 shares of the registrant’s common stock, par value $0.001 pershare, were outstanding.

 

 

 

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**COMMERCE ENERGY GROUP,INC.**

 

**Form 10-Q**

 

**For the Period Ended January 31, 2009**

 

**Index**

 
| ** **                                                                                                         | ** ** | **Page  No.** |
|--------------------------------------------------------------------------------------------------------------------|------------|---------------|
| Explanatory Note                                                                                                   |       | i             |
| Forward-Looking  Statements                                                                                        |       | ii            |
| PART I —  FINANCIAL INFORMATION                                                                          |       | 1             |
| Item 1.  Financial Statements (Unaudited)                                                                          |       | 1             |
| Condensed Statement of Net Assets in Liquidation as of  January 31, 2009                                      |       | 1             |
| Condensed Consolidated Balance Sheet as of  July 31, 2008                                                     |       | 2             |
| Condensed Consolidated Statements of Operations for  the three and six months ended January 31, 2009 and 2008 |       | 3             |
| Condensed Consolidated Statements of Cash Flows for  the six months ended January 31, 2009 and 2008           |       | 4             |
| Notes to Condensed Consolidated Financial Statements                                                               |       | 5             |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations                |       | 8             |
| Item 3. Quantitative and Qualitative Disclosures About  Market Risk                                                |       | 9             |
| Item 4. Controls and Procedures                                                                                    |       | 9             |
| PART II  — OTHER INFORMATION                                                                             |       | 10            |
| Item  1. Legal Proceedings                                                                                         |       | 10            |
| Item  1A. Risk Factors                                                                                             |       | 10            |
| Item 2. Unregistered Sales of Equity Securities and  Use of Proceeds                                               |       | 10            |
| Item 3. Defaults Upon Senior Securities                                                                            |       | 10            |
| Item 4. Submission of Matters to a Vote of   Security Holders                                                 |       | 10            |
| Item  5. Other Information                                                                                         |       | 10            |
| Item 6.  Exhibits                                                                                                  |       | 11            |
| SIGNATURES                                                                                                         |       | 13            |

 

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**COMMERCE ENERGY GROUP, INC.**

 

**Explanatory Note**

 

OnDecember 15, 2008, Commerce Energy Group, Inc, or the Company, filed acurrent report on Form 8-K/A (Amendment No. 1) dated December 12,2008, or the December 2008 Form 8-K, with the U.S. Securities andExchange Commission, or the SEC, reporting, among other things, that it hadconsented to a foreclosure proceeding under Section 9-620 under the NewYork Uniform Commercial Code, or the Consensual Foreclosure. In connection withsuch foreclosure, all of the common stock of Commerce Energy, Inc., thewholly-owned operating company of the Company, or Commerce, was ultimatelyaccepted by the lenders in satisfaction of all of the Company’s secureddebt.  To induce the Company to consentrather than exercising its statutory rights to delay the foreclosure, andpursuant to the terms of the acceptance agreement, the lenders (i) consentedto the payment of a dividend from Commerce to the Company in the amount of $3.1million; and (ii) consented to Commerce’s assumption of certainliabilities and obligations of the Company. Immediately after the Consensual Foreclosure, the Board decided to makea distribution to its stockholders of $2,614,780, after providing for all knownand reasonably foreseeable obligations to the Company.  This distribution was comprised of a cashdividend on shares of the Company’s common stock in the amount of $0.084 pershare to be paid to the Company’s stockholders of record as of December 11,2008.  In addition to the dividendpayment, such stockholders also received an additional payment of $0.001 per rightin connection with the redemption of all the outstanding rights under theCompany’s Shareholders Rights Plan dated July 1, 2004.  The distribution date was December 17,2008.

 

Afterthe dividend and the redemption payment, the Company has continued as a shellcompany, as defined in Section 12b-2 of the Securities Exchange Act of1934, as amended, with no operating business and no material assets.  It is the recommendation of the Board ofDirectors of the Company to wind up and dissolve the Company.  To that end, the Company intends to noticeand hold a special meeting of stockholders to consider and vote upon a proposalto adopt a plan of liquidation and dissolve the Company.  The Company expects to hold this Meeting in May 2009.  The Company has filed a preliminary proxystatement relating to such meeting with the SEC and will be filing a definitiveproxy statement relating to the special meeting with the SEC prior to mailingsuch definitive proxy statement to the Company’s stockholders.  This Quarterly Report on Form 10-Q shallnot constitute a solicitation of a proxy to vote shares of common stock of theCompany with respect to any matter related to the special meeting.

 

Fora further discussion of the Consensual Foreclosure, including the related proforma financial information, reference is made to the December 2008 Form 8-K.You should read this quarterly report on Form 10-Q in conjunction with theDecember 2008 Form 8-K.

 

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**FORWARD-LOOKING STATEMENTS**

 

Some of the statements in this quarterly report on Form 10-Qwhich relate to periods prior to the Consensual Foreclosure, during which theCompany had an operating business, are forward-looking statements regarding ourassumptions, projections, expectations, targets, intentions or beliefs aboutfuture events which involve risks and uncertainties.   All statements other than statements ofhistorical facts included in this quarterly report on Form 10-Q  relating to expectation of future financialperformance, continued growth, changes in economic conditions or capitalmarkets and changes in customer usage patterns and preferences, areforward-looking statements.    In somecases, you can identify forward-looking statements by terms such as “may,” “will,”“should,” “expect,” “plan,” “intend,” “forecast,” “anticipate,” “believe,” “estimate,”“predict,” “potential,” “continue” or the negative of these terms or other comparableterms.

 

The forward-looking statements contained in thisquarterly report on Form 10-Q involve known and unknown risks anduncertainties and situations that may cause our or our industry’s actualresults, level of activity, performance or achievements to be materiallydifferent from any future results, levels of activity, performance orachievements expressed or implied by these statements.   Factors that might cause actual events orresults to differ materially from those indicated by these forward-lookingstatements may include the matters listed under “Risk Factors” in Item 1A inthe Form 10-K and elsewhere in this quarterly report on Form 10-Q,including, without limitation, our ability to obtain and retain creditnecessary to profitably support our operations; changes in general economicconditions in the markets in which we may compete; fluctuations in the marketprice of energy which may negatively impact the competitiveness of our productofferings to current and future customers; decisions by our energy suppliersrequiring us to post additional collateral for our energy purchases;uncertainties relating to federal and state proceedings regarding issuesemanating from the 2000-2001 California energy crisis, including any resultingfederal, state, or administrative legal proceedings which could affect us;increased competition; our ability to address changes in laws and regulations;adverse state or federal legislation or regulation or adverse determinations byregulators; and other factors identified from time to time in our filings withthe U.S. Securities and Exchange Commission, or the SEC.  We caution that, while we make suchstatements in good faith and we believe such statements are based on reasonableassumptions, including, without limitation, management’s examination ofhistorical operating trends, data contained in records and other data availablefrom third parties, we cannot assure you that our expectations will berealized.

 

Any forward-looking statement speaks only as of thedate on which such statement is made, and, except as required by law, weundertake no obligation to update any forward-looking statement to reflectevents or circumstances after the date on which such statement is made or toreflect the occurrence of unanticipated events. New factors emerge from time totime, and it is not possible for management to predict all such factors.

 

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**PART I — FINANCIAL INFORMATION**

 

***Item 1. Financial Statements.***

 

**COMMERCE ENERGY GROUP, INC.**

 

**CONDENSED STATEMENT OF NET ASSETSIN LIQUIDATION**

**(In Thousands)**

**(Unaudited)**

 
| ** **                           | ** ** | **January  31,2009** | ** ** |
|--------------------------------------|------------|----------------------|------------|
| Total assets; cash                   |       | $                    | 285        |   |
| Other liabilities                    |       | (127                 | )          |
| Net assets  available in liquidation |       | $                    | 158        |   |

 

The accompanying notes are an integral part of these CondensedConsolidated Financial Statements.

 

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**COMMERCE ENERGY GROUP, INC.**

 

**CONDENSED CONSOLIDATED BALANCESHEET**

**(Going Concern Basis)**

**(In thousands, except per share amounts)**

 
| ** **                                                                                                                                                                 | ** ** | **July 31,  2008** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|
| **ASSETS**                                                                                                                                                                 |       |                    |       |
| Current assets:                                                                                                                                                            |       |                    |       |
| Cash and equivalents                                                                                                                                                       |       | $                       | 5,042      |   |
| Accounts receivable, net                                                                                                                                                   |       | 82,416                  |       |
| Natural gas inventory                                                                                                                                                      |       | 7,717                   |       |
| Prepaid expenses and other current assets                                                                                                                                  |       | 13,269                  |       |
| Total current assets                                                                                                                                                       |       | 108,444                 |       |
|                                                                                                                                                                       |       |                    |       |
| Deposits and other assets                                                                                                                                                  |       | 1,600                   |       |
| Property and equipment, net                                                                                                                                                |       | 8,009                   |       |
| Other intangible assets, net                                                                                                                                               |       | 3,976                   |       |
|                                                                                                                                                                       |       |                    |       |
| Total assets                                                                                                                                                               |       | $                       | 122,029    |   |
|                                                                                                                                                                       |       |                    |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                             |       |                    |       |
| Current liabilities:                                                                                                                                                       |       |                    |       |
| Energy and accounts payable                                                                                                                                                |       | $                       | 58,500     |   |
| Short-term borrowings                                                                                                                                                      |       | 11,756                  |       |
| Accrued liabilities                                                                                                                                                        |       | 11,901                  |       |
| Total current liabilities                                                                                                                                                  |       | 82,157                  |       |
|                                                                                                                                                                       |       |                    |       |
| Commitments and contingencies                                                                                                                                              |       |                    |       |
|                                                                                                                                                                       |       |                    |       |
| Stockholders’ equity:                                                                                                                                                 |       |                    |       |
| Common stock — 150,000 shares authorized  with $0.001 par value; 30,762 (unaudited) issued and outstanding at  January 31, 2009 and 31,141 at July 31, 2008 |       | 61,919                  |       |
| Other comprehensive loss                                                                                                                                                   |       | (996                    | )          |
| Accumulated deficit                                                                                                                                                        |       | (21,051                 | )          |
| Total stockholders’ equity                                                                                                                                            |       | 39,872                  |       |
|                                                                                                                                                                       |       |                    |       |
| Total liabilities and stockholders’ equity                                                                                                                            |       | $                       | 122,029    |   |

 

The accompanying notes are an integral part of these CondensedConsolidated Financial Statements.

 

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**COMMERCE ENERGY GROUP, INC.**

 

**CONDENSED CONSOLIDATED STATEMENTSOF OPERATIONS**

**(In thousands, except per share amounts)**

**(Unaudited)**

 
| ** **                                           | ** ** | **Three Months Ended  January 31,** | ** ** | **Six Months Ended  January 31,** | ** ** |
|------------------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                           | ** ** | **2009**                                           | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                           | ** ** | ** **                                         | ** ** | ** **                                       | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net revenue                                          |       | $                                                  | 23,013     |                                             | $          | 108,392 |   | $ | 121,627 |   | $ | 213,990 |   |
| Direct energy costs                                  |       | 25,869                                             |       | 89,126                                           |       | 114,409 |   | 178,336 |   |
| Gross profit                                         |       | (2,856                                             | )          | 19,266                                           |       | 7,218 |   | 35,654 |   |
| Selling and marketing expenses                       |       | 1,274                                              |       | 4,260                                            |       | 3,137 |   | 8,192 |   |
| General and administrative expenses                  |       | 5,687                                              |       | 15,973                                           |       | 17,635 |   | 29,433 |   |
| Adjustment to adopt liquidation basis of  accounting |       | (8,533                                             | )          | —                                           |       | 24,969 |   | — |   |
|                                                 |       |                                               |       |                                             |       |   |   |   |   |
| Income (loss) from operations                        |       | (1,284                                             | )     | (967                                             | )          | (38,523 | ) | (1,971 | ) |
| Other income (expense):                              |       |                                               |       |                                             |       |   |   |   |   |
| Interest income                                      |       | 5                                                  |       | 87                                               |       | 63 |   | 317 |   |
| Interest expense                                     |       | (1,515                                             | )          | (369                                             | )          | (8,361 | ) | (682 | ) |
| Gain on sale of Texas electric service  contracts    |       | (148                                               | )          | —                                           |       | 7,642 |   | — |   |
| Total other income and expenses                      |       | (1,658                                             | )          | (282                                             | )          | (656 | ) | (365 | ) |
| Net loss                                             |       | $                                                  | (2,942     | )                                                | $          | (1,249 | ) | $ | (39,179 | ) | $ | (2,336 | ) |
|                                                 |       |                                               |       |                                             |       |   |   |   |   |
| Loss per common share:                               |       | —                                             |       |                                             |       | — |   |   |   |
| Basic                                                |       | $                                                  | (.10       | )                                                | $          | (0.04 | ) | $ | (1.26 | ) | $ | (0.08 | ) |
| Diluted                                              |       | $                                                  | (.10       | )                                                | $          | (0.04 | ) | $ | (1.26 | ) | $ | (0.08 | ) |

 

The accompanying notes are an integral part of these CondensedConsolidated Financial Statements.

 

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**COMMERCE ENERGY GROUP, INC.**

 

**CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS**

**(In Thousands)**

**(Unaudited)**

 
| ** **                                                                                 | ** ** | **Six Months Ended  January 31,** | ** ** |
|--------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                 | ** ** | **2009**                                         | ** ** | **2008** | ** ** |
| **Cash Flows From Operating Activities**                                                   |       |                                             |       |   |   |
| Net loss                                                                                   |       | $                                                | (39,179    | ) | $ | (2,336 | ) |
| Adjustments to reconcile net loss to net cash  provided by (used in) operating activities: |       |                                             |       |   |   |
| Adjustment to adopt liquidation basis  of  accounting                            |       | 24,969                                           |       | — |   |
| Depreciation                                                                               |       | 1,038                                            |       | 1,167 |   |
| Amortization                                                                               |       | 478                                              |       | 880 |   |
| Amortization of deferred loan costs                                                        |       | 4,720                                            |       | 82 |   |
| Gain on sale of assets                                                                     |       | (7,642                                           | )          | — |   |
| Provision for doubtful accounts                                                            |       | 3,596                                            |       | 9,855 |   |
| Stock-based compensation                                                                   |       | 13                                               |       | 283 |   |
| Changes in operating assets and  liabilities:                                              |       |                                             |       |   |   |
| Accounts receivable, net                                                                   |       | 86,012                                           |       | (17,539 | ) |
| Inventory                                                                                  |       | 7,717                                            |       | 1,787 |   |
| Prepaid expenses and other assets                                                          |       | 17,989                                           |       | (1,380 | ) |
| Energy and accounts payable                                                                |       | (58,500                                          | )          | (3,771 | ) |
| Accrued liabilities and other                                                              |       | (11,774                                          | )          | (1,192 | ) |
| Net cash provided by (used in) operating  activities                                       |       | 29,437                                           |       | (12,164 | ) |
|                                                                                       |       |                                             |       |   |   |
| **Cash Flows From Investing Activities**                                                   |       |                                             |       |   |   |
| Purchase of property and equipment                                                         |       | —                                           |       | (2,215 | ) |
| Proceeds from sale of Texas electric  service contracts                                    |       | 9,600                                            |       | — |   |
| Payment received in consensual foreclosure                                                 |       | 3,100                                            |       |   |   |
| Net assets transferred in connection with  consensual foreclosure                          |       | (30,088                                          | )          |   |   |
| Net cash used in investing activities                                                      |       | (17,388                                          | )          | (2,215 | ) |
|                                                                                       |       |                                             |       |   |   |
| **Cash Flows From Financing Activities**                                                   |       |                                             |       |   |   |
| Dividend paid to shareholders                                                              |       | (2,615                                           | )          |   |   |
| Short-term borrowings                                                                      |       | (11,756                                          | )          | 3,000 |   |
| Credit line commitment fee                                                                 |       | (2,435                                           | )          | — |   |
| Decrease in restricted cash                                                                |       | —                                           |       | 10,457 |   |
| Net cash provided by (used in) financing  activities                                       |       | (16,806                                          | )          | 13,457 |   |
|                                                                                       |       |                                             |       |   |   |
| Decrease in cash and equivalents                                                           |       | (4,757                                           | )          | (922 | ) |
| Cash and equivalents at beginning of period                                                |       | 5,042                                            |       | 6,559 |   |
|                                                                                       |       |                                             |       |   |   |
| Cash and equivalents at end of period                                                      |       | $                                                | 285        |   | $ | 5,637 |   |
|                                                                                       |       |                                             |       |   |   |
| **Supplemental Disclosure of Cash Flow  Information**                                      |       |                                             |       |   |   |
| Cash paid for:                                                                             |       |                                             |       |   |   |
| Interest                                                                                   |       | $                                                | 5,806      |   | $ | 601 |   |
| Income taxes                                                                               |       | $                                                | —     |   | $ | 118 |   |

 

The accompanying notes are an integral part of these CondensedConsolidated Financial Statements.

 

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**COMMERCE ENERGY GROUP, INC.**

 

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**(Dollars In Thousands, Except for Share and Per ShareAmounts) — Continued**

**(Unaudited)**

 

**Note 1.Basis of Presentation**

 

Theinformation set forth in this Form 10-Q for the Quarterly Period Ended January 31,2009, or the January 2009 Form 10-Q, relates to periods during whichthe Company had an operating business, which periods were prior to theconsensual foreclosure, or the Consensual Foreclosure, summarized below andpreviously disclosed in the Company’s Current Report on Form 8-K/A(Amendment No. 1) dated December 12, 2008 and filed with theSecurities and Exchange Commission on December 15, 2008, or the December 2008Form 8-K. As a result of the Consensual Foreclosure, the Company no longerhas an operating business and the Board of Directors of the Company has recommendedthat the Company be dissolved. The January 2009 Form 10-Q is beingfiled to comply with a requirement under the Securities Exchange Act of 1934,as amended.  As used herein and unlessthe context requires otherwise, references to the “Company,” “we,” “us,” “us,”and “our” refer specifically to Commerce Energy Group, Inc. and itssubsidiaries.  “Commerce” refers toCommerce Energy, Inc., our former principal operating subsidiary.

 

OnDecember 11, 2008, AP Finance, LLC and Commerce Gas and Electric Corp.,collectively, the Lenders, notified the Company in writing that an event ofdefault existed under the Discretionary Line of Credit Demand Note executed bythe Company and Commerce in favor of AP Finance, LLC, or the Secured Debt. On December 11,2008, the Lenders proposed under Section 9-620 of the Uniform CommercialCode, or the UCC, as in effect in the State of New York and subject toobtaining the Company’s consent, to accept all shares of stock in Commerce insatisfaction of the Company’s liabilities and obligations with respect to theSecured Debt pursuant to the terms and conditions of an acceptance agreement orthe Acceptance Agreement, between the Company and the Lenders.

 

Inconnection with the Consensual Foreclosure, to induce the Company to consentrather than exercising its statutory rights to delay the foreclosure, andpursuant to the terms of the Acceptance Agreement, the Lenders: (i) consentedto the payment of a divided from Commerce to the Company in the amount of $3.1million immediately prior to the delivery of the Acceptance Agreement; (ii) consentedto Commerce’s assumption of certain liabilities and obligations of the Companyidentified in an assumption letter dated December 11, 2008 between theCompany and Commerce, or the Assumption Letter, including, but not limited to,all liabilities and obligations of the Company under the employment agreementsbetween the Company and its executive officers (including any severanceobligations thereunder); (iii) agreed to assume responsibility for thesponsorship and administration of the Company’s employee benefit plans coveringCommerce’s employees (other than the equity incentive and employee stockpurchase plans); (iv) agreed to indemnify the Company and its officers,directors, employees, agents and representatives from liabilities arising fromany breach by Commerce of its obligations under the Assumption Letter; (v) releasedthe Company from any and all liabilities and obligations with respect to theSecured Debt; and (vi) cancelled all warrants to acquire shares of commonstock of the Company held by AP Finance, LLC.

 

TheCompany consented to the Consensual Foreclosure and executed and delivered theAcceptance Agreement and the other documents related thereto on December 11,2008.

 

Asa result of the Consensual Foreclosure, the Company ceased alloperations. Additionally, following the Consensual Foreclosure and afterproviding for all known and reasonably foreseeable liabilities and obligationsof the Company, the Company decided to make a distribution in the amount of$2,614,780. This distribution was comprised of a cash dividend on shares of theCompany’s common stock in the amount of $0.084 per share to be paid to theCompany’s stockholders of record as of December 11, 2008. In addition tothe dividend payment, such stockholders also received an additional payment of $0.001 per right in connectionwith the redemption of all the outstanding Rights under the Company’sShareholders Rights Plan dated July 1, 2004. The distribution date was December 17,2008.  After the dividend and theredemption payment, the Company continues as a shell company, as defined in Section 12b-2of the Securities Exchange Act of 1934, as amended, with no operating businessand no material assets.  It is the recommendationof the Board of Directors to wind up and dissolve the Company.

 

Asa result, the Company changed its basis of accounting effective October 31,2008 (and for the periods ending subsequent to that date) from the goingconcern basis to a liquidation basis in accordance with generally acceptedaccounting principals in the United States (“GAAP”).  The valuation of assets and liabilities inliquidation is based on management’s estimate of their net realizable value orsettlement amounts at January 31, 2009. Such values could differmaterially from amounts ultimately realized in the future as the Companycompletes its liquidation. Differences between the estimated revalued amountsof assets and liabilities and actual cash transactions after January 31, 2009will be recognized in the period in which they are subject to reasonableestimation in accordance with GAAP.

 

Theaccompanying condensed statement of net assets in liquidation at January 31,2009, the condensed statements of operations for the three and six monthperiods ended January 31, 2009 and 2008, and the statements of cash flowsfor the six month periods ended January 31, 2009 and 2008 are unaudited.Except for the statement of net assets in 

 

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**COMMERCE ENERGY GROUP, INC.**

 

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Dollars In Thousands, Except for Share and Per ShareAmounts) — Continued**

**(Unaudited)**

 

liquidation, these financial statements have been prepared on the samebasis as the Company’s audited financial statements and, in the opinion ofmanagement, reflect all adjustments which (except as described in these notesto unaudited condensed financial statements) are only of a normal recurringnature and which are necessary for a fair presentation of the net assets inliquidation, cash flows, and results of operations for such periods.Except for the statement of net assets in liquidation, these unauditedcondensed financial statements should be read in conjunction with the auditedfinancial statements included in the Company’s Form 10-K filed withthe Securities and Exchange Commission on November 13, 2008.

 

**Note 2.  Basic and Diluted Income (Loss) per CommonShare**

 

Basicincome (loss) per common share was computed by dividing net income (loss)available to common stockholders, by the weighted average number of commonshares outstanding during the period. Diluted income per common share reflectsthe potential dilution that would occur if all outstanding options or othercontracts to issue common stock were exercised or converted, and was computedby dividing net income (loss) by the weighted average number of common sharesplus dilutive common equivalent shares outstanding, unless they wereanti-dilutive.

 

Thefollowing is a reconciliation of the numerator, income (loss), and thedenominator, (common shares in thousands), used in the computation of basic anddiluted income (loss) per common share:

 
| ** **                                                            | ** ** | **Three Months Ended****January 31,** | ** ** | **Six Months Ended****January 31,** | ** ** |
|-----------------------------------------------------------------------|------------|------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                            | ** ** | **2009**                                             | ** ** | **2008**                                           | ** ** | **2009** | ** ** | **2008** | ** ** |
| **Numerator:**                                                        |       |                                                 |       |                                               |       |   |   |   |   |
| Net income (loss)                                                     |       | $                                                    | (2,942     | )                                                  | $          | (1,249 | ) | $ | (39,179 | ) | $ | (2,336 | ) |
| Net income (loss) applicable to common  stock —basic and diluted |       | $                                                    | (2,942     | )                                                  | $          | (1,249 | ) | $ | (39,179 | ) | $ | (2,336 | ) |
|                                                                  |       |                                                 |       |                                               |       |   |   |   |   |
| **Denominator:**                                                      |       |                                                 |       |                                               |       |   |   |   |   |
| Weighted-average outstanding common shares  — basic              |       | 30,947                                               |       | 30,397                                             |       | 30,127 |   | 30,391 |   |
| Effect of stock options                                               |       | —                                               |       | —                                             |       | — |   | — |   |
| Weighted-average outstanding common shares  — diluted            |       | 30,947                                               |       | 30,397                                             |       | 30,127 |   | 30,391 |   |

 

**Note 3.  Sale of Texas Electric Service Contracts**

 

OnOctober 24, 2008, Commerce completed the sale of all of its electricservice contracts with its customers in Texas and certain assets related tothese contracts to Ambit pursuant to the terms and conditions of an AssetPurchase Agreement dated October 23, 2008 by and between Commerce andAmbit.

 

Theinitial purchase price paid to Commerce in connection with the transaction was$11.2 million with $8.5 million paid in cash on October 24,2008, and $2.7 million, to be reduced by customer deposits and adjusted bypositive or negative monetary adjustments if the number of active customerstransferred deviates by more than 2.5% from 57,588 customers, payable in cash onor before November 24, 2008. The second payment, originally due on November 24,2008, received on December 5, 2008, totaled $1.1 million, and reflectedadjustments primarily due to customer deposits. In addition, Ambit will assumecertain liabilities relating to the assets being sold. Ambit has also agreed tomake residual payments to Commerce during a period beginning on the closingdate and continuing through December 31, 2010. The residual payments,which are calculated and paid monthly, generally consist of $3.50 for eachelectric service contract being transferred that has charges invoiced to Ambitthat are not past due and are estimated to be approximately $3.6 million.

 

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**COMMERCE ENERGY GROUP, INC.**

 

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Dollars In Thousands, Except for Share and Per ShareAmounts) — Continued**

**(Unaudited)**

 

The following details the gain recorded from the sale of Texas electricservice contracts:

 
| Proceeds from sale (before residual  payments)              |   | $      | 11,200 |   |
|-------------------------------------------------------------|--------|--------|--------|--------|
| Less:                                                       |   |   |   |
| Write off of prepaid sales commissions                      |   | (1,969 | )      |
| Settlement of receivables and customer  deposits            |   | (596   | )      |
| Write off of Texas customer related  property and equipment |   | (638   | )      |
| Broker and legal fees                                       |   | (355   | )      |
| Gain on sale of Texas electric service  contracts           |   | $      | 7,642  |   |

 

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***Item 2.Management’s Discussion and Analysis of Financial Condition and Results ofOperations.***

 

*As used herein and unless the context requires otherwise,references to the “Company,” “we,” “us,” and “our” refer specifically toCommerce Energy Group, Inc. and its subsidiaries. “Commerce” refers toCommerce Energy, Inc., our former principal operating subsidiary. Thisdiscussion and analysis should be read in conjunction with Management’sDiscussion and Analysis of Financial Condition and Results of Operations setforth in our Annual Report on Form 10-K/A (Amendment No. 1) for theyear ended July 31, 2008, or the Form 10-K/A..*

 

**Overview**

 

Wewere an independent marketer of retail electricity and natural gas toresidential, commercial, industrial and institutional end-use customers.  We were founded in 1997 as a retailelectricity marketer in California. As of October 31, 2008, we deliveredelectricity to approximately 97,000 customers in California, Maryland,Michigan, New Jersey, Pennsylvania and Texas; and natural gas to approximately46,000 customers in California, Florida, Georgia, Maryland, Nevada, Ohio andPennsylvania.

 

*Consensual Foreclosure*.

 

Theinformation set forth in this Quarterly Report on Form 10-Q for the PeriodEnded January 31, 2009 relates to periods during which the Company had anoperating business, which periods were prior to the consensual foreclosure, orthe Consensual Foreclosure, summarized below and previously disclosed in theCompany’s Current Report on Form 8-K/A (Amendment No. 1) dated December 12,2008 and filed with the U.S. Securities and Exchange Commission, or  the SEC, on December 15, 2008, or the December 2008Form 8-K. You are encouraged to read the December 2008 Form 8-K,including the exhibits thereto, in its entirety.   As a result of the Consensual Foreclosure,the Company no longer has an operating business and it is the recommendation ofthe Board of Directors of the Company to wind up and dissolve the Company.

 

OnDecember 11, 2008, AP Finance, LLC and Commerce Gas and Electric Corp.,collectively the Lenders, notified the Company in writing that an event ofdefault existed under the Discretionary Line of Credit Demand Note executed bythe Company and Commerce in favor of AP Finance, LLC, or the Secured Debt.  On December 11, 2008, the Lendersproposed under Section 9-620 of the Uniform Commercial Code, or the UCC asin effect in the State of New York and Section 9620 of the UCC as ineffect in the State of California and subject to obtaining the Company’sconsent, to accept all shares of stock in Commerce in satisfaction of theCompany’s liabilities and obligations with respect to the Secured Debt pursuantto the terms and conditions of an acceptance agreement, or the Acceptance Agreement,between the Company and the Lenders.

 

Inconnection with the Consensual Foreclosure, to induce the Company to consentrather than exercising its statutory rights to delay the foreclosure, andpursuant to the terms of the Acceptance Agreement, the Lenders: (i) consentedto the payment of a divided from Commerce to the Company in the amount of $3.1million immediately prior to the delivery of the Acceptance Agreement; (ii) consentedto Commerce’s assumption of certain liabilities and obligations of the Companyidentified in an assumption letter dated December 11, 2008 between theCompany and Commerce, or the Assumption Letter, including, but not limited to,all liabilities and obligations of the Company under the employment agreementsbetween the Company and its executive officers (including any severanceobligations thereunder); (iii) agreed to assume responsibility for thesponsorship and administration of the Company’s employee benefit plans coveringCommerce’s employees (other than the equity incentive and employee stockpurchase plans); (iv) agreed to indemnify the Company and its officers,directors, employees, agents and representatives from liabilities arising fromany breach by Commerce of its obligations under the Assumption Letter; (v) releasedthe Company from any and all liabilities and obligations with respect to theSecured Debt; and (vi) cancelled all warrants to acquire shares of commonstock of the Company held by AP Finance, LLC.

 

TheCompany consented to the Consensual Foreclosure and executed and delivered theAcceptance Agreement and the other documents related thereto on December 11,2008.

 

Asa result of the Consensual Foreclosure, the Company ceased all operations.Additionally, following the Consensual Foreclosure and after providing for allknown and reasonably foreseeable liabilities and obligations of the Company,the Board of Directors of the Company, or the Board, decided to make a cashdistribution to the Company’s stockholders of $2,614,780. This distribution wascomprised of a cash dividend on shares of the Company’s common stock in theamount of $0.084 per share to be paid to the Company’s stockholders of recordas of December 11, 2008.   Inaddition to the dividend payment, such stockholders also received an additionalpayment of $0.001 per right in connection with the redemption of all theoutstanding rights under the Company’s Shareholders Rights Plan dated July 1,2004.  The distribution date was December 17,2008.  After the dividend and theredemption payment, the Company continues as a shell company, as defined in Section 12b-2of the Securities Exchange Act of 1934, as amended, with no operating businessand no material assets.  It is therecommendation of the Board to wind up and dissolve the Company.

 

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TheDecember 2008 Form 8-K includes a more detailed description of theConsensual Foreclosure transaction and includes pro form financial informationrelating thereto.  We encourage you toreview the December Form 8-K in conjunction with the quarterly reporton Form 10-Q.

 

**Results of Operations**

 

Acomparison of the results of operations between fiscal periods would notbe helpful to investors due to the announced intention to pursue an orderlycessation of our operations. The Company has implemented liquidationbasis accounting effective October 31, 2008.

 

Inconnection with the adoption of liquidation accounting discussed above, theCompany recognized impairment charges of $25.0 million for the six months endedJanuary 31, 2009.

 

***Liquidity and Capital Resources***

 

Asa result of the Consensual Foreclosure, the Company ceased all operations.Additionally, following the Consensual Foreclosure and after providing for allknown and reasonably foreseeable liabilities and obligations of the Company,the Company’s board of directors took action to distribute substantially all ofits cash to its stockholders, the result of which leaves the Company withvirtually no assets.

 

***Item 3.   Quantitative and Qualitative DisclosuresAbout Market Risk***

 

Not Applicable.

 

***Item 4.  Controls andProcedures.***

 

***Evaluation of Disclosure Controls andProcedures***

 

OurChief Financial Officer, the sole remaining officer and employee of theCompany, has concluded, based on his evaluation required by paragraph (b) ofRules 13a-15 or 15d-15(e) as of the end of the period covered bythis report, that our disclosure controls and procedures, as defined in Rules 13a-15(e) or15d-15(e) under the Securities Exchange Act of 1934, as amended (the “ExchangeAct”), were not effective at the reasonable assurance level because of thematerial weakness in internal control over financial reporting referenced belowto ensure that all information required to be disclosed by us in the reportsfiled or submitted by us under the Exchange Act is recorded, processed,summarized and reported within the time periods specified in the rules andforms of the SEC.

 

Inour Annual Report on Form 10-K/A (Amendment No. 1) for the year endedJuly 31, 2008, we identified material weaknesses in our internal controlover financial reporting under the caption “Management’s Report on InternalControl over Financial Reporting” in Part II, Item 9A(T). Controls andProcedures.  The material weaknesses included deficiencies in our internalcontrols over the existence, completeness and accuracy of revenues, cost ofrevenues, deferred revenues and associated accounts receivable.  Specifically, the design of controls over the preparation and review of theaccount reconciliations and analysis of revenues, cost of revenues and deferredrevenues may not be adequate to detect material errors in revenues, cost ofrevenues, deferred revenues and associated accounts receivable. A contributingfactor was found to be the ineffective operations of certain of our Informationsystem controls over revenue and billing systems. This control deficiency couldresult in a misstatement of revenue, deferred revenue and accounts receivablethat would result in a material misstatement to the Company’s interim or annualconsolidated financial statements. As a result, management determined that thiscontrol deficiency constituted a material weakness.

 

Inlight of the Consensual Foreclosure, no steps have been taken to remediate thedeficiencies because such deficiencies related to controls regarding thebusiness transferred pursuant to the Consensual Foreclosure.

 

**Changes in Internal Control over Financial Reporting**

 

Therewas no change in the Company’s internal control over financial reporting duringthe quarter ended January  31, 2009 that has materially affected, or isreasonably likely to materially affect, our internal control over financialreporting.

 

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**PART II — OTHER INFORMATION**

 

***Item 1. Legal Proceedings.***

 

Referenceis made to our Annual Report on Form 10-K/A (Amendment No. 1) for theyear ended July 31, 2008, or the Form 10-K, for a summary of ourpreviously reported legal proceedings.  Since the date of the Form 10-K,there have been no material developments in previously reported legalproceedings.

 

***Item 1A. Risk Factors.***

 

NotApplicable.

 

***Item 2. Unregistered Sales of EquitySecurities and Use of Proceeds.***

 

None.

 

***Item 3. Defaults upon SeniorSecurities.***

 

OnDecember 15, 2008, Commerce Energy Group, Inc, or the Company, filed acurrent report on Form 8-K/A (Amendment No. 1) dated December 12,2008, with the U.S. Securities and Exchange Commission, or the SEC, reporting,among other things, that it had consented to a foreclosure proceeding under Section 9-620under the New York Uniform Commercial Code, or the Consensual Foreclosure. As aresult of the Consensual Foreclosure, the Company no longer has an operatingbusiness and the Board of Directors of the Company has recommended that theCompany be wound up and dissolved.

 

***Item 4. Submission of Matters to aVote of Security Holders.***

 

None.

 

***Item 5. Other Information.***

 

None.

 

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***Item 6.***   ***Exhibits.***

 

TheExhibits listed below are hereby filed with the SEC as part of this QuarterlyReport on Form 10-Q.

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                               |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 3.1                 |       | Amended and Restated  Certificate of Incorporation of Commerce Energy Group, Inc., previously  filed with the SEC on July 6, 2004 as Exhibit 3.3 to Commerce  Energy Group, Inc.’s Registration Statement on Form 8-A and  incorporated herein by reference.                                                                    |
| 3.2                 |       | Certificate of Designation  of Series A Junior Participating Preferred Stock of Commerce Energy  Group, Inc., dated July 1, 2004, previously filed with the SEC on  July 6, 2004 as Exhibit 3.4 to Commerce Energy Group, Inc.’s  Registration Statement on Form 8-A and incorporated herein by reference.            |
| 3.3                 |       | Second Amended and  Restated Bylaws of Commerce Energy Group, Inc., as amended.                                                                                                                                                                                                                                                                          |
| 4.1                 |       | Rights Agreement dated as  of July 1, 2004, entered into between Commerce Energy Group, Inc.  and Computershare Trust Company, as rights agent, previously filed with the  SEC on July 6, 2004 as Exhibit 10.1 to Commerce Energy  Group, Inc.’s Registration Statement on Form 8-A and incorporated  herein by reference. |
| 4.2                 |       | Form of Rights  Certificate, previously filed with the SEC on July 6, 2004 as  Exhibit 10.2 to Commerce Energy Group, Inc.’s Registration  Statement on Form 8-A and incorporated herein by reference.                                                                                                                          |
| 10.1                |       | Letter Agreement dated  November 11, 2008 by and between Commerce Energy Group, Inc. and  Universal Energy Group Ltd., previously filed with the SEC on  November 12, 2008 as Exhibit 99.1 to Commerce Energy  Group, Inc.’s Current Report on Form 8-K and incorporated herein by  reference.                        |
| 10.2                |       | Amendment No. 1 to  Letter Agreement dated November 26, 2008, by and between Commerce Energy  Group, Inc. and Universal Energy Group Ltd., previously filed with the  SEC on November 28, 2008 as Exhibit 99.1 to Commerce Energy  Group, Inc.’s Current Report on Form 8-K and incorporated herein by  reference.    |
| 10.3                |       | Acceptance Agreement dated  as of December 11, 2008 among Commerce Energy Group, Inc., AP  Finance, LLC and Commerce Gas and Electric Corp., previously filed with the  SEC on December 12, 2008 as Exhibit 99.1 to Commerce Energy  Group, Inc.’s Current Report on Form 8-K and incorporated herein by  reference.       |
| 10.4                |       | Assumption Letter dated as  of December 11, 2008 between Commerce Energy Group, Inc. and  Commerce Energy, Inc., previously filed with the SEC on  December 12, 2008 as Exhibit 99.2 to Commerce Energy  Group, Inc.’s Current Report on Form 8-K and incorporated herein by  reference.                              |
| 10.5*               |       | Amendment to Employment  Agreement dated December 11, 2008 between Commerce Energy  Group, Inc. and Gregory L. Craig., previously filed with the SEC on  December 12, 2008 as Exhibit 99.3 to Commerce Energy Group, Inc.’s  Current Report on Form 8-K and incorporated herein by reference.                              |
| 10.6*               |       | Amendment to Employment  Agreement dated December 11, 2008 between Commerce Energy  Group, Inc. and Michael J. Fallquist, previously filed with the SEC on  December 12, 2008 as Exhibit 99.4 to Commerce Energy  Group, Inc.’s Current Report on Form 8-K and incorporated herein by  reference.                          |
| 10.7*               |       | Amendment to Employment  Letter Agreement dated December 11, 2008 between Commerce Energy  Group, Inc. and C. Douglas Mitchell, previously filed with the SEC on  December 12, 2008 as Exhibit 99.5 to Commerce Energy  Group, Inc.’s Current Report on Form 8-K and incorporated herein by  reference.                    |
| 10.8*               |       | Amendment to Employment  Letter Agreement dated December 11, 2008 between Commerce Energy Group, Inc.  and John H. Bomgardner, previously filed with the SEC on December 12,  2008 as Exhibit 99.6 to Commerce Energy Group, Inc.’s Current  Report on Form 8-K and incorporated herein by reference.                      |

 

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| **Exhibit  Number** | ** ** | **Description**                                                                                                                             |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                |       | Principal Executive  Officer and Principal Financial Officer Certification pursuant to Section 302  of the Sarbanes-Oxley Act of 2002. |
| 32.1                |       | Principal Executive  Officer and Principal Financial Officer Certification pursuant to Section 906  of the Sarbanes-Oxley Act of 2002. |

 

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*Denotes Compensatory plan, contract or arrangement

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
|                            | COMMERCE ENERGY GROUP,  INC. |
|---------------------------------|------------------------------|
|                            |                         |
|                            |                         |
| Date: March 17,  2009 | By:                          |   | /s/ C. DOUGLAS MITCHELL |
|                            | * *                     | C. Douglas Mitchell |
|                            |                         | Chief Financial Officer |
|                            |                         | *(Principal Executive Officer,* |
|                            |                         | *Principal Financial Officer* |
|                            |                         | *and Principal Accounting Officer)* |

 

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**EXHIBIT INDEX**

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                            |
|---------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                                                                                                                                                                                       |
| 3.1                 |       | Amended and Restated  Certificate of Incorporation of Commerce Energy Group, Inc., previously  filed with the SEC on July 6, 2004 as Exhibit 3.3 to Commerce  Energy Group, Inc.’s Registration Statement on Form 8-A and  incorporated herein by reference.                                                                 |
| 3.2                 |       | Certificate of Designation  of Series A Junior Participating Preferred Stock of Commerce Energy  Group, Inc., dated July 1, 2004, previously filed with the SEC on  July 6, 2004 as Exhibit 3.4 to Commerce Energy Group, Inc.’s  Registration Statement on Form 8-A and incorporated herein by reference.         |
| 3.3                 |       | Second Amended and  Restated Bylaws of Commerce Energy Group, Inc., as amended.                                                                                                                                                                                                                                                                       |
| 4.1                 |       | Rights Agreement dated as  of July 1, 2004, entered into between Commerce Energy Group, Inc.  and Computershare Trust Company, as rights agent, previously filed with the SEC  on July 6, 2004 as Exhibit 10.1 to Commerce Energy Group, Inc.’s  Registration Statement on Form 8-A and incorporated herein by reference.    |
| 4.2                 |       | Form of Rights  Certificate, previously filed with the SEC on July 6, 2004 as  Exhibit 10.2 to Commerce Energy Group, Inc.’s Registration Statement on  Form 8-A and incorporated herein by reference.                                                                                                                            |
| 10.1                |       | Letter Agreement dated  November 11, 2008 by and between Commerce Energy Group, Inc. and  Universal Energy Group Ltd., previously filed with the SEC on  November 12, 2008 as Exhibit 99.1 to Commerce Energy  Group, Inc.’s Current Report on Form 8-K and incorporated herein by  reference.                     |
| 10.2                |       | Amendment No. 1 to  Letter Agreement dated November 26, 2008, by and between Commerce Energy  Group, Inc. and Universal Energy Group Ltd., previously filed with the  SEC on November 28, 2008 as Exhibit 99.1 to Commerce Energy  Group, Inc.’s Current Report on Form 8-K and incorporated herein by  reference. |
| 10.3                |       | Acceptance Agreement dated  as of December 11, 2008 among Commerce Energy Group, Inc., AP  Finance, LLC and Commerce Gas and Electric Corp., previously filed with the  SEC on December 12, 2008 as Exhibit 99.1 to Commerce Energy  Group, Inc.’s Current Report on Form 8-K and incorporated herein by  reference.    |
| 10.4                |       | Assumption Letter dated as  of December 11, 2008 between Commerce Energy Group, Inc. and  Commerce Energy, Inc., previously filed with the SEC on  December 12, 2008 as Exhibit 99.2 to Commerce Energy  Group, Inc.’s Current Report on Form 8-K and incorporated herein by  reference.                           |
| 10.5*               |       | Amendment to Employment  Agreement dated December 11, 2008 between Commerce Energy  Group, Inc. and Gregory L. Craig., previously filed with the SEC on  December 12, 2008 as Exhibit 99.3 to Commerce Energy  Group, Inc.’s Current Report on Form 8-K and incorporated herein by  reference.                          |
| 10.6*               |       | Amendment to Employment  Agreement dated December 11, 2008 between Commerce Energy  Group, Inc. and Michael J. Fallquist, previously filed with the SEC on  December 12, 2008 as Exhibit 99.4 to Commerce Energy Group, Inc.’s  Current Report on Form 8-K and incorporated herein by reference.                        |
| 10.7*               |       | Amendment to Employment  Letter Agreement dated December 11, 2008 between Commerce Energy  Group, Inc. and C. Douglas Mitchell, previously filed with the SEC on  December 12, 2008 as Exhibit 99.5 to Commerce Energy  Group, Inc.’s Current Report on Form 8-K and incorporated herein by  reference.                 |
| 10.8*               |       | Amendment to Employment  Letter Agreement dated December 11, 2008 between Commerce Energy  Group, Inc. and John H. Bomgardner, previously filed with the SEC on  December 12, 2008 as Exhibit 99.6 to Commerce Energy  Group, Inc.’s Current Report on Form 8-K and incorporated herein by  reference.                  |

 

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| **Exhibit  Number** | ** ** | **Description**                                                                                                                             |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                |       | Principal Executive  Officer and Principal Financial Officer Certification pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1                |       | Principal Executive  Officer and Principal Financial Officer Certification pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002. |

 

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*Denotes Compensatory plan, contract or arrangement

 

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