UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934





For the
quarterly period ended June 30, 2009





or





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





For the
transition period
from     to    .





Commission
file number 000-51968





MMC ENERGY,
      INC.(Exact name of registrant as
      specified in its
charter)




Delaware
              
              98-0493819(State
      or other jurisdiction of incorporation
                or
      organization)
              
              (IRS
      Employer Identification No.)





26
      Broadway New York NY 10004(Address
      of principal executive offices)(Zip
Code)





(212)
977-0900


(Registrant’s
telephone number, including area code)


________________________________


(Former
name, former address and former fiscal year,


if
changed since last report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yesx No ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes ̈ No ̈





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


Large Accelerated Filer ̈
            Accelerated Filer ̈Non-Accelerated Filer ̈ (Do not check if
      a smaller reporting company)
            Smaller reporting company
      x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes ̈Nox





As of
August 19, 2009 the registrant had 14,161,325 shares of Common Stock
outstanding.








TABLE OF
CONTENTS





PART
      I
              FINANCIAL
      INFORMATIONITEM
      1
              Financial
      StatementsCondensed
      Consolidated Statement of Net Assets In Liquidation (unaudited) at June
      30, 2009 (liquidation basis)
              3Condensed
      Consolidated Statements of Changes in Net Assets in Liquidation
      (unaudited) for the six months ended June 30, 2009 (liquidation
      basis)
              4Consolidated
      Balance Sheet at December 31, 2008 (going concern basis)
              6Condensed
      Consolidated Statements of Operations (unaudited) for the
      six  month period ended June 30, 2008 (going concern
      basis)
              7Condensed
      Consolidated Statements of Cash Flows (unaudited) for the six month period
      ended June 30, 2008 (going concern basis)
              8Notes
      to Condensed Consolidated Financial Statements (unaudited)
              9ITEM
      2
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
              20ITEM
      3
              Quantitative
      and Qualitative Disclosures about Market Risk
              25ITEM
      4T
              Controls
      and Procedures
              25PART
      II
              OTHER
      INFORMATIONITEM
      1
              Legal
      Proceedings
              25ITEM
      1A
              Risk
      Factors
              26ITEM
      2
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              26ITEM
      3
              Defaults
      Upon Senior Securities
              26ITEM
      4
              Submission
      of Matters to a Vote of Security Holders
              26ITEM
      5
              Other
      Information
              26ITEM
      6
              Exhibits
              27SIGNATURES
              28







FORWARD-LOOKING
STATEMENTS





Some of
the statements under “Business,” “Management's Discussion and Analysis of
Financial Condition and Results of Operations,” and elsewhere in this Quarterly
Report on Form 10-Q constitute forward-looking statements.  These
statements relate to future events or our strategy, future operations, future
financial position, future revenues, projected costs, prospects, and the plans
and objectives of management and involve known and unknown risks, uncertainties
and other factors that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed, implied or
inferred by these forward-looking statements. Such factors include, among other
things, those listed under "Risk Factors" and elsewhere in this Quarterly
Report. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "could," "would," "expects,"
"plans," "intends," “anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of such terms and other comparable
terminology.




Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we do not know whether we can achieve projected future results,
levels of activity, performance, or goals. Actual events or results may differ
materially. We undertake no obligation to update any of the forward-looking
statements after the date of this Quarterly Report to conform those statements
to reflect the occurrence of unanticipated events, except as required by
applicable law.


- 1
-


MMC
ENERGY, INC,





Financial
Statements for the Six Months Ended June 30, 2009 on a liquidation basis of
accounting





The
following statements have been prepared on the liquidation basis of accounting
for the six month periods ended June 30, 2009 (all of which are
unaudited):





·
            Condensed Consolidated Statement
      of Net Assets in Liquidation (Liquidation
  Basis)


·
            Condensed Consolidated Statement
      of Changes in Net Assets in Liquidation (Liquidation
      Basis)








- 2
-




PART
I. FINANCIAL INFORMATION





ITEM
1. FINANCIAL STATEMENTS




MMC
ENERGY, INC.


CONDENSED
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION (LIQUIDATION
BASIS)





June
      30,2009(unaudited)AssetsProperty,
      plant and equipment, net  (Note 3)
                          
                          $
                          29,413,497Cash
      and cash equivalents
                          
                          
                          3,997,413Receivables,
      prepaids and deposits (Note 4)
                          
                          
                          1,070,500Deferred
      costs (Note 5)
                          
                          
                          441,951Spare
      parts inventories
                          
                          
                          79,016Other
      assets (Note 6)
                          
                          
                          50,000Total
      assets
                          
                          
                          35,052,377LiabilitiesSecured
      loans payable (Note 7)
                          
                          
                          8,284,265Accrued
      expenses and other liabilities
                          
                          
                          991,256Reserve
      for estimated costs during liquidation period
                          
                          
                          3,539,120Total
      liabilities
                          
                          
                          12,814,641Net
      assets in liquidation
                          
                          $
                          22,237,736





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


- 3
-





MMC
ENERGY, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION (LIQUIDATION
BASIS)


(Unaudited)





Six
      Months Ended
                      June
      30,2009Net
      assets in liquidation - January 1, 2009
                    
                    $
                    36,941,554Operating
      loss excluding impairment charges
                    
                    
                    (2,396,328
                    )Stock
      awards and options, net of cancellations
                    
                    
                    216,138Estimated
      net costs during liquidation
                    
                    
                    (3,539,120
                    )Adjust
      assets to net realizable value (impairment charges)
                    
                    
                    (8,883,190
                    )Adjust
      liabilities to estimated fair value
                    
                    
                    (101,318
                    )Net
      assets in liquidation - June 30, 2009
                    
                    $
                    22,237,736





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


- 4
-





MMC
ENERGY, INC,





Financial
Statements presented for comparison purposes on a Going Concern Basis of
Accounting





The
following statements have been prepared on the going concern basis of
accounting





·
            Consolidated Balance Sheet at
      December 31, 2008


·
            Condensed Consolidated Statement
      of Operations for the six months ended June 30, 2008
      (unaudited)


·
            Condensed
      Consolidated Statement of Cash Flows for the six months ended June 30,
      2008 (unaudited)


- 5
-





MMC
ENERGY, INC.


CONSOLIDATED
BALANCE SHEET (GOING CONCERN BASIS)





December
      31,2008AssetsCurrent
      assets:Cash
      and equivalents
                                
                                $
                                5,915,432Accounts
      receivable (Note 4)
                                
                                
                                420,209Unbilled
      receivables (Note 4)
                                
                                
                                230,722Spare
      parts inventories
                                
                                
                                98,500Prepaids
      and deposits (Note 4)
                                
                                
                                243,048Total
      current assets
                                
                                
                                6,907,911Property,
      plant and equipment, net (Note 3)
                                
                                
                                4,915,372Other
      assets:Deferred
      costs (Note 5)
                                
                                
                                3,228,627Long-term
      deposits
                                
                                
                                28,159,454Other
      assets and deferred charges
                                
                                
                                415,919Total
      other assets
                                
                                
                                31,804,000Total
      assets
                                
                                $
                                43,627,283Liabilities
      & Stockholders' equityCurrent
      Liabilities:Current
      maturities of long-term debt
                                
                                $
                                444,456Accounts
      payable
                                
                                
                                2,086,286Accrued
      interest
                                
                                
                                15,814Accrued
      compensation
                                
                                
                                344,022Other
      accrued expenses
                                
                                
                                2,276,671Total
      current liabilities
                                
                                
                                5,167,249Long-term
      debt
                                
                                
                                1,518,480Commitments
      & contingencies (Note 8)Stockholders'
      EquityPreferred
      Stock; 10,000,000 shares authorized; none issued and outstanding; $.001
      par value
                                
                                
                                -Common
      stock; 300,000,000 shares authorized with 14,194,347 issued and 14,161,325
      outstanding as of June 30, 2009 and as of December 31, 2008; $.001 par
      value
                                
                                
                                14,194Additional
      paid-in capital
                                
                                
                                62,041,693Accumulated
      deficit
                                
                                
                                (25,084,970
                                )Treasury
      stock
                                
                                
                                (29,363
                                )Total
      stockholders' equity
                                
                                
                                36,941,554Total
      liabilities and stockholders' equity
                                
                                $
                                43,627,283





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


- 6
-





MMC
ENERGY, INC.


CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS (GOING CONCERN BASIS)


(Unaudited)




Six
      Months Ended
                          June
      30,2008Operating
      revenues:Resource
      adequacy capacity
                        
                        $
                        1,209,650Ancillary
      services
                        
                        
                        332,619Energy
      production
                        
                        
                        195,959Total
      operating revenues
                        
                        
                        1,738,228Costs
      of sales:Costs
      of resource adequacy capacity
                        
                        
                        87,700Costs
      of ancillary services
                        
                        
                        48,240Costs
      of energy production
                        
                        
                        117,936Total
      costs of sales
                        
                        
                        253,876Gross
      Profit
                        
                        
                        1,484,352Operating
      expenses:Depreciation
                        
                        
                        594,661Operations
      and maintenance
                        
                        
                        1,413,333General
      and administrative expenses
                        
                        
                        3,277,688Total
      operating expenses
                        
                        
                        5,285,682Loss
      from operations
                        
                        
                        (3,801,330
                        )Interest
      and other expensesInterest
      expense
                        
                        
                        (120,798
                        )Interest
      income
                        
                        
                        560,733Interest
      income (expense), net
                        
                        
                        439,935Other
      income, net
                        
                        
                        -Total
      interest and other income (expense)
                        
                        
                        439,935Net
      loss before provision for income taxes
                        
                        
                        (3,361,395
                        )Provision
      for income taxes
                        
                        
                        -Net
      loss
                        
                        $
                        (3,361,395
                        )Basic
      (loss) earnings per common shareNet
      (loss) earnings per share
                        
                        $
                        (0.24
                        )Weighted
      average shares outstanding
                        
                        
                        14,057,912Diluted
      (loss) earnings per common shareNet
      (loss) earnings per share
                        
                        $
                        (0.24
                        )Weighted
      average shares outstanding
                        
                        
                        14,057,912Weighted
      average shares outstanding - basic
                        
                        
                        14,057,912Dilutive
      effect of assumed exercise of employee stock options, warrants and
      immediate vesting of unvested stock awards
                        
                        
                        -Weighted
      average shares outstanding - diluted
                        
                        
                        14,057,912Anti-dilutive
      shares excluded from diluted EPS computations
                        
                        
                        747,381




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


- 7
-


MMC
ENERGY, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (GOING CONCERN BASIS)


(unaudited)





Six
      Months Ended
                                  June
      30, 2008Operating
      Activities of Continuing OperationsNet
      loss
                                
                                $
                                (3,361,395
                                )Adjustments
      to reconcile net loss to cash used in operating activitiesDepreciation
                                
                                
                                594,661Stock-based
      compensation
                                
                                
                                133,649Changes
      in current assets & liabilities(Increase)
      in receivables
                                
                                
                                (485,330
                                )Decrease
      in spare parts inventories
                                
                                
                                3,172Decrease
      (increase) in prepaids and deposits
                                
                                
                                (53,287
                                )(Decrease)
      in accounts payable
                                
                                
                                (23,709
                                )(Decrease)
      in deferred revenues
                                
                                
                                (65,713
                                )(Decrease)
      increase in other accrued expenses
                                
                                
                                (137,827
                                )(Decrease)
      in accrued compensation
                                
                                
                                (1,138,210
                                )(Decrease)
      increase in accrued interest
                                
                                
                                65,124Decrease
      in other assets and deferred charges
                                
                                
                                10,130Net
      cash used in operations
                                
                                
                                (4,458,735
                                )Investing
      Activities of Continuing OperationsPurchases
      of property, plant and equipment
                                
                                
                                (296,063
                                )Equipment
      deposits paid
                                
                                
                                (20,029,229
                                )Proceeds
      from sale of equipment
                                
                                
                                -Redemption
      (purchase) of securities available for sale, net
                                
                                
                                4,075,000Deferred
      acquisition costs
                                
                                
                                (774,700
                                )Net
      cash used in investing activities
                                
                                
                                (17,024,992
                                )Financing
      Activities of Continuing OperationsRepayment
      of long-term debt
                                
                                
                                (222,228
                                )Net
      cash used in financing activities
                                
                                
                                (222,228
                                )Net
      decrease in cash and cash equivalents
                                
                                
                                (21,705,955
                                )Cash
      and cash equivalents at beginning of period
                                
                                
                                42,582,697Cash
      and cash equivalents at end of period
                                
                                $
                                20,876,742Supplemental
      disclosures:Cash
      paid for income taxes
                                
                                $
                                -Cash
      paid for interest
                                
                                
                                89,322Non-cash
      investing and financing activitiesStock-based
      compensation
                                
                                $
                                133,649





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


- 8
-





MMC
ENERGY, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


June
30, 2009


(Unaudited)




NOTE
1 – ORGANIZATION, LINE OF BUSINESS AND PLAN OF LIQUIDATION




General




As a
result of the Board of Directors adoption of a plan of liquidation and
dissolution of the Company (the “Plan”) on May 19, 2009 the Company changed its
basis of accounting to the liquidation basis effective April 1, 2009. Adoption
and execution of the Plan is contingent upon shareholder approval. Under the
liquidation basis of accounting, assets are stated at their estimated net
realizable values and liabilities are stated at their estimated settlement
amounts.





The
accompanying unaudited interim condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America and the instructions to Form 10-Q. Accordingly, they do
not include all of the information and notes required by accounting principles
generally accepted in the United States of America for complete
financial


statements.
The Condensed Consolidated Balance Sheet at December 31, 2008 has been derived
from the audited financial statements at that date. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation, have been included. The interim
results should not be considered indicative of the annual results. These
unaudited condensed consolidated financial statements should be read in
conjunction with the consolidated December 31, 2008 financial statements and
footnotes thereto included in the Company's Form 10-K filed with the Securities
and Exchange Commission (the “SEC”).





Organization
and Line of Business





MMC
Energy, Inc. was originally incorporated in Nevada under the name High Tide
Ventures, Inc. on February 13, 2003. On May 3, 2006, High Tide Ventures changed
its name to MMC Energy, Inc. On May 15, 2006, a wholly-owned subsidiary of MMC
Energy, Inc. merged with and into MMC Energy North America LLC, a Delaware
limited liability company. On September 22, 2006, the Company was reincorporated
as a Delaware corporation by means of a merger of the existing Nevada
corporation with and into MMC Energy, Inc., a newly-formed Delaware
corporation.  Pursuant to the reincorporation merger, the Delaware
corporation succeeded to the business of the Nevada corporation and the separate
existence of the Nevada corporation ceased.




The
Company is an energy management company that historically has been in the
business of acquiring and actively managing electricity generating and
energy infrastructure related assets in the United States.  The
Company’s historical mission was to acquire, directly or through joint ventures,
a portfolio of small to mid-size electricity generating assets, generally below
100 megawatts.  In January 2006, the Company acquired two power
generation facilities located in Chula Vista and Escondido, California, and in
November 2006, the Company acquired a facility in Bakersfield, California
(“Mid-Sun”).





Due to
the recent stresses in the financial markets, coupled with depressed electricity
prices, it has become increasingly difficult for the Company to continue to
execute its acquisition growth strategy.  Furthermore, the California
Energy Commission (the “CEC”) issued its Final Decision in June 2009 denying the
Company’s Chula Vista Energy Upgrade Project the required permit to proceed, in
what the Company believes to be an unprecedented reversal of the CEC staff’s
Final Staff Assessment in full support of the Company’s
application.  The Company has chosen not to appeal the CEC Final
Decision based on its assessment that there is an extremely low probability of
success in an appeal.  While the Company has successfully permitted
its Escondido Energy Upgrade Project, we have yet to obtain a satisfactory long
term-revenue contract to finance the Escondido Energy Upgrade Project’s
completion.





In
February 2009, the Company entered into a purchase and sale agreement with Pro
Energy Services, Inc. (“Pro Energy”) to sell its Mid-Sun facility’s GE LM2500
gas-fired turbine and related power generating equipment for a gross purchase
price of $4 million. The sale successfully closed on April 1, 2009. Subsequent
to closing, the Mid-Sun facility ceased all operations. The Company expects to
realize approximately $3.1 million after settlement of all costs of selling and
extinguishment of associated liabilities. The Company had previously recorded
impairment charges to reflect its appraised net realizable value of the Mid-Sun
facility. The Company will continue to recognize any unanticipated costs and
associated liabilities as a loss on disposal.


- 9
-


On May
21, 2009, the Company signed a definitive purchase agreement to sell its Chula
Vista and Escondido electric generating facilities and certain other assets for
$4,865,500 to affiliates of Wellhead Electric Company, Inc (“Wellhead”). The
sale represents the conclusion of a process to sell substantially all of the
Company's remaining operating assets, except for its two remaining GE LM6000 PC
Sprint® turbines. The sale of two gas compressors to Wellhead announced in March
2009 was originally included in the process and in Wellhead's initial bid for
these assets, but closed sooner on mutual agreement of the parties. The sale of
these remaining power plant assets is subject to standard closing conditions,
including shareholder approval. The Company expects to close this transaction by
the end of September 2009.
 
 On August
7, 2009, the Company signed a definitive equipment purchase agreement to sell
its two remaining General Electric LM6000PC Sprint® turbines and related power
generating equipment for a gross purchase price of $26.65 million to an
affiliate of Pro Energy Services, LLC., $3 million of which was paid to the
Company as a non-refundable deposit at signing. The transaction is targeted to
close on October 7, 2009.  The Company expects to receive, at closing,
additional proceeds of approximately $23.3 million, net of transaction
costs.  Accordingly, the Company recorded an approximately $5.4
million impairment charge against the company’s cost basis of $31.7 million for
the turbines in the Company’s second quarter results.
  As a
result of receiving the $3 million non-refundable deposit for the sale of the
turbines, on August 11, 2009, the Company settled the full amount of outstanding
debt with GE Financial which, inclusive of fees, amounted to approximately $6.5
million.
  Plan
of Liquidation
 
 On May
18, 2009, the Company’s Board of Directors approved, subject to stockholder
approval, the Plan. The Plan calls for the sale of all or substantially all of
the Company’s remaining assets in connection therewith. The Company is seeking
stockholder approval for such plan of liquidation. The approval and adoption of
the plan of liquidation will be contingent upon the Company’s stockholders’
approval of the Wellhead transaction and the subsequent successful consummation
of the Wellhead transaction.
 
 The Plan
will be executed in accordance with sections 275 and 281(b) of the General
Corporation Law of the State of Delaware (“DGCL”) and Section 331 of the
Internal Revenue Code of 1986, As Amended (the “Code”) pursuant to a number of
steps described in further detail in “Annex B” of the Company’s Preliminary Form
14A filed on June 5, 2009 (“the Proxy”) and the subsequent updates, the most
recent amendment filed on August 14, 2009. As of the
report date, the Proxy is under review by the SEC. Upon final approval by the
SEC the Company will set its meeting date for the special meeting of
stockholders whereupon the stockholders will be able to vote on approval of the
Plan.
 
 NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Basis
of Consolidation
 
 These
condensed consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries: MMC Energy North America LLC, MMC
Escondido LLC, MMC Chula Vista LLC, MMC Mid-Sun LLC, MMC Chula Vista II LLC,
Kauai Energy Holdings, LLC and Kauai Energy Partners, LLC. All intercompany
accounts and transactions have been eliminated except with respect to Kauai
Energy Holdings, LLC and Kauai Energy Partners, LLC as explained in “Note 6 –
Other Assets.”.
 
 Liquidation
Basis of Accounting
 
 Whenever
an entity is to be liquidated, its historical costs are no longer relevant and a
new basis of accounting applies. In these circumstances, the liquidation basis
of accounting is considered to constitute “Generally Accepted Accounting
Principles” (“GAAP”). Accordingly the financial statements should present assets
at their estimated net realizable values and liabilities at their estimated
settlement amounts. However, a company in liquidation (or whose liquidation is
imminent) may not be able to estimate and reflect the realizable values of all
of its assets and the settlement amounts of all of its liabilities. In such
cases, the statements should reflect the assets and liabilities not "revalued"
at going-concern amounts and identify them.
 
 The
liquidation basis of accounting described should be used for companies: (a)
whose survival is not probable, (b) who are in the process of liquidation, or
(c) who are not in financial difficulty but that have adopted a plan of
liquidation. A conclusion that an entity's survival is not probable should
generally be caused by a discrete event that makes liquidation imminent, such as
the company being placed in receivership for the purpose of liquidation or the
board of directors passing a resolution to liquidate the company.
  The
conversion from the going concern to liquidation basis of accounting required
management to make significant estimates and judgments in order to record assets
at estimated net realizable value and liabilities at estimated settlement
amounts under the liquidation basis of accounting. The Company has adopted a
liquidation basis of accounting due to the Company’s Board of Directors
approval, subject to stockholder approval, of the Plan.
  - 10
-
  The
Company’s net assets in liquidation at June 30, 2009 were:
 
 June
      30,2009Net
      assets in liquidation
                      
                      $
                      22,237,736Common
      stock outstanding
                      
                      
                      14,161,325Net
      assets in liquidation per share outstanding
                      
                      $
                      1.57
 
 The
reported amounts for net assets in liquidation present all or substantially all
of our assets at estimated net realizable value on an undiscounted basis. The
amount also includes reserves for future estimated general and administrative
expenses and other costs. There can be no assurance that these estimated values
will be realized or that future expenses and other costs will not be greater
than recorded estimated amounts. Such amounts should not be taken as an
indication of the timing or amount of future distributions to be made by the
Company if the Wellhead transaction is not consummated and if the Plan were to
continue.
  If the
Plan is not terminated, the timing and amount of interim liquidating
distributions (if any) and the final liquidating distribution will depend on the
timing and amount of proceeds the Company will receive on the sale of the
remaining assets and the extent to which reserves for current or future
liabilities are required. Accordingly, there can be no assurance that there will
be any interim liquidating distributions before a final liquidating distribution
if the Plan were not terminated.
 
 A
Statement of Net Assets in Liquidation and a Statement of Changes in Net Assets
in Liquidation are the principal financial statements presented under the
liquidation basis of accounting. The valuation of assets at their net realizable
value and liabilities at their anticipated settlement amounts represent
estimates, based on present facts and circumstances, of the net realizable
values of assets and the costs associated with carrying out the Plan based on
the assumptions set forth below. The actual values and costs associated with
carrying out the Plan are expected to differ from the amounts shown herein
because of the inherent uncertainty and will be greater than or less than the
amounts recorded. Such differences may be material. It is not possible to
predict the aggregate amount or timing of future distributions to stockholders,
as long as the Plan is in effect, and no assurance can be given that the amount
of liquidating distributions to be received will equal or exceed the estimate of
net assets in liquidation presented in the accompanying Statements of Net Assets
in Liquidation, or the price or prices at which the Company’s common stock has
traded or is expected to trade in the future. If the Plan is terminated, no
additional liquidating distributions will be made.
 
 Net
Assets in Liquidation
 
 Cash and
cash equivalents, prepaid and deposit accounts are presented at face value. The
Company’s remaining assets are stated at estimated net realizable value which is
the expected selling price less applicable direct costs or expenses to sell, if
any. The assets that have been valued on this basis include all or substantially
all of our assets.
  Loans
payable, accrued expenses and other liabilities are stated at estimated
settlement amounts. Obligations of the Company that are collateralized by
certain assets of the company, (i.e. secured obligations), are presented
separately from other liabilities of the Company on the face of the Statement of
Net Assets in Liquidation.
  Reserve
for Estimated Costs During the Liquidation Period
  Under the
liquidation basis of accounting, the Company is required to estimate and accrue
the costs associated with implementing and completing the Plan. These amounts
can vary significantly due to, among other things, the timing and realized
proceeds from sales of the remaining  assets, the costs of retaining
personnel and others to oversee the liquidation, including the cost of
insurance, the timing and amounts associated with discharging known and
contingent liabilities and the costs associated with cessation of the Company’s
operations including an estimate of costs subsequent to that date (which would
include reserve contingencies for the appropriate statutory periods). As a
result, the Company has accrued the projected costs, including corporate
overhead and specific liquidation costs of severance, professional fees, and
other miscellaneous wind-down costs, expected to be incurred during the
projected period required to complete the liquidation of the Company’s remaining
assets. The Reserve will be adjusted from time to time as projections and
assumptions change concomitant with the most current facts and circumstances.
The current reserve reflects the low end of management’s range of estimates for
net assets/cash available for distribution.
  - 11
-
 
 The
following is a summary of the “Reserve for Estimated Costs During the
Liquidation Period” (the “Reserve”):
 
 December 31,
                  
                  
                  Adjustments and
                  
                  
                  June 30,2008
                  
                  
                  Payments
                  
                  
                  2009Payroll,
      severance and related costs
                  
                  $
                  -
                  
                  
                  $
                  2,215,000
                  
                  
                  $
                  2,215,000Professional
      fees
                  
                  
                  -
                  
                  
                  
                  475,000
                  
                  
                  
                  475,000Lease
      related expenses
                  
                  
                  -
                  
                  
                  
                  159,625
                  
                  
                  
                  159,625Insurance
                  
                  
                  -
                  
                  
                  
                  319,000
                  
                  
                  
                  319,000Net
      operating loss
                  
                  
                  -
                  
                  
                  
                  370,495
                  
                  
                  
                  370,495Total
                  
                  $
                  -
                  
                  
                  $
                  3,539,120
                  
                  
                  $
                  3,539,120
 
 Going
Concern Basis Accounting
 
 For all
periods prior to April 1, 2009, the Company’s financial statements are presented
on the going concern basis of accounting. Such financial statements reflect the
historical basis of assets and liabilities and the historical results of
operations related to the Company’s assets and liabilities for the period from
January 1, 2008 to December 31, 2008. The accounting policies below relate
to this period, except as otherwise noted.
 
 Cash
and Cash Equivalents
 
 For
purposes of the Statement of Cash Flows, the Company considers all time deposits
and highly liquid debt instruments purchased that mature in three months or less
to be cash equivalents.
 
 Receivables
 
 Accounts
receivable are composed substantially of trade accounts receivable that arise
primarily from the sale of electricity or services on account and in accordance
with liquidation basis accounting are stated at net realizable value. The
Company does not have an allowance for doubtful accounts.
 
 Inventories
 
 Inventories
are stated, in accordance with liquidation basis accounting, at management’s
estimated net realizable value.
 
 Property,
Plant and Equipment
 
 Property,
plant and equipment are stated at net realizable value. Depreciation is computed
principally by using the straight-line method at rates based on estimated useful
lives as follows:
  Office
      equipment
                    
                    
                    3
      yearsMachinery,
      automobiles and equipment
                    
                    
                    3 –
      10 yearsSoftware
                    
                    
                    3
      years
 
 Long-Lived
Assets
 
 In
accordance with liquidation basis accounting all assets including long-lived
assets are recorded at their net realizable value based upon management’s best
estimates at the time.
 
 The
Company evaluated its long-lived assets for impairment per SFAS No. 157 “Fair
Value Measurement” (“SFAS 157”). Impairment charges for certain assets held for
sale were derived using Level 2 inputs when it was on a going-concern
basis.
    - 12
-
 
 Assets
Held For Sale
 
 The
Company previously disclosed all assets held for sale when the company was on
the going concern basis of accounting. As the Company has adopted the
liquidation basis of accounting all or substantially all its assets are held for
sale and stated at management’s best estimate of net realizable
value.
 
 Fair
Value of Financial Instruments
 
 At June
30, 2009 the Company’s assets were stated at their then expected net realizable
values and liabilities were stated at their estimated settlement amounts. Assets
and liabilities were stated at their historical values except where noted in
accordance with US GAAP and the going concern basis of accounting. All of the
Company’s debt at June 30, 2009 was fixed rate based. See Note 7 for further
information. The Company has adopted FASB Staff Position 107-1, “Interim
Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1”) which
asserts that an entity shall disclose in the body or in the accompanying notes
of its summarized financial statements for all reporting periods the fair value
of all financial instruments for which it is practicable to estimate the value,
whether recognized or not in the balance sheets or statement of net assets in
liquidation.
 
 Subsequent
Events
 
 The
Company adopted SFAS No. 165, “Subsequent Events” effective with the six
months ended June 30, 2009.   Subsequent events are events or
transactions about which information becomes available after the balance sheet
date but before the financial statements are issued or are available to be
issued.  In the case of the Company the applicable subsequent events
cutoff date is the date the financial statements are issued.
 
 The
statement requires that certain subsequent events (“recognized subsequent
events”) be recorded in the financial statements of the latest preceding period
currently being issued.  These items provide evidence about conditions
that existed at the date of that balance sheet, including estimates inherent in
preparing the financial statements for that period.   Other
subsequent events (“non-recognized subsequent events”) are not recorded in a
balance sheet for the latest preceding period currently being issued. Those
items relate to conditions that arose only after the balance sheet
date.   Disclosure is required for non-recognized subsequent
events if necessary to prevent those financial statements from being
misleading.
 
 Recent Accounting
Pronouncements
 
 SFAS No. 168. In June 2009
the FASB issued SFAS No. 168 “The FASB Accounting Standards CodificationTM and
the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB
Statement No. 162” (“SFAS 168”). The FASB Accounting Standards
CodificationTM (the “Codification”) will become the source of
authoritative U.S. generally accepted accounting principles (“GAAP”) recognized
by the FASB to be applied by nongovernmental entities. Rules and interpretive
releases of the Securities and Exchange Commission (the “SEC”) under authority
of federal securities laws are also sources of authoritative GAAP for SEC
registrants. On the effective date of this statement, the Codification will
supersede all then-existing non-SEC accounting and reporting standards. All
other non-grandfathered non-SEC accounting literature not included in the
Codification will become non-authoritative.   This statement is effective
for financial statements issued for interim and annual periods ending after
September 15, 2009. Consistent with the view of the FASB that SFAS No. 168 will
not change GAAP, the Company does not believe this standard will have any
impact on its financial position, results of operations or cash
flows
 
 SFAS No. 167. In June 2009
the FASB issued SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”
(“SFAS 167”). The objective in issuing this statement is to improve financial
reporting by enterprises involved with variable interest entities. The statement
is effective at the beginning of each reporting entity’s first annual reporting
period after November 15, 2009. The Company does not believe this standard will
have any impact on its financial position, results of operations or cash
flows.
 
 SFAS No. 166.In June 2009 the FASB
issued SFAS No. 166 “Accounting for Transfers of Financial Assets—an amendment
of FASB Statement No. 140” (“SFAS 166”). The objective of this Statement is to
improve the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial statements about
transfers of financial assets and their effects on its financial position,
financial performance, and cash flows; and a transferor’s continuing
involvement, if any, in transferred financial assets. The statement is effective
at the beginning of each reporting entity’s first annual reporting period after
November 15, 2009. The Company will not be affected by the issuance of this
statement.
  - 13
-
 
 Reclassifications
  Certain
reclassifications have been made to conform prior period data to the current
presentation. These reclassifications had no effect on reported
losses.
 
 NOTE
3 – PROPERTY, PLANT AND EQUIPMENT
 
 At June
30, 2009 and December 31, 2008 property, plant and equipment consisted of the
following:
 
 June 30,
                        
                        
                        December 31,2009
                        
                        
                        2008Land
                        
                        $
                        375,000
                        
                        
                        $
                        375,000Automobile
                        
                        
                        20,427
                        
                        
                        
                        21,927Office
      equipment
                        
                        
                        150,450
                        
                        
                        
                        148,156Transformer
                        
                        
                        1,584,063
                        
                        
                        
                        -Machinery,
      equipment & other
                        
                        
                        3,337,950
                        
                        
                        
                        8,207,849LM-6000
      turbines
                        
                        
                        31,714,192
                        
                        
                        
                        -37,182,082
                        
                        
                        
                        8,752,932Impairment/disposal
      charges
                        
                        
                        (5,430,692
                        )
                        
                        
                        (914,353
                        )Accumulated
      depreciation
                        
                        
                        (2,337,893
                        )
                        
                        
                        (2,923,207
                        )Total
                        
                        $
                        29,413,497
                        
                        
                        $
                        4,915,372
  Property,
plant and equipment are held at management’s best estimate of net realizable
value at June 30, 2009 and at historical costs consistent with US GAAP and going
concern basis of accounting at December 31, 2008.
 
 NOTE
4 – RECEIVABLES, PREPAIDS AND DEPOSITS
 
 At June
30, 2009 and December 31, 2008 accounts receivable and prepaid items consisted
of the following:
  June
      30,
                                        
                                        
                                        December
      31,2009
                                        
                                        
                                        2008Accounts
      receivable
                                        
                                        $
                                        541,191
                                        
                                        
                                        $
                                        314,169Employee
      loan
                                        
                                        
                                        68,324
                                        
                                        
                                        
                                        106,040Total
                                        
                                        $
                                        609,515
                                        
                                        
                                        $
                                        420,209Unbilled
      receivables
                                        
                                        $
                                        160,795
                                        
                                        
                                        $
                                        230,722Total
                                        
                                        $
                                        160,795
                                        
                                        
                                        $
                                        230,722Prepaid
      insurance
                                        
                                        $
                                        153,919
                                        
                                        
                                        $
                                        129,983Prepaid
      expenses
                                        
                                        
                                        48,153
                                        
                                        
                                        
                                        101,959Project
      and other deposits
                                        
                                        
                                        98,118
                                        
                                        
                                        
                                        28,170,560Total
                                        
                                        $
                                        300,190
                                        
                                        
                                        $
                                        28,402,502Total
                                        
                                        $
                                        1,070,500
                                        
                                        
                                        $
                                        29,053,433
  All
receivables, prepaids and deposits are held at net realizable value as per
management’s best estimates at June 30, 2009 and at historical costs consistent
with US GAAP and going concern basis of accounting at December 31,
2008.
  - 14
-
 
 NOTE
5 – DEFERRED COSTS
  Deferred
costs consist of costs incurred in connection with acquisitions and capital
raises and are accounted for based upon their stage in the acquisition/financing
process. Costs of acquisitions and or financings can be broadly classified in
four categories: exploratory, pre-acquisition, in-process and in-service.
Typically, exploratory costs are expensed as incurred. When a financing or
acquisition is determined to be probable as per management’s assessment, all
costs in connection with such transaction are eligible to be capitalized at the
assessment date as well as throughout the actual implementation. When the
acquisition is completed, related deferred costs are capitalized as a component
of the asset cost basis and depreciated over the useful life of the
asset.
 
 June
      30,
                        
                        
                        December
      31,2009
                        
                        
                        2008Deferred
      CostsDeferred
      development costs - Chula Vista
                        
                        $
                        -
                        
                        
                        $
                        2,259,396Deferred
      development costs - Escondido
                        
                        
                        441,951
                        
                        
                        
                        969,231Total
                        
                        $
                        441,951
                        
                        
                        $
                        3,228,627
 
 On May
21, 2009 the Company signed a definitive purchase agreement to sell its Chula
Vista and Escondido electric generating facilities and certain other assets for
$4,865,500 to affiliates of Wellhead Electric Company, Inc (“Wellhead”). The
sale represents the conclusion of a process to sell substantially all of the
Company's remaining operating assets, except for its two GE LM6000 PC Sprint®
turbines. The sale of two gas compressors to Wellhead announced in March 2009
was originally included in the process and in Wellhead's initial bid for these
assets, but closed sooner on the mutual agreement of the parties. The Company
expects the this transaction to close at the end of September 2009. In
accordance with liquidation basis accounting these deferred costs are stated at
net realizable value.
 
 NOTE
6 – OTHER ASSETS
 
 In
October 2008, the Company and Pacific West Energy, LLC (“PacWest”) jointly
formed Kauai Energy Partners, LLC (“KEP”), a venture to trade waste oil on the
island of Kauai in Hawaii. The Company initially provided the total contributed
capital of $112,458 which entitled the Company to 90% participation in the
profits of the venture as well as the role of Managing Member of KEP.
Subsequently, in December 2008, the Company sold 50% of its position to Province
Line Capital, LLC for $62,458, while still retaining the position of Managing
Member.  Accordingly, the Company holds a 44% capital interest, and remains
entitled to 45% profit interest. The profit sharing percentages are only
applicable after operations start and only after profits exceed the Company’s
contributed capital. The Company is entitled to 100% of the profits until
profits exceed the Company’s contributed capital.
 
 At the
date of the balance sheet KEP had no activity except for the incurrence of
$12,458 of organization cost.  Although KEP is eligible for consolidation
due to its immateriality the Company has chosen not to consolidate this entity
and reports the net investment amount of $50,000 on the “Other Assets and
Deferred Charges” line of the balance sheet.  In addition, the Company has
guaranteed an amount of up to $250,000 to KEP’s supplier of waste oil for any
purchase liabilities that KEP should fail to honor. Through the six month
period ended June 30, 2009 KEP has remained inactive. KEP received all
regulatory approvals in July 2009 and the Company’s guaranty is in effect. As of
the report date, however, KEP has not yet commenced operations.
 
 NOTE 7
– SECURED LOANS PAYABLE
 
 All loans
payable of the Company are collateralized or secured by specific assets of the
Company. The entirety of the Company’s loans payable are secured and
collateralized.
 
 On
January 31, 2006, MMC North America entered into a Loan and Security Agreement
(the “Loan Agreement”) with TD Banknorth (the “Bank”), for a $3.5 million senior
debt facility, including a $3.0 million term loan (the “Term Loan”) and a
$500,000 revolving loan (the “Revolver,” together with the Term Loan, the
“Loans”).  The Term Loan provides for interest payments only for the
first nine months and 81 monthly principal payments in the amount of $37,038
each thereafter, with a final maturity date of May 3, 2013.  The Term
Loan bears interest at a fixed rate equal to
7.58%.   Approximately $2.1 million of the Term Loan proceeds
were funded into an escrow account under control of the Bank and restricted in
use to valid repair and re-commissioning costs in accordance with a
re-commissioning plan agreed to between MMC North America and the
Bank.  The remaining proceeds, net of related transaction costs, were
used for general working capital purposes.  All escrowed funds for
repair and re-commissioning were expended for the intended use.
  - 15
-
  Advances
against the Revolver are payable on demand and bear interest at the Prime Rate
plus 1.00%.  Beginning in 2007, amounts outstanding under the Revolver
must be repaid in full and a zero balance maintained for at least 30 consecutive
days at any time during the year.  MMC North America has not made any
borrowings under the Revolver.
 
 MMC North
America has arranged for the issuance by the Bank of an irrevocable letter of
credit in the amount of $100,000 (the “Letter of Credit”) to a counterparty
under an energy services agreement entered into in November 2008 (the
“ESA”).  The counterparty may draw upon the Letter of Credit to
recover liquidated damages suffered by the counterparty in connection with any
energy sales it may make on behalf of MMC North America and MMC Mid-Sun in the
event MMC North America or MMC Mid-Sun fails to meet its obligations, or for any
other unsatisfied obligations under the ESA.  The Letter of Credit
expires on December 31, 2009.  Availability under the Revolver is
reduced from $500,000 to $400,000 while the Letter of Credit remains
outstanding.
 
 The Loan
Agreement further subjects MMC North America to certain financial and other
covenants, including maintaining a minimum Net Worth and minimum Debt Service
Coverage ratio.  The financial covenants are measured annually. In 2008,
MMC North America failed to maintain its required minimum net worth or debt
service coverage ratio, due solely to the effect of the CAISO settlement (see
“Legal Proceedings”) of which MMC North America was allocated 2/3rds, or
$666,000.  The Bank has agreed to waive the covenant requirements for 2008,
and accordingly MMC North America was cured.  In 2007, the Company was in
compliance with all of its covenants.  The loans continue to be
collateralized by substantially all assets of MMC North America.
 
 The loan
from the Bank is stated at management’s estimated settlement value inclusive of
prepayment penalty and closing costs. Upon consummation of the Wellhead
transaction the entire estimated settlement value of the loan from the Bank will
become due.
 
 On June
30, 2008 the Company’s wholly owned subsidiaries, Chula Vista II and
Escondido II agreed to a $25.5 million loan facility with GE Energy Financial
Services (“GE Finance”) in connection with the purchase of three GE LM6000 PC
Sprint® natural gas-fired turbines from GE Energy.  This facility has
provided the additional funding needed to complete the purchase of the turbines.
The loan agreement originally allowed the Company’s subsidiaries to
borrow the $25.5 million, provided that it first contribute equity capital
to each subsidiary sufficient to cover the balance of the turbines' purchase
price, among other customary conditions. The loans bore interest at the prime
rate plus 275 basis points and are fully guaranteed by the Company. GE Finance
has obtained the right of first refusal to provide the full project debt
financing to each of the projects upon receipt of final permitting. The loans
are due in full 150 days after the final turbine is ready to ship, and carry
prepayment penalties if prepaid in the first 12 months or in the event the
projects proceed with debt other than from GE Finance.
  On
December 10, 2008 the Company completed the sale of its membership interest in
Escondido II a wholly-owned subsidiary whose only asset was an agreement to
acquire a General Electric LM6000 PC Sprint® turbine for $15.3 million to an
affiliate of Wellhead Electric Company, Inc. In connection with the sale, the
Company repaid its then entire outstanding loan balance of $8.574
million.  Also, in connection with the sale of the Company’s interest
in MMC Escondido II, the interest rate on borrowings was increased by 150 basis
points and the loan agreement amount was reduced to $10.275 million which was
sufficient to cover the balance of the remaining payments due on the turbines
purchased in connection with the then-anticipated Chula Vista upgrade project.
As of the three month period ended June 30, 2009 the Company had approximately
$6.4 million of outstanding debt related to the GE facility and has taken title
to the turbines.
  On July
31, 2009 the Company amended its loan facility agreement with GE Energy
Financial Services (“GE Financial”).The amendment provides for
the extension of maturity date of the Company’s loan facility with GE Financial
from July 31, 2009 to August 14, 2009. As a result of receiving the $3 million
non-refundable deposit for the sale of the turbines, on August 11, 2009 the
Company paid the full amount of outstanding debt with GE Financial which
inclusive of fees amounted to approximately $6.5 million.
  As of
June 30, 2009, the Company had approximately $8.2 million of outstanding debt
consisting of $6.4 million of debt related to the GE facility with the remainder
consisting of its debt to the Bank.
  - 16
-
  NOTE 8
– COMMITMENTS AND CONTINGENT LIABILITIES
 
 In
February 2007, the Company announced that it had learned that one hundred
thousand shares of its common stock issued as part of a 1.2 million share
private placement transaction it consummated in May 2006 were purchased by
an entity controlled by Louis Zehil, who at the time of the purchase was
a partner of the Company’s external legal counsel for the private placement
transaction, McGuireWoods LLP. The Company also announced that it believes that
Mr. Zehil improperly caused the Company’s former transfer agent not to
place a required restrictive legend on the certificate for these one hundred
thousand shares and that Mr. Zehil then caused the entity he controlled to
resell these shares. The Company reported Mr. Zehil’s conduct to the Securities
and Exchange Commission (the “SEC”) and, subsequently, the SEC recently
sued Mr. Zehil in connection with this matter further alleging that Mr.
Zehil engaged in a similar fraudulent scheme with respect to six additional
public companies represented at the relevant time by McGuireWoods
LLP.
 
 Persons
who purchased shares directly from Mr. Zehil when he resold his shares may have
a rescission right versus Mr. Zehil, and could make the claim that this
rescission right somehow extends to the Company as well. One or more of the
Company’s investors from the Company’s May 2006 private placement of 1.2 million
shares could also claim a rescission right. It is also possible that one or
more of the Company’s stockholders could claim that they somehow suffered a loss
as a result of Mr. Zehil’s conduct and attempt to hold the Company
responsible for their losses. The Company is unable to predict the extent of its
ultimate liability with respect to any and all future securities matters.
If any such claims are successfully made against the Company and it is not
adequately indemnified for those claims from available sources
of indemnification, then such claims could have a material adverse effect
on the Company’s financial condition and operating results. The Company also
may incur significant costs resulting from its investigation of this
matter, any litigation it may initiate as a result and the Company’s
cooperation with governmental authorities. The Company may not be
adequately indemnified for such costs from available sources of
indemnification.
 
 MMC North
America has arranged for the issuance by the Bank of an irrevocable letter of
credit in the amount of $100,000 (the “Letter of Credit”) to a counterparty
under an energy services agreement entered into in November 2008 (the
“ESA”).  The counterparty may draw upon the Letter of Credit to
recover liquidated damages suffered by the counterparty in connection with any
energy sales it may make on behalf of MMC North America and MMC Mid-Sun in the
event MMC North America or MMC Mid-Sun fails to meet its obligations, or for any
other unsatisfied obligations under the ESA.  The Letter of Credit
expires on December 31, 2009.  Availability under the Revolver is
reduced from $500,000 to $400,000 while the Letter of Credit remains
outstanding.
  - 17
-
  As the
Company’s facilities are located in California, they are exposed to the risk of
potential damage from a catastrophic event such as an earthquake.  In
addition, the Chula Vista facility lies within a designated flood plane and is
therefore potentially at risk if subject to a 100 year flood event.  While
the Company generally insures its facilities at replacement cost, the Company’s
insurance policy imposes a $1 million limit on claims resulting from an
earthquake or flood.  Supplemental coverage for these risks is cost
prohibitive and therefore the Company has foregone purchasing such
coverage.  Accordingly, should any of the Company’s facilities be damaged
by such an event, the insurance proceeds to the Company may not be sufficient to
cover the costs required to restore such facilities to operating
condition.  Furthermore, should such a catastrophic event result in the
permanent loss of any of its two facilities, the Company believes the insurance
proceeds would not be sufficient to recover the loss of future cash flows, or
expected market value, of the facility.
  As
discussed in Note 6, the Company has guaranteed an amount of up to $250,000 to
KEP’s supplier of waste oil for any purchase liabilities that KEP should fail to
honor. As of the date of this report, KEP received the relevant regulatory
approvals and this guaranty is in effect. As of the report date, however, KEP
has not yet commenced operations.
 
 The
Company’s primary office space is currently leased through December 31, 2010 and
the Company is attempting to negotiate a buy-out of the lease.
 
 The
Company has consulting agreements with outside contractors to provide various
services. The Agreements are generally for a term of 12 months from
inception and renewable automatically from year to year unless either the
Company or the Consultant terminates such engagement by written notice. The
Company is terminating these contracts as the need for these services is
eliminated.
 
 The
Company is subject to legal proceedings and claims which arise in the ordinary
course of its business. Although occasional adverse decisions or settlements may
occur, the Company believes that the final disposition of such matters should
not have a material adverse effect on its financial position, results of
operations or liquidity.
 
 NOTE 9
– EQUITY COMPENSATION
 
 Under the
Company’s 2006 Equity Incentive Plan (the “Plan”), 500,000 shares of common
stock were reserved for issuance as incentive awards to executive officers, key
employees and directors and outside consultants.  As of June 30, 2009,
93,000 shares have been granted to employees, net of cancellations, in the form
of stock option grants, with a weighted average exercise price of $9.21 per
share. These stock option awards were issued consistent with the market value of
the Company’s common stock at the time of issuance. As of June 30, 2009 the
Company had also issued 295,836 shares of restricted stock to employees and
directors. As of June 30, 2009, 111,164 shares remain available for issue under
the Plan. The Company has no plans to award any further equity
compensation.
 
 For the
six month periods ended June 30, 2009 and 2008 the Company issued -0- and
277,000 shares of restricted stock, respectively.
 
 NOTE
10 – RELATED PARTY TRANSACTIONS
 
 The
Company had no related party transactions six month periods ended June 30, 2009
and 2008.
 
 NOTE
11 – RESULTS FROM OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2009
 
 The table
below provides the unaudited going concern basis statement of operations for the
six months ended June 30, 2009. This statement does not include all adjustments,
charges and reserves necessary to be comparable with the Condensed Consolidated
Statement of Changes of Net Assets in Liquidation for the six months ended June
30, 2009.
  - 18
-
 
 Six
      Months Ended
                                  June
      30,2009Operating
      revenues:Resource
      adequacy capacity
                                
                                $
                                934,970Ancillary
      services
                                
                                
                                31,410Energy
      production
                                
                                
                                696,232Total
      operating revenues
                                
                                
                                1,662,612Costs
      of sales:Costs
      of resource adequacy capacity
                                
                                
                                67,785Costs
      of ancillary services
                                
                                
                                7,337Costs
      of energy production
                                
                                
                                272,233Total
      costs of sales
                                
                                
                                347,355Gross
      Profit
                                
                                
                                1,315,257Operating
      expenses:Depreciation
                                
                                
                                360,012Operations
      and maintenance
                                
                                
                                1,093,025General
      and administrative expenses
                                
                                
                                1,940,634Loss
      on disposal
                                
                                
                                201,003Impairment
      charges
                                
                                
                                8,883,190Total
      operating expenses
                                
                                
                                12,477,864Loss
      from operations
                                
                                
                                (11,162,607
                                )Interest
      and other expensesInterest
      expense
                                
                                
                                (126,986
                                )Interest
      income
                                
                                
                                10,075Interest
      income (expense), net
                                
                                
                                (116,911
                                )Net
      loss before provision for income taxes
                                
                                
                                (11,279,518
                                )Provision
      for income taxes
                                
                                
                                -Net
      loss
                                
                                $
                                (11,279,518
                                )
  In
addition to the net loss above, the Company recorded the Reserve, adjusted
liabilities to their settlement values and recorded the vesting of various stock
options awards. These items in conjunction with the operating loss contributed
to the Changes in Net Assets in Liquidation financial statement
provided.
 
 NOTE
12 – SUBSEQUENT EVENTS
  On July
31, 2009 the Company amended its loan facility agreement with GE Energy
Financial Services (“GE Financial”).The amendment provides for
the extension of the maturity date of the Company’s loan facility with GE
Financial from July 31, 2009 to August 14, 2009. On August 11, 2009 the Company
settled the full amount of outstanding debt with GE Financial which inclusive of
fees amounted to approximately $6.5 million.
  On August
7, 2009, the Company signed a definitive equipment purchase agreement to sell
its two remaining General Electric LM6000PC Sprint® turbines and related power
generating equipment for a gross purchase price of $26.65 million to an
affiliate of Pro Energy Services, Inc., $3 million of which was paid to the
Company as a non-refundable deposit at signing. The transaction is targeted to
close on October 7, 2009.  The Company expects to receive at closing
proceeds of approximately $23.3 million, net of the deposit and transaction
costs.  Accordingly, the Company has recorded an approximately $5.4
million impairment charge against the Company’s cost basis of $31.7 million for
the turbines in the Company’s second quarter results.
  - 19
-
 
 ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
  The following discussion should be
read in conjunction with the consolidated financial statements and notes thereto
included in our public filings, including this report.
 
 Information
contained in this filing contains “forward-looking statements” which can be
identified by the use of forward-looking terminology such as “believes,”
“expects,” “may,” “will,” “should,” “anticipates” or comparable terminology, or
by discussions of strategy. We cannot assure you that the future results covered
by these forward-looking statements will be achieved. Some of the matters
described in the “Risk Factors” section of our Annual Report on Form 10-K and in
our other public filings constitute cautionary statements which identify factors
regarding these forward-looking statements, including certain risks and
uncertainties that could cause actual results to vary materially from future
results indicated in these forward-looking statements. Other factors could also
cause actual results to vary materially from future results indicated in such
forward-looking statements.
  Overview
and Management’s Plan of Operation
  We were
an energy management company that has actively manages electricity generating
and energy infrastructure related assets in the United States.  Our
historical mission was to acquire, directly or through joint ventures, a
portfolio of small to mid-size electricity generating assets, generally below
100 megawatts, or “MW.” To date, we had acquired three electricity generating
assets in California, totaling 110 MW of capacity. We are in the process of
liquidating our assets in lieu of continuing to seek additional acquisitions of
small to medium-sized power generating facilities.  Our natural gas
fueled electricity generating facilities are commonly referred to as “peaker”
plants. Our plants are used to balance unexpected short term surges in demand,
making them critical to the reliability, or “insurance,” of the power grids they
serve. Our assets generate revenue from providing capacity and ancillary
reliability services to the transmission grid that distributes electricity to
industrial and retail electricity providers. During peak electricity usage
times, such as the summer, we also sell our electricity in the merchant
market.
  We
launched our acquisition strategy in January 2006 with the acquisition of two 44
MW natural gas fired electricity generating facilities in San Diego county, one
in Chula Vista and the other in Escondido, California. This acquisition provided
us entry to the California wholesale electricity market. We fully
re-commissioned the facilities and began earning revenues in June 2006. We
acquired these formerly idle facilities for what we believe to be a discounted
value to market. In November 2006, we acquired MMC Mid-Sun, a 22 MW facility
near Bakersfield, California, which we also successfully re-commissioned and
began operating in January 2007.
 
 Due to
the recent stresses in the financial markets, coupled with depressed electricity
prices, it has become increasingly difficult for us to continue to execute our
acquisition growth strategy.  Furthermore, the California Energy
Commission, or the CEC, issued its Final Decision in June 2009 denying our Chula
Vista Energy Upgrade Project the required permit to proceed, in what we believe
to be an unprecedented reversal of the CEC staff’s Final Staff Assessment in
full support of our application.  We have chosen not to appeal the CEC
Final Decision due to our assessment that there is an extremely low probability
of success in an appeal. While we have successfully permitted our Escondido
Energy Upgrade Project, we have yet to obtain a satisfactory long-term revenue
contract that is necessary to finance the upgrade of this facility.
 
 These and
other events have led us to more aggressively evaluate our strategic
alternatives, including pursuing the sale of our assets, as noted above. Our
asset sales to date include the sale of: (1) our subsidiary MMC Escondido II,
LLC, whose only asset was one of three GE LM6000 PC Sprint® turbines we had on
order, (2) the GE LM2500 turbine and related equipment powering our MMC Mid-Sun
facility, which closed on April 1, 2009, and (3) our two natural gas compressors
on order.  These asset sales have resulted in approximately $12.7
million of cash to us after repayment of debt of $8.6 million and relieved us of
the obligation to pay an additional $2.1 million under relevant purchase
agreements through the date of this report.
 
 If we are
not successful in closing the sales of our remaining assets we will reduce
general and administrative expenses significantly in order to minimize the
extent of further cash utilized for operations.  This effort is in process
and included reduction of our headcount by 57% through June 30, 2009. We expect
general administrative costs to continue to trend downward during 2009,
excluding related severance costs.
  - 20
-





On May
18, 2009, our Board of Directors approved, subject to stockholder approval, a
plan for the liquidation and dissolution of the Company (the “Plan”). The Plan
calls for the sale of all or substantially all of our remaining assets in
connection therewith. We are seeking stockholder approval for such plan of
liquidation. The approval and adoption of the plan of liquidation will be
contingent upon stockholder approval of the Wellhead transaction and the
subsequent successful consummation of the Wellhead transaction.





On May 21, 2009, we signed a definitive
purchase agreement to sell our Chula Vista and Escondido electric generating
facilities and certain other assets for $4,865,500 to affiliates of Wellhead
Electric Company, Inc. (“Wellhead”). The sale represents the conclusion of a
process to sell substantially all of our remaining operating assets, except for
our two GE LM6000 PC Sprint® turbines. The sale of two gas compressors to
Wellhead announced in March 2009 was originally included in the process and in
Wellhead's initial bid for these assets, but closed sooner on mutual agreement
of the parties. The sale of these remaining power plant assets is subject to
standard closing conditions. We expect to close the Wellhead transaction
coincident with shareholder approval of the sale by expected to be obtained no
later than the end of September 2009.





On August 7, 2009, we signed a
definitive equipment purchase agreement to sell our two remaining General
Electric LM6000PC Sprint® turbines and related power generating equipment for a
gross purchase price of $26.65 million to an affiliate of Pro Energy Services,
Inc., $3 million of which was paid to us as a non-refundable deposit at
signing.  The transaction is targeted to close on October 7,
2009.  We expect to receive at closing proceeds of approximately $23.3
million, net of the deposit and transaction costs.  Accordingly, the
Company has recorded an approximately $5.4 million impairment charge against the
Company’s cost basis of $31.7 million for the turbines in the Company’s second
quarter results.





The Plan
will be executed in accordance with sections 275 and 281(b) of the General
Corporation Law of the State of Delaware (“DGCL”) and Section 331 of the
Internal Revenue Code of 1986, As Amended (the “Code”) pursuant to a number of
steps described in further detail in “Annex B” of the Company’s Preliminary Form
14A filed on June 5, 2009 (“the Proxy”). Updates to the Proxy are filed as
amendments with the latest being filed on August 14, 2009, these should be read
in conjunction with the original Proxy. As of the report date the Proxy is under
review by the SEC. Upon final approval by the SEC we will set the meeting date
for the special meeting of the stockholders whereupon the stockholders will be
able to vote on approval of the Plan.





Critical
Accounting Policies




Our
condensed consolidated financial statements are prepared in accordance with
accounting principals generally accepted in the United States. The preparation
of our consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires us to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues, costs and expenses, and related disclosure. We base our estimates and
assumptions on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances; however, our operating
experience is limited. Future events may differ markedly from our current
expectations and assumptions. While there are a number of significant accounting
policies affecting our consolidated financial statements, we believe the
following critical accounting policies involve the most complex, difficult and
subjective estimates and judgments.




Liquidation
Basis of Accounting





Whenever
an entity is to be liquidated, its historical costs are no longer relevant and a
new basis of accounting applies. In these circumstances, the liquidation basis
of accounting is considered to constitute “Generally Accepted Accounting
Principles” (“GAAP”). Accordingly the financial statements should present assets
at their estimated net realizable values and liabilities at their estimated
settlement amounts. However, a company in liquidation (or whose liquidation is
imminent) may not be able to estimate and reflect the realizable values of all
of its assets and the settlement amounts of all of its liabilities. In such
cases, the statements should reflect the assets and liabilities not "revalued"
at going-concern amounts and identify them.





The
liquidation basis of accounting described should be used for companies: (a)
whose survival is not probable, (b) who are in the process of liquidation, or
(c) who are not in financial difficulty but that have adopted a plan of
liquidation. A conclusion that an entity's survival is not probable should
generally be caused by a discrete event that makes liquidation imminent, such as
the company being placed in receivership for the purpose of liquidation or the
board of directors passing a resolution to liquidate the company.


The
conversion from the going concern to liquidation basis of accounting required
management to make significant estimates and judgments in order to record assets
at estimated net realizable value and liabilities at estimated settlement
amounts under the liquidation basis of accounting.


- 21
-


Our net
assets in liquidation at June 30, 2009 were:





June
      30,2009Net
      assets in liquidation
                  
                  $
                  22,237,736Common
      stock outstanding
                  
                  
                  14,161,325Net
      assets in liquidation per share outstanding
                  
                  $
                  1.57





The
reported amounts for net assets in liquidation present all or substantially all
of our assets at estimated net realizable value on an undiscounted basis. The
amount also includes reserves for future estimated general and administrative
expenses and other costs. There can be no assurance that these estimated values
will be realized or that future expenses and other costs will not be greater
than recorded estimated amounts. We have recorded these estimates at the low end
of the range of possible outcomes. Such amounts should not be taken as an
indication of the timing or amount of future distributions to be made by the
Company if the Wellhead transaction is not consummated and if the Plan were to
continue.




If the
Plan is not terminated, the timing and amount of interim liquidating
distributions (if any) and the final liquidating distribution will depend on the
timing and amount of proceeds the Company will receive on the sale of the
remaining assets and the extent to which reserves for current or future
liabilities are required. Accordingly, there can be no assurance that there will
be any interim liquidating distributions before a final liquidating distribution
if the Plan is not terminated.





A
Statement of Net Assets in Liquidation and a Statement of Changes in Net Assets
in Liquidation are the principal financial statements presented under the
liquidation basis of accounting. The valuation of assets at their net realizable
value and liabilities at their anticipated settlement amounts represent
estimates, based on present facts and circumstances, of the net realizable
values of assets and the costs associated with carrying out the Plan based on
the assumptions set forth below. The actual values and costs associated with
carrying out the Plan are expected to differ from the amounts shown herein
because of the inherent uncertainty and will be greater than or less than the
amounts recorded. We have recorded these estimates at the low end of the range
of possible outcomes. Such differences may be material. It is not possible to
predict the aggregate amount or timing of future distributions to stockholders,
as long as the Plan is in effect, and no assurance can be given that the amount
of liquidating distributions to be received will equal or exceed the estimate of
net assets in liquidation presented in the accompanying Statements of Net Assets
in Liquidation, or the price or prices at which the Company’s common stock has
traded or is expected to trade in the future. If the Plan is terminated, no
additional liquidating distributions will be made.





Net
Assets in Liquidation





Cash and
cash equivalent, prepaid and deposit accounts are presented at face value.
Our  remaining assets are stated at estimated net realizable value
which is the expected selling price less applicable direct costs or expenses, if
any. The assets that have been valued on this basis include all or substantially
all of our assets.




Loans
payable, accrued expenses and other liabilities are stated at settlement
amounts. Obligations of the Company that are collateralized by certain assets of
the company, i.e. secured obligations, are presented on a net basis on the face
of the Statement of Net Assets in Liquidation.




Reserve
for Estimated Costs During the Liquidation Period




Under the
liquidation basis of accounting, we are required to estimate and accrue the
costs associated with implementing and completing the Plan. These amounts can
vary significantly due to, among other things, the timing and realized proceeds
from sales of the sale of the remaining  assets, the costs of
retaining personnel and others to oversee the liquidation, including the cost of
insurance, the timing and amounts associated with discharging known and
contingent liabilities and the costs associated with cessation of our operations
including an estimate of costs subsequent to that date (which would include
reserve contingencies for the appropriate statutory periods). As a result, we
have accrued what we estimate to be the maximum projected costs, including
corporate overhead and specific liquidation costs of severance, professional
fees, and other miscellaneous wind-down costs, expected to be incurred during
the projected period required to complete the liquidation of our remaining
assets. Also, we have not recorded any liability for any cash operating
shortfall that may result in executing the Plan. These accruals will be adjusted
from time to time as projections and assumptions change concomitant with the
most current facts and circumstances. We have recorded these estimates at the
low end of the range of possible outcomes.


- 22
-





The
following is a summary of the “Reserve for Estimated Costs During the
Liquidation Period” (the “Reserve”):





December
      31,
                  
                  
                  Adjustments
      and
                  
                  
                  June
      30,2008
                  
                  
                  Payments
                  
                  
                  2009Payroll,
      severance and related costs
                  
                  $
                  -
                  
                  
                  $
                  2,215,000
                  
                  
                  $
                  2,215,000Professional
      fees
                  
                  
                  -
                  
                  
                  
                  475,000
                  
                  
                  
                  475,000Lease
      related expenses
                  
                  
                  -
                  
                  
                  
                  159,625
                  
                  
                  
                  159,625Insurance
                  
                  
                  -
                  
                  
                  
                  319,000
                  
                  
                  
                  319,000Net
      operating loss
                  
                  
                  -
                  
                  
                  
                  370,495
                  
                  
                  
                  370,495Total
                  
                  $
                  -
                  
                  
                  $
                  3,539,120
                  
                  
                  $
                  3,539,120





Going
Concern Basis Accounting





For all
periods prior to January 1, 2009, our financial statements are presented on the
going concern basis of accounting. Such financial statements reflect the
historical basis of assets and liabilities and the historical results of
operations related to our assets and liabilities for the period from
January 1, 2008 to June 30, 2008.





Long-Lived
Assets





In
accordance with liquidation basis accounting all assets including long-lived
assets are recorded at their net realizable value based on management’s best
estimates at the time.





We
evaluated our long-lived assets for impairment per SFAS No. 157 “Fair Value
Measurement” (“SFAS 157”). Impairment charges for certain assets held for sale
were derived using Level 2 inputs when it was on a going-concern
basis.





During
the six month periods ended June 30, 2009 and 2008 the Company recorded
impairment charges of $8,883,190 and $0, respectively to write-down long-lived
assets to their net realizable values in accordance with liquidation basis
accounting.





Liquidity
and Capital Resources





As of
June 30, 2009, we had $4.0 million in cash and equivalents.  The
Company used approximately $5.0 million for operations for the six months ended
June 30, 2009, which was mostly offset by the receipt of approximately $4.8
million in net proceeds related to the sale of our KobelCo compressors and the
sale of our LM2500 turbine at Mid-Sun that closed on April 1, 2009. In addition,
we drew $6.4 million from our loan facility with GE described below to fund the
final installment payments on our LM6000 turbines which related loan facility is
now paid in full.





On
January 31, 2006, MMC North America, one of our wholly-owned subsidiaries,
entered into a Loan and Security Agreement with TD Banknorth providing for a
$3.5 million senior debt facility including a $3.0 million term loan and a
$500,000 revolving loan. The term loan provides for interest-only payments
during the first nine months, and 81 equal monthly principal payments in the
amount of $37,038 thereafter, with a final maturity date of May 3, 2013. The
term loan bears interest at a fixed rate equal to 7.58%. Upon the successful
closing of the sale of our operating assets to Wellhead, the entirety of the
term loan would become immediately due. As of June 30, 2009, the loan balance
with TD Banknorth is approximately $1.7 million.





Advances
against the revolver are payable on demand and bear interest at the prime rate
plus 1.00%. Beginning in 2007, amounts outstanding under the revolver must be
repaid in full and a zero balance maintained for at least 30 consecutive days at
any time during the year. We have not borrowed under the revolver.





As part
of such loan facility, MMC North America arranged for the issuance by the bank
of an irrevocable letter of credit in the amount of $100,000 to a counterparty
under an energy services agreement entered into in November 2008. The
counterparty may draw upon the letter of credit to recover liquidated damages
suffered by the counterparty in connection with any energy sales it may make on
behalf of MMC North America and MMC Mid-Sun in the event MMC North America or
MMC Mid-Sun fails to meet its obligations, or for any other unsatisfied
obligations under the energy services agreement. The letter of credit expires on
December 31, 2009. Availability under the revolver is reduced from $500,000 to
$400,000 while the letter of credit remains outstanding.


- 23
-





The Loan
and Security Agreement further subjects MMC North America to certain financial
and other covenants, including maintaining minimum net worth and minimum debt
service coverage ratio.  The financial covenants are measured annually. In
2008, MMC North America failed to maintain its required minimum net worth or
debt service coverage ratio, due solely to the effect of the CAISO settlement
(see “Legal Proceedings”) of which MMC North America was allocated 2/3, or
$666,000.  The Bank has agreed to waive the covenant requirements for 2008,
and accordingly MMC North America is not in default under the loan. The
loans continue to be collateralized by substantially all assets of MMC North
America.





On
January 29, 2008 we entered into an agreement with GE Packaged Power, Inc., or
GE Power, for the purchase of two LM6000 PC Sprint® turbines to be used in our
Chula Vista Upgrade Project for approximately $31 million. Through the date of
this quarterly report we have made all scheduled payments and have received
title to the turbines.





On May
15, 2008 our wholly-owned subsidiary MMC Escondido II, LLC entered into an
agreement with GE Power for the purchase of one LM6000 PC Sprint® turbine to be
used in our Escondido Upgrade Project for approximately $15.3 million and
through December 10, 2008 had made payments of approximately $13.8 million.
These payments were classified as long-term deposits on our consolidated balance
sheet. On December 10, 2008 we sold our membership interest in Escondido II
whose primary asset was the agreement to purchase one GE LM6000 PC Sprint®
turbine from GE Packaged Power, Inc. We sold the membership interest at the cost
of the contract but did incur a loss on disposal resulting from the incurrence
of a prepayment fee to GE Finance and professional fees related to consummating
the transaction.





On June
30, 2008 our wholly-owned subsidiaries, Chula Vista II and Escondido II entered
into a $25.5 million loan facility with GE Finance in connection with the
purchase of the three turbines described above.   This facility
was intended to provide the additional funding needed to complete the purchase
of the turbines. On December 10, 2008, we completed the sale of our membership
interest in Escondido II a wholly-owned subsidiary, whose only asset was an
agreement to acquire one of the turbines described above for $15.3 million to an
affiliate of Wellhead Electric Company, Inc. We used a portion of the proceeds
received in the sale to repay our outstanding borrowings of $8.57 million to GE
Finance, of which $3.5 million related to the Escondido turbine and $5.0 million
related to the two Chula Vista turbines that remain on order, as well as paying
all accrued interest on such borrowings, applicable prepayment penalties, and
the remaining $1.5 million installment payment on the Escondido
turbine.




The loan
agreement with GE Finance originally allowed our subsidiaries to borrow the
$25.5 million, provided that we first contribute equity capital to each
subsidiary sufficient to cover the balance of the turbines' purchase price,
among other customary conditions. As of August 15, 2008, we had made the
required equity contributions for turbines to be purchased for both Escondido II
Chula Vista II. The loans bear interest at the prime rate plus 275 basis points
and are fully guaranteed by us. GE Finance has obtained the right of first
refusal to provide the full project debt financing to each of the projects upon
receipt of final permitting. We took title to the turbines during the first
quarter of 2009. In connection with the sale of our interest in Escondido II,
the loan agreement was modified with all prepayment penalty provisions removed
and the loan amount reduced to $10.275 million which was sufficient to cover the
balance of the two remaining turbines’ purchase price. The reduced facility
amount is the only substantial change in the loan agreement. As of June 30, 2009
we had approximately $6.4 million due to GE Finance under the loan facility.
 The loans outstanding were paid in full on August 11,
2009.




On August 7, 2009, we signed a
definitive equipment purchase agreement to sell our two remaining General
Electric LM6000PC Sprint® turbines and related power generating equipment for a
gross purchase price of $26.65 million to an affiliate of Pro Energy Services,
LLC. $3 million of which was paid to us as a non-refundable deposit at signing.
The transaction is targeted to close on October 7, 2009.  We expect to
receive at closing proceeds of approximately $23.3 million, net of the deposit
and transaction costs.  Accordingly, the Company has recorded an
approximately $5.4 million impairment charge against the Company’s cost basis of
$31.7 million for the turbines in the Company’s second quarter
results.





Under the
Plan, our business has shifted, and has become limited to the sale and
disposition of our remaining assets, the resolution of remaining liabilities and
the orderly wind-down of our operations. Completion and execution of the Plan is
subject to approval of our stockholders. Upon the completion of these
activities, if successful, we expect to distribute any remaining cash to our
shareholders and then proceed to terminate the Company and its reporting
obligations under the SEC’s Securities Exchange Act of 1934. The Plan, once
approved by the stocholders, gives sole authority to the Board of Directors and
executive management to conduct our dissolution, liquidation and termination
without additional shareholder approval. As of the date of this filing, the
stockholders have not yet voted upon approval or rejection of the
Plan.


- 24
-





Off-Balance
Sheet Arrangements





We do not have any off-balance sheet
arrangements nor do we participate in non-exchange traded contracts requiring
fair value accounting treatment.





Recent
Accounting Pronouncements





See Note 2 of the Notes to Condensed
Consolidated Financial Statements for recent accounting
pronouncements.





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not
Applicable





ITEM
4T. CONTROLS AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





We maintain disclosure controls and
procedures that are designed to ensure that information required to be disclosed
in our reports filed or submitted pursuant to the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and that information required to be
disclosed in our Exchange Act reports is accumulated and communicated to our
Chief Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.





Under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer as of
June 30, 2009, we conducted an evaluation of effectiveness of the design and
operation of our disclosure controls and procedures, (as defined in Rule
13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective as of such date to ensure that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the SEC’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act is accumulated and communicated to management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding disclosure.




Changes
in Internal Control Over Financial Reporting





There were no changes in our internal
controls over financial reporting identified in connection with the evaluation
required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred
during our last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal controls over financial
reporting.





PART
II


OTHER
INFORMATION




ITEM
1. LEGAL PROCEEDINGS





On September 22, 2008, we and the CAISO
reached a settlement of a previously disclosed dispute with respect to the
Company’s spinning reserve certification. We agreed to pay the CAISO $1 million
to settle all outstanding disputed items and we recorded this proposed
settlement as a $1 million reduction of ancillary services revenue in our
Statement of Operations at September 30, 2008. On October 14, 2008, we and the
CAISO jointly filed an Offer of Settlement and Request for Expedited Action with
the FERC requesting that the FERC expeditiously review and approve the
Settlement Agreement without modification. Under the terms of the Settlement
Agreement, we are required to make four equal installment payments of $250,000
to the CAISO with the first payment to be made conditioned upon receipt of FERC
approval of the Settlement Agreement, with the remaining payments due on
December 31, 2008, March 31, 2009 and June 30, 2009. As of September 26, 2008
the CAISO withdrew our certification to provide spinning reserve services. On
January 15, 2009 the FERC approved the settlement agreement. Pursuant to that
agreement we made a payment of $500,000 on January 16, another payment of
$250,000 on March 31, 2009 and a final payment of $250,000 on June 30,
2009.


- 25
-





From time to time we may become a party
to routine litigation or other legal proceedings that are incidental and part of
the ordinary course of our business. Management and legal counsel periodically
review the probable outcome of such proceedings, the costs and expenses
reasonably expected to be incurred, the availability and extent of insurance
coverage, and established reserves.





ITEM
1A. RISK FACTORS




In addition to the information set
forth in our annual report on Form 10-K and most recent prospectus filed on
November 19, 2007, you should carefully consider the following risk factor and
all of the other information included or incorporated by reference in this Form
10-Q. If any of the following risks, or other risks not presently known to us or
that we currently believe not to be significant, develop into actual events,
then our business, financial condition and results of operations could be
adversely affected. In that case, the trading price of our common stock could
decline and you might lose all or part of your investment in our common
stock.




ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





None.





ITEM
3. DEFAULTS UPON SENIOR SECURITIES





None.





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





None.





ITEM
5. OTHER INFORMATION





None


- 26
-





ITEM
6. EXHIBITS





(a)
Exhibits.


10.32
                    
                    Equipment
      Purchase Agreement, dated August 7, 2009, by and between MMC Chula Vista
      II, LLC and Energy Parts Solutions, LLC.31.1
                    
                    Certification pursuant to Rules
      13a – 14(a) and 15d – 14(a) under the Securities Exchange Act of 1934, as
      amended31.2
                    
                    Certification pursuant Rules 13a
      – 14(a) and 15d – 14(a) under the Securities Exchange Act of 1934, as
      amended32.1
                    
                    Certification
      pursuant to 18 U.S. C.Section
      135032.2
                    
                    Certification
      pursuant to 18 U.S. C.Section
      1350


- 27
-


SIGNATURES




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


MMC
      ENERGY, INC.By:
              /s/ Michael J.
    HamiltonMichael
      J. HamiltonChief Executive
      Officer





By:
                /s/ Denis GagnonDenis
      GagnonChief
      Financial Officer and Principal Accounting OfficerDATE:August
      19, 2009


- 28
-