UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.  20549  FORM 10-Q  xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the quarterly period endedMarch 31, 2009   ̈TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  Commission file number333-125678  PROBE MANUFACTURING, INC. (Exact name of small business issuer as specified in its charter)  Nevada20-2675800(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)  25242 Arctic Ocean Dr. Lake Forest, CA 92630 (Address of principal executive offices)  (949) 206-6868 (Issuers telephone number)   Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   þ     No   o  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   þ     No   o  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):  Large accelerated filer Accelerated filer o o  Non-accelerated filer Smaller reporting company o þ    Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   o     No   þ  APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of each of the registrants classes of common stock, as of May 14, 2009 was as follows: 32,638,320    Table of contents   PROBE MANUFACTURING, INC. 10-Q   TABLE OF CONTENTS  Part I  Item 1.Financial Statements2Item 2.Managements discussion and Analysis of Financial Condition and Results of Operation26Item 3.Quantitative and Qualitative Disclosures About Market Risk35Item 4.Controls and Procedures35Item 4T.Controls and Procedures36   Part II Item 1.Legal Proceedings36Item 1A.Risk Factors36Item 2.Unregistered Sales of Equity Securities and Use of Proceeds39Item 3.Default Upon Senior Securities40Item 4.Submission of Matters to a Vote of Security Holders41Item 5.Other Information41Item 6.Exhibits41Signatures41  Page  of 45   Table of contents   PART 1  FINANCIAL INFORMATION  Item 1. Financial Statements  PROBE MANUFACTURING, INC. 10-Q TABLE OF CONTENTS    Financial StatementsPageReport of independent registered public accounting firm3Balance Sheet as of March 31, 2009 and December 31, 20084Statement of Operations for the three  months ended March 31, 2009 and 20085Statements of Cashflows for the three months ended March 31, 2009 and 20086Footnotes to the Financial Statements8    Page  of 45   Table of contents  W. T. UNIACK & CO. CPAS, P.C. CERTIFIED PUBLIC ACCOUNTANTS  1003 Weatherstone Pkwy., Ste. 320     12600 Deerfield Pkwy., Ste 100 Woodstock, GA  30188       Alpharetta, GA  30004 Phone: 770-592-3233       Phone: 678-566-3774 _____________________________________________________________________________________  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors Probe Manufacturing, Inc. Lake Forest, CA  We have reviewed the accompanying balance sheet of Probe Manufacturing, Inc. as of March 31, 2009, and the related statements of operations and cash flows for the three month period ending March 31, 2009. These financial statements are the responsibility of the Companys management.  We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of personal responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.  Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.  The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, conditions exist which raise substantial doubt about the Companys ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of the uncertainty.   W.T. UNIACK & CO. CPAs, P.C.  May 15, 2009        Page  of 45   Table of contents   PROBE MANUFACTURING, INC.Consolidated Balance SheetUn-auditedMarch 31,December 31,20092008AssetsCurrent Assets:Cash$           14,777$              9,754Accounts receivable - trade - net575,666700,490Inventory621,733786,416Deposits2,60052,600Total Current Assets1,214,7761,549,260Property And Equipment - Net120,836143,610Other Assets67,59467,594Total Assets$      1,403,206$       1,760,464Liabilities And Stockholders' ( Deficit )Current Liabilities:Bank overdraft$           30,186$          105,882Accounts payable - trade397,567668,464Customer Deposits108,54031,540Accrued Expenses250,458194,764Notes payable - Related Party427,902414,948Notes payable293,912302,979Un-earned Revenue90,838-Current Portion of Long Term Debt73,65272,377Total Current Liabilities1,673,0551,790,954Long-Term Debt:Capital lease settlement obligations266,880284,504Less Current portion of Long Term Debt(73,652)(72,377)Net Long-Term Debt193,228212,127Total Liabilities1,866,2832,003,081Stockholders'  ( Deficit )Common Stock to issue, 0 and 472,599 shares  respectively--Common stock, $.001 par value; 200,000,000 shares authorized; 32,638,320 and 31,196,832 shares issued and outstanding respectively32,63832,638Additional paid-in capital327,091325,033Accumulated deficit(822,806)(600,288)Total Stockholders'  ( Deficit )(463,077)(242,617)Total Liabilities And Stockholders' Deficit$      1,403,206$       1,760,464  See Accountants review report  Page  of 45   Table of contents    Probe Manufacturing, Inc.Consolidated Statement of Operationsfor the three months ended March 31,Un-AuditedUn-Audited20092008Sales$            887,928$         2,185,444Cost of Goods Sold761,6031,550,612Gross Profit126,325634,832General And Administrative322,016380,076Share Based Compensation2,0582,058Stock Issued for Services-18,904Research and Development-83,324Net Profit / (Loss) From Operations(197,749)150,470Other Income / (Expenses) - Net-(39)Interest Expense(24,769)(42,367)Net Profit / (Loss) Before Income Taxes(222,518)108,064Income Tax Expense--Net Profit / (Loss)$          (222,518)$            108,064Per Share Information:Basic weighted average numberof common shares outstanding32,638,32031,456,503Net Profit / (Loss) per common share$            (0.0068)$              0.0034Per Share Information:Diluted, weighted average numberof common shares outstanding32,638,32046,857,417Diluted, Net Profit / (Loss) per common share$              (0.0068)$                 0.0023  See Accountants review report   Page  of 45   Table of contents    PROBE MANUFACTURING, INC.Consolidated Statements of Cash Flowsfor the three months ended March 31,Un-AuditedUn-Audited20092008Cash Flows from Operating Activities:Net Income / ( Loss )$              (222,518)$                108,065Adjustments to reconcile net loss to net cashused in operating activities:Depreciation and amortization15,32438,497Share based compensation2,0582,058Stock issued for Services-18,904Changes in assets and liabilities:(Increase) decrease in accounts receivable124,824(462,941)(Increase) decrease in inventory164,683(69,429)(Increase) decrease in other assets50,000-(Decrease) increase in accounts payable(270,897)301,706(Decrease) increase in customer deposits77,000-(Decrease) increase in un-earned revenue90,838-Other (Decrease) increase in accrued expenses55,69413,222Net Cash provided / (Used) In Operating Activities87,006(49,918)Cash Flows from Investing ActivitiesDisposed of Property and equipment7,450-Cash Flows Used In Investing Activities7,450-Cash Flows from Financing ActivitiesBank Overdraft / (Repayment)(75,696)-Payments on capital lease settlement obligations(17,624)(16,436)Proceeds / (Payments) on notes payable3,88743,549Cash Flows Provided / (used)  By Financing Activities(89,433)27,113Net (Decrease) Increase in Cash and Cash Equivalents5,023(22,805)Cash and Cash Equivalents at Beginning of Period9,75429,490Cash and Cash Equivalents at End of Period$                  14,777$                    6,685Supplemental Information:Interest Paid$                    5,724$                  36,568  See Accountants review report  Page  of 45   Table of contents  PROBE MANUFACTURING, INC.  Notes to Financial Statements  Notes 1- GENERAL  The Company Probe Manufacturing Industries, Inc. was incorporated on July 7, 1995. On April 21, 2005, the Company was re-domiciled from California to Nevada, and changed its name to Probe Manufacturing, Inc.  Probe Manufacturing, Inc. (the Company or Probe) is a leading provider of advanced electronics manufacturing services, or EMS, to original equipment manufacturers, or OEMs, primarily in the medical device, aerospace, industrial, instrumentation and alternative fuel segments. This includes end-to-end manufacturing solutions ranging from engineering to manufacturing of printed circuit board assembly, cable assembly, enclosures, complete system integration and testing, as well as global order fulfillment.  In August 2008 we acquired the assets of Solar Masters, LLC, a distributer of solar powered products. Probe Manufacturing's headquarters are located in Lake Forest, California.  Solar Masters is located in Fountain Valley, California.  Going Concern The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. For the three months ended March 31, 2009, we had a net loss of $(222,518), a working capital deficit of $(458,279), and we had shareholder deficit of $(463,077).  The ability of the Company to operate as a going concern is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate positive cash flow from operations.  Plan of Operations: The company has seen a dramatic drop in revenue beginning in the 4th quarter of 2008 and continuing into 2009.  The company has made significant expense cuts as a direct result of this drop in revenue.  In addition to the steps discussed below, the company has initiated a major sales push in an attempt to gain new revenue; however no guarantees can be made as to whether or not the company will be successful in winning the quoted business or if it will be able to keep its existing business.  Management is taking the following steps to address this situation: (a) to improve operational efficiencies by: (i) re-negotiating direct material cost with all of our suppliers, (ii) by setting up Managed inventory Solutions, such as bonded inventory levels and auto-release programs with our major suppliers, whereby they maintain stock at their facilities and deliver Just-in-Time.  This will improve the utilization of our line of credits with suppliers and maintain inventory at its lowest value point; however, from time to time inventory levels may increase due to scheduling issues and acquisition of new customers and/or products;  (iii) by improving all systems and processes across operations and streamlining production lines; (b) we are attempting to renegotiate our lines of credit with agreement(s) that have more attractive terms, as well as increase our credit lines with suppliers; (c) to increase revenue; (i) we are attempting to acquire new customers that are a better fit for us, (ii) and we are trying to grow the business with our existing customers with offering more value added; and finally (iii) were attempting to focus on a stable customer base such as medical device, aerospace, and alternative fuel industries that have a better chance of  maintaining their manufacturing in Southern California instead of moving it to low cost and offshore regions;  (e)  to help sustainability of the company, were currently looking at merger and acquisition options while continuing to operate our EMS business. The future success of the company is likely dependent on its ability to attain additional capital to support growth and ultimately, upon its ability to reach profitability and then maintain that profitability.  There can be no assurance that the company will be successful in obtaining any such financing, or that it will be able to generate sufficient positive cash flow from operations.  The successful outcome of these or any future activities cannot be determined at this time and there is no assurance that if achieved, the company will have sufficient funds to execute its business plans. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the company be unable to continue as a going concern.  NOTE 2  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:  Page  of 45   Table of contents  The accompanying financial statements of the Company have been prepared in accordance with the instructions to Form 10-K and, therefore, omit or condense certain footnotes and other information normally included in financial statements prepared in accordance with generally accepted accounting principles.  It is suggested that these condensed financial statements should be read in conjunction with the Company's financial statements and notes thereto included in the Company's audited financial statements on Form 10-K for the fiscal year ended December 31, 2008.  The Company follows United States Generally Accepted Accounting Principles. Certain of the principles involve selection among alternatives and choices of methods, which are described in the footnotes to the Companys reviewed financial statements.  Cash and Cash Equivalents The Company maintains the majority of its cash accounts at a commercial bank. The total cash balance is insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per commercial bank. For purposes of the statement of cash flows the Company considers all cash and highly liquid investments with initial maturities of one year or less to be cash equivalents.  Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates may be materially different from actual financial results. Significant estimates include the recoverability of long-lived assets, the collection of accounts receivable and valuation of inventory and reserves.  Accounts Receivable The Company grants credit to its customers located within the United States of America; and does not require collateral. The Companys ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by the Company.  Reserves for un-collectable amounts are provided, based on past experience and a specific analysis of the accounts.  Although the Company expects to collect amounts due, actual collections may differ from the estimated amounts. As of March 31,2009, the Company had a reserve for potentially un-collectable accounts of $25,000.  Five (5) customers accounted for approximately 96% of accounts receivable at March 31, 2009 and one customer accounted for 63% of the accounts receivable balance.  The Companys trade accounts primarily represent unsecured receivables.  Historically, the Companys bad debt write-offs related to these trade accounts have been insignificant.  Inventory Inventories are valued at the lower of weighted average cost or market value.   Our industry experiences changes in technology, changes in market value and availability of raw materials, as well as changing customer demand.  The Company makes provisions for estimated excess and obsolete inventories based on regular audits and cycle counts of our on-hand inventory levels and forecasted customer demands and at times additional provisions are made.  Any inventory write offs are charged to the reserve account. For the year ended, December 31, 2008 the company increased the inventory reserve by $149,509.  As of March 31, 2009, the Company had a reserve for potentially obsolete inventory of $450,000.  Property and Equipment Property and equipment are stated at cost. Assets held under capital leases are recorded at lease inception at the lower of the present value of the minimum lease payments or the fair market value of the related assets.  The Company follows the practice of capitalizing property and equipment purchased over $5,000.  The cost of ordinary maintenance and repairs is charged to operations. Depreciation and amortization are computed on the straight-line method over the following estimated useful lives of the related assets:  Furniture and fixtures 3 to 7 years  Page  of 45   Table of contents  Equipment 7 to 10 years Leasehold improvements 2 years (life of the lease)  Long Lived Assets The Companys management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long lived asset impairment if any, is measured based on fair value and is charged to operations in the period in which long lived assets impairment is determined by management. There can be no assurance however, that market conditions will not change or demand for the Companys services will continue, which could result in impairment of long-lived assets in the future.  Revenue Recognition Revenue from product and services are recognized at the time goods are shipped or services are provided to the customer, with an appropriate provision for returns and allowances. Terms are generally FOB Origination with the right of inspection and acceptance. The Company has not experienced a material amount of rejected or damaged product.  Fair Value of Financial Instruments The carrying amount of accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of these financial instruments.  Other Comprehensive Income The Company has no material components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods.  Net Profit / (Loss) per Common Share Basic profit / (loss) per share is computed on the basis of the weighted average number of common shares outstanding.  At March 31, 2009 the Company had outstanding common shares of 32,638,320 used in the calculation of basic earnings per share.  Basic Weighted average common shares and equivalents at March 31, 2009 were 32,638,320.  As of March 31, 2009 the Company had outstanding warrants to purchase 14,247,330 additional common shares and options to purchase 1,358,726 additional common shares, which may dilute future earnings per share. Fully diluted weighted average common shares and equivalents at March 31, 2009 were 48,244,376. For the three months ended,  March 31, 2009, all of the Company's common stock equivalents were excluded from the calculation of diluted loss per common share because they were anti-dilutive, due to the Company's net loss in that period.  Research and Development: The company is curtailing its research and development and focusing its business on its core business of electronics contract manufacturing and growing its subsidiary Solar Masters.  Research and Development Costs incurred in association with the alternative fuels technology development (which include salaries and equipment) are expensed as incurred.  We expensed $0 in R&D during the three months ended March 31, 2009.  We expensed $83,324 for the 3 months ended March 31, 2008, for the acquisition of a 125 KW natural gas distributed power generator converted to run on hydrogen fuel. We have tabled the development of this project.  Our second research and development project involves an Engine Control Unit (ECU) to help convert gasoline cars to run on natural gas.  The Solaris project is in prototype stage. The Company is currently in the process of evaluating the efficacy of moving this project forward.  Segment Information Except as identified above in the research and development section, we operate our primary business of electronics contract manufacturing and our subsidiary business of distribution of solar powered products.  Share Based Compensation The company has adopted the use of Statement of Financial Accounting Standards No. 123R, Share-Based Payment (SFAS No. 123R), which supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance and eliminates the alternative to use Opinion 25s intrinsic value method of  Page  of 45   Table of contents  accounting that was provided in Statement 123 as originally issued. This Statement requires an entity to measure the cost of employee services received in exchange for an award of an equity instruments, which includes grants of stock options and stock warrants, based on the fair value of the award, measured at the grant date, (with limited exceptions). Under this standard, the fair value of each award is estimated on the grant date, using an option-pricing model that meets certain requirements. We use the Black- Scholes option-pricing model to estimate the fair value of our equity awards, including stock options and warrants. The Black-Scholes model meets the requirements of SFAS No. 123R; however the fair values generated may not reflect their actual fair values, as it does not consider certain factors, such as vesting requirements, employee attrition and transferability limitations. The Black-Scholes model valuation is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We estimate the expected volatility and estimated life of our stock options at grant date based on historical volatility; however, due to the thinly traded nature of our stock, we have chosen to use an average of the annual volatility of like companies in our industry. For the risk-free interest rate, we use the Constant Maturity Treasury rate on 90 day government securities. The term is equal to the time until the option expires. The dividend yield is not applicable, as the company has not paid any dividends, nor do we anticipate paying them in the foreseeable future. The fair value of our restricted stock is based on the market value of our free trading common stock, on the grant date calculated using a 20 trading day average. At the time of grant, the share based-compensation expense is recognized in our financial statements based on awards that are ultimately expected to vest using historical employee attrition rates and the expense is reduced accordingly.  It is also adjusted to account for the restricted and thinly traded nature of the shares.  The expense is reviewed and adjusted in subsequent periods if actual attrition differs from those estimates. We re-evaluate the assumptions used to value our share-based awards on a quarterly basis and if changes warrant different assumptions, the share-based compensation expense could vary significantly from the amount expensed in the past. We may be required to adjust any remaining share-based compensation expense, based on any additions, cancellations or adjustments to the share based awards. The expense is recognized over the period during which an employee is required to provide service in exchange for the awardthe requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.   For the three months ended March 31, 2009 and 2008, we recognized $2,058 and $2,058 respectively, in share based expense, due to the issuance of our options and warrants.  We also had $11,616 in non-vested expense to be recognized over the next three years.  Income Taxes  The Company accounts for income taxes under SFAS No. 109, which requires the asset and liability approach to accounting for income taxes.  Under this method, deferred tax assets and liabilities are measured based on differences between financial reporting and tax bases of assets and liabilities measured using enacted tax rates and laws that are expected to be in effect when differences are expected to reverse. As of March 31, 2009 the Company had a net operating loss carry forward of $(822,807) and a deferred tax asset of $300,154 using the statutory rate of 34%. The deferred tax asset may be recognized in future periods, not to exceed 20 years.  However, due to the uncertainty of the company ability to operate as a going concern, we have not booked any deferred tax asset as a result.   NOTE 3  INVENTORY  Inventories by major classification were comprised of the following at:  March 31, 2009December 31, 2008Raw Material$                 1,021,075$                 1,176,337Work in Process47,44553,870Finished Goods3,2136,208Total1,071,7331,236,416Less Reserve for excess or obsolete inventory(450,000)(450,000)Total Inventory$                    621,733$                    786,416   NOTE 4  PROPERTY AND EQUIPMENT  Page  of 45   Table of contents   Property and equipment were comprised of the following at:  March 31, 2009December 31, 2008Furniture and fixtures$                          57,044$                          57,044Equipment2,388,4252,397,325Leasehold improvements210,403210,403Total2,655,8732,664,773Less accumulated depreciation and amortization(2,535,038)(2,521,163)Net Fixed Assets$                        120,834$                        143,610    NOTE 5  ACCRUED EXPENSES  The Company had the following accrued expenses, as of:  March 31, 2009December 31, 2008Sales Tax Payable$                             -$                       1,639Property Tax accrual--Accrued Wages54,90549,248Accrued Interest2,5122,512Accrued Professional Fees35,02237,000Accrued Other20,196Accrued CEO Compensation77,50045,000Accrued Vacation60,28759,365Total Accrued Expenses$                   250,422$                   194,764   NOTE 7 - CAPITAL LEASE SETTLEMENT OBLIGATIONS  On July 9, 1997 and December 21, 1997, the Company entered into two lease agreements, with Crocker capital, which subsequently assigned the leases to The CIT Group.  In September 2004 the Company had outstanding balances of $457,604 and $556,293 on the two leases and was unable to make the monthly lease payments. As a result, the Company entered into a forbearance agreement with The CIT Group, with monthly payments of $7,500 and an early payment schedule as follows:  The CIT Group would release the Company and its guarantors if one of the following payments were made, less the total of all monthly payments made to that date:  $375,000 if paid by October 25, 2004 $425,000 if paid by December 25, 2004 $500,000 if paid by June 25, 2005 $550,000 if paid by December 25, 2005 $600,000 if paid by June 25, 2006 $650,000 if paid by December 25, 2006 $700,000 if paid by June 25, 2007  On June 1, 2007 an amended forbearance agreement was entered into:  1) In consideration of CIT entering into this Addendum, Probe will pay CIT the sum of $7,500 on or before June 25, 2007, which was paid. 2) Recital B is amended to state that as of June 25, 2007 Probes payment obligation to CIT totals $457,500.  Page  of 45   Table of contents  3) Section 2.3 of the Forbearance Agreement is amended to state that probe will pay CIT the amount of $457,500 in sixty-one (61) monthly installments of $7,500 each, commencing on July 25, 2007 and ending on July 25, 2012. If at any time Probe elects to pay in full the remaining balance, upon 30 day written notice, CIT will provide a payoff figure for the remaining balance using a present value rate of 7.0%. 4) The Company imputed interest at 7% over the term of the payments, which resulted in a present value of $384,025 and a gain of $324,330 which had an effect on Net profit per common share of $.031 and Diluted Net Profit per common share of $.022. 5) As of March 31, 2009 the outstanding balance was $ 266,880.  NOTE 8  NOTES PAYABLE  Note Payable - dated March 10, 2006  special use, line of credit in the amount of $90,000, unsecured, 12% interest paid in cash due May 10, 2007, payable to Ashford Capital, LLC.  This note was converted to a term note payable, with an effective date of June 30, 2006, unsecured, 12% interest rate, with a 36 month amortization, payments of $1,997 and a balloon payment of $33,068 on April 15, 2008.   On April 15, 2008 we were unable to meet the balloon payment and the note is in default. As of March 31, 2009 the outstanding balance was $30,490.  Note Payable  This Note was an operating line of credit, secured by the assets of the Company. Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the Company) per annum, payable to Ed Lassiter.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $ $4,650 and a balloon payment of $77,014 on April 15, 2008. On April 15, 2008 we were unable to meet the balloon payment and the note is in default. As of March 31, 2009 the outstanding balance was $73,802.  Note Payable -- This Note was an operating line of credit, secured by the assets of the Company. Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the Company) per annum, payable to William Duncan.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $1,661 and a balloon payment of $27,505 on April 15, 2008. On April 15, 2008, we were unable to meet the balloon payment and the note is in default. As of March 31, 2009 the outstanding balance was $25,068.  Note Payable  This Note was an operating line of credit, secured by the assets of the Company.   Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the Company) per annum, payable to Benner Exemption Trust.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, payments of $4,650 and a balloon payment of $77,014 on April 15, 2008. On April 15, 2008 we were unable to meet the balloon payment and the note is in default. As of March 31, 2009, the outstanding balance was $71,721.  Note Payable  This note was an operating line of credit, secured by the assets of the Company.  Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the Company) per annum, payable to Ashford Capital, LLC.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $3,321 and a balloon payment of $55,010 on April 15, 2008.  On April 15, 2008 we were unable to meet the balloon payment and the note is in default. As of March 31, 2009, the outstanding balance was $52,115.  Note Payable  This Note was an operating line of credit, secured by the assets of the Company.  Borrowings under this line of credit were at an interest rate of 15% per annum, payable to Hoa Mai.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $1,661 and a balloon payment of $27,505 on April 15, 2008.  As of June 30, 2008 the outstanding balance was $24,726.  The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date.  As of March 31, 2009 the note is in default and the outstanding balance was $9,607.  Related Party  Notes payable   Page  of 45   Table of contents  Note Payable - dated March 10, 2006   related party, special use, line of credit in the amount of $45,000, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock),  due May 10, 2007.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, 12% interest rate, with a 36 month amortization, monthly payments of $1,001 and a balloon payment of $16,588 on April 15, 2008.  This note is payable to Kambiz Mahdi. On April 15, 2008 we were unable to meet the balloon payment and the note is in default. As of March 31, 2009 the outstanding balance was $14,228.  Note Payable - dated March 10, 2006  related party, special use, line of credit in the amount of $45,000, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock),  due May 10, 2007.   This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, 12% interest rate, with a 36 month amortization, monthly payments of $1,001 and a balloon payment of $16,588 on April 15, 2008.  This note is payable to Reza Zarif. The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date. As of September 30, 2008 the note was in default. As of March 31, 2009 the outstanding balance was $13,221.  Note Payable  related party, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock) due on May 10, 2007, Payable to Kambiz Mahdi.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $7,871 and a balloon payment of $130,366 on April 15, 2008. On April 15, 2008 we were unable to meet the balloon payment and the note is in default. As of March 31, 2009 the outstanding balance was $124,304.  Note Payable  related party, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock) due on May 10, 2007, Payable to Reza Zarif.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $7,871 and a balloon payment of $130,366 on April 15, 2008. As of June 30, 2008 the outstanding balance was $126,759.The note wasextended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date.  As of March 31, 2009 the note was in default and the outstanding balance was $127,525.  Note Payable  related party.  This note was an operating line of credit, secured by the assets of the Company. Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the Company) per annum, payable to Rufina Paniego.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, 12% interest rate, with a 36 month amortization, monthly payments of $2,491 and a balloon payment of $39,759 on April 15, 2008.  As of June 30, 2008 the outstanding balance was $42,893. The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date. As of March 31, 2009 the note was in default and the outstanding balance was $38,952.  Note Payable  related party.  This note was an operating line of credit, secured by the assets of the Company.   Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the Company) per annum, payable to eFund Capital Partners.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $4,982 and a balloon payment of $82,516 on April 15, 2008. As of June 30, 2008 the outstanding balance was $79,371. The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date.  As of March 31, 2008, the note was in default and the outstanding balance was $81,879.  Note Payable  related party. This is a term note payable, with an effective date of January 15, 2008, payable to Jeff Conrad, Esq. at a 12% interest rate, with a 30 month amortization and monthly payments of $1,162.  As of March 31, 2009 the note was in default and the outstanding balance was $27,796.  Other Long-Term Debt  1) We have reached a settlement with I-Source, a supplier, with monthly payments of $2,500. As of March 31, 2009 the note was in default and outstanding balance was $11,925.   Page  of 45   Table of contents  2) We currently owe the Internal Revenue Service $19,187 for past tax liabilities.  We negotiated a settlement with the IRS and have entered into a payment plan with them in which we pay the IRS $3,000 per month.  All payments to date are current.  The balance is included in other long-term debt.  NOTE 9  COMMITMENTS AND CONTIGENCIES  Operating Rental Leases On September 11, 2006 we entered into a sublease agreement for 10,000 sq ft. of manufacturing space which includes office space with Quantum Fuel System Technologies Worldwide, Inc. for $15,500 per month. On May 19, 2008 we entered into a new extension of the sublease agreement with an effective termination date ofAugust 31, 2009. The facility is located at 25242 Arctic Ocean Drive, Lake Forest, CA 92630.  Solar Masters entered into a lease agreement effective September 26, 2008 for a one year lease with rent beginning December 1, 2008.  For approximately 1260 sq ft. of office and warehouse space, the monthly rent is $1273.  The facility is located at 17451 Mt. Herrmann Street, Suite D, Fountain Valley, CA 92708.  Litigation The Company may be involved from time to time in various claims, lawsuits, and disputes with third parties, action involving allegations or discrimination or breach of contract actions incidental in the normal operations of the business.  As of March 31, 2009, we believe that there are no claims or litigation pending, with the exception of certain creditors whose notes are in default.  The Company is currently negotiating with the creditor to find an amicable solution..  However, if litigation should arise and the company was to receive an unfavorable ruling, there is a possibility that it would have a material adverse impact on our financial condition, results of operations, or liquidity of the period in which the ruling occurs, or future periods.  NOTE 10  CAPITAL STOCK TRANSACTIONS  On April 21, 2005 the Companys Board of Directors and shareholders approved the following capital stock transactions:  The Company re-domiciled in the state of Nevada, whereby increasing the number of authorized common shares to 200,000,000 and designating a par value of $.001 per share.  On May 25, 2006 the Companys Board of Directors and shareholders approved the following capital stock transactions:  An amendment to the Articles of Incorporation of the Company authorizing a new series of Preferred stock, which shall be designated as Series C, and shall consist of 15,000 shares.  Common Stock transactions: From June 16, 2004 to April 1, 2005 the Company sold 6,663,750 shares of common stock through a Private Placement Memorandum at $.267 per Share to 49 individuals generating net proceeds of $1,777,000, of which 2,145,000 shares were sold in 2005, generating net proceeds of $572,000.  During 2005 the Company issued 93,354 shares of common stock, in lieu of interest payments at $.267 per share for a total of $24,894.  In February 2006 the Company issued 40,314 shares of common stock, in lieu of interest payments at $.267 per share for a total of $10,751.  In May 2006 the Company issued 49,008 shares of common stock, in lieu of interest payments at $.267 per share for a total of $13,094.   Page  of 45   Table of contents  On May 25, 2006 the Company issued 1,500,000 shares of common stock at .033 cents (Market value of shares on that date), for a total of $50,000,  to compensate its directors for services through a stock grant pursuant to Form S-8 in the following amounts:  NameAmount of Common Stock issuedKambiz Mahdi300,000Reza Zarif300,000Barrett Evans300,000Jeffrey Conrad300,000Dennis Benner300,000   In August 2006 the Company issued 90,762 shares of common stock, in lieu of interest payments at $.267 per share for a total of $24,205.  In August 2006 the Company issued 35,034 shares of common stock, in lieu of interest payments at $.267 per share for a total of $9,343.  In August 2006 the Company issued 12,615 shares of common stock for officer compensation at $.267 per share for a total of $3,365.  In August 2006 the Company accrued 141,780 shares of common stock for officer compensation at $.033 per share (fair market value at time of accrual) for a total of $4,726. These shares were issued on March 30, 2007.  In September 2006 the Company accrued 87,249 shares of common stock for officer compensation at $ .216 per share (fair market value at time of accrual) for a total of $18,904. These shares were issued on March 30, 2007. . In December 2006 the Company accrued 103,110 shares of common stock for officer compensation at $.183 per share (fair market value at time of accrual) for a total of $18,904.  These shares were issued on March 30, 2007.  In July 2006 the Company converted 12,500 shares from Preferred B to Preferred C, 14,040 shares.  In August 2006 the holders of preferred series C elected to convert 14,040 shares into 5,265,000 shares of common stock.  On August 14, 2006 the holders converted 440 shares of the Preferred Series A for 13,417,272 shares of the Companys common stock.  On March 30, 2007 the Company issued 332,139 shares of common stock for officer compensation.  On June 30, 2007 the Company issued 235,089 shares of common stock for officer compensation for the first and second quarter of 2007.  On October 15, 2007 the Company issued 141,780 shares of common stock for officer compensation for the 3rd quarter of 2007.  On November 5, 2007 the Company entered into a consulting services agreement with Global Capital Management (GCM), to provide investment banking services, for one year.  As a result we issued 1,275,000 warrants to purchase 1,275,000 shares of common stock at a price of $.133 per share.  As a result we recognized share based compensation expense in the amount of $16,607 for the year ended December 31, 2007.  On February 11, 2008, the Company issued 472,599 shares of common stock for officer compensation.  On April 12, 2008, the Company issued 113,424 shares of common stock for officer compensation.   Page  of 45   Table of contents  On August 11, 2008 the board of directors of the issuer approved a 3-for-1 forward stock split of its outstanding and issued common stock.  Pursuant to the forward stock split the Companys issued and outstanding share capital will increase from 10,594,258 shares of common stock to 31,782,774 shares of common stock.  The effective date of the forward stock split will be September 1, 2008.  All computations for common shares and equivalents have been adjusted accordingly.  On August 13, 2008, the Company issued 105,465 shares of common stock for officer compensation..  On September 30, 2008 the Company issued 750,000 shares of its common stock for the purchase of the assets of Solar Masters, Inc.  COMMON STOCK Our Articles of Incorporation authorize us to issue 200,000,000 shares of common stock, par value $0.001 per share. As of March 31, 2009 and December 31, 2008 there were 32,638,320 and 32,638,320 shares of common stock issued and outstanding, respectively.  All outstanding shares of common stock are, and the common stock to be issued will be, fully paid and non-assessable.  Each share of our common stock has identical rights and privileges in every respect. The holders of our common stock are entitled to vote upon all matters submitted to a vote of our shareholders and are entitled to one vote for each share of common stock held. There are no cumulative voting rights.  The holders of our common stock are entitled to share equally in dividends and other distributions that our Board of Directors may declare from time to time out of funds legally available for that purpose, if any, after the satisfaction of any prior rights and preferences of any outstanding preferred stock. If we liquidate, dissolve or wind up, the holders of shares of common stock will be entitled to share ratably in the distribution of all of our assets remaining available for distribution after satisfaction of all our liabilities and our obligations to holders of our outstanding preferred stock.  PREFERRED STOCK Our Articles of Incorporation authorize us to issue 10,000,000 shares of preferred stock.  We authorized 440 shares of Series A Convertible Preferred Stock and 20,000 shares of Series B Convertible Preferred Stock.  On May 25, 2006 the Articles of Incorporation were amended authorizing 15,000 shares Series C Convertible Preferred Stock. As of August 20, 2006 all Preferred Stock has been converted into Common stock and there are no outstanding Preferred shares as of September 30, 2008.  Preferred Series A Previously, there were 440 shares of Convertible A Preferred Stock outstanding, with a stated value of $1,000.  Each share is convertible into 0.1% percent of the shares of our common stock outstanding at the date of conversion, which shall convert upon election of the holder.  The holders of series A Preferred stock have the right to vote with the holders of common stock on any matter to which the common stock holders are entitled to vote and they are entitled to vote number of shares of common stock into which the series A Preferred Stock is convertible. If we are liquidated, distribute our assets, dissolve or wind-up, the holders of Convertible A Preferred Stock shall receive the greater of (i) $2,500 per share of Convertible A Preferred Stock they hold at the time of such liquidation, or (ii) their pro rata share of the total value of our assets and funds to be distributed, assuming the Convertible A preferred stock is converted to common stock.  On August 14, 2006 the holders converted 440 shares of the Preferred Series A for 4,544,188 shares of the Companys common stock.  Preferred Series B Previously there were 12,500 shares of Series B Convertible stock outstanding, with a stated value of $100. Each share of Series B Stock shall be converted into a number of shares of common stock that is equal to each share being divided by the average of the 3 lowest intraday bids in the twenty (20) days prior to conversion multiplied by 100 (1 divided by x, multiplied by 100), or 125 shares per Series B, whichever is greater.  The minimum conversion price which Series B shareholders shall convert their Series B shares to common stock shall be $0.10.  Exchange of Preferred Series B to Preferred Series C On May 25, 2006 the Board of Directors approved the exchange of Series B Convertible Preferred Stock for Series C No-Par, Convertible Preferred Stock for its Series B stockholders.  After the exchange took place Series B  Page  of 45   Table of contents  Convertible Preferred Stock was cancelled.  The Series C Convertible Preferred Stock carries the same rights as Series B Convertible Preferred Stock except that Series C Convertible Preferred Stock can be redeemed by the Company.  At any time, the Company may, in its sole discretion, redeem some or all of the outstanding shares of Series C Stock at a Redemption Price equal to the greater of $120.00 per share for the first year from the date of this certificate and after which the redemption price shall increase by twelve percent (12%) per year until all outstanding shares of Series C have been redeemed.  To redeem Series C Stock, the Company, at least five (5) days prior to the date on which it desires to redeem such stock (the Redemption Date), shall send the applicable holder of Series C Stock a notice of the redemption provided, however, that failure to give such notice or any defect therein or in the mailing thereof shall not affect the validity of the proceedings for the redemption of any shares of Series C Stock.  Such notice shall state:  (i) the redemption date; (ii) the redemption price; and (iii) the number of shares of Series C Stock to be redeemed.  Furthermore, the holders of Series C Convertible Preferred Stock shall receive one A Warrant and one B Warrant for every Ten (10) shares of common stock received from converting a share of Series C Convertible Preferred stock of the Company.  This series A and B Warrants are pursuant to the terms and conditions of the Companys Series A and B warrant agreement as amended.  Preferred Series C Previously there were 14,040 shares of Convertible C Preferred Stock outstanding.   Originally as filed on May 25, 2006 each share of Series C Stock shall be converted into a number of shares of Common Stock that is equal to each share being divided by the average of the 3 lowest intraday bids in the twenty (20) days prior to conversion or $0.10, whichever is greater, multiplied by 100 (1 divided by x, multiplied by 100), or 125 shares per Series C, whichever is greater. However, on August 07, 2006 the terms of Series C were amended as follows: Each share of Series C stock shall be converted into a number of shares of Common Stock that is equal to each share divided $0.267 multiplied by 100 (1 divided by $0.267, multiplied by 100).  On August 14, 2006 the holders of Preferred Series C elected to convert their shares into common stock.  As a result 14,040 shares of Preferred Series C were converted into 5,265,000 shares of common stock.  Our Board of Directors has the authority to issue additional shares of preferred stock in one or more series, and fix for each series, the designation of and number of shares to be included in each such series. Our Board of Directors is also authorized to set the powers, privileges, preferences, and relative participating, optional or other rights, if any, of the shares of each such series and the qualifications, limitations or restrictions of the shares of each such series.  Unless our Board of Directors provides otherwise, the shares of all series of preferred stock will rank on parity with respect to the payment of dividends and to the distribution of assets upon liquidation. Any issuance by us of shares of our preferred stock may have the effect of delaying, deferring or preventing a change of our control or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect the rights and powers, including voting rights, of the holders of common stock.  Warrants Series A - Common Stock Warrants: We currently have 1,192,875 Series A Warrants issued and outstanding.  Each warrant gives the holder the right to purchase 5 shares of common stock (5,964,375 total shares) at $.33 per share.  The Series A Warrants expire on November 15, 2009.  Series B - Common Stock Warrants We currently have 1,192,875 Series B Warrants issued and outstanding.  Each warrant gives the holder the right to purchase 5 shares of common stock (5,964,375 total shares) at $.50 per share.  The Series B Warrants will expire on May 15, 2010.  Series C  Common Stock Warrants We currently have 600,000 Series C Warrants issued and outstanding.  Each warrant gives the holder the right to purchase 1 shares of common stock (600,000 total shares) at $.267 per share.  The Series C Warrants expire on November 5, 2010.  Series D  Common Stock warrants  Page  of 45   Table of contents  We currently have 1,718,580 Series D Warrants issued and outstanding.  Each warrant gives the holder the right to purchase 1 share of common stock (1,718,580 total shares) at $.133 per share. The Series D Warrants expire on November 5, 2012.  For the year ended December 31, 2007 and 2008 we recognized share based compensation expense of $21,921 and $14,403 from the issuance of options and Warrants  Warrants Activity for the Period and Summary of Outstanding Warrants From June 16, 2004 to April 1, 2005 the Company sold 666,375 common stock units pursuant to a private placement memorandum at $2.67 per unit to 49 individuals generating net proceeds of $1,777,000.  Each Unit consists of ten (10) shares of common stock.  In addition, each unit entitles the holder to purchase a total of 10 shares of Probe Common Stock through the exercise of Warrants as follows: series A Warrants, for 5 shares at a price of $.33 per share which would expire on November 16, 2005, which has been subsequently extended to November 15, 2009 and series B Warrants, for 5 shares at a price of $.50 per share which would expire on May 16, 2005, which was subsequently extended to May 15, 2010.  As of December 31, 2008 no warrants were exercised.  On August 14, 2006 the holders of Preferred Series C elected to convert their shares into common stock.  As a result 14, 040 shares of Preferred Series C were converted into 5,265,000 shares of common stock.  Furthermore, the holders of Series C Convertible Preferred Stock shall receive one A Warrant and one B warrant for every Ten (10) shares of common stock received from converting a share of Series C convertible Preferred stock of the Company.  On December 31, 2004 the company issued 300,000 shares of its common stock for services.  Each share of stock issued included two warrants, for a total of 600,000 common share equivalents, which were replaced with series C warrants created, approved and issued on November 5, 2007 by the board of directors.  On November 5, 2007 the company entered into a consulting services agreement with Global Capital Management (GCM), to provide investment banking services, for one year.  As a result we issued 1,275,000 warrants to purchase 1,275,000 shares of common stock at a price of .133 per share.  As a result we recognized share based compensation expense in the amount of $16,607 for the year ended December, 31, 2007.  On April 2, 2008 the following notes were converted and series D warrants were issued:  Note Payable  This Note was an operating line of credit, secured by the assets of the Company. Borrowings under this line of credit were at an interest rate of 15% per annum, payable to Hoa Mai.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $1,661 and a balloon payment of $27,505 on April 15, 2008. The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date. As of March 31, 2009 the note was in default and the outstanding balance was $9,607.  Note Payable - dated March 10, 2006  related party, special use, line of credit in the amount of $45,000, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock),  due May 10, 2007.   This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, 12% interest rate, with a 36 month amortization, monthly payments of $1,001 and a balloon payment of $16,588 on April 15, 2008.  This note is payable to Reza Zarif.  The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date.  As of March 31, 2009 the note was in default, with an outstanding balance of $13,221.  Note Payable  related party.  This note was an operating line of credit, secured by the assets of the Company. Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the Company) per annum, payable to Rufina Paniego.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, 12% interest rate, with a 36 month amortization, monthly payments of $2,491 and a balloon payment of $39,759 on April 15, 2008.  The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date. As of March 31, 2009 the note was in default with outstanding balance of $38,952.   Page  of 45   Table of contents  Note Payable  related party.  This note was an operating line of credit, secured by the assets of the Company.   Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the Company) per annum, payable to eFund Capital Partners.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $4,982 and a balloon payment of $82,516 on April 15, 2008.. The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date. As of March 31, 2009 the note was in default with an outstanding balance of $81,879.  Note Payable  related party, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock) due on May 10, 2007, Payable to Reza Zarif.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $7,871 and a balloon payment of $130,366 on April 15, 2008.The note wasextended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date. As of March 31, 2009 the note was in default with an outstanding balance of $127,524.  A summary of warrant activity for the periods is as follows:  Warrants - Common Share EquivalentsWeighted Average Exercise priceWarrants exercisable - Common Share EquivalentsWeighted Average Exercise priceOutstanding December 31, 2003--Granted5,118,7500.425,118,7500.42Exercised--Outstanding December 31, 20045,118,7500.425,118,7500.42Granted2,145,0000.422,145,0000.42Exercised--Outstanding December 31, 20057,263,7500.427,263,7500.42Granted5,265,0000.425,265,0000.42Exercised--Outstanding December 31, 200612,528,7500.4212,528,7500.42Granted1,275,0000.131,275,0000.13Exercised--Outstanding December 31, 200713,803,7500.3813,803,7500.38Granted443,5800.13443,5800.13Exercised--Outstanding December 31, 200814,247,3300.3814,247,3300.38Granted----Exercised---Outstanding March 31, 200914,247,3300.3814,247,3300.38  Note: The weighted average exercise price has been adjusted retroactively due to price decreases in the warrant strike prices.  Warrants OutstandingWarrants Exercisable  Page  of 45   Table of contents   Range of Warrant Exercise PriceWarrants - Common Share EquivalentsWeighted Average Exercise priceWeighted Average Remaining Contractual lifeWarrants - Common Share EquivalentsWeighted Average Exercise price0.335,964,375$0.330.625,964,375$0.330.505,964,375$0.501.135,964,375$0.500.27600,000$0.271.85600,000$0.270.131,275,000$0.133.61,275,000$0.130.13443,580$0.133.6443,580$0.13Total14,247,33014,247,330     STOCK OPTIONS On February 8, 2007 pursuant to the Companys 2006 Qualified Incentive Option Plan which was adopted by the Companys Board of Directors granted Company employees an incentive stock option to purchase up to 652,766 shares of common stock in the Company.  These options were granted at $.173 cents, the fair market value of the Company at the time of the grant. These options expire on February 8, 2017. As of March 31, 2008 we had a reduction in the outstanding stock options of 307,788 as a result of employee termination and forfeiture of the options.  As of March 31, 2009 there were 308,726 outstanding options under this plan.  On February 8, 2007 the Company granted stock options to its key employees, to purchase up to 750,000 shares of the Companys common stock, which was approved by the companys Board of Directors.  These options were granted at $.173 cents, the fair market value of the Company at the time of the grant.  These options expire on February 8, 2017. As a result the company recognized share-based compensation expense in the amount of $5,313 for the year ended December 31, 2007, $2,657 for the year ended December 31, 2008 and $664 for the three months ended March 31, 2009, with a balance to be expensed over the next three years of $4,649.  On February 28, 2008 the Company granted stock options to a key employee, to purchase up to 300,000 shares of the Companys common stock, which was approved by the companys Board of Directors.  These options were granted at $.033 cents, the fair market value of the Company at the time of the grant.  These options expire on February 8, 2017.  As a result the company recognized share-based compensation expense in the amount of $5,574 year ended December 31, 2008 and $1,394 for the three months ended March 31, 2009, with a balance to be expensed over the next three years of $6,968.  Stock to be issued under option and warrant plans Any shares issued under the existing option or warrant plans will come from the companys authorized but un-issued, un-registered shares.  NOTE 11  RELATED PARTY TRANSACTIONS  Jeffrey Conrad provides legal services for the Company and receives a monthly retainer of $2,500 and is one of the Company directors. Total payments for the three months ended March 31, 2009 were $0.  On May 25, 2006 the holders of Series B Convertible Preferred Stock exchanged their stock for Series C Convertible Preferred Stock.  Pursuant to the exchange Reza Zarif, our CEO, received 4,500 shares of Series C; Kambiz Mahdi received 4,500 shares of series C; and eFund Capital Partners, LLC received 5,040 shares of series C.  As originally filed on May 25, 2006 each share of Series C Stock shall be converted into a number of shares of Common Stock that is equal to each share being divided by the average of the 3 lowest intraday bids in the twenty (20) days prior to conversion or $0.033, whichever is greater, multiplied by 100 (1 divided by x, multiplied by 100), or 125 shares per Series C, whichever is greater.  However, on August 07, 2006 the terms of Series C were amended  Page  of 45   Table of contents  as follows: Each share of Series C Stock shall be converted into a number of shares of Common Stock that is equal to each share being divided $0.267 multiplied by 100 (1 divided by $0.267, multiplied by 100).  For the 1st quarter of 2006, the Company leased its 35,000 sq/ft facility for $19,700 per month from Kambiz Mahdi, Reza Zarif and Pacific Sail Bay Trust.   Kambiz Mahdi was the former Chief Executive Officer and a Director of the company.  Reza Zarif is the Chief Executive Officer and a Director of the company.   Pacific Sail Bay Trust is managed by Frank Kavanaugh.  Frank Kavanaugh is also the managing member of Ashford Capital, LLC, and the managing partner of Ashford Transition Fund, L.P.  Furthermore, Mr. Kavanaugh was a director of the company from July 2004 to December 2004; however, he is no longer a member of the Board of Directors. Total payments made for the year ended December 31, 2006 were $59,100.  This lease was terminated on March 7, 2006  Related Party  Notes payable  Note Payable  related party. This is a term note payable, with an effective date of January 15, 2008, payable to Jeff Conrad, Esq. at a 12% interest rate, with a 30 month amortization and monthly payments of $1,162.  As of March 31, 2009, the note was in default and the outstanding balance was $27,796.  Note Payable - dated March 10, 2006   related party, special use, line of credit in the amount of $45,000, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock),  due May 10, 2007. This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, 12% interest rate, with a 36 month amortization, monthly payments of $1,001 and a balloon payment of $16,588 on April 15, 2008.  This note is payable to Kambiz Mahdi.  On April 15, 2008 we were unable to meet the balloon payment.  As of March 31, 2009 the note was in default and the outstanding balance was $14,228.  Note Payable - dated March 10, 2006   related party, special use, line of credit in the amount of $45,000, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock),  due May 10, 2007.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, 12% interest rate, with a 36 month amortization, monthly payments of $1,001 and a balloon payment of $16,588 on April 15, 2008.  This note is payable to Reza Zarif.  As of June 30, 2008, the outstanding balance was $15,972. The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date. As of March 31, 2009 the note was in default and the outstanding balance was $13,221.  Note Payable  related party, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock) due on May 10, 2007, Payable to Kambiz Mahdi.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $7,871 and a balloon payment of $130,366 on April 15, 2008.On April 15, 2008 we were unable to meet the balloon payment and the note is in default. As of March 31, 2009 the note was in default and the outstanding balance was $124,304.  Note Payable  related party, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock) due on May 10, 2007, Payable to Reza Zarif.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $7,871 and a balloon payment of $130,366 on April 15, 2008. The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date. As of March 31, 2009 the note was in default and the outstanding balance was $127,525.  Note Payable  related party.  This note was an operating line of credit, secured by the assets of the Company. Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the Company) per annum, payable to Rufina Paniego.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, 12% interest rate, with a 36 month amortization, monthly payments of $2,491 and a balloon payment of $41,257 on April 15, 2008.  The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date. As of March 31, 2009 the note was in default and the outstanding balance was $38,952.  Note Payable  related party.  This note was an operating line of credit, secured by the assets of the Company.   Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock  Page  of 45   Table of contents  in the Company) per annum, payable to eFund Capital Partners.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $4,982 and a balloon payment of $82,516 on April 15, 2008. The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date.  As of March 31, 2009 the note was in default and the outstanding balance was $81,879.  NOTE 12  Acquisition of Solar Masters  On August 13, 2008 the issuer entered a definitive agreement for the sale and purchase of business assets of Solar Masters Company.  The purchase price of the assets was: $2,719.65 in cash payable to Solar Masters, LLC. plus 250,000 shares of Probe common stock valued at $.40 each = $100,000.00,  for a total of $102,719.65.  The company Solar Masters, inc. was formed and is a wholly owned Subsidiary of Probe Manufacturing, Inc. The Assets of Solar Masters included $10,125 of inventory, $25,000 in deposits paid by the previous owner on the container of product the web site, the rights to the name Solar Masters and the customer base.  The allocation to the purchase price was as follows: Inventory10,125.00Deposit on Container25,000.00Goodwill67,594.65  NOTE 13  Subsequent Events Unaudited The Company has experienced a dramatic decrease in Sales from its customers.  Based on the current sales forecast, we are expecting 2009 sales of approximately half of our sales for 2008.  The company has made a major push to secure new accounts to offset the decrease in sales.  While there can be no assurance that sales efforts will be successful, the company is focused on securing new business.  As a result of the drop in sales, the company has made a series of layoffs in order to cut costs and manage its resources as efficiently as possible.        Page  of 45   Table of contents  Managements discussion and Analysis of Financial Condition and Results of Operation  Overview Probe Manufacturing, Inc. was founded in 1995.  Probe is a high quality electronics manufacturing services (EMS) company. We provide a range of engineering, quality manufacturing and integrated supply chain services to companies who design and market electronic products, original equipment manufacturers (OEM). Currently, our revenue is generated from sales of our services primarily to customers in the medical device, aerospace, alternative fuel and industrial products manufacturers. The Company strives to provide OEMs with lowest cost of ownership, flexibility, and quality that improves their competitive advantage. Probe's EMS offerings include new product introduction, collaborative design, materials management, product manufacturing, product testing and product warranty repair, and end-of-life support. Because our core business is a service company, were impacted by our customers ability to appropriately predict market demand for their products. While we work with our customers to understand their demand needs, we are removed from the actual end-market served by our customers. Consequently determining future trends and estimates of activity can be very difficult.  On August 13, 2008 the issuer entered a definitive agreement for the sale and purchase of business assets of Solar Masters.  Solar Masters is a wholly-owned subsidiary of Probe.  Solar Masters is an importer and distributor of solar powered products. The purchase price of the assets was: $2,719.65 in cash payable to Solar Masters, LLC. plus 250,000 shares of Probe common stock valued at $.40 each = $100,000.00,  for a total of $102719.65.  The company Solar Masters, inc. was formed and is a wholly owned Subsidiary of Probe Manufacturing, Inc. The Assets of Solar Masters included $10,500.00 of inventory, the web site the rights to the name Solar Masters and the customer base.  The allocation to the purchase price was $10,500.00 in inventory and $92,219.65 in goodwill under Solar Masters, Inc.  The main product line consists of various solar powered barricade lights.  Solar Masters also offers a solar powered battery charger, solar powered outdoor lighting and a solar powered flashlight.  It is the intent of Solar Masters to grow the product line as it sees demand for various other products.  Solar Masters recently made its first sale of solar panels.  Due to the high-cost of research and development, the Company is suspending its research and development of its hydrogen powered generator and is currently deliberating the on the future of its internally developed electronic control unit for alternative fuel cars.  Selected Financial Data The following selected historical financial information of Probe Manufacturing, Inc. has been derived from the historical results and are not necessarily indicative of future results. The following table is qualified by reference to and should be read in conjunction with Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations and Item 8, Financial Statements and Supplementary Data.  Probe Manufacturing, Inc.Consolidated Statement of Operationsfor the three months ended March 31,Un-AuditedUn-AuditedUn-Audited200920082007Sales$            887,928$         2,185,444$         1,877,090Cost of Goods Sold761,6031,550,6121,386,529Gross Profit126,325634,832490,561General And Administrative322,016380,076396,837Share Based Compensation2,0582,058-Stock Issued for Services-18,90418,904  Page  of 45   Table of contents   Research and Development-83,324-Net Profit / (Loss) From Operations(197,749)150,47074,820Other Income / (Expenses) - Net-(39)(33)Interest Expense(24,769)(42,367)(35,836)Net Profit / (Loss) Before Income Taxes(222,518)108,06438,951Income Tax Expense---Net Profit / (Loss)$          (222,518)$            108,064$              38,951Per Share Information:Basic weighted average numberof common shares outstanding32,638,32031,456,50331,456,503Net Profit / (Loss) per common share$             (0.0068)$              0.0034$              0.0012Per Share Information:Diluted, weighted average numberof common shares outstanding32,638,32046,857,41746,857,417Diluted, Net Profit / (Loss) per common share$                (0.0068)$           0.0023$           0.0008    PROBE MANUFACTURING, INC.Condensed Balance sheetUn-auditedMarch 31,December 31,December 31,200920082007Working Capital$             (458,279)$              (250,082)$                  (174,657)Total Assets1,403,2061,760,4641,897,127Long term Debt193,228203,739310,155Stockholder Equity$             (463,077)$              (242,617)$                  (273,030)   Plan of Operations: For the three months ended March 31, 2009, we had a net loss of $(222,586), a working capital deficit of $(458,279), and we had shareholder deficit of $(463,077).  The ability of the Company to operate as a going concern is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate positive cash flow from operations.  Management is taking the following steps to address this situation: (a) to continue improving operational efficiencies by: (i) re-negotiating direct material cost with all of our suppliers, (ii) by setting up managed inventory solutions, such as bonded inventory levels and auto-release programs with our major suppliers, whereby they maintain stock at their facilities and deliver Just-in-Time.  This will improve the utilization of our lines of credit with suppliers and maintain inventory at its lowest value point; however, from time to time inventory levels may increase temporarily  Page  of 45   Table of contents  due to scheduling issues and acquisition of new customers and/or products;  (iii) by continuing to improve systems and processes across operations and streamlining production lines; (b) renegotiation of credit lines for more attractive terms, as well as increasing our credit lines with suppliers; (c) to increase revenue; (i) we are acquiring new customers that are a better fit for us, (ii) and we are  growing the business with our existing customers; and finally (iii) we are focusing on a more stable customer base such as medical device, aerospace, and alternative fuel industries that have a better chance of  maintaining their manufacturing in Southern California instead of moving it to low cost and offshore regions;  and (d)  acquisition of market ready products to distribute through our wholly owned subsidiary Solar Masters. The future success of the Company is likely dependent on its ability to attain additional capital to support growth and ultimately, upon its ability to continue profitable operations.  There can be no assurance that the Company will be successful in obtaining such financing, or that it will continue to generate sufficient positive cash flow from operations.  The successful outcome of these or any future activities cannot be determined at this time and there is no assurance that if achieved, the Company will have sufficient funds to execute its business plans. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.  Summary of Results: For the three months ended March 31, 2009 we had a net loss of $(222,518) compared to net profits of $108,064 for the same period in 2008. The loss in is due to the significant decrease in revenue. For the three months ended March 31, 2009 our revenue was $887,928 compared to $2,185,444 for the same period in 2008. For the three months ended March 31, 2009 our cost of goods sold was 85.8% compared to 71% for the same period in 2008. For the three months ended March 31, 2009 our gross margin was 14.26% compared to 29% for the same period in 2008. For the three month ended March 31, 2009 our SG&A cost was 36.3% compared to 17.4% for the same period in 2008. In the quarter ended March 31, 2009 we had a net profit of $(222,518) and a working capital deficit of $(458,279). Our total stockholders deficit increased in the quarter by $(220,460), causing the shareholder deficit to be ($463,077) as of March 31, 2009; As of March 31, 2009 we had a working capital deficit of $(458,279) compared to working capital deficit of ($241,694) as of December 31, 2008 an improvement of $(216,585).  Key performance indicators for the three months ended March 31: 200920082007Inventory Turns5.596.275.42Days Sales in Backlog81132143Days Receivables Outstanding733842Days Payables Outstanding654641   Inventory turns: are calculated as the ratio of cost of material compared to the average inventory for the quarter. For the 3 month ended March 31, 2009 our inventory turns were 5.59 compared to 6.27 for the same period in 2008.  Days Sales in Backlog is calculated based on our back log divided by average daily sales during the quarter.  For the three months ended March 31, 2009 Days Sales in Backlog was 81 days compared to 132 days for the same period in 2008.   Page  of 45   Table of contents  Days Receivables Outstanding is calculated as the ratio of average accounts payable during the fiscal year compared to average daily sales for the same period, this has worsened as a result of our customers stretching out payments and the economy in general.  Days Payable Outstanding, is calculated as the ratio of average accounts payable during the fiscal year compared to daily cost of sales for the same period.  Critical Accounting Policies and basis of presentation The interim financial information included herein is unaudited; however, such information reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the Companys financial position, results of operations, changes in stockholders equity (deficit) and cash flows for the interim periods.  All such adjustments are of a normal, recurring nature.  The results of operations for the first three months of the year are not necessarily indicative of the results of operations which might be expected for the entire year.  The Company follows United States Generally Accepted Accounting Principles. Certain of the principles involve selection among alternatives and choices of methods, which are described in the footnotes to the Companys reviewed financial statements.  Cash and Cash Equivalents The Company maintains the majority of its cash accounts at a commercial bank. The total cash balance is insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per commercial bank. For purposes of the statement of cash flows the Company considers all cash and highly liquid investments with initial maturities of one year or less to be cash equivalents.  Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates may be materially different from actual financial results. Significant estimates include the recoverability of long-lived assets, the collection of accounts receivable and valuation of inventory and reserves.  Accounts Receivable The Company grants credit to its customers located within the United States of America; and does not require collateral. The Companys ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by the Company.  Reserves for un-collectable amounts are provided, based on past experience and a specific analysis of the accounts.  Although the Company expects to collect amounts due, actual collections may differ from the estimated amounts. As of March 31,2009, the Company had a reserve for potentially un-collectable accounts of $25,000.  Five (5) customers accounted for approximately 96% of accounts receivable at March 31, 2009 and one customer accounted for 63% of the accounts receivable balance.  The Companys trade accounts primarily represent unsecured receivables.  Historically, the Companys bad debt write-offs related to these trade accounts have been insignificant.  Inventory Inventories are valued at the lower of weighted average cost or market value.   Our industry experiences changes in technology, changes in market value and availability of raw materials, as well as changing customer demand.  The Company makes provisions for estimated excess and obsolete inventories based on regular audits and cycle counts of our on-hand inventory levels and forecasted customer demands and at times additional provisions are made.  Any inventory write offs are charged to the reserve account. For the year ended, December 31, 2008 the company increased the inventory reserve by $149,509.  As of March 31, 2009, the Company had a reserve for potentially obsolete inventory of $450,000.  Property and Equipment  Page  of 45   Table of contents  Property and equipment are stated at cost. Assets held under capital leases are recorded at lease inception at the lower of the present value of the minimum lease payments or the fair market value of the related assets.  The Company follows the practice of capitalizing property and equipment purchased over $5,000.  The cost of ordinary maintenance and repairs is charged to operations. Depreciation and amortization are computed on the straight-line method over the following estimated useful lives of the related assets:  Furniture and fixtures 3 to 7 years Equipment 7 to 10 years Leasehold improvements 2 years (life of the lease)  Long Lived Assets The Companys management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long lived asset impairment if any, is measured based on fair value and is charged to operations in the period in which long lived assets impairment is determined by management. There can be no assurance however, that market conditions will not change or demand for the Companys services will continue, which could result in impairment of long-lived assets in the future.  Revenue Recognition Revenue from product and services are recognized at the time goods are shipped or services are provided to the customer, with an appropriate provision for returns and allowances. Terms are generally FOB Origination with the right of inspection and acceptance. The Company has not experienced a material amount of rejected or damaged product.  Fair Value of Financial Instruments The carrying amount of accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of these financial instruments.  Other Comprehensive Income The Company has no material components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods.  Net Profit / (Loss) per Common Share Basic profit / (loss) per share is computed on the basis of the weighted average number of common shares outstanding.  At March 31, 2009 the Company had outstanding common shares of 32,638,320 used in the calculation of basic earnings per share.  Basic Weighted average common shares and equivalents at March 31, 2009 were 32,638,320.  As of March 31, 2009 the Company had outstanding warrants to purchase 14,247,330 additional common shares and options to purchase 1,358,726 additional common shares, which may dilute future earnings per share. Fully diluted weighted average common shares and equivalents at March 31, 2009 were 48,244,376. For the three months ended,  March 31, 2009, all of the Company's common stock equivalents were excluded from the calculation of diluted loss per common share because they were anti-dilutive, due to the Company's net loss in that period.  Research and Development: The company is curtailing its research and development and focusing its business on its core business of electronics contract manufacturing and growing its subsidiary Solar Masters.  Research and Development Costs incurred in association with the alternative fuels technology development (which include salaries and equipment) are expensed as incurred.  We expensed $0 in R&D during the three months ended March 31, 2009.  We expensed $83,324 for the 3 months ended March 31, 2008, for the acquisition of a 125 KW natural gas distributed power generator converted to run on hydrogen fuel. We have tabled the development of this project.  Our second research and development project involves an Engine Control Unit (ECU) to help convert gasoline cars to run on natural gas.  The Solaris project is in prototype stage. The Company is currently in the process of evaluating the efficacy of moving this project forward.  Segment Information  Page  of 45   Table of contents  Except as identified above in the research and development section, we operate our primary business of electronics contract manufacturing and our subsidiary business of distribution of solar powered products.  Share Based Compensation The company has adopted the use of Statement of Financial Accounting Standards No. 123R, Share-Based Payment (SFAS No. 123R), which supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance and eliminates the alternative to use Opinion 25s intrinsic value method of accounting that was provided in Statement 123 as originally issued. This Statement requires an entity to measure the cost of employee services received in exchange for an award of an equity instruments, which includes grants of stock options and stock warrants, based on the fair value of the award, measured at the grant date, (with limited exceptions). Under this standard, the fair value of each award is estimated on the grant date, using an option-pricing model that meets certain requirements. We use the Black- Scholes option-pricing model to estimate the fair value of our equity awards, including stock options and warrants. The Black-Scholes model meets the requirements of SFAS No. 123R; however the fair values generated may not reflect their actual fair values, as it does not consider certain factors, such as vesting requirements, employee attrition and transferability limitations. The Black-Scholes model valuation is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We estimate the expected volatility and estimated life of our stock options at grant date based on historical volatility; however, due to the thinly traded nature of our stock, we have chosen to use an average of the annual volatility of like companies in our industry. For the risk-free interest rate, we use the Constant Maturity Treasury rate on 90 day government securities. The term is equal to the time until the option expires. The dividend yield is not applicable, as the company has not paid any dividends, nor do we anticipate paying them in the foreseeable future. The fair value of our restricted stock is based on the market value of our free trading common stock, on the grant date calculated using a 20 trading day average. At the time of grant, the share based-compensation expense is recognized in our financial statements based on awards that are ultimately expected to vest using historical employee attrition rates and the expense is reduced accordingly.  It is also adjusted to account for the restricted and thinly traded nature of the shares.  The expense is reviewed and adjusted in subsequent periods if actual attrition differs from those estimates. We re-evaluate the assumptions used to value our share-based awards on a quarterly basis and if changes warrant different assumptions, the share-based compensation expense could vary significantly from the amount expensed in the past. We may be required to adjust any remaining share-based compensation expense, based on any additions, cancellations or adjustments to the share based awards. The expense is recognized over the period during which an employee is required to provide service in exchange for the awardthe requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.   For the three months ended March 31, 2009 and 2008, we recognized $2,058 and $2,058 respectively, in share based expense, due to the issuance of our options and warrants.  We also had $11,616 in non-vested expense to be recognized over the next three years.  Income Taxes  The Company accounts for income taxes under SFAS No. 109, which requires the asset and liability approach to accounting for income taxes.  Under this method, deferred tax assets and liabilities are measured based on differences between financial reporting and tax bases of assets and liabilities measured using enacted tax rates and laws that are expected to be in effect when differences are expected to reverse. As of March 31, 2009 the Company had a net operating loss carry forward of $(822,807) and a deferred tax asset of $300,154 using the statutory rate of 34%. The deferred tax asset may be recognized in future periods, not to exceed 20 years.  However, due to the uncertainty of the companys ability to operate as a going concern, we have not booked any deferred tax asset as a result.   Result of operations: The following table summarizes certain items in the statements of operations as a percentage of net sales. The financial information and discussion below should be read in conjunction with the accompanying financial statements and notes thereto.   Probe Manufacturing, Inc.Consolidated Statement of Operations  Page  of 45   Table of contents   for the three months ended March 31,Percentage BasedUn-AuditedUn-AuditedUn-Audited200920082007Sales100.00%100.00%100.00%Cost of Goods Sold85.77%70.95%73.87%Gross Profit14.23%29.05%26.13%General And Administrative36.27%17.39%21.14%Share Based Compensation0.23%0.09%0.00%Stock Issued for Services0.00%0.86%1.01%Research and Development0.00%3.81%0.00%Net Profit / (Loss) From Operations-22.27%6.89%3.99%Other Income / (Expenses) - Net0.00%0.00%0.00%Interest Expense-2.79%-1.94%-1.91%Net Profit / (Loss) Before Income Taxes-25.06%4.94%2.08%Income Tax Expense0.00%0.00%0.00%Net Profit / (Loss)-25.06%4.94%2.08%   Net Sales For the three months ended March 31, 2009 our revenue was $887,928 compared to $2,185,444 for the same period in 2008.  Our revenue decreased $1,297,516 for the quarter ended March 31, 2009 compared to the same period in 2008.  The decrease in revenue was the result of fewer orders from our customer base. Major Customers Our top 5 customers accounted for approximately 91% of our net sales for the three months ended March 31, 2009 compared to 82%, for the same period in 2008.  We continue to see a positive trend in customer diversification and revenue concentration.  Over the last couple of years, we have changed our customer base from primarily semiconductor, industrial, and communication industries to medical device manufacturing, aero-space/defense and alternative energy industries.  We believe that our ability to grow our core business depends on increasing sales to existing customers, and on successfully attracting new customers. Customer contracts can be canceled and volume levels can be changed or delayed based on our customers performance and the end users markets which we have no control over. The timely replacement of delayed, canceled or reduced orders with new business cannot be ensured. In addition, we cannot assume that any of our current customers will continue to utilize our services. Consequently, our results of operations may be materially adversely affected.  Gross Profit For the three months ended March 31, 2009 our gross profits were 14.2% from 29.0% in the same period in 2008.   This was caused primarily due to increased direct labor and overtime pay caused by scheduling and additional receiving inspection to address quality issues from our PCB suppliers, as well as increased cost of printed circuit boards due to sourcing them in the US versus overseas due to quality issues.  Our gross profits could vary from period to period and is affected by a number of factors, including product mix, production efficiencies, component availability and costs, pricing, competition, customer requirements and unanticipated restructuring or inventory charges and potential scrap.  Selling, General and Administrative (SG&A) Expenses For the three months ended March 31, 2009 our SG&A expense was 36% compared to 17% for the same period in 2008.  This increase is primarily due to the decrease in revenue.  The Company has made adjustments to decrease SG&A expense.  Page  of 45   Table of contents   Net Income/ (Loss) from operations For the three months ended March 31, 2009, our net income from operations was (25.0%) compared to 4.94% for the same period in 2008.   This was primarily due to a decrease in orders from customers.  For the three months ended March 31, 2009 our interest expense was ($24,769) compared to ($42,367) for the same period in 2008.  Liquidity and Capital Resources:  PROBE MANUFACTURING, INC.Condensed Statements of Cash Flowsfor the three months ended March 31,Un-auditedUn-auditedUn-audited200920082007Net Cash provided / (Used) In Operating Activities$                  87,006$                (49,918)$                182,484Cash Flows Used In Investing Activities7,450-(81,000)Cash Flows Provided / (used)  By Financing Activities(89,433)27,113(120,720)Net (Decrease) Increase in Cash and Cash Equivalents$                    5,023$                (22,805)$                (19,236)    For the three months ended March 31, 2009, we generated net cash from our operating activities of $87,006 compared to generating net cash of $(49,918) for same period in 2008.  The following is a summary of certain obligations and commitments as of March 31, 2009 for continuing operations:  Capital Requirements for long-term Obligations  Capital Requirements for long-term Obligations2009201020112012Notes Payable$      690,703$                       -$                       -$                       -Other Long term debt31,111--Capital Lease Settlement  Obligations54,75477,60983,22051,296Total$      776,568$             77,609$           83,220$           51,296   On July 9, 1997 and December 21, 1997, the Company entered into two lease agreements, with Crocker capital, which subsequently assigned the leases to The CIT Group.  In September 2004 the Company had outstanding balances of $457,604 and $556,293 on the two leases and was unable to make the monthly lease payments. As a result, the Company entered into a forbearance agreement with The CIT Group, with monthly payments of $7,500 and an early payment schedule as follows:  On July 9, 1997 and December 21, 1997, the Company entered into two lease agreements, with Crocker capital, which subsequently assigned the leases to The CIT Group.  In September 2004 the Company had outstanding balances of $457,604 and $556,293 on the two leases and was unable to make the monthly lease payments. As a  Page  of 45   Table of contents  result, the Company entered into a forbearance agreement with The CIT Group, with monthly payments of $7,500 and an early payment schedule as follows:  The CIT Group would release the Company and its guarantors if one of the following payments were made, less the total of all monthly payments made to that date:  $375,000 if paid by October 25, 2004 $425,000 if paid by December 25, 2004 $500,000 if paid by June 25, 2005 $550,000 if paid by December 25, 2005 $600,000 if paid by June 25, 2006 $650,000 if paid by December 25, 2006 $700,000 if paid by June 25, 2007  On June 1, 2007 an amended forbearance agreement was entered into:  1) In consideration of CIT entering into this Addendum, Probe will pay CIT the sum of $7,500 on or before June 25, 2007, which was paid. 2) Recital B is amended to state that as of June 25, 2007 Probes payment obligation to CIT totals $457,500. 3) Section 2.3 of the Forbearance Agreement is amended to state that probe will pay CIT the amount of $457,500 in sixty-one (61) monthly installments of $7,500 each, commencing on July 25, 2007 and ending on July 25, 2012. If at any time Probe elects to pay in full the remaining balance, upon 30 day written notice, CIT will provide a payoff figure for the remaining balance using a present value rate of 7.0%. 4) The Company imputed interest at 7% over the term of the payments, which resulted in a present value of $384,025 and a gain of $324,330 which had an effect on Net profit per common share of $.031 and Diluted Net Profit per common share of $.022. 5) As of March 31, 2009 the outstanding balance was $ 266,880.  We had a balloon payment of $710,286 in notes payables due on April 15 2008.  We are currently exploring options to extend the notes and/or pay them off.  We were able to extend $295,608 of the balloon notes by 18 months; leaving $414,678 with balloon payments past due.  All notes including the extended notes are currently in default.  Off-balance Sheet Arrangement We currently have no off-balance sheet arrangements.   Item 3.  Quantitative and Qualitative Disclosure about Market Risk.  Not applicable to smaller reporting companies.   Item 4. Controls and Procedures.  Not Applicable.   Item 4T.  Controls and Procedures.  (a) 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 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to us, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily were required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.   Page  of 45   Table of contents   As of March 31, 2009, an evaluation was conducted under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective.   (b) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  PART II--OTHER INFORMATION   Item 1. Legal Proceedings  The Company may be involved from time to time in various claims, lawsuits, and disputes with third parties, action involving allegations or discrimination or breach of contract actions incidental in the normal operations of the business.  As of March 31, 2009, we believe that there are no claims or litigation pending, with the exception of certain creditors whose notes are in default.  The Company is currently negotiating with the creditor to find an amicable solution..  However, if litigation should arise and the company was to receive an unfavorable ruling, there is a possibility that it would have a material adverse impact on our financial condition, results of operations, or liquidity of the period in which the ruling occurs, or future periods.   Item 1A.  Risk Factors. RISKS ABOUT OUR BUSINESS  OUR INDEPENDENT ACCOUNTANTS HAVE ISSUED A GOING CONCERN OPINION AND IF WE CANNOT OBTAIN ADDITIONAL FINANCING AND/OR REDUCE OUR OPERATING COSTS SUFFICIENTLY, WE MAY HAVE TO CURTAIL OPERATIONS AND MAY ULTIMATELY CEASE TO EXIST.  The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. For the three months ended March 31, 2009, we had a net loss of $(222,586), a working capital deficit of $(458,279), and we had shareholder deficit of $(463,077).  The ability of the Company to operate as a going concern is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate positive cash flow from operations.  WE HAVE AN ACCUMULATED DEFICIT AND MAY INCUR ADDITIONAL LOSSES; THEREFORE WE MAY NOT BE ABLE TO OBTAIN THE ADDITIONAL FINANCING NEEDED FOR WORKING CAPITAL, CAPITAL EXPENDITURES AND TO MEET OUR DEBT SERVICE OBLIGATIONS.  As of March 31, 2009, we had current liabilities of $1,866,283. Our debt could limit our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, or other purposes in the future, as needed; to plan for, or react to, changes in technology and in our business and competition; and to react in the event of an economic downturn.  We may not be able to meet our debt service obligations. If we are unable to generate sufficient cash flow or obtain funds for required payments, or if we fail to comply with covenants in our revolving lines of credit, we will be in default.  WE FACE INTENSE COMPETITION, WHICH MAY REDUCE OUR SALES, OPERATING PROFITS, OR BOTH.   Page  of 45   Table of contents  The market segments in which we compete are rapidly evolving and intensely competitive.The electronic manufacturing service or EMS industry is extremely competitive and includes hundreds of companies, several of which have achieved substantial market share. We compete with numerous domestic and foreign EMS firms, including Benchmark Electronics, Inc.; Celestica Inc; Flextronics International Ltd.; Jabil Circuit, Inc.; Plexus Corp.; Sanmina-SCI Corporation; CTS Electronics.; Express Manufacturing, Inc., and others.  Current and prospective customers also evaluate our capabilities against the merits of internal production. Some of our competitors may have greater design, manufacturing, financial or other resources than us. Additionally, we face competition from foreign ODM suppliers, who have a substantial share of the global market for information technology hardware production, primarily related to notebook and desktop computers and personal computer motherboards, as well as provide consumer products and other technology manufacturing services.  In recent years, many participants in the industry, including us, have substantially expanded their manufacturing capacity. The overall demand for electronics manufacturing services has decreased, resulting in increased capacity and substantial pricing pressures, which has harmed our operating results. Certain sectors of the EMS industry are currently experiencing increased price competition, and if this increased level of competition should continue, our revenues and gross margin may continue to be adversely affected.  WE MAY BE ADVERSELY AFFECTED BY SHORTAGES OF REQUIRED ELECTRONIC COMPONENTS.   IN ADDITION, WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS TO PROCURE OUR PARTS FOR PRODUCTION WHICH IF AVAILABILITY OF PRODUCTS BECOMES COMPROMISED IT COULD ADD TO OUR COST OF GOODS SOLD AND AFFECT OUR REVENUE GROWTH.  At various times, there have been shortages of some of the electronic components that we use, as a result of strong demand for those components or problems experienced by suppliers. These unanticipated component shortages have resulted in curtailed production or delays in production, which prevented us from making scheduled shipments to customers in the past and may do so in the future. Our inability to make scheduled shipments could cause us to experience a reduction in our sales and an increase in our costs and could adversely affect our relationship with existing customers as well as prospective customers. Component shortages may also increase our cost of goods sold because we may be required to pay higher prices for components in short supply and redesign or reconfigure products to accommodate substitute components. As a result, component shortages could adversely affect our operating results for a particular period due to the resulting revenue shortfall and increased manufacturing or component costs.  In addition, we depend upon a number of major suppliers for our products.  We do not have long-term agreements with our major suppliers, except for our purchase orders.   There is an inherent risk that certain products will be unavailable for prompt delivery or, in some cases, discontinued.  We will have only limited control over any third-party manufacturer as to quality controls, timeliness of production and deliveries and various other factors.  Lack of long-term agreement with our major suppliers could also impact material availability and could delay shipments.  Should the availability of products be compromised, it could also force us to develop alternative products, which could add to the cost of goods sold and compromise delivery commitments.  OUR PRINCIPAL SHAREHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS , IN THE AGGREGATE, BENEFICIALLY OWN MORE THAN 50% OF OUR OUTSTANDING COMMON STOCK AND THESE SHAREHOLDERS, IF ACTING TOGETHER, WILL BE ABLE TO EXERT SUBSTANTIAL INFLUENCE OVER ALL MATTERS REQUIRING APPROVAL OF OUR SHAREHOLDERS .  Our principal shareholders, directors and executive officers in the aggregate, beneficially own more than 50%our outstanding common stock on a fully diluted basis. These shareholders, if acting together, will be able to exert substantial influence over all matters requiring approval of our shareholders, including amendments to our Articles of Incorporation, fundamental corporate transactions such as mergers, acquisitions, the sale of the company, and other matters involving the direction of our business and affairs and specifically the ability to determine the members of our board of directors. (See: Principal Shareholders)  WE CURRENTLY  SERVICE AND ATTEMPT TO OBTAIN THE MAJORITY OF OUR CUSTOMERS IN THE LIMITED GEOGRAPHIC OF SOUTHERN CALIFORNIA WHICH IS A SMALL ADDRESSABLE MARKET AND COULD BE SUBJECT TO ECONOMIC HARDSHIP OR SLOWDOWN,  Page  of 45   Table of contents  AS A RESULT OUR GROWTH COULD BE LIMITED AND ADVERSELY AFFECT OUR PROJECTED SALES AND OPERATING INCOME.  We currently service, solicit, and direct a majority of our marketing efforts to customers in the Southern California region.  This is a very small addressable market which ultimately limits the amount of growth we could experience.  In addition, this region could experience an economic recession or other market contraction which would cause our current customers and any potential customers to also contract their businesses as well and cease outsourcing any current products that we currently service and would attempt to obtain. Both the size of the market and any potential economic hardship affecting this small regional market could adversely affect our project sales and operating incomer.  If we are forced to expand our marketing efforts outside this region we could also incur significant costs in an attempt to penetrate other regional or national markets.  WE DEPEND ON LOW TO MEDIUM VOLUME HIGH MIX TECHNOLOGY PRODUCTS THAT ARE BUILT DOMESTICALLY. THESE APPLICATIONS INCLUDE INDUSTRIAL INSTRUMENTATION, MEDICAL DEVICES, AEROSPACE-DEFENSE, ALTERNATIVE FUEL TECHNOLOGIES, SCIENTIFIC COMMUNICATION, SEMICONDUCTOR AND AUTOMOTIVE PRODUCTS, WHICH CONTINUALLY PRODUCE TECHNOLOGICALLY ADVANCED PRODUCTS WITH SHORT LIFE CYCLES; OUR INABILITY TO CONTINUALLY MANUFACTURE SUCH PRODUCTS ON A COST-EFFECTIVE BASIS COULD HARM OUR BUSINESS.  During the three months ended March 31, 2009 we derived approximately 54% of our revenue from customers in the Medical Device Manufacturing, 26% Industrial Products, 15% from customers in Alternative Fuel, and 5% from customers in Aerospace/Defense industries.  Factors affecting these industries in general could seriously harm our customers and, as a result, us. These factors include:  · Rapid changes in technology, which result in short product life cycles, often reduce the volume and market share for our customers and ultimately us. It will lead to the loss of previous design wins and frequent new product introductions and substantial development costs. This could result in loss of revenue and it could adversely affect our operating income.  · Seasonality of demand for our customers products would force our customers to manage their inventories for seasonal variations and inventory management and excess build ups. Customers could dramatically increase their request for production quantities, which could cause lead time problems with getting the components or we may not be able to build enough products which could have loss of revenue for our customers. As a result we could lose these customers and it would adversely affect our projected sales. If the projected sales will not materialize, we will have loss of revenue and reduced margins.  Any cancellation or delay in production would also have the same adverse effect on our sales projections and profitability.  · The inability of our customers to successfully market their products, and the failure of these products to gain widespread commercial acceptance; could effect their long term business plans and sales.  Our success depends upon the ability of our customers to successfully market their products and if they fail, it could result in cancellations or rescheduling orders lower sales volume and operating income.  · Recessionary periods in our customers markets will affect both our customers and our overall business output. It would require dramatic changes to the overall business model, layoffs and major adjustments to the business overhead.  If we fail to adjust to new recessionary environment, our business would be adversely affected and we may not be able to compete successfully against other companies in our industry and achieve profitability.  THE MAJORITY OF OUR SALES COME FROM A SMALL NUMBER OF CUSTOMERS WITH WHOM WE DO NOT HAVE LONG TERM CONTRACTS; IF WE LOSE ANY OF THESE CUSTOMERS, OUR SALES COULD DECLINE SIGNIFICANTLY.   Page  of 45   Table of contents  Sales to our five largest customers have represented a significant percentage of our net sales in recent periods. Our five largest customers accounted for approximately 91% of net sales during the three months ended March 31, 2009.  Our principal customers have varied from year to year, and our principal customers may not continue to purchase services from us at current levels, if at all. Significant reductions in sales to any of these customers, or the loss of major customers, would seriously harm our business. If we are not able to timely replace expired, canceled or reduced contracts with new business, our revenues could be harmed. The part number, quantity,  price, workmanship standards, and scheduled delivery dates of the products to be Manufactured are determined by written purchase orders given by our customers and accepted or confirmed by us in writing or via email.  We agree to deliver the products manufactured pursuant to each purchase order in accordance with the terms and conditions set forth in the purchase order. Probe manufactures hundreds of different types of assemblies on an ongoing basis and each product has a purchase order associated with it.  Please see attcahed filing of several samples of these purchase orders. We do not have any long term agreements with our customers, and our principal customers may not continue to purchase services from us. The duration of a purchase order is usually from 30 to 360 days. These purchase orders could be cancelled or rescheduled at any time. Significant reductions in sales to any of these customers would reduce our projected sales, adversely affect our profits, and seriously harm our business. IF WE LOSE KEY SENIOR MANAGEMENT PERSONNEL OUR BUSINESS COULD BE NEGATIVELY AFFECTED. FURTHER, WE WILL NEED TO RECRUIT AND RETAIN ADDITIONAL SKILLED MANAGEMENT PERSONNEL AND IF WE ARE NOT ABLE TO DO SO, OUR BUSINESS AND OUR ABILITY TO CONTINUE TO GROW COULD BE HARMED.  Our success depends to a large extent upon the continued services of our executive officers. Generally our employees are not bound by employment or non-competition agreements, and we cannot assure that we will retain our executive officers and other key employees. We could be seriously harmed by the loss of any of our executive officers. In order to manage our growth, we will need to recruit and retain additional skilled management personnel and if we are not able to do so, our business and our ability to continue to grow could be harmed. Although a number of companies in our industry have implemented workforce reductions, there remains substantial competition for highly skilled employees.  WE ARE SUBJECT TO ENVIRONMENTAL COMPLIANCE RISKS AND UNEXPECTED COSTS THAT WE MAY INCUR WITH RESPECT TO ENVIRONMENTAL MATTERS MAY RESULT IN ADDITIONAL LOSS CONTINGENCIES, THE QUANTIFICATION OF WHICH CANNOT BE DETERMINED AT THIS TIME.  We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, storage, discharge and disposal of hazardous substances in the ordinary course of our manufacturing process. If more stringent compliance or cleanup standards under environmental laws or regulations are imposed, or the results of future testing and analyses at our current or former operating facilities indicate that we are responsible for the release of hazardous substances, we may be subject to additional remediation liability. Further, additional environmental matters may arise in the future at sites where no problem is currently known or at sites that we may acquire in the future. Currently unexpected costs that we may incur with respect to environmental matters may result in additional loss contingencies, the quantification of which cannot be determined at this time.  WE HAVE DEDICATED COMPANYS CAPITAL RESOURCES IN THE PURSUIT OF NEW BUSINESS VENTURES WHICH MAY NOT BE PROFITABLE IN THE NEAR FURTURE OR AT ALL AND AS A RESULT THE COMPANY COULD EXPERIENCE OPERATING LOSSES ASSOICATED WITH THE NEW VENTURES.  To provide for long term sustainability and growth, the Company is now leveraging its manufacturing and commercializing competencies, combined with product knowledge to develop its own proprietary products in alternative fuel technologies.  The two major sectors in alternative energy are electricity generation and  Page  of 45   Table of contents  transportation.  Our efforts have been focused on these two sectors.  In transportation our focus is on power electronics and controllers, which enable vehicles to operate on clean alternative fuels. In power generation our focus is on Hydrogen, distributed power generators, and solar power.  Furthermore, we recently acquired the assets of Solar Masters.  Solar Masters is a solar company dedicated to providing highly innovated solutions by means of solar power through the development of lighting and battery charging products.   There can be no assurance that any of these business ventures may be profitable at any time and may cause the Company to sustain operating losses beyond the capital we have already expended to pursue these ventures. Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds  For the quarter ended March 31, 2008 the company accrued 37,808 shares of common stock for officer compensation, these shares were issued on April 12, 2008.  For the quarter ended June 30, 2008 the company accrued 35,515 shares of common stock for officer compensation, which were issued on August 13, 2008.  On September 30, 2008 the company issued 750,000 shares of its common stock for the purchase of the assets of Solar Masters, Inc.  We believe the issuance of the shares described above were exempt from the registration and prospectus delivery requirement of the Securities Act of 1933 by virtue of Section 4(2).  The shares were issued directly by the Company and did not involve a public offering or general solicitation.  The recipients of the shares were afforded an opportunity for effective access to files and records of our company that contained the relevant information needed to make their investment decision, including our financial statements and 34 Act reports. We reasonably believed that the recipients had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment. The recipients had the opportunity to speak with our management on several occasions prior to their investment decision.  Subsequent Issuances  None.   Item 3. Defaults Upon Senior Securities  Note Payable - dated March 10, 2006  special use, line of credit in the amount of $90,000, unsecured, 12% interest paid in cash due May 10, 2007, payable to Ashford Capital, LLC.  This note was converted to a term note payable, with an effective date of June 30, 2006, unsecured, 12% interest rate, with a 36 month amortization, payments of $1,997 and a balloon payment of $33,068 on April 15, 2008.   On April 15, 2008 we were unable to meet the balloon payment and the note is in default. As of March 31, 2009 the outstanding balance was $30,490.  Note Payable  This Note was an operating line of credit, secured by the assets of the Company. Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the Company) per annum, payable to Ed Lassiter.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $ $4,650 and a balloon payment of $77,014 on April 15, 2008. On April 15, 2008 we were unable to meet the balloon payment and the note is in default. As of March 31, 2009 the outstanding balance was $73,802.  Note Payable -- This Note was an operating line of credit, secured by the assets of the Company. Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the Company) per annum, payable to William Duncan.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $1,661 and a balloon payment of $27,505 on April 15, 2008. On April 15, 2008, we were unable to meet the balloon payment and the note is in default. As of March 31, 2009 the outstanding balance was $25,068.  Note Payable  This Note was an operating line of credit, secured by the assets of the Company.   Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the Company)  Page  of 45   Table of contents  per annum, payable to Benner Exemption Trust.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, payments of $4,650 and a balloon payment of $77,014 on April 15, 2008. On April 15, 2008 we were unable to meet the balloon payment and the note is in default. As of March 31, 2009, the outstanding balance was $71,721.  Note Payable  This note was an operating line of credit, secured by the assets of the Company.  Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the Company) per annum, payable to Ashford Capital, LLC.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $3,321 and a balloon payment of $55,010 on April 15, 2008.  On April 15, 2008 we were unable to meet the balloon payment and the note is in default. As of March 31, 2009, the outstanding balance was $52,115.  Note Payable  This Note was an operating line of credit, secured by the assets of the Company.  Borrowings under this line of credit were at an interest rate of 15% per annum, payable to Hoa Mai.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $1,661 and a balloon payment of $27,505 on April 15, 2008.  As of June 30, 2008 the outstanding balance was $24,726.  The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date.  As of March 31, 2009 the note is in default and the outstanding balance was $9,607.  Related Party  Notes payable  Note Payable - dated March 10, 2006   related party, special use, line of credit in the amount of $45,000, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock),  due May 10, 2007.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, 12% interest rate, with a 36 month amortization, monthly payments of $1,001 and a balloon payment of $16,588 on April 15, 2008.  This note is payable to Kambiz Mahdi. On April 15, 2008 we were unable to meet the balloon payment and the note is in default. As of March 31, 2009 the outstanding balance was $14,228.  Note Payable - dated March 10, 2006  related party, special use, line of credit in the amount of $45,000, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock),  due May 10, 2007.   This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, 12% interest rate, with a 36 month amortization, monthly payments of $1,001 and a balloon payment of $16,588 on April 15, 2008.  This note is payable to Reza Zarif. The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date. As of September 30, 2008 the note was in default. As of March 31, 2009 the outstanding balance was $13,221.  Note Payable  related party, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock) due on May 10, 2007, Payable to Kambiz Mahdi.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $7,871 and a balloon payment of $130,366 on April 15, 2008. On April 15, 2008 we were unable to meet the balloon payment and the note is in default. As of March 31, 2009 the outstanding balance was $124,304.  Note Payable  related party, unsecured, 20% interest (10% paid in Cash and 10% paid in Company stock) due on May 10, 2007, Payable to Reza Zarif.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $7,871 and a balloon payment of $130,366 on April 15, 2008. As of June 30, 2008 the outstanding balance was $126,759.The note wasextended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date.  As of March 31, 2009 the note was in default and the outstanding balance was $127,525.  Note Payable  related party.  This note was an operating line of credit, secured by the assets of the Company. Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the Company) per annum, payable to Rufina Paniego.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, 12% interest rate, with a 36 month amortization, monthly payments of $2,491 and a balloon payment of $39,759 on April 15, 2008.  As of June 30, 2008 the outstanding balance was  Page  of 45   Table of contents  $42,893. The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date. As of March 31, 2009 the note was in default and the outstanding balance was $38,952.  Note Payable  related party.  This note was an operating line of credit, secured by the assets of the Company.   Borrowings under this line of credit were at an interest rate of 20% (12% paid in cash and 8% paid in common stock in the Company) per annum, payable to eFund Capital Partners.  This note was converted to a term note payable, with an effective date of June 30, 2006, un-secured, at 12% interest rate, with a 36 month amortization, monthly payments of $4,982 and a balloon payment of $82,516 on April 15, 2008. As of June 30, 2008 the outstanding balance was $79,371. The note was extended by 18 months, with an interest rate of 13% per annum.  The holder was also issued 3 series D Warrants for every $2.00 of outstanding note balance on that date.  As of March 31, 2008, the note was in default and the outstanding balance was $81,879.  Note Payable  related party. This is a term note payable, with an effective date of January 15, 2008, payable to Jeff Conrad, Esq. at a 12% interest rate, with a 30 month amortization and monthly payments of $1,162.  As of March 31, 2009 the note was in default and the outstanding balance was $27,796.   Item 4. Submission of Matters to a Vote of Security Holders  None.   Item 5. Other Information  None.   Item 6.  Exhibits EXHIBIT NUMBER                                         DESCRIPTION  3.1 Articles of Incorporation (included as exhibit 3.1 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  3.2 Bylaws (included as exhibit 3.2 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  4.1 Certificate of Designation for Series A Convertible Preferred Stock, dated May 20, 2004 (included as exhibit 4.1 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  4.2 Certificate of Designation for Series B Convertible Preferred Stock dated December 31, 2004 (included as exhibit 4.2 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  4.3 Sample Series A Warrant Purchase Agreement (included as exhibit 4.3 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).  4.4 Sample Series B Warrant Purchase Agreement (included as exhibit 4.4 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).  4.5 Sample Amended Series A Warrant Purchase Agreement (included as exhibit 4.5 to the Form SB-2/A filed on November 25, 2005 and incorporated herein by reference).  4.6 Sample Amended Series B Warrant Purchase Agreement (included as exhibit 4.6 to the Form SB-2/A filed on November 25, 2005 and incorporated herein by reference).  4.7. Certificate of Designation of Series C Convertible Preferred Stock dated May 25, 2006 (included as exhibit 4.1 to the Form 8-K filed on June 14, 2006 and incorporated herein by reference).   Page  of 45   Table of contents  4.8 Amended Certificate of Designation of Series C Convertible Preferred Stock dated May 25, 2006 (included as exhibit 4.1 to the Form 8-K filed on August 14, 2006 and incorporated herein by reference).  4.9 Sample Amended Series A Warrant Purchase Agreement (included as exhibit 10.1 to the Form 8-k filed on November 15, 2006 and incorporated herein by reference).  4.10 Sample Amended Series B Warrant Purchase Agreement (included as exhibit 10.2 to the Form 8-k filed on November 15, 2006 and incorporated herein by reference).  4.11 Amended Series A Warrant Purchase Agreement (included as exhibit 4.1 to Form 8-K filed on November 10, 2008 and incorporated herein by reference).  4.12 Amended Series B Warrant Purchase Agreement (included as exhibit 4.2 to Form 8-K filed on November 10, 2008 and incorporated herein by reference).  10.1 Lease Agreement between Probe Manufacturing, Inc. (F.K.A. Probe Manufacturing Industries, Inc. and Reza Zarif and Kambiz Mahdi, dated May 2, 1997 (included as exhibit 10.1 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.2 Consulting Agreement between Probe Manufacturing Industries and Anthony Reed dated December 31, 2004 (included as exhibit 10.2 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.3 Legal retainer agreement between Probe Manufacturing, Inc. and Jeffrey Conrad dated (included as exhibit 10.3 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.4 Line of Credit agreement between Probe Manufacturing, Inc. and eFund Capital Partners, LLC dated January 1, 2005 (included as exhibit 10.4 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.5 Line of Credit agreement between Probe Manufacturing, Inc. and Ashford Capital, LLC dated January 1, 2005 (included as exhibit 10.5 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.6 Line of Credit agreement between Probe Manufacturing, Inc. and Benner Exemption Trust dated March 8, 2005 (included as exhibit 10.6 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.7 Line of Credit agreement between Probe Manufacturing, Inc. and Edward Lassiter dated March 22, 2005 (included as exhibit 10.7 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.8 Line of Credit agreement between Probe Manufacturing, Inc. and Rufina V. Paniego dated January 1, 2004  (included as exhibit 10.8 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.9 Promissory Note between Probe Manufacturing, Inc and Ashford Transitional Fund, L.P. dated September 20, 2004 (included as exhibit 10.9 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.10 Engagement Letter between Probe Manufacturing, Inc. and eFund Capital Partners, LLC dated May 20, 2004 (included as exhibit 10.10 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.11 Series A Convertible Preferred Stock Purchase Agreement with eFund Capital Partners, LLC dated May 20, 2004 (included as exhibit 10.11 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.12 Series A Convertible Preferred Stock Purchase Agreement with Reza Zarif dated May 20, 2004 (included as exhibit 10.12 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.13 Series A Convertible Preferred Stock Purchase Agreement with Kambiz Mahdi dated May 20, 2004. (included as exhibit 10.13 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).   Page  of 45   Table of contents  10.14 Series B Convertible Preferred Stock Purchase Agreement with eFund Capital Partners, LLC dated December 31, 2004 (included as exhibit 10.14 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10. 15 Series B Convertible Preferred Stock Purchase Agreement with Reza Zarif dated December 31, 2004 (included as exhibit 10.15 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.16 Series B Convertible Preferred Stock Purchase Agreement with Kambiz Mahdi dated December 31, 2004 (included as exhibit 10.16 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.17 Agreement to Cancel and Return shares of common stock between Probe and eFund Capital Partners, LLC, Ashford Capital, LLC, Reza Zarif, Kambiz Mahdi, dated December 31, 2004 (included as exhibit 10.17 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.18 Promissory note with eFund Capital Partners, LLC dated October 12, 2004 (included as exhibit 10.18 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.19 Promissory note with Rufina V. Paniego dated July 1, 2004 (included as exhibit 10.19 to the Form SB-2/A filed on June 10, 2005 and incorporated herein by reference).  10.20 Sample purchase order agreement with Celerity, Inc (included as exhibit 10.20 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).  10.21 Sample purchase order agreement with Newport Corporation (included as exhibit 10.21 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).  10.22 Sample purchase order agreement with Asymtek Corporation (included as exhibit 10.22 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).  10.23 Sample purchase order agreement with Jetline Engineering Corporation (included as exhibit 10.23 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).  10.24 Sample purchase order agreement with our supplier Future Active, Inc (included as exhibit 10.24 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).  10.25 Sample purchase order agreement with our supplier Arrow Electronics, Inc. (included as exhibit 10.25 to the Form SB-2/A filed on September 26, 2005 and incorporated herein by reference).  10.26 Lease Agreement between Probe Manufacturing, Inc. and Mitchell Fitch, LLC, dated November 15, 2005 (included as exhibit 10.26 to the Form 10-KSB on April 5, 2007 and incorporated herein by reference).  10.27 Employment Agreement with Reza Zarif, Chief Executive Officer of Probe Manufacturing, Inc. (included as exhibit 10.1 to Form 8-K filed on June 14, 2006 and incorporated herein by reference).  10.27 Series C Convertible Preferred Exchange Agreement with eFund Capital Partners, LLC (included as exhibit 10.2 to Form 8-K filed on June 14, 2006 and incorporated herein by reference).  10.28 Series C Convertible Preferred Exchange Agreement with Reza Zarif (included as exhibit 10.3 to Form 8-K filed on June 14, 2006 and incorporated herein by reference).  10.29 Series C Convertible Preferred Exchange Agreement with Kambiz Mahdi (included as exhibit 10.4 to Form 8-K filed on June 14, 2006 and incorporated herein by reference).  10.30 Amended Series C Convertible Preferred Exchange Agreement with eFund Capital Partners, LLC (included as exhibit 10.1 to Form 8-K filed on August 14, 2006 and incorporated herein by reference).   Page  of 45   Table of contents  10.31 Amended Series C Convertible Preferred Exchange Agreement with Reza Zarif (included as exhibit 10.2 to Form 8-K filed on August 14, 2006 and incorporated herein by reference).  10.32 Amended Series C Convertible Preferred Exchange Agreement with Kambiz Mahdi (included as exhibit 10.3 to Form 8-K filed on August 14, 2006 and incorporated herein by reference).  10.33 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Kambiz Mahdi dated August 10, 2006 (included as exhibit 10.1 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).  10.34 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Reza Zarif dated August 10, 2006 (included as exhibit 10.2 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).  10.35 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Frank Kavanaugh dated August 10, 2006 (included as exhibit 10.3 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).  10.36 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Kambiz Mahdi dated August 10, 2006 (included as exhibit 10.4 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).  10.37 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Reza Zarif dated August 10, 2006 (included as exhibit 10.5 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).  10.38 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Rufina Paniego dated August 10, 2006 (included as exhibit 10.6 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).  10.39 Amended Line of Credit agreement between Probe Manufacturing, Inc. and eFund Capital Partners, LLC dated August 10, 2006 (included as exhibit 10.7 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).  10.40 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Benner Exemption Trust dated August 10, 2006 (included as exhibit 10.8 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).  10.41 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Ed Lassiter dated August 10, 2006 (included as exhibit 10.9 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).  10.42 Amended Line of Credit agreement between Probe Manufacturing, Inc. and William Duncan dated August 10, 2006 (included as exhibit 10.10 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).  10.43 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Hoa Mai dated August 10, 2006 (included as exhibit 10.11 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).  10.44 Amended Line of Credit agreement between Probe Manufacturing, Inc. and Ashford Transition Fund dated August 10, 2006 (included as exhibit 10.12 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).  10.45 Employee Profit Sharing Plan (included as exhibit 10.13 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).  10.46 Probe Manufacturing 2006 Employee Incentive Stock Option Plan (included as exhibit 10.14 to the Form 8-K filed on August 23, 2006 and incorporated herein by reference).  10.47 Employment offer to John Bennett, the Companys Chief Financial Officer (included as exhibit 10.1 to Form 8-K filed March 26, 2008).  10.48 Letter of intent to acquire the assets of Solar Master Company (Included as exhibit 10.1 to Form 8-K filed July 28, 2008).  Page  of 45   Table of contents   10.49 Amended Letter of intent to acquire the assets of Solar Master Company. Attached hereto.  10.50 Purchase and Sale of Assets Agreement between Solar Masters, LLC and Probe (filed as exhibit 10.1 to Form 8-K dated August 21, 2008 and incorporated herein by reference).  10.51 Lease Agreement for Solar Masters, Inc., our subsidiary (included as exhibit 10.1 to form 10-Q/A filed November 18, 2008 and incorporated herein by reference).  10.52. Executive Consulting Agreement with Barrett Evans ((included as exhibit 10.1 to form 8-K filed September 12, 2008 and incorporated herein by reference).  14.1 Code of Ethics (included as exhibit 14.1 to the Form 10-KSB on April 5, 2007 and incorporated herein by reference).  21.1 List of Subsidiaries (included as Exhibit 21.1 to the Form 10-K filed on April 15, 2009 and incorporated herein by reference).  31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.  31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley  Act  of  2002.  32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant  to  Section  906  of  the  Sarbanes-Oxley  Act  of  2002.  32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant  to  Section  906  of  the  Sarbanes-Oxley  Act  of  2002.  SIGNATURES  Pursuant  to  the requirements of Section 13 or 15(d) 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, in the City of Lake Forest, State  of  California  on  the  15th day  of  May 2009.   PROBE MANUFACTURING, INC. ______________________________ REGISTRANT   /s/  Barrett Evans ___________________ By:       Barrett Evans Interim Chief  Executive  Officer  /s/  John Bennett ___________________ By: John Bennett Chief Financial Officer  Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.  Signature Title Date   Page  of 45   Table of contents  /s/ Barrett Evans Interim Chief Executive Officer and May 15, 2009 Director _______________________ Barrett Evans  /s/ John Bennett Chief Financial Officer May 15, 2009 _______________________ John Bennett  /s/ Kambiz Mahdi Director May 15, 2009 _______________________ Kambiz Mahdi  /s/ Jeffrey Conrad Director May 15, 2009 _______________________ Jeffrey Conrad  Page  of 45