**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-K/A****(Amendment No. 1)**

 

**(Mark One)**

 
| **x**                                            | ** ** | **Annual  Report Pursuant to Section 13 or 15(d) of the Securities Exchange  Act of 1934**     |
|--------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|
| ** **                                       | ** ** | ** **                                                                                               |
| **For the fiscal year ended May 31,  2008** |
| ** **                                       | ** ** | ** **                                                                                               |
| **OR**                                           |
| ** **                                       | ** ** | ** **                                                                                               |
| **o**                                            | ** ** | **Transition  Report Pursuant to Section 13 or 15(d) of the Securities Exchange  Act of 1934** |

** **

**Commission file number 000-50450**

 

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**OPENENERGY CORPORATION**

(Name of small businessissuer in its charter)

 

| **Nevada**                                                           | ** ** | **98-0370750**                        |
|----------------------------------------------------------------------|------------|---------------------------------------|
| (State or other jurisdiction  of incorporation or organization)      |       | (I.R.S. Employer  Identification No.) |
| ** **                                                           | ** ** | ** **                            |
| **514 Via de la Valle,  Suite 200****Solana Beach, California** | ** ** | **92075**                             |
| (Address of principal  executive offices)                            |       | (Zip Code)                            |

 

**(858) 794-8800**

(Issuer’s telephone number, including areacode)

 

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

 

| **Title of each class** | ** ** | **Name of each exchange on   which registered** |
|-------------------------|------------|-------------------------------------------------|
| None                    |       | None                                            |

 

Securities registered pursuant to Section 12(g) of the Exchange Act:

 

**Common Stock, par value $0.001per share**

(Title of class)

 

Indicateby check mark if the registrant is not required to file reports pursuant to Section 13or 15(d) of the Exchange Act.

Yes  o    No  x

 

Indicateby check mark if the registrant is a well known seasoned issuer, as defined in Rule 405of the Securities Act.

Yes  o    No  x

 

Indicateby check mark whether the registrant (1) has filed all reports required bySection 13 or 15(d) of the Exchange Act during the past 12 months (orfor such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90days.   Yes x  No o

 

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. o

 

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

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

 

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

Yeso No  x

 

Theaggregate market value of the voting and non-voting common equity held bynon-affiliates of the registrant (based on the average bid and asked price ofsuch stock on such date) as of November 30, 2007 (the last business day ofthe registrants most recently completed second fiscal quarter) wasapproximately $32,035,000. (See definition of affiliate in Rule 12b-2 ofthe Exchange Act.)  Without acknowledgingthat any individual director of registrant is an affiliate, all directors havebeen included as affiliates with respect to shares owned by them.

 

AtSeptember 15, 2008, there were 127,952,397 shares outstanding of theissuer’s common stock, the only class of common equity.

 

#### **DOCUMENTS INCORPORATED BY REFERENCE**

 

None.

 

Transitional Small BusinessDisclosure Format (Check one)  Yes o    No x

 

 

 

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**ExplanatoryNote:  This Amendment No. 1 to OpenEnergy Corporation’s Annual Report on Form 10-K for the year ended May 31,2008 is being filed solely to include the information required by Part IIIof such form, in lieu of incorporating such information from the registrant’sdefinitive proxy statement on Schedule 14A. Accordingly, this Amendment No. 1should be read in conjunction with our Annual Report on Form 10-K for the yearended May 31, 2008 filed with the Securities and Exchange Commission onSeptember 15, 2008.**

 

**PART III**

 

# **ITEM 10.               DIRECTORS EXECUTIVE OFFICERS ANDCORPORATE GOVERNANCE**

 

**Directors**

 

Set forth below is certain information regarding ourcurrent directors. There are no family relationships among members of ourmanagement or our board of directors.

 
| **Name**              | ** ** | **Position**                                     | ** ** | **Age** |
|-----------------------|------------|--------------------------------------------------|------------|---------|
| David P.  Saltman     |       | Chairman and  Chief Executive Officer            |       | 54      |
| David A.  Field       |       | Director,  President and Chief Operating Officer |       | 47      |
| Steven J.  Kemper     |       | Director                                         |       | 52      |
| Kenneth F.  Potashner |       | Director                                         |       | 50      |
| Edward  Douglas Ward  |       | Director                                         |       | 75      |

 

*David P. Saltman* is currently the chairman of our board of directors,a position he has held since October 1, 2007, and also serves as our chiefexecutive officer, a position he has held since September 2005. From September 2005to October 2007, Mr. Saltman served as our president. From June 2000to September 2005, Mr. Saltman was a senior executive ofBioComposites International, Inc., a company producing natural fiberreinforced plastics for a wide range of industrial applications, includingautomotive interiors, building materials and consumer products. Mr. Saltmanserved on the President’s Advisory Council that created environmentalpurchasing guidelines for the federal government, and is the recipient of severalawards from the American Marketing Association and the National RecyclingCoalition for his work on sustainable technologies. Prior to his efforts in theenergy sector, Mr. Saltman enjoyed a career in the entertainment industry,including being a founder of the “E!” Entertainment Network. Mr. Saltmanis a former board member of the California League of Conservation Voters andcurrently sits on the board of directors of CALEAP, a California clean energybond initiative. In 1978, Mr. Saltman earned a Bachelor of Arts Degree inMotion Picture/Television Production from UCLA.

 

*David A.Field* iscurrently our president, chief operating officer and a director, positions hehas held since October 2007, June 2007 and 2008, respectively. Priorto joining us, Mr. Field was a senior executive at Clark SecurityProducts, the largest independent vertically integrated security distributioncompany in North America from January 2005 to August 2006.Previously, he founded and managed several companies in the energy sector. In June 2001.Mr. Field founded and was chief executive officer of Clarus EnergyPartners, a leading Distributed Generation developer, owner and operator thatwas acquired by Hunt Power in early 2004. Prior to Clarus Energy, Mr. Fieldco-founded Omaha-based Kiewit Fuels, a renewable energy company specializing inthe development of biofuels production. In addition to a career in sustainableenergy development, he also has an extensive background in water technology andinfrastructure development, with companies such as; Bechtel, Peter Kiewit, andPoseidon Resources, as well as, in corporate finance with Citicorp. Mr. Fieldholds a MBA from the Garvin School of International Management (Thunderbird).

 

*Steven J.Kemper* iscurrently one of our directors and chair of our audit committee, positions hehas held since November 2007. Mr. Kemper is a certified publicaccountant with an MBA and has over 25 years of financial management experiencein the health care, high tech and consumer electronics industries. He is theformer chief financial officer of DexCom, a medical technology leader incontinuous glucose monitoring, and of CryoGen, which was sold to AmericanMedical Systems. Prior to joining us, Mr. Kemper was the chief financialofficer of General Instrument’s Satellite Communications Group (now a divisionof Motorola). Mr. Kemper earned a degree in accounting from San DiegoState University and earned a MBA from Loyola Marymount University.

 

*Kenneth F. Potashner’s* extensive career includes  being thepresident, chief executive officer and chairman of SonicBlue, a leader inproducts for the  digital media, entertainment, and consumer electronicsmarkets where the initial  MP3 players and DVRs were brought to market .He served as president, chief executive officer and chairman of MaxwellTechnologies, where he and his team successfully turned around thecompany  transitioning it from a defense focus to a commercial focus,evidenced by a substantial  increase in market capitalization. Prior toleading Maxwell Technologies, Mr. Potashner was executive vice presidentand general manager of Conner Peripherals, where he helped the company become aleading supplier of hard drives. He also held executive managementpositions at Quantum, DEC (Digital Equipment Corporation), and TexasInstruments. Mr. Potashner currently serves on the boards of directors ofNewport Corporation where he is the chairman, Cornerstone Properties, Taxcient,and One Stop Systems. He is an advisor and investor in several othercorporations.  Mr. Potashner earned hisbachelor’s degree in electrical engineering at Lafayette College and a masters’degree in electrical engineering from Southern Methodist University.

 

1

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*Edward Douglas Ward*, or E. Douglas Ward, is currently a director andchair of our compensation committee. Mr. Ward has served as a directorsince March 1, 2006. Since 1994 he has served as a managing director ofIrvine Associates, Inc., a privately held corporate finance group thatarranges credit facilities and equity infusions for under-financed technologycompanies. Previously, he was president and chief operating officer ofAstrotech International Corporation, which had five operating companies and acommercial space venture. Earlier, he was vice president and general manager,executive vice president, and president of five diverse commercial andaerospace companies. In 1956, Mr. Ward earned a Diploma in AeronauticalEngineering from Northrop Aeronautical Institute.

 

**Executive Officers**

 

Thefollowing table sets forth information as to persons who currently serve as ourexecutive officers.

 
| **Name**                     | ** ** | **Age** | ** ** | **Position**                                                    |
|------------------------------|------------|---------|------------|-----------------------------------------------------------------|
| David P. Saltman             |       | 54      |       | Chairman of the Board  of Directors and Chief Executive Officer |
| David Field                  |       | 47      |       | President and Chief  Operating Officer                          |
| Aidan Shields                |       | 41      |       | Chief Financial Officer  and Treasurer                          |
| Christopher S. Gopal,  Ph.D. |       | 56      |       | Executive Vice  President, World Wide Operations                |
| Dalton W. Sprinkle           |       | 35      |       | General Counsel, Senior  Vice President and Corporate Secretary |

 

Forinformation regarding Messrs. Saltman and Field, see “Directors,” above.

 

*Aidan Shields* was appointed as our chief financial officer****effectiveas of June 5, 2007. Prior to joining us, Mr. Shields was chieffinancial officer****of SatelliteSecurity Corporation, a start-up micro-cap company in the wireless GPStechnology space from May 2006 to March 2007. Previously, he spent 11years with Gap Inc. in several roles, including chief financial officer****of the Outlet Division and senior directorand controller of the Old Navy Division. During his time with Old Navy, thedivision grew from a start up to the fastest growing retailer in U.S. history.While at Gap Inc., Mr. Shields spent time in a multitude of rolessupporting Real Estate, Financial Planning, Business development, MarketingEffectiveness, Supply Chain, Operations and SEC reporting. Before joining GapInc., Mr. Shields worked for Minerals Technologies Inc. in Cork, Irelandand Europe. Mr. Shields is a native of the Republic of Ireland and is agraduate of the Institute of Chartered Accountants in Ireland. He received histraining as a Chartered Accountant with KPMG in Ireland.

 

*Christopher S. Gopal, Ph.D.* is currently our ExecutiveVice President, World Wide Operations, a position he has held since November 2007.Prior to joining us, Mr. Gopal held senior executive positions at majorproduct and services companies. These have included vice president inWorld-Wide Operations at Dell Computer, and director of Global Supply ChainServices at Ernst & Young Consulting. From November 2006 to October 2007,he was a director at Deloitte Consulting, and served as an independentconsultant to electronics manufacturing firms from September 2005 to November 2006.He was the vice president of Commercial Supply Chain at SAIC from June 2003to August 2005. Prior to that, Mr. Gopal was the vice president ofGlobal Supply Chain Services at Unisys from November 2001. He has workedfor, and consulted to, many of the leading global companies in the technologyand consumer product industries, where he has helped develop supply chainstrategy and information strategy, source products, and execute for world-classresults. In addition to his corporate experience, Mr. Gopal has beeninvolved in small and startup companies in the technology andtelecommunications industries, the most recent of which was Telseon, anext-generation telecommunication company. Mr. Gopal is recognized as athought leader in the industry, has been an invited speaker and panel member atleading supply chain and information technology forums, and has co-authoredthree books on the subject. Mr. Gopal holds a Ph.D. from the University ofSouthern California, and an MBA from the Cranfield School of Management, UK.

 

*Dalton W. Sprinkle*currently serves as ourgeneral counsel, senior vice president and secretary, positions he has heldsince January 2008. Mr. Sprinkle served on our board of directorsfrom December 2006 through January 2008. From June 2007 through January 2008,Mr. Sprinkle was an attorney in private practice. Mr. Sprinkle waspresident and chief executive officer and a director of Integrated DentalSolutions, Inc., an international dental services company headquartered inSan Diego from September 2006 through June 2007. Mr. Sprinklewas special counsel to Sheppard Mullin Richter & Hampton LLP from October 2005through September 2006, where he counseled public and private companies ona wide range of business and legal issues. From July 2004 through October 2005,Mr. Sprinkle was associated with Luce, Forward, Hamilton &Scripps, where he practiced corporate and securities law with an emphasis onprivate placements of real estate securities and REITs. From November 2002through July 2004, Mr. Sprinkle was associated with Morgan, Lewis &Bockius in Los Angeles where he practiced corporate and securities law with an emphasison renewable and other energy transactions. Mr. Sprinkle serves on the board ofdirectors of several other private companies. Mr. Sprinkle earned his JurisDoctor degree, cum laude, from Georgetown University Law Center, where heserved as editor-in-chief of The Tax Lawyer, and received his B.A. degree,magna cum laude, from the University of Southern California.

 

2

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**MaterialProceedings**

 

To ourknowledge, none of our directors, officers or affiliates, no owner of record orbeneficial owner of more than five percent of our securities, or any associateof any of the foregoing, is a party adverse to us, or has a material interestadverse to us, in any material proceeding.

 

**AuditCommittee and Audit Committee Financial Expert**

 

We have aseparately designated standing audit committee established in accordance with Section 3(a)(58)(A) ofthe Exchange Act. The members of the audit committee are Messrs. Kemper (chair)and Potashner. The board of directors has determined that Steve Kemper is an “auditcommittee financial expert” and “independent” as defined under applicable SECand NASDAQ Marketplace rules.

 

**Section16(a) Beneficial Ownership Reporting Compliance**

 

Section 16(a) ofthe Exchange Act requires our directors, executive officers and beneficialowners of more than 10% of a registered class of our equity securities to filewith the SEC initial reports of ownership and reports of changes in ownershipof our common stock and other equity securities. Directors, executive officersand greater than 10% beneficial owners are required by SEC regulations tofurnish to us copies of all Section 16(a) reports they file.

 

Based solely onour review of the reports, except as described below, we believe that allrequired Section 16(a) reports were timely filed during our last fiscalyear:  Mr. Field filed a late Form 4 onJune 20, 2007 reporting one transaction; The Quercus Trust filed a late Form 4on August 16, 2007 reporting four transactions and one late Form 4 on September26, 2007, reporting two transactions; Mr. Kemper filed a late Form 3 onNovember 13, 2007 and a late Form 4 on November 6, 2007 reporting onetransaction; Mr. Gopal filed a late Form 3 on November 13, 2007 and a late Form4 on November 6, 2007 reporting one transaction; Mr. Potashner filed a lateForm 3 on November 13, 2007 and a late Form 4 on November 6, 2007 reporting onetransaction; Ms. Eckert filed a late Form 3 on November 13, 2007 and a lateForm 4 on November 13, 2007 reporting one transaction; and Mr. Saltman filed alate Form 4 on November 26, 2007 reporting one transaction. None of ourdirectors, executive officers or greater than 10% beneficial owners filed anyForm 5s.

 

**Code ofBusiness Conduct and Ethics**

 

We have adopted a “Codeof Business Conduct and Ethics,” a code of ethics that applies to allemployees, including our executive officers. A copy of the Code of BusinessConduct and Ethics is posted on our Internet site at www.openenergycorp.com.

 

# **ITEM 11.               EXECUTIVE COMPENSATION**

 

Thefollowing table provides information regarding the compensation earned duringthe fiscal year ended May 31, 2008 by our chief executive officer and ourtwo other most highly compensated executive officers who were employed by us asof May 31, 2008. We refer to our chief executive officer and these otherexecutive officers as our “named executive officers” elsewhere in thisdocument.

 

**Summary Compensation Table**

 
| **Name and  Principal Position**        | ** ** | **Year** | ** ** | **Salary  ($)** | ** ** | **Bonus  ($)** | ** ** | **Stock  Awards  ($) (1)** | ** ** | **Option  Awards  ($) (2)** | ** ** | **Non-  Equity  Incentive  Plan  Compensation  ($)** | ** ** | **Change in  Pension  Value and  Non-  qualified  Deferred  Compensation  Earnings  ($)** | ** ** | **All Other  Compensation  ($) (3)** | ** ** | **Total  ($)** | ** ** |
|---------------------------------------------------|------------|----------|------------|-----------------|------------|----------------|------------|---------------------------------|------------|----------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------|------------|------------------------------------------------|------------|----------------|------------|
| David P. Saltman                                  |       | 2008     |       | 244,423         |       | —         |       | 4,496,226                       | (6)        | 1,650,000                        |       | —                                               |       | —                                                                                              |       | 8,709                                          |       | 6,399,358      |       |
| Chief Executive Officer                           |       | 2007     |       | 251,880         |       | —         |       | 5,395,472                       | (6)        | —                           |       | —                                               |       | —                                                                                              |       | 10,665                                         |       | 5,658,017      |       |
| David Field                                       |       | 2008     |       | 198,308         |       | —         |       | —                          |       | 980,000                          |       | —                                               |       | —                                                                                              |       | 6,525                                          |       | 1,184,833      |       |
| Chief Operating  Officer & President (4) |       | 2007     |       | 82,223          |       | —         |       | —                          |       | 93,000                           |       | —                                               |       | —                                                                                              |       | 431                                            |       | 175,654        |       |
| Aidan Shields                                     |       | 2008     |       | 168,215         |       | —         |       | —                          |       | 590,000                          |       | —                                               |       | —                                                                                              |       | 3,077                                          |       | 761,292        |       |
| Chief Financial  Officer (5)                      |       | 2007     |       | —          |       | —         |       | —                          |       | —                           |       | —                                               |       | —                                                                                              |       | —                                         |       | —         |       |

 

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| (1) | This column represents the compensation expense recognized for  financial statement reporting purposes in fiscal 2008 and 2007 for stock  awards granted in fiscal 2006, in accordance with Statement of Financial  Accounting Standards No. 123 (Revised 2004) Share - Based Payments, or SFAS  123R. These amounts reflect the Company’s accounting expense for these  awards, and do not represent the actual value that may be realized by the  named executive officer. For additional information, please see “Stock Based  Compensation,” in the Notes to Consolidated Financial Statements included in  our Annual Report on Form 10-K filed with the SEC on September 15,  2008. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Stock options were granted as follows for the fiscal year ended  May 31, 2008: 3,500,000 to David P. Saltman of which 500,000 have been  cancelled; 2,000,000 to David Field of which 12,500 were cancelled; and  1,200,000 to Aidan Shields. For the fiscal year ended May 31, 2007,  300,000 stock options were granted to David Field. Refer to “Accounting for  Stock Based Compensation,” in the Notes to Consolidated Financial Statements  included in our Annual Report on Form 10-K filed with the SEC  September 15, 2008 for the relevant assumptions used to determine the  valuation of our option awards.                                                              |
| (3) | Amounts shown include 401K matching, and payments for family medical  insurance above the single employee rate that is typically paid for all  employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (4) | David Field became an employee of the Company on November 1,  2006. He was appointed chief operating officer on June 5, 2007, and  president on October 1, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (5) | Aidan Shields was appointed as our chief financial officer on  June 12, 2007, which was subsequent to our 2007 fiscal year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (6) | Pursuant to the terms of Mr. Saltman’s employment agreement, he was  granted a total of 8,235,662 shares of common stock  on September 15, 2005, such shares vesting quarterly commencing on  December 31, 2005, with 686,305 shares vesting in each of the first five  quarters, 1,601,378 shares vesting in May and August of 2009 and  the remaining 1,601,381 vesting in November 2009. All unvested shares  were forfeited after May 31, 2008 pursuant to the letter agreement  described below under Employment Arrangements and Change in Control  Arrangements. Mr. Saltman is responsible for making arrangements with  respect to tax withholdings.    |

 

**Grants ofPlan-Based Awards**

 

Allplan-based awards granted to our named executive officers are incentive stockoptions.  The exercise price per share of each option granted to our namedexecutive officers was the closing price of our stock on the date of the grant,unless the markets were closed on that date, in which case the price per sharewas the closing price on the next business day when the markets wereopen.  All options were granted under our 2006 Stock Incentive Plan.

 

Thefollowing table presents information concerning grants to each of the namedexecutive officers during the fiscal year ended May 31, 2008.

 
| ** **                | ** ** | ** ** | ** ** | **Estimated Future Payouts  Under Non-Equity Incentive  Plan Awards** | ** ** | **Estimated Future Payouts  Under Equity Incentive  Plan Awards** | ** ** | **All Other  Stock  Awards:  Number of  Shares  of Stock** | ** ** | **All Other  Option  Awards:  Number of  Securities  Underlying** | ** ** | **Exercise  or Base  Price of  Option** | ** ** | **Grant Date  Fair Value  of Stock  and Option** | ** ** |
|---------------------------|------------|------------|------------|------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------|------------|---------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                | ** ** | **Grant**  | ** ** | **Threshold**                                                                                  | ** ** | **Target**                                                                                 | ** ** | **Maximum**                                                               | ** ** | **Threshold**                                                               | ** ** | **Target**                                        | ** ** | **Maximum**                                                          | ** ** | **or Units** | ** ** | **Options** | ** ** | **Awards** | ** ** | **Awards** | ** ** |
| **Name**                  | ** ** | **Date**   | ** ** | **($)**                                                                                        | ** ** | **($)**                                                                                    | ** ** | **($)**                                                                   | ** ** | **(#)**                                                                     | ** ** | **(#)**                                           | ** ** | **(#)**                                                              | ** ** | **(#)** | ** ** | **(#) (1)** | ** ** | **($/Sh) (2)** | ** ** | **($) (3)** | ** ** |
| David P Saltman |       | 6/15/07    |       | —                                                                                         |       | —                                                                                     |       | —                                                                    |       | —                                                                      |       | —                                            |       | —                                                               |       | — |   | 1,000,000 |   | 0.46 |   | 400,000 |   |
|                      |       | 10/15/07   |       | —                                                                                         |       | —                                                                                     |       | —                                                                    |       | —                                                                      |       | —                                            |       | —                                                               |       | — |   | 2,500,000 |   | 0.56 |   | 1,250,000 |   |
| David Field               |       | 12/01/06   |       | —                                                                                         |       | —                                                                                     |       | —                                                                    |       | —                                                                      |       | —                                            |       | —                                                               |       | — |   | 300,000 |   | 0.48 |   | 93,000 |   |
|                      |       | 6/15/2007  |       | —                                                                                         |       | —                                                                                     |       | —                                                                    |       | —                                                                      |       | —                                            |       | —                                                               |       | — |   | 1,000,000 |   | 0.46 |   | 480,000 |   |
|                      |       | 10/15/07   |       | —                                                                                         |       | —                                                                                     |       | —                                                                    |       | —                                                                      |       | —                                            |       | —                                                               |       | — |   | 1,000,000 |   | 0.56 |   | 500,000 |   |
| Aidan Shields             |       | 6/15/07    |       | —                                                                                         |       | —                                                                                     |       | —                                                                    |       | —                                                                      |       | —                                            |       | —                                                               |       | — |   | 500,000 |   | 0.46 |   | 240,000 |   |
|                      |       | 10/15/07   |       | —                                                                                         |       | —                                                                                     |       | —                                                                    |       | —                                                                      |       | —                                            |       | —                                                               |       | — |   | 700,000 |   | 0.56 |   | 350,000 |   |

 

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| (1) |   | For David Saltman, 500,000 of these option awards were cancelled, and  for David Field, 12,500 option awards were cancelled.                                                                                                                                                                        |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | The exercise price of the stock option awards is equal to the closing  price of the common stock on the date of the grant.                                                                                                                                                                          |
| (3) |   | Refer to “Accounting for Stock-Based compensation,” in the Notes to Consolidated  Financial Statements included in our Annual Report on Form 10-K filed  with the SEC on September 15, 2008 for the relevant assumptions used to  determine the valuation of our option awards. |

 

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**Outstanding EquityAwards at Fiscal Year-End**

 

Thefollowing table presents the outstanding equity awards held by each of thenamed executive officers as of the fiscal year ended May 31, 2008,including the value of the stock awards.

 
| ** **       | ** ** | **Option  Awards**   | ** ** | **Stock Awards** | ** ** |
|------------------|------------|----------------------|------------|-----------------------|------------|
| ** **       | ** ** | ** **           | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Equity** | ** ** |
| ** **       | ** ** | ** **           | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Incentive** | ** ** |
| ** **       | ** ** | ** **           | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Equity** | ** ** | **Plan** | ** ** |
| ** **       | ** ** | ** **           | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Incentive** | ** ** | **Awards:** | ** ** |
| ** **       | ** ** | ** **           | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Plan** | ** ** | **Market** | ** ** |
| ** **       | ** ** | ** **           | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Awards:** | ** ** | **or Payout** | ** ** |
| ** **       | ** ** | ** **           | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Number of** | ** ** | **Value of** | ** ** |
| ** **       | ** ** | ** **           | ** ** | ** **            | ** ** | **Equity** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Market** | ** ** | **Unearned** | ** ** | **Unearned** | ** ** |
| ** **       | ** ** | ** **           | ** ** | ** **            | ** ** | **Incentive** | ** ** | ** ** | ** ** | ** ** | ** ** | **Number** | ** ** | **Value** | ** ** | **Shares,** | ** ** | **Shares,** | ** ** |
| ** **       | ** ** | ** **           | ** ** | ** **            | ** ** | **Plan Awards** | ** ** | ** ** | ** ** | ** ** | ** ** | **of Shares** | ** ** | **of Shares** | ** ** | **Units, or** | ** ** | **Units, or** | ** ** |
| ** **       | ** ** | **Number of**   | ** ** | **Number of**    | ** ** | **Number of** | ** ** | ** ** | ** ** | ** ** | ** ** | **or Units** | ** ** | **or Units** | ** ** | **Other** | ** ** | **Other** | ** ** |
| ** **       | ** ** | **Securities**       | ** ** | **Securities**        | ** ** | **Securities** | ** ** | ** ** | ** ** | ** ** | ** ** | **of Stock** | ** ** | **of Stock** | ** ** | **Rights** | ** ** | **Rights** | ** ** |
| ** **       | ** ** | **Underlying**       | ** ** | **Underlying**        | ** ** | **Underlying** | ** ** | **Option** | ** ** | ** ** | ** ** | **That** | ** ** | **That** | ** ** | **That** | ** ** | **That** | ** ** |
| ** **       | ** ** | **Unexercised**      | ** ** | **Unexercised**       | ** ** | **Unexercised** | ** ** | **Exercise** | ** ** | **Option** | ** ** | **Have Not** | ** ** | **Have Not** | ** ** | **Have Not** | ** ** | **Have Not** | ** ** |
| ** **       | ** ** | **Options (#)** | ** ** | **Options (#)**  | ** ** | **Unearned** | ** ** | **Price** | ** ** | **Expiration** | ** ** | **Vested** | ** ** | **Vested** | ** ** | **Vested** | ** ** | **Vested** | ** ** |
| **Name**         | ** ** | **Exercisable**      | ** ** | **Unexercisable**     | ** ** | **Options** | ** ** | **($)** | ** ** | **Date** | ** ** | **(#) (5)** | ** ** | **($)** | ** ** | **(#)** | ** ** | **($)** | ** ** |
| David P. Saltman |       | 500,000              |       | —                |  (1)  | — |   | 0.46 |   | 6/15/2017 |   | 4,804,137 |   | 1,393,200 |   | — |   | — |   |
|             |       | 775,001              |       | 1,724,999             | (2)        | — |   | 0.56 |   | 10/15/2017 |   | — |   | — |   | — |   | — |   |
| David Field      |       | 145,833              |       | 141,667               | (3)        | — |   | 0.48 |   | 12/1/2016 |   | — |   | — |   | — |   | — |   |
|             |       | 833,332              |       | 166,668               | (4)        | — |   | 0.46 |   | 6/15/2017 |   | — |   | — |   | — |   | — |   |
|             |       | 249,999              |       | 750,001               | (4)        | — |   | 0.56 |   | 10/15/2017 |   | — |   | — |   | — |   | — |   |
| Aidan Shields    |       | 408,335              |       | 91,665                | (4)        | — |   | 0.46 |   | 6/15/2017 |   | — |   | — |   | — |   | — |   |
|             |       | 174,999              |       | 525,001               | (4)        | — |   | 0.56 |   | 10/15/2017 |   | — |   | — |   | — |   | — |   |

 

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| (1) |   | Vested on  issue.                                                                                                                                                                      |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | Vesting  1/12th per quarter after initial vesting.                                                                                                                                     |
| (3) |   | A portion of  which are performance based.                                                                                                                                             |
| (4) |   | Vesting 1/12th  per quarter.                                                                                                                                                           |
| (5) |   | Vesting was  to occur as follows: 1,601,378 on May 20, 2009, 1,601,378 on August 20, 2009,  and 1,601,381 on November 20, 2009. See note (6) to the Summary Compensation  Table above. |

 

**Option Exercisesand Stock Vested at Fiscal Year End**

 

Duringthe fiscal year ended May 31, 2008, no stock options were exercised by anynamed executive officer and no stock vested for any named executive officer.

 

**Pension Benefits**

 

We nothave any defined benefit plans at this time.

 

**NonqualifiedDeferred Compensation**

 

Noneof our named executive officers participate in or have account balances innon-qualified defined contribution plans or other deferred compensation plans.

 

**EmploymentArrangements and Change in Control Arrangements**

 

Weentered into an employment agreement dated August 25, 2005, with David P.Saltman whereby we appointed Mr. Saltman as our president and chiefexecutive officer. The term of the employment agreement is from September 15,2005 to September 30, 2008, and automatically extends for additionalone-year terms unless either party gives notice of its election to terminatethe agreement at least 90 days prior to the expiration of the then-currentterm. Pursuant to the terms of the employment agreement, we agreed to pay Mr. Saltmanan annual base salary of $250,000 plus annual bonuses as determined by ourboard of directors, based upon our financial achievements. In addition, and inpartial consideration for the services of Mr. Saltman as president andchief executive officer, he was granted a total of 8,235,662 shares of commonstock on September 15, 2005. Such shares vest quarterly commencing on December 31,2005, with 686,305 shares being vested for each of the first 11 quarters and686,307 shares being vested in the 12th and final quarter.  On January 30,2007, Mr. Saltman’s employment agreement was amended to provide that allshares that were scheduled to vest on March 31, 2007, June 30, 2007, September 30,2007 and December 31, 2007, would instead vest ratably on March 31,2008, June 30, 2008, and September 30, 2008.  All unvestedshares will be forfeited if the employment agreement is terminated byus for cause or if Mr. Saltman terminates the employment agreementother than for good reason. Upon Mr. Saltman’s death, disability, terminationby us other than for cause, or termination by Mr. Saltman for good reasonor upon a change of control, as provided in the employment agreement, allunvested shares shall immediately vest. Finally, Mr. Saltman isentitled to certain benefits, reimbursement of qualified expenses, a $600 permonth automobile allowance and reasonable office support services at ourcorporate headquarters, as set out in the employment agreement.

 

5

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On September 18,2008, we entered into a letter agreement with Mr. Saltman pursuant towhich he tendered his resignation as our chief executive officer and all otheremployment positions with us. Such resignation is effective October 31,2008. We and Mr. Saltman agreed to terminate his employment agreementeffective September 18, 2008, and as a result, all rights and obligationsof the parties thereunder were terminated. For the period from September 18,2008 to October 31, 2008, Mr. Saltman will continue to serve as ourchief executive officer and will be paid a base salary of $250,000 per annum. Hewill also be entitled to participate in our health plans to the same extent asour other senior executives. Mr. Saltman’s employment with us under the letteragreement may be terminated at any time. If his employment is terminatedwithout cause by us or for good reason by him, we agreed to pay him an amountequal to his base salary for the remainder of the term of his employment underthe letter agreement.

 

Inaddition, under the terms of the letter agreement, we agreed to (i) $112,863to the appropriate taxing authorities on behalf of Mr. Saltman insatisfaction of withholding liabilities he incurred in connection with previousrestricted stock grants, and a “gross up” payment to Mr. Saltman of$54,803, (ii) accelerate the vesting in full of options Mr. Saltmanheld to purchase 3 million shares of our common stock, and to make such optionsexercisable through March 31, 2010 at the exercise price of the option weagreed to grant to Mr. Saltman that is described in the following clause,and (iii) grant Mr. Saltman an additional option to purchase up to500,000 shares of our common stock, which will be immediately vested and havean exercise price equal to the exercise price of stock options granted to ourother senior executives between September 18, 2008 and October 31,2008.

 

Mr. Saltmanhas up to seven days following the execution of the letter agreement to revokeit, in which case, it will be null and void in its entirety.

 

On November 1,2006, we appointed David Field as Senior Vice President of Business Developmentand entered into an employment agreement with him, which was amended June 15,2007, upon his promotion to Executive Vice President and Chief OperatingOfficer. Mr. Field was also appointed as our President effective October 1,2007. Pursuant to Mr. Field’s employment agreement, as amended, we agreedto pay him an annual base salary of $175,000.  Provided that the Companyhas achieved its funding and revenue targets for the period June 1 throughSeptember 30, 2007, the base salary will be increased to $225,000 as of October 1,2007. We may, in our sole and absolute discretion, pay Mr. Field a bonuspayment as may be determined by our board of directors. Per the June 15,2007 amendment, Mr. Field was granted options for an additional 1,000,000shares, which options vest quarterly, based on company performance against theagreed business plan, over three years. In addition, we may, in our sole andabsolute discretion, award Mr. Field other forms of equitycompensation.  Mr. Field is eligible to participate in the standardfringe benefits package and incentive compensation plans generally madeavailable to our executive management employees.

 

On September 18,2008, we entered into a retention agreement with Mr. Field pursuant towhich we agreed to grant him an option to purchase 2.5% of the fully dilutedshares of the Company, which is estimated to be approximately 30,228,000 sharesof our common stock, in exchange for the cancellation of all other options heldby him. In addition, we agreed that if his employment is terminated by uswithout cause or by him for good reason, he would be entitled to severanceequal to three months of his base salary at the time of termination. Such severancesupersedes and replaces all other severance packages previously granted to Mr. Field.

 

On June 12,2007 we appointed Aidan Shields as our chief financial officer and entered intoentered into an employment agreement with him pursuant to which we agreed topay him an annual base salary of $175,000. We will base our annual salary,bonus and equity compensation for Mr. Shields on a benchmark study versussimilar roles, experience levels and positions in the marketplace as well ashis performance and our economic circumstances.  Mr. Shield’s salarywas increased to $200,000 per year effective October 15, 2007. Mr. Shieldsis entitled to participate in a fiscal 2007-08 bonus incentive plan to bedesigned and approved by our chief executive officer and our compensationcommittee. The amount of his bonus is based on the attainment of a fiscal2007-08 performance target and based on his and our performance. Under theterms of his employment agreement, we also agreed to grant Mr. Shields anoption to purchase 500,000 shares of our common stock which vests quarterlyover a three year period.  In addition, we agreed to review his equitycompensation package as part of a senior officer review during negotiations andon the completion of a new round of equity or debt financing.  Inaddition, we may, in our sole and absolute discretion, award Mr. Shieldsother forms of equity compensation.  Mr. Shields is eligible toparticipate in the standard fringe benefits package and incentive compensationplans generally made available to our executive management employees.

 

On September 18,2008, we entered into a retention agreement with Mr. Shields that isidentical to the retention agreement we entered into with Mr. Field,discussed above, except that we granted Mr. Shields an option to purchase 1.4%of the fully diluted shares of the Company, which is estimated to be approximately16,928,000 shares of our common stock, in exchange for the cancellation of allother options held by him.

 

6

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Thestock option agreements of our named executive officers provide that,generally, in case of a change of control, the option will be assumed or anequivalent option or right substituted by the successor corporation or a parentor subsidiary of the successor corporation.  If the successor corporationrefuses to assume or substitute for the option, then immediately before andcontingent on the consummation of the change in control, the optionee willfully vest in and have the right to exercise his or her options. As of May 31,2008, the value of the unvested, in-the-money options of our named executiveofficers that would accelerate upon a change of control, based on thedifference between the closing price on the last trading day of the year of $0.30per share and the exercise price of the respective options, was as follows:

 
| **Name**         | ** ** | **Option Value as of May 31, 2008** | ** ** |
|------------------|------------|-------------------------------------------------------------------|------------|
| David P. Saltman |       | $                                                                 | —     |   |
| David Field      |       | —                                                            |       |
| Aidan Shields    |       | —                                                            |       |
|                  |            |                                                                   |            |  |

 

**Director Compensation**

 

Wecompensate the non-employee members of our board of directors in the amount of$40,000 per annum, payable in quarterly installments. The following table setsforth summary information concerning compensation paid or accrued for servicesrendered to us in all capacities by the non-employee members of our board ofdirectors for the fiscal year ended May 31, 2008. Other than as set forthbelow and the reimbursement of actual and ordinary out-of-pocket expenditures,we did not compensate any of our directors for their services as directorsduring the fiscal year ended May 31, 2008.

 
| ** **                | ** ** | ** **         | ** ** | ** ** | ** ** | ** **       | ** ** | ** **       | ** ** | **Change in** | ** ** | ** **         | ** ** | ** ** | ** ** |
|---------------------------|------------|--------------------|------------|------------|------------|------------------|------------|------------------|------------|--------------------|------------|--------------------|------------|------------|------------|
| ** **                | ** ** | ** **         | ** ** | ** ** | ** ** | ** **       | ** ** | ** **       | ** ** | **Pension**        | ** ** | ** **         | ** ** | ** ** | ** ** |
| ** **                | ** ** | ** **         | ** ** | ** ** | ** ** | ** **       | ** ** | ** **       | ** ** | **Value and** | ** ** | ** **         | ** ** | ** ** | ** ** |
| ** **                | ** ** | ** **         | ** ** | ** ** | ** ** | ** **       | ** ** | **Non-Equity**   | ** ** | **Nonqualified**   | ** ** | ** **         | ** ** | ** ** | ** ** |
| ** **                | ** ** | **Fees**           | ** ** | ** ** | ** ** | ** **       | ** ** | **Incentive**    | ** ** | **Deferred**       | ** ** | ** **         | ** ** | ** ** | ** ** |
| ** **                | ** ** | **Earned or** | ** ** | **Stock**  | ** ** | **Options**      | ** ** | **Plan**         | ** ** | **Compensation**   | ** ** | **All Other** | ** ** | ** ** | ** ** |
| ** **                | ** ** | **Paid in**   | ** ** | **Awards** | ** ** | **Awards**       | ** ** | **Compensation** | ** ** | **Earnings**       | ** ** | **Compensation**   | ** ** | **Total**  | ** ** |
| **Name**                  | ** ** | **Cash ($)**  | ** ** | **($)**    | ** ** | **($) (1)** | ** ** | **($)**          | ** ** | **($)**            | ** ** | **($)**            | ** ** | **($)**    | ** ** |
| Edward Douglas  Ward (2)  |       | 55,000             |       | —     |       | 150,000          |       | —           |       | —             |       | —             |       | 205,000    |       |
| Kenneth F.  Potashner (3) |       | 10,000             |       | —     |       | 127,500          |       | —           |       | —             |       | —             |       | 137,500    |       |
| Steven J. Kemper  (4)     |       | 10,000             |       | —     |       | 127,500          |       | —           |       | —             |       | —             |       | 137,500    |       |

 

----

| (1)  | Refer to “Accounting for Stock-Based  compensation,” in the Notes to Consolidated Financial Statements included in  our Annual Report on Form 10-K filed with the SEC on September 15,  2008 for the relevant assumptions used to determine the valuation of our  option awards. |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)       | Edward Douglas Ward has  outstanding options to purchase an aggregate of 460,000 shares as of  May 31, 2008.                                                                                                                                                                                    |
| (3)       | Kenneth F. Potashner  has outstanding options to purchase an aggregate of 250,000 shares as of  May 31, 2008.                                                                                                                                                                                   |
| (4)       | Steven J. Kemper has  outstanding options to purchase an aggregate of 250,000 shares as of  May 31, 2008.                                                                                                                                                                                       |

 
| **ITEM  12.** | **SECURITY  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER  MATTERS** |
|---------------|------------------------------------------------------------------------------------------------------|

 

Thefollowing table sets forth information as of September 15, 2008, regardingthe beneficial ownership of our common stock by (i) each person we know tobe the beneficial owner of five percent or more of our common stock, (ii) eachof our named executive officers, (iii) each of our directors and (iv) allof our named executive officers and directors as a group.  Informationwith respect to beneficial ownership has been furnished by each director, namedexecutive officer or five percent or more stockholder, as the case maybe.  The address for all executive officers and directors is c/o CorporateSecretary at Open Energy Corporation, 514 Via De La Valle, Suite 200,Solana Beach, California 92075.

 

7

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Percentageof beneficial ownership is calculated based on 127,952,400 shares of commonstock outstanding as of September 15, 2008.  Beneficial ownership isdetermined in accordance with the rules of the SEC which generallyattribute beneficial ownership of securities to persons who possess sole orshared voting power or investment power with respect to those securities andincludes shares of our common stock issuable pursuant to the exercise of stockoptions, warrants or other securities that are immediately exercisable orconvertible or exercisable or convertible within 60 days of September 15,2008. Unless otherwise indicated, the persons or entities identified in thistable have sole voting and investment power with respect to all shares shown asbeneficially owned by them. For the two largest beneficial owners by ownershippercentage, the table presents beneficial ownership information before andafter the issuance of the warrants in connection with the securities purchaseagreement dated September 12, 2008, that we entered into with The Quercus Trustas described in greater detail under “Item 13. Certain Relationships andRelated Transactions, and Director Independence - Related Transactions,” below,which warrants we may refer to as the September 2008 Warrants in this report.

 

 
| ** **                                                        | ** ** | **Before Issuance of the  September 2008 Warrants** | ** ** | **After Issuance of the  September 2008 Warrants** | ** ** |
|-------------------------------------------------------------------|------------|------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------|------------|
| **Name  of Beneficial Owner**                 | ** ** | **Number of  Shares  Beneficially  Owned**                              | ** ** | **Percent of  Shares  Beneficially  Owned**                            | ** ** | **Number of  Shares  Beneficially  Owned** | ** ** | **Percent of  Shares  Beneficially  Owned** | ** ** |
|                                                              |       |                                                                         |       |                                                                        |       |   |   |   |   |
| **5% Stock holders:**                                             |       |                                                                         |       |                                                                        |       |   |   |   |   |
| Cornell/YA Global Investments, L.P.                               |       | 23,200,000                                                                   | (1)        | 15.9                                                                        | %          | 109,835,057 | (10) | 47.2 | % |
| The Quercus Trust                                                 |       | 95,663,041                                                                   | (2)        | 45.7                                                                        | %          | 734,346,297 | (11) | 86.3 | % |
|                                                              |       |                                                                         |       |                                                                        |       |   |   |   |   |
| **Executive Officers and Directors:**                             |       |                                                                         |       |                                                                        |       |   |   |   |   |
| David P. Saltman                                                  |       | 8,367,327                                                                    | (3)        | 6.5                                                                         | %          |   |   |   |   |
| David Field                                                       |       | 1,420,830                                                                    | (4)        | *                                                                           |       |   |   |   |   |
| Aidan Shields                                                     |       | 683,334                                                                      | (5)        | *                                                                           |       |   |   |   |   |
| Edward Douglas Ward                                               |       | 273,333                                                                      | (6)        | *                                                                           |       |   |   |   |   |
| Kenneth F. Potashner                                              |       | 83,332                                                                       | (7)        | *                                                                           |       |   |   |   |   |
| Steven J. Kemper                                                  |       | 83,332                                                                       | (8)        | *                                                                           |       |   |   |   |   |
|                                                              |       |                                                                         |       |                                                                        |       |   |   |   |   |
| All Executive Officers and Directors as a  group (6 persons) |       | 10,911,488                                                                   | (9)        | 8.3                                                                         | %          |   |   |   |   |

 

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| *    | Indicates beneficial  ownership of less than 5% of the total outstanding common stock.                                                                                                                                                                                                                                                                                                   |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)  | Includes 4,950,000  shares of common stock and 18,250,000 shares of common stock issuable upon  conversion of convertible notes. This stockholder’s address is 101 Hudson  Street, Suite 3700, Jersey City, NJ 07302.                                                                                                                                                          |
| (2)  | Includes 14,273,945  shares of common stock, 40,000,000 shares of common stock issuable upon  conversion of a convertible note dated September 19, 2007, and  41,389,096 shares of common stock issuable upon exercise of warrants. This  stockholder’s address is c/o Joseph P. Bartlett, Esq., 1900 Avenue of  the Stars, Suite 2100, Los Angeles, CA 90067.       |
| (3)  | Includes 6,900,659  shares of common stock, of which 4,804,137 shares remain unvested and are  subject to forfeiture, 1,275,001 shares of common stock issuable upon  exercise of currently vested options, and 191,667 shares of common stock  issuable upon exercise of options that will vest by November 15, 2008.                                                              |
| (4)  | Includes 1,229,164  shares of common stock issuable upon exercise of currently vested options and  191,666 shares of common stock issuable upon exercise of options that will  vest by November 15, 2008.                                                                                                                                                                           |
| (5)  | Includes 583,334 shares  of common stock issuable upon exercise of currently vested options and  100,000 shares of common stock issuable upon exercise of options that will  vest by November 15, 2008.                                                                                                                                                                             |
| (6)  | Includes 235,000 shares  of common stock issuable upon exercise of currently vested options and 38,333  shares of common stock issuable upon exercise of options that will vest by  November 15, 2008.                                                                                                                                                                              |
| (7)  | Includes 62,499 shares  of common stock issuable upon exercise of currently vested options and 20,833  shares of common stock issuable upon exercise of options that will vest by  November 15, 2008.                                                                                                                                                                               |
| (8)  | Includes 62,499 shares  of common stock issuable upon exercise of currently vested options and 20,833  shares of common stock issuable upon exercise of options that will vest by  November 15, 2008.                                                                                                                                                                               |
| (9)  | See footnotes 3 through  8 inclusive.                                                                                                                                                                                                                                                                                                                                                    |
| (10) | Includes 4,950,000  shares of common stock and 104,885,057 shares of common stock issuable upon  exercise of warrants                                                                                                                                                                                                                                                                    |
| (11) | Includes 11,270,575  shares of common stock, 229,885,057 shares of common stock issuable upon  conversion of a convertible note dated September 19, 2007, 258,190,665  shares of common stock issuable upon exercise of warrants (excluding the  September 2008 Warrants), and 235,000,000 shares of common stock  issuable upon exercise of the September 2008 Warrants. |

 

8

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# **ITEM 13.               CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS, AND DIRECTOR INDEPENDENCE**

 

**Review of Related Party Transactions**

 

It is our policy and procedure to have all transactions with a valueabove $120,000, including loans, between us and our officers, directors andprincipal stockholders and their affiliates, reviewed and approved by amajority of our board of directors, including a majority of the independent anddisinterested members of the board of directors, and that such transactions beon terms no less favorable to us than those that we could obtain fromunaffiliated third parties. We believe that all of the transactions described below were reviewedand approved under the foregoing policies and procedures.

 

**Related Transactions**

** **

Since June 1, 2007, there has not been, nor isthere currently proposed, any transaction or series of similar transactions towhich we were or are a party to in which the amount involved exceeds $120,000and in which any director, executive officer or beneficial holder of more than5% of any class of our voting securities or members of such person’s immediatefamily had or will have a direct or indirect material interest, other than thetransactions described below.

 

Asdescribed in more detail in our Current Report on Form 8-K filed with theSEC on September 18, 2008, on September 12, 2008, we entered into asecurities purchase agreement with The Quercus Trust, which at the time held,and continues to hold, more than five percent of our outstanding common stock.Under the terms of the securities purchase agreement we agreed to sell warrantsto The Quercus Trust to acquire, in the aggregate, 235,000,000 shares of ourcommon stock in exchange for $4.2 million of cash, $300,000 of forgiveness ofaccrued interest on our Series B Convertible Notes held by The QuercusTrust and a $200,000 restructuring fee for the amendment of certain terms ofthe $3.5 million secured loan previously extended to us by The Quercus Trust.The warrants will have an exercise price of $0.067 per share. The terms of the$3.5 million secured loan that were amended are the following: (i) weextended the maturity date of the loan from October 2008 to March 2009,(ii) we reduced the borrowing base collateral requirement to 100% of theoutstanding loan amount, and (iii) we eliminated the requirement that wemake prepayments of the loan with the proceeds of California state solarrebates that we receive.

 

Inaddition, under the terms of the securities purchase agreement, we amended theterms of our Series B Convertible Notes held by The Quercus Trust to: (i) grantvoting rights to the holders of the Series B Convertible Notes on an asconverted basis, which will require an amendment of our articles ofincorporation before such rights may apply and a failure to effect suchamendment within six months of the closing under the securities purchaseagreement would be deemed an trigger event under the Series B ConvertibleNotes; (ii) include certain protective provisions in the Series BConvertible Notes, including limitations on our ability to effect stockredemptions, incur indebtedness in excess of $500,000, engage in certain merger,acquisition or similar transactions, effecting material changes to ourbusiness, or entering into compensation arrangements with our officers anddirectors; and (iii) provide that future interest payments under the Series BConvertible Notes will be made in warrants with substantially the same terms asset forth in the warrants issued pursuant to the securities purchase agreement.

 

Asdescribed in more detail in our Current Report on Form 8-K filed with theSEC on April 30, 2008, on April 30, 2008 we entered into a loan andsecurity agreement with The Quercus Trust pursuant to which The Quercus Trustagreed to loan us up to $3.5 million secured by a first priority securityinterest in all of our inventory, accounts receivable and money and deposit accounts.The unpaid principal amount of our borrowings is due in full on October 30,2008, and interest is payable in warrants to acquire shares of our common stockat an exercise price of $0.506 per share. The total number of warrants that maybe issued, assuming we borrow the maximum amount of $3.5 million, is 1,389,096,which the parties agreed equates to an 18% per annum interest rate. On April 30,2008, we borrowed $1,550,000 under the loan and security agreement and on thatday we issued warrants to acquire 615,171 shares of our common stock to TheQuercus Trust in connection therewith.

 

As described in more detail in our Current Report on Form 8-Kfiled with the SEC on September 25, 2007,  on September 19,2007, we entered into a Securities Purchase Agreement (the “Agreement”) withThe Quercus Trust for the private placement of (i) a convertible note (the“Series B Note”) in the principal amount of $20,000,000 and (ii) awarrant (the “Warrant”) to acquire up to 40,000,000 shares of common stock, parvalue $0.001 per share (the “Common Stock”) for a purchase price of $20,000,000(the “Transaction”).  The maturity date on the Series B Note is September 19,2010.  The Series B Note accrues interest at a rate of 6% per annum,with accrued interest due and payable quarterly in arrears on each January 1,April 1, July 1 and October 1 beginning on the first such dateafter September 19, 2007. The Series B Note was convertible intoCommon Stock at an initial price of $0.50, which is subject toadjustment.  The Series B Note provides The Quercus Trust with theright to require redemption upon the occurrence of certain triggeringevents.  The Warrant associated with the Series B Note was originallyexercisable for up to 40,000,000 shares of Common Stock at an exercise price of($0.506) per share, subject to adjustment.  The largest amount outstandingwhile the Series B Note has been outstanding is $20,000,000 plus accruedinterest.  To date, we have not paid any principal under the Series BNote and have issued warrants to acquire 3,003,370 shares of our common stockon terms substantially similar to the Warrant.   The amountoutstanding as of the date of this report is $20,000,000.

 

9

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At May 31, 2008 and 2007, we accrued payrollliabilities totaling $190,000 and $2,417,000, respectively, representingestimated employer and employee taxes, employee withholding, interest andpenalties related to stock-based compensation resulting from the vestingthrough February 29, 2008 and May 31, 2007 of previous issuances ofrestricted stock grants to certain of our officers and employees. In connectionwith the issuance of these restricted stock grants, we failed to withhold therequired amounts related to the individuals’ federal and state income andpayroll tax liabilities, pay the related employer tax liabilities associatedwith the issuances, and did not remit the amounts to the appropriate federaland state government agencies associated with amounts vested at the timesrequired by law. In January 2008, we paid past-due taxes related to theserestricted stock grants, as well as related estimated interest and penaltiesassociated with previously unpaid taxes. We have recorded corresponding amountsdue from the officers and employees at May 31, 2008 and 2007 totaling$397,000 and $1,993,000, respectively. These amounts are classified as due fromrelated parties on our balance sheets and represent the amount of the liabilitythat is owed by the individuals to us for the required withholdings not made ontheir behalf. In December 2007, we received $1,498,770 from our chiefexecutive officer to satisfy the employee portion of the required withholdingtaxes on his restricted stock grants. The May 31, 2008 balance representsthe remaining obligation for one employee and one former employee to repay usfor taxes to be paid on their behalf.

 

We assumed advances from various related parties,including shareholders, in connection with the acquisition of SRS. Theseadvances are due on demand and bear interest at 6% per annum. As of May 31,2008 and 2007, balances due to related parties totaled $67,000 and $312,000,respectively, and related accrued interest totaled $3,000 and $81,000,respectively.

 

**Issuancesof Options**

 

During the year ended May 31, 2008, we grantedoptions to purchase an aggregate of 9,350,000 shares of our common stock to ourdirectors and executive officers, including each of our executive officersnamed in the Summary Compensation Table, at an weighted average exercise priceof $0.52 per share.

 

**OtherTransactions**

 

We have purchased a policy of directors’ and officers’liability insurance that insures our directors and officers against the cost ofdefense, settlement or payment of a judgment in some circumstances.

 

We believe that all of the transactions describedabove were on terms at least as favorable to us as they would have been had weentered into those transactions with unaffiliated third parties.

 

**DirectorIndependence**

 

Our board ofdirectors has determined that three of our current five directors – each ofMessrs. Kemper, Potashner and Ward – are independent as defined by theNasdaq Marketplace Rules. Mr. Kemper is the chair of the audit committee of ourboard of directors and also serves on the nominating & governance committeeof our board of directors.  Mr. Potashnerserves on the audit committee and the nominating & governance committee ofour board of directors.  Mr. Ward is thechair of the compensation committee of our board of directors and also serveson the nominating & governance committee of our board of directors.  We do not have any directors that are notindependent serving on any of the committees of our board of directors.

 

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# **ITEM 14.               PRINCIPAL ACCOUNTANT FEES ANDSERVICES**

 

The following table presents the fees billed forprofessional services rendered by Squar, Milner, Peterson, Miranda &Williamson, LLP, for the audits of our annual financial statements and relatedmatters for the years ended May 31, 2008 and May 31, 2007,respectively, and fees billed for other services rendered by Squar, Milnerduring those periods:

 
| ** **             | ** ** | **FY 2008** | ** ** | **FY2007** | ** ** |
|------------------------|------------|------------------|------------|------------|------------|
| Audit fees (1)         |       | $                | 257,475    |       | $          | 242,931 |   |
| Audit-related fees (2) |       | —           |       | —     |       |
| Tax fees (3)           |       | 53,546           |       | 16,820     |       |
| All other fees (4)     |       | 15,635           |       | 33,859     |       |
|                   |       | $                | 326,656    |       | $          | 293,610 |   |

 

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| (1)    |   | Audit fees include fees and expenses for professional services  rendered for the audits of the Company’s annual financial statements for  those years and for the review of the financial statements included in the  Company’s Quarterly Reports on Form 10-QSB.                                                                                                                                                                                                                                                                                                                   |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)    |   | Audit-related fees consist of fees billed for assurance and related  services that are related to the performance of the audit or review of the  Company’s financial statements and are not reported as audit fees.                                                                                                                                                                                                                                                                                                                                                                           |
| (3)    |   | Tax fees consist of preparation of federal and state tax returns,  review of quarterly estimated payments, and consultation concerning tax  compliance issues.                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (4)    |   | All other fees include any fees for services not covered above. Fees  noted for both periods primarily represent fees associated with reviews of  registration statements filed by the Company.                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   | The Audit Committee has determined that the rendering of all  non-audit services by Squar, Milner, Peterson, Miranda & Williamson,  LLP is compatible with maintaining the auditor’s independence. All non-audit  related services in the above table were pre-approved and/or ratified by the  Audit Committee. The Audit Committee approves non-audit services by Squar,  Milner, Peterson, Miranda & Williamson, LLP on an ad hoc basis, and  has vested authority with Steven J. Kemper, the chairman of the Audit  Committee, to approve non-audit services as needed. |

 

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**SIGNATURES**

 

In accordance with Section 13 or 15(d) ofthe Securities Exchange Act of 1934, the registrant caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.

 
|     | Open Energy Corporation |
|----------|-------------------------|
|     |                    |
|     | By:                     | /s/   David P. Saltman |
| * * | * *                | *Chief Executive Officer  (Principal Executive Officer)* |

 

In accordance with the Securities Exchange Act of1934, this report has been signed below by the following persons on behalf ofregistrant in their capacities and on September 26, 2008.

 
| **Signature**             | ** ** | **Title**                                                           | ** ** | **Date**                 |
|---------------------------|------------|---------------------------------------------------------------------|------------|--------------------------|
|                      |       |                                                                |       |                     |
| /s/ David P. Saltman      |       | Director and Chief Executive Officer  (Principal Executive Officer) |       | September 26,  2008 |
| David P. Saltman          |       |                                                                |       |                     |
|                      |       |                                                                |       |                     |
| /s/ Aidan H. Shields      |       | Chief Financial Officer and Treasurer  (Principal Financial and     |       | September 26,  2008 |
| Aidan H. Shields          |       | Accounting Officer)                                                 |       |                     |
|                      |       |                                                                |       |                     |
| /s/ David A. Field        |       | Director and President and Chief Operating  Officer                 |       | September 26,  2008 |
| David A. Field            |       |                                                                |       |                     |
|                      |       |                                                                |       |                     |
|                      |       | Director                                                            |       |                     |
| Steven J. Kemper          |       |                                                                |       |                     |
|                      |       |                                                                |       |                     |
| /s/ Edward Douglas Ward*  |       | Director                                                            |       | September 26  2008  |
| Edward Douglas Ward       |       |                                                                |       |                     |
|                      |       |                                                                |       |                     |
| /s/ Kenneth S. Potashner* |       | Director                                                            |       | September 26,  2008 |
| Kenneth S. Potashner      |       |                                                                |       |                     |

 

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* By David A. Field, Attorney-in-Fact.

 

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| **Exhibit  #** | ** ** | **Exhibit**                                                                                                                |
|----------------|------------|----------------------------------------------------------------------------------------------------------------------------|
| 31.1*          |       | Certification of  Principal Executive Officer as required pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002. |
| 31.2*          |       | Certification of  Principal Financial Officer as required pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002. |
| 32.1*          |       | Certification of  Principal Executive Officer pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.             |
| 32.2*          |       | Certification of  Principal Financial Officer pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.             |

 

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