**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON
      D.C. 20549**





**FORM
      10-Q**





( Mark
      One)


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





For
      the
      quarterly period ended: **March
      31, 2008**


OR


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





For
      the
      transition period from: _______ to _______





Commission
      File Number: 000-53105





**CLEAR
      SKIES SOLAR, INC.**


(Exact
      name of Registrant as Specified in Its Charter)





**DELAWARE**
            
            **30-0401535**(State
                or Other Jurisdiction of Incorporation or Organization)
            
            (I.R.S.
                Employer Identification No.)**5020
                Sunrise Highway, Suite 227**
              **Massapequa
                Park, New York**
            
            **11762**(Address
                of Principal Executive Offices)
            
            (Zip
                code)





**(516)
      809-0498**





(Registrant’s
      Telephone Number, Including Area Code)





(Former
      Name, Former Address and Former Fiscal Year, if Changed Since Last
      Report)





Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days


YES  x   NO  o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
                Accelerated Filer o
            Accelerated
                Filer o
            Non-Accelerated
                Filer x









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





YES  o   NO  x 
 As
        of May
        12, **** 2008,
        31,305,308 shares of the issuer’s common stock, $0.001 par value per share, were
        outstanding.
 
 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 o
              Accelerated
                  filer oNon-accelerated
                  filer o
              Smaller
                  reporting company x
 (Do
        not
        check if a smaller reporting company)
  
  Table
        of Contents
 **Page**PART
                    I
                
                FINANCIAL
                    INFORMATION
                1Item
                    1.
                
                Financial
                    Statements (Unaudited)
                1Condensed
                    Consolidated Balance Sheet as at March 31, 2008 (unaudited) and
                    Condensed
                    Consolidated Balance Sheet as at December 31, 2007
                1Unaudited
                    Condensed Consolidated Statements of Operations for the three-month
                    periods ended March 31, 2008 and March 31, 2007
                2Unaudited
                    Condensed Consolidated Statements of Cash Flows for the three-month
                    periods ended March 31, 2008 and March 31, 2007
                3Notes
                    to Unaudited Condensed Consolidated Financial Statements
                4Item
                    2.
                
                Management’s
                    Discussion and Analysis of Financial Condition and Results of
                    Operations
                13Item
                    3.
                
                Quantitative
                    and Qualitative Disclosures About Market Risk
                17Item
                    4T.
                
                Controls
                    and Procedures
                17PART
                    II
                
                OTHER
                    INFORMATION
                18Item
                    2.
                
                Unregistered
                    Sales of Equity Securities and Use of Proceeds
                18Item
                    4.
                
                Submission
                    of Matters to a Vote of Security Holders
                19Item
                    6.
                
                Exhibits
                19
  
  **PART
        I – FINANCIAL INFORMATION**
  **Item
        1.**  **Financial
        Statements**
  **CLEAR
        SKIES SOLAR, INC.**
 **Condensed
        Consolidated Balance Sheets**
 
 **March
                  31, 2008**
              
              **December 31, 2007**(Unaudited)**ASSETS****Current
                  assets**Cash
                  and cash equivalents
              
              $
              3,372,302
              
              $
              4,866,842Accounts
                    receivable, less allowance for doubtful accounts
                    of $41,775 and $32,775 at March 31, 2008 and December 31, 2007,
                    respectively
              
              
              214,698
              
              
              92,291Other
                  receivable
              
              
              167,988
              
              
              -Costs
                  and estimated earnings in excess of billings
              
              
              35,885
              
              
              27,641Total
                  current assets
              
              $
              3,790,874
              
              $
              4,986,774**Property
                  and equipment, net**
              
              
              20,114
              
              
              13,293**Prepaid
                  expenses and investor relations fees**
              
              
              385,074
              
              
              960,507**Other
                  Assets**
              
              
              53,735
              
              
              54,017$
              4,249,797
              
              $
              6,014,591**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****Current
                  liabilities**Accounts
                  payable and accrued expenses
              
              $
              800,652
              
              $
              788,468Billings
                  in excess of costs and estimated earnings
              
              
              36,434
              
              
              35,007Due
                  to related parties
              
              
              -
              
              
              104,410Customer
                  deposits
              
              
              -
              
              
              5,000Obligation
                  to issue options and warrants
              
              
              327,650
              
              
              327,650Payroll
                  liabilities
              
              
              41,354
              
              
              140,729Installation
                  warranty liability
              
              
              7,742
              
              
              7,742Estimated
                  loss on uncompleted contracts
              
              
              27,969
              
              
              -Total
                  current liabilities
              
              $
              1,241,801
              
              $
              1,409,007**Stockholders'
                  equity**Preferred
                  stock, $ .001 par value, 10,000,000 shares authorized, none issued
                  and
                  outstandingCommon
                  stock, $.001 par value, 100,000,000 shares authorized, 30,925,097
                  and
                  30,883,723 issued and outstanding at March 31, 2008 and December
                  31, 2007,
                  respectively
              
              
              30,925
              
              
              30,883Additional
                  paid-in capital
              
              
              9,386,021
              
              
              9,247,682Accumulated
                  deficit
              
              
              (6,408,948
              )
              
              (4,672,981
              )Total
                  stockholders' equity
              
              $
              3,007,996
              
              $
              4,605,584**$**
              **4,249,797**
              
              **$**
              **6,014,591**
 
 See
        Accompanying Notes to Unaudited Condensed Consolidated Financial
        Statements
  -
            1 -
  **CLEAR
        SKIES SOLAR , INC.**
 **Unaudited
        Condensed Consolidated Statements of Operations**
 **For
        the three months ended March 31,**
 
 **2008**
              
              **2007**RevenuesContract
                  revenue
              
              $
              138,224
              
              $
              12,600Subcontractor
                  revenue
              
              
              -
              
              
              223,633Other
              
              
              15,000
              
              
              -Total
                  revenues
              
              
              153,224
              
              
              236,233Cost
                  of revenues
              
              
              193,348
              
              
              257,593**Gross
                  margin**
              
              
              (40,124
              )
              
              (21,360
              )**Operating
                  expenses**Selling
                  expenses
              
              
              233,959
              
              
              61,813General
                  and administrative expenses
              
              
              1,488,302
              
              
              198,5171,722,261
              
              
              260,330Loss
                  from operations
              
              
              (1,762,385
              )
              
              (281,690
              )**Other
                  revenue (expense)**Interest
                  income
              
              
              32,347
              
              
              -Interest
                  expense
              
              
              (5,930
              )
              
              -**Net
                  (loss)**
              
              $
              (1,735,968
              )
              $
              (281,690
              )**Weighted
                  average common shares outstanding, basic and
                  diluted**
              
              
              30,886,678
              
              
              4,427,269**Loss
                  per share, basic and diluted**
              
              
              (0.06
              )
              
              (0.06
              )
 
 See
        Accompanying Notes to Unaudited Condensed Consolidated Financial
        Statements
  -
            2 -
  **CLEAR
        SKIES SOLAR, INC.**
 **Unaudited
        Condensed Consolidated Statements of Cash Flows**
 **For
        the three months ended March 31,**
 **2008**
                  
                  **2007**Net
                      Loss
                  
                  $
                  (1,735,968
                  )
                  $
                  (281,690
                  )Adjustment
                      to reconcile net loss to net cash used in operating
                      activities:Depreciation
                  
                  
                  2,120
                  
                  
                  -Stock-based
                      compensation
                  
                  
                  124,881
                  
                  
                  -Estimated
                      loss on contracts
                  
                  
                  27,969
                  
                  
                  -Bad
                      debt expense
                  
                  
                  9,000
                  
                  
                  68,000Increase
                      (decrease) in cash and cash equivalents attributable to changes
                      in
                      operating assets and liabilities:Accounts
                      receivable
                  
                  
                  (131,407
                  )
                  
                  (72,419
                  )Costs
                      and estimated earnings in excess of billings
                  
                  
                  (8,244
                  )
                  
                  51,210Prepaid
                      expenses and investor relations fees
                  
                  
                  407,445
                  
                  
                  (220
                  )Other
                      assets
                  
                  
                  282
                  
                  
                  (978
                  )Accounts
                      payable and accrued expenses
                  
                  
                  25,684
                  
                  
                  114,549Customer
                      deposits
                  
                  
                  (5,000
                  )
                  
                  -Billings
                      in excess of costs and estimated earnings
                  
                  
                  1,427
                  
                  
                  -Payroll
                      liabilities
                  
                  
                  (99,376
                  )
                  
                  35,541**Net
                      cash used in operating activities**
                  
                  $
                  (1,381,189
                  )
                  $
                  (86,007
                  )**Net
                      cash flows used in investing activities:**Purchases
                      of equipment
                  
                  
                  (8,941
                  )
                  
                  -**Net
                      cash flows from financing activities:**Advances
                      from related party
                  
                  
                  (104,410
                  )
                  
                  -Net
                      decrease in cash and cash equivalents
                  
                  
                  (1,494,540
                  )
                  
                  (86,006
                  )Cash
                      and cash equivalents, beginning of period
                  
                  $
                  4,866,842
                  
                  $
                  111,439Cash
                      and cash equivalents, end of period
                  
                  $
                  3,372,302
                  
                  $
                  25,433**Supplemental
                      disclosures of cash flow information:**Cash
                      paid for interest
                  
                  $
                  5,930
                  
                  $
                  -**Supplemental
                      disclosure of non-cash financing and investing
                      activities:**Value
                      of shares of common stock issued to consultants
                  
                  $
                  13,500
                  
                  $
                  -
 Reclassification
                    of prepaid investor relations to other receivable
                
                $
                167,988
                
                $
                -Issuance
                    of stock out of obligation to issue stock
                
                $
                -
                
                $
                894,000
 See
        Accompanying Notes to Unaudited Condensed Consolidated Financial
        Statements
  -
            3 -
  **NOTES
        TO UNAUDITED CONDENSED COLSOLIDATED FINANCIAL STATEMENTS**
  **1.
        Basis of presentation and nature of operations**
 
 The
        accompanying unaudited condensed consolidated interim financial statements
        of
        the Company as of March 31, 2008 and for the three month periods ended March
        31,
        2008 and 2007 reflect all adjustments of a normal and recurring nature to
        present fairly the consolidated financial position, results of operations
        and
        cash flows for the interim periods. These unaudited condensed, consolidated
        financial statements have been prepared by the Company pursuant to the
        instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Pursuant to such
        instructions, certain financial information and footnote disclosures normally
        included in such financial statements have been condensed or omitted.
 
 These
        unaudited condensed consolidated interim financial statements should be read
        in
        conjunction with the audited consolidated financial statements of the Company
        and notes thereto, together with management’s discussion and analysis or plan of
        operations, contained in the Company’s annual report on Form 10-KSB for the year
        ended December 31, 2007. The results of operations for the three month period
        ended March 31, 2008 are not necessarily indicative of the results that may
        occur for the year ending December 31, 2008.
 
 ***Nature
        of Operations***
 
 Clear
        Skies Group, Inc. (“CSG”) was formed in New York in September 2003 for the
        purpose of providing turnkey solar electricity installations and renewable
        energy technology solutions to commercial and residential customers across
        the
        United States. CSG commenced operations in August 2005 and received its
        initial funding from Rudd-Klein Alternative Energy, LLC in September 2005.
        The
        Company also has proprietary and patented remote monitoring technology under
        the
        name XTRAX® with applications in the solar electricity production industry and
        other potential markets.
  Unless
        the context requires otherwise, references to the “Company ” for periods prior
        to the closing of the Reverse Merger (Note 2) on December 20, 2007 refer
        to
        Clear Skies Group, Inc., a private New York corporation that is now Clear
        Skies
        Solar, Inc.’ s wholly owned subsidiary, and such references for periods
        subsequent to the closing of the Reverse Merger on December 20, 2007, refer
        to
        Clear Skies Solar, Inc., a publicly traded Delaware corporation formerly
        known
        as Clear Skies Holdings, Inc. (“CSH”), together with its subsidiaries, including
        Clear Skies Group, Inc.
  **2.** **Business
        combination and subsequent financing**
  ***The
        reverse merger***
  On
        December 13, 2007, our predecessor, BIP Oil, Inc., a Nevada corporation (“BIP”),
        and Clear Skies Holdings, Inc., a Delaware corporation and wholly owned
        subsidiary of BIP (“CSH”), entered into an Agreement and Plan of Merger. On
        December 18, 2007, BIP merged with and into CSH, so that BIP and CSH became
        a
        single corporation named Clear Skies Holdings, Inc., which exists under,
        and is
        governed by, the laws of the State of Delaware (the “Reincorporation”).
        Immediately following the Reincorporation, there were 59,841,923 shares of
        Clear
        Skies Holdings, Inc. issued and outstanding to stockholders of
        record.
  -
            4 -
  On
        December 20, 2007, Clear Skies Acquisition Corp., a newly formed wholly owned
        subsidiary of Clear Skies Holdings, Inc., was merged with and into Clear
        Skies
        Group, Inc. (the “Reverse Merger”), and Clear Skies Group, Inc., as the
        surviving corporation, became a wholly owned subsidiary of Clear Skies Holdings,
        Inc. Prior to the Reverse Merger, certain stockholders of Clear Skies Group,
        Inc. agreed to surrender an aggregate of 60,000 shares of Clear Skies Group,
        Inc. (exchangeable for an aggregate of 116,276 shares of common stock of
        Clear
        Skies Holdings, Inc. in the Reverse Merger) for cancellation. Pursuant to
        the
        Reverse Merger, the outstanding shares of common stock of Clear Skies Group,
        Inc. were exchanged for an aggregate of 8,492,067 shares of Clear Skies
        Holdings, Inc. at a conversion rate of 1.937943 shares of Clear Skies Holdings,
        Inc. for each share of Clear Skies Group, Inc. In addition, pursuant to the
        Reverse Merger, outstanding warrants to purchase an aggregate of 760,000
        shares
        of common stock of Clear Skies Group, Inc. were exchanged for an aggregate
        of
        416,656 shares of common stock of Clear Skies Holdings, Inc.
 
 Immediately
        following the closing of the Reverse Merger, Clear Skies Holdings, Inc.
        transferred all of its pre-Reverse Merger operating assets and liabilities
        to
        its newly formed wholly owned subsidiary, BIP Holdings, Inc., a Delaware
        corporation, and transferred all of BIP Holdings, Inc.’s outstanding capital
        stock to Clear Skies Holdings, Inc.’s then-majority stockholders in exchange for
        cancellation of 53,866,923 shares of Clear Skies Holdings, Inc. common
        stock held by those stockholders (such transaction, the “Split-Off”). The
        remaining stockholders of Clear Skies Holdings, Inc. continued to hold 5,975,000
        shares of Clear Skies Holdings, Inc. after the split-off.
 
 After
        the
        Reverse Merger, Clear Skies Holdings, Inc. succeeded to the business of Clear
        Skies Group, Inc. as its sole line of business, and all of Clear Skies Holdings,
        Inc.’s then-current officers and directors resigned and were replaced by Clear
        Skies Group, Inc.’s officers and directors.
 
 On
        January 25, 2008, Clear Skies Holdings, Inc. changed its name to Clear Skies
        Solar, Inc.
 
 The
        Reverse Merger was accounted for as a reverse acquisition and recapitalization
        of Clear Skies Group, Inc. for financial accounting purposes. Consequently,
        the
        assets and liabilities and the historical operations that are reflected in
        the
        Company’s consolidated financial statements for periods prior to the Reverse
        Merger are those of Clear Skies Group, Inc. and have been recorded at the
        historical cost basis of Clear Skies Group, Inc., and the Company’s consolidated
        financial statements for periods after completion of the reverse merger include
        both the Company’s and Clear Skies Group, Inc.’s assets and liabilities, the
        historical operations of Clear Skies Group, Inc. prior to the Reverse Merger
        and
        the Company’s operations from the closing date of the Reverse
        Merger.
  ***The
        private placement***
 
 Following
        the business combination discussed above, the Company closed on a private
        placement offering of 16,000,000 shares of its common stock for an aggregate
        gross purchase price of $8,000,000, including $745,000 of exchanged debt.
        The
        cash costs of the private placement of common stock and the prior
        issuance of $745,000 of bridge notes were approximately $2 million in the
        aggregate, and the Company issued warrants expiring in December 2010, in
        connection with both financings, to the placement agent and its designees
        to
        purchase an aggregate of up to 732,401 shares of the Company’s common stock at
        $.50 per share. The common stock of Clear Skies Solar, Inc. trades on the
        over
        the counter bulletin board under the symbol CSKH:OB. The Company agreed to
        file
        a registration statement with the Securities and Exchange Commission within
        ninety days of the closing of the private placement (by March 23, 2008) seeking
        registration of the 16,000,000 shares as well as shares issuable under certain
        options and warrants issued in connection with the sale of the bridge notes
        and
        to two consultants. The Company also agreed to use its best efforts to cause
        the
        registration statement to become effective within 180 days of the closing
        of the
        private placement. If either obligation is not met, the Company is required
        to
        pay the purchasers of the 16,000,000 shares, pro rata liquidated damages
        of
        $80,000 per month (or approximately $2,700 per day for periods less that
        a full
        month). The Company filed the registration statement with the Securities
        and
        Exchange Commission after the expiration of the ninety day period and has
        recorded its estimated $15,000 liability as of December 31, 2007.
  -
            5 -
  **3.** **Summary
        of significant accounting policies**
 
 ***Accounts
        Receivable and Allowance for Doubtful Accounts***
 
 The
        Company regularly evaluates the validity of its accounts receivable. The Company
        carries its accounts receivable at cost less an allowance for doubtful accounts.
        On a periodic basis, the Company evaluates its accounts receivable and
        establishes an allowance for doubtful accounts, if necessary, based on a
        history
        of past bad debts and collections and current credit conditions. Accounts
        receivable are written-off as uncollectible on a case-by-case basis at the
        discretion of management. Accounts receivable consist of trade receivables
        and
        when applicable amounts due from state agencies for rebates on state-approved
        solar systems installed. A total of $37,080 of rebates was included in accounts
        receivable at March 31, 2008. When the Company sells systems with a rebate
        component, the savings is passed directly to the customer and the Company
        takes
        ownership of the rebate receivable from the applicable state
        agency.
 
 ***Revenue
        Recognition***
 
 The
        Company has two distinct revenue streams that have very different
        characteristics and payment time cycles. Therefore, a different revenue
        recognition policy applies to each category.
 
 Contract
        revenue: In accordance with SEC Staff Accounting Bulletin No. 101 - “Revenue
        Recognition in Financial Statements” (“SAB”), which was superseded by SAB 104,
        contract revenues are recognized using the percentage of completion method.
        The
        percentage of completion is calculated by dividing the direct labor and other
        direct costs incurred by the total estimated direct costs of the project.
        Contract value is defined as the total value of the contract, plus the value
        of
        approved change orders. Estimates of costs to complete are reviewed periodically
        and modified as required. Provisions are made for the full amount of anticipated
        losses, on a contract-by-contract basis. These loss provisions are established
        in the period in which the losses are first determined. Changes in estimates
        are
        also reflected in the period they become known. The Company maintains all
        the
        risks and rewards of billing. Regardless of a customer’s structure or industry,
        if the Company is the lead contractor, then the Company recognizes all revenues
        using the percentage of completion method.
 
 Subcontractor
        Revenue: From time to time, the Company performs installation and other services
        as a subcontractor. These services differ from contract revenue in that the
        Company is entitled to be compensated for subcontractor work performed prior
        to
        completion of the system, because the Company has no obligation or ownership
        of
        the system so long as it completes its tasks satisfactorily. Revenues from
        subcontractor projects are realized as they are completed.
 
 ***Cost
        Recognition***
 
 Contract
        costs include all direct material, labor, and equipment costs and those indirect
        costs related to contract performance such as indirect labor, supply, and
        tool
        costs. The Company makes provisions for estimated losses on uncompleted
        contracts in the period in which such losses are determined. Changes in job
        performance, job conditions, and estimated profitability, including those
        arising from contract penalty provisions, and final contract settlements
        may
        result in revisions to costs and income and are recognized in the period
        in
        which the revenues are determined.
 
 The
        Company carries inventory as it needs to buy materials in advance of anticipated
        orders due to possible long lead times at vendors. In addition, the Company
        will
        have purchased material at job sites prior to installation and completion
        of the
        job. Costs incurred of approximately $25,000 as of March 31, 2008, to acquire
        materials that were purchased for certain jobs which had not been completed
        as
        of the balance sheet date are included in costs and estimated earnings in
        excess
        of billings. These costs are charged to the projects as they are
        installed.
  -
            6 -
  ***Earnings
        Per Share***
  The
        Company complies with SFAS No. 128, “Earnings Per Share.” SFAS No. 128 requiring
        dual presentation of basic and diluted income/loss per share for all
        periods presented. Basic income/loss per share excludes dilution and is computed
        by dividing income/loss available to common stockholders by the weighted
        average
        number of common shares outstanding for the period. Diluted income/loss per
        share reflects the potential dilution that could occur if securities or other
        contracts to issue common stock were exercised or converted into common stock
        or
        resulted in the issuance of common stock that then share in the income/loss
        of
        the Company. The difference between the number of shares used to compute
        basic
        income/loss per share and diluted income/loss per share relates to additional
        shares to be issued upon the assumed exercise of stock options and warrants,
        net
        of shares hypothetically repurchased at the average market price with the
        proceeds of exercise. As the Company reported a net loss for the three months
        ended March 31, 2008 and 2007, the effects of the 3,422,401 shares issuable
        on
        exercise of outstanding warrants and options as of March 31, 2008 has not
        been
        considered in the diluted net loss per common share since these dilutive
        securities would reduce the loss per common share and become
        anti-dilutive.
 
 ***Recent
        Accounting Pronouncements***
  In
        December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” SFAS
        No. 141(R) provides companies with principles and requirements on how an
        acquirer recognizes and measures in its financial statements the identifiable
        assets acquired, liabilities assumed, and any non-controlling interest in
        the
        acquiree as well as the recognition and measurement of goodwill acquired
        in a
        business combination. SFAS No. 141(R) also requires certain disclosures to
        enable users of the financial statements to evaluate the nature and financial
        effects of the business combination. Acquisition costs associated with the
        business combination will generally be expensed as incurred. SFAS No. 141(R)
        is
        effective for business combinations occurring in fiscal years beginning after
        December 15, 2008, which will require the Company to adopt these provisions
        for
        business combinations occurring in fiscal 2009 and thereafter. Early adoption
        of
        SFAS No. 141(R) is not permitted.
 
  In
        December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
        Consolidated Financial Statements - An Amendment of ARB No. 51”. SFAS No. 160
        requires reporting entities to present noncontrolling (minority) interests
        as
        equity as opposed to as a liability or mezzanine equity and provides guidance
        on
        the accounting for transactions between an entity and noncontrolling interests.
        SFAS No. 160 is effective the first fiscal year beginning after December
        15,
        2008, and interim periods within that fiscal year. SFAS No. 160 applies
        prospectively as of the beginning of the fiscal year SFAS No. 160 is initially
        applied, except for the presentation and disclosure requirements which are
        applied retrospectively for all periods presented subsequent to adoption.
        The
        adoption of SFAS No. 160 will not have a material impact on the financial
        statements; however, it could impact future transactions entered into by
        the
        Company.
  
 ***Stock
        Based Compensation***
  The
        FASB
        issued SFAS No. 123(R), “Accounting for Stock-Based Compensation (Revised).”
SFAS No. 123(R) focuses primarily on accounting for transactions in which
        an
        entity obtains employee services in share-based payment transactions. SFAS
        123(R) requires an entity to measure the cost of employee services received
        in
        exchange for an award of equity instruments based on the grant-date fair
        value
        of the award (with limited exceptions). That cost will be recognized of the
        period during which an employee is required to provide service in exchange
        for
        the award. No compensation costs are recognized for equity instruments for
        which
        employees do not render the requisite service. The Company adopted SFAS No.
        123(R) at commencement of operations.
  -
            7 -
  **4.
        Liquidity and capital resources**
  Since
        inception, the Company has incurred losses and negative cash flows from
        operations and at March 31, 2008 the Company has an accumulated deficit of
        approximately $6.4 million. In December 2007 the Company completed a private
        placement of 16 million shares of its common stock and received net
        proceeds of approximately $5.9 million, including the cancellation of
        $745,000 of debt. At March 31, 2008 the Company’s cash balance was approximately
        $3.3 million. Based upon management’s current forecast of future revenues and
        expenses, the Company believes that its cash resources will be adequate to
        fund
        operations in 2008. There can be no assurance that our future cash flow will
        be
        sufficient to meet our obligations and commitments. If revenues from operations
        turn out to be insufficient to meet the Company’s projected capital needs, or if
        management’s forecasts prove inaccurate, then the Company will experience a cash
        shortage and will likely be required to raise additional capital through
        equity
        or debt financings, the sale of assets, or other means. There can be no
        assurance that any such actions could be effected on a timely basis or on
        satisfactory terms or at all, or that these actions would enable us to continue
        to satisfy our capital requirements which may have a negative impact on
        operations.
 
 **5.
        Prepaid expenses and investor relations fees**
 
 Prepaid
        expenses and prepaid investor relation fees at March 31, 2008 and December
        31,
        2007 are as follows:
 **2008**
              
              **2007**Payments
                  to US public and investor relations firms
              
              $
              179,927
              ****
              $
              305,667Payment
                  to a European investor relations firm
              
              
              168,053
              
              
              394,790Prepayment
                  of compensation to be amortized over the periods in which the services
                  will be rendered
              
              
              -
              
              
              224,698Prepaid
                  insurance premiums
              
              
              37,094
              
              
              35,352Total
              
              $
              385,074
              
              $
              960,507
 
 The
        Company has entered into agreements with several firms in the US to provide
        it
        with both public relations and investor relations advice and services over
        periods from one to three years. These agreements call for payments in both
        cash
        and common stock and payments are being amortized over the period of each
        agreement. In addition to the amounts above, the Company has committed to
        pay
        monthly retainers to the above firms ranging from $5,000 to $15,000 per month
        over the life of the agreement The payment to the European firm was originally
        pursuant to a six month agreement and represented an advance payment of
        anticipated out of pocket expenses of the consultant in 2008. The agreement
        was
        subsequently terminated and the European firm returned $167,988 on April
        24,
        2008, the balance of uncommitted funds. The remaining expenses are being
        amortized over the applicable periods in 2008. In the first three months
        of
        2008, $226,737 was charged to earnings.
 
 **6.
        Stock-based compensation and common stock issued and agreed to be
        issued**
 
 Upon
        commencement of operations, the Company entered into multiple agreements
        in
        which the Company received consulting and other services in exchange for
        the
        Company’s common stock or options to purchase the Company’s common stock. The
        Company complies with SFAS 123(R) and records compensation expense for the
        fair
        value of these services over the periods in which they are
        provided.
 
 In
        September 2005, the Company agreed to grant 120,000 shares (exchanged for
        232,553 shares in the Reverse Merger) to three individuals for agreeing to
        serve
        on the Board of Directors for a three year term. The fair value of these
        shares
        at the date of such agreement was estimated to be approximately $96,000.
        For the
        three months ended March 31, 2008 and 2007, the Company recorded Board of
        Director fees and compensation expense, which are included in general and
        administrative expenses, of approximately $8,000 and $8,000, respectively,
        for
        these shares. Included in other assets as of March 31, 2008 and December
        31,
        2007 are deferred Board of Director fees of approximately $13,000 **** and
        $21,000, respectively.
  -
            8 -
  As
        a
        result of the above transactions, capital advances of $310,000 in September
        2005 and $200,000 in April 2006, and services performed in exchange for shares
        issued prior to 2006, the Company became contractually obligated to issue
        shares
        in excess of its 200 authorized shares (“Old Shares of Clear Skies Group,
        Inc.”). As a result, the Company recorded a liability of approximately $894,000
        as of December 31, 2006 for the value of the contractual obligations. Due
        to the
        contractual obligation to issue the excess shares, the Board of Directors,
        with
        stockholder approval, passed a resolution to increase the authorized shares
        to
        10,000,000. On January 30, 2007, the certificate of incorporation (the
“Charter”) was officially amended to authorize the Company to issue 10,000,000
        shares (“New Shares of Clear Skies Group, Inc.”) of $0.01 par value common
        stock. Concurrently with the amendment to the Charter, the Company’s sole
        shareholder was issued 1,570,000 New Shares of Clear Skies Group, Inc.
        (exchanged for 3,042,570 shares in the Reverse Merger) in exchange for the
        Old
        Share of Clear Skies Group, Inc. previously issued. Upon the amendment to
        the
        Charter, the obligation to issue 1,042,500 shares of CSG common stock (exchanged
        for 2,020,297 in the Reverse Merger) was fulfilled and the liability was
        reclassified to stockholders equity as Common Stock to the extent of par
        value
        with the excess classified as Additional Paid-In Capital.
 
 The
        Company is obligated under a contract with a public relations consultant
        to
        issue $4,500 worth of its common stock to the consultant each month during
        the
        term of the contract which expires on September 30, 2008. On March 24, 2008
        the
        Company issued 41,374 shares of its common stock to that public relations
        consultant. Of the shares issued, 27,000 shares, with a value of $13,500,
        were
        issued for services rendered in the three months ended December 31, 2007
        and the
        $13,500 was recorded as an expense in that quarter. The shares were valued
        at
        the price paid for shares in the private placement described above. The
        remaining 14,374 shares also with a value of $13,500 were for services rendered
        in the first quarter of 2008 and the value was charged to expense in that
        quarter. The Board determined to value the shares for each month at the closing
        price of our common stock on the last trading day of the prior
        month.
 
 **7.** **Related
        party transactions**
  In
        April
        2007, the Company issued 40,000 shares (exchanged for 77,517 shares in the
        Reverse Merger) to an individual who was a director as compensation for services
        rendered other than as a director. The fair value of these shares at issuance
        was estimated to be approximately $33,000 which was recorded as service fees
        and
        included in general and administrative expenses for the three months ended
        March
        31, 2007.
  -
            9 -
  Several
        of the Company’s officers and directors, or their affiliates, have from time to
        time extended loans to the Company or agreed to defer compensation payable
        to
        them in order to fund the Company’s operating expenses.  In this
        regard:  (i) Quixotic Systems, Inc. (“Quixotic”) loaned $285,000 at 10%
        interest compounded daily, which had been repaid in full as of December 31,
        2007; and (ii) Gelvin Stevenson loaned $20,000 all of which had been repaid
        in
        full as of December 31, 2007. Furthermore, Ezra Green agreed to the deferral
        of
        $73,259 of his compensation (of which $69,366 was unpaid and included in
        accrued
        expenses as of December 31, 2007). As of March 18, 2008, Mr. Green’s deferred
        compensation had been repaid in full. Mr. Green advanced $30,275 to the Company
        in 2006 and an additional $70,037 in 2007 (which has been recorded as a balance
        of $100,312 due to related party at December 31, 2007). This related party
        transaction was also repaid in full by March 18, 2008.   Such loans and
        other arrangements were interest free (except for Quixotic) and have not
        been
        memorialized by written promissory notes.  At December 31, 2007, there were
        miscellaneous due to related parties of approximately $4,000 which were paid
        in
        March, 2008.
 
 **8.
        Stock Options and Warrants**
 
 In
        accordance with SAS No. 123(R), the Company uses the Black-Scholes option
        pricing model to measure the fair value of its Option awards granted in 2007
        as
        part of or after the Reverse Merger described in Note 1. All Option awards
        granted prior to the Reverse Merger transaction described in Note 2 were
        exchanged for common stock as part of that transaction. The Black-Scholes
        model
        requires the input of highly subjective assumptions including volatility,
        expected term, risk-free interest rate and dividend yield. As the Options
        were
        granted to non-employee consultants the resulting fair value is recorded
        as
        consulting expense on a straight-line basis over the period of service of
        the
        consultants, in this case one year. The amount of this expense charged to
        earnings for the three months ended March 31, 2008 and 2007 was $13,400 and
        zero, respectively, and $224,700 will be charged against earnings in the
        last
        nine months of 2008. The warrants granted to the placement agent and its
        designees to purchase a total of 732,401 shares at $.50 per share expiring
        on
        December 20, 2010 are reflected as offsetting charges to additional paid-in
        capital as of and for the year ended December 31, 2007.
 
 In
        December 2007 the Company’s shareholders approved its 2007 Equity Incentive Plan
        which provides for the granting of options to both employees and non-employees
        to purchase up to 2,500,000 shares of the Company’s common stock. The Plan is
        administered by the Company’s Board of Directors or a committee appointed by the
        Board. As of December 31, 2007 no options have been granted under this Plan.
        On
        May 1, 2008 the Company adopted the Clear Skies Solar, Inc. 2008 Non-Employee
        Director Compensation Plan and, pursuant to that Plan, each of the three
        non-employee directors were granted options expiring in ten years to purchase
        90,000 shares at $1.30 each.
  -
            10 -
  The
        Company agreed to issue a total number of shares of common stock with a value
        of
        $4,500 per month pursuant to a one year contract with one of the consultants,
        the exact number of shares being dependant on the market price of the Company’s
        common stock. For the three months ended March 31, 2008 in which the contract
        was in effect the Company issue a total of 41,374 shares of common stock
        to this
        consultant.
 
 The
        Company did not issue any stock options to employees in 2007. A summary of
        the
        Company’s stock option activity in the first three months of 2008 for employees
        is as follows:
 
 **Weighted****Weighted**
              
              **Average****Average**
              
              **Remaining****Exercise**
              
              **Contractual**
              
              **Aggregate****Number
                  of**
                **Options**
              
              **Price
                  per**
                **Option**
              
              **Term**
                **(Years)**
              
              **Intrinsic**
                **Value**Outstanding,
                  January 1, 2008
              
              
              0Granted
                  February 6, 2008
              
              
              1,045,000
              
              $
              1.58
              
              
              8.64
              
              $
              1,491,754Granted
                  March 31, 2008
              
              
              500,000
              
              $
              1.25
              
              
              8.00
              
              $
              1,052,833Cancelled/forfeited
              
              
              0Outstanding,
                  March 31, 2008
              
              
              1,455,000
 
 The
        following table summarized additional information about stock options granted
        during the three months ended March 31, 2008:
 
 Risk
                  free rate
              
              
              4.51%
                  - 4.65%Stock
                  price volatility
              
              
              121%Dividend
                  yield
              
              
              0
 
 The
        estimated stock price volatility was derived based on the average volatility
        of
        34 companies that the Company considered reasonably similar to it. The risk
        free
        rate of return was based on the yield of US Treasury debt of comparable
        maturities on the date of issuance of the Options.
 During
          the three months ended March 31, 2008, the Company recorded approximately
          $83,000 of stock based compensation for issuances under this
          Plan.
 **9.
        Contracts**
  The
        Company generates billings based on the fulfillment of milestones, which
        are set
        forth in the signed contract for each project. Milestones may include, but
        are
        not limited to, initial permits being obtained, delivery of materials, and
        when
        installation is subsequently complete.
  -
            11 -
  **As
                  of March 31, 2008 and December 31, 2007**
              
              **2008**
              
              **2007**Costs
                  Incurred on Contracts
              
              $
              524,692
              
              
              355,183Estimated
                  Earnings, less foreseeable losses
              
              
              9,325
              
              
              30,610534,017
              
              
              385,793Billings
                  to Date
              
              
              (534,566
              )
              
              (393,159
              )Net
                  costs and estimated earnings/losses in excess of billings
              
              $
              (549
              )
              
              (7,366
              )These
                  amounts are included in the accompanyingMarch
                  31, 2008 balance sheet under the following captions:Costs
                  and estimated earnings in excess of billings
              
              $
              35,885
              
              
              27,641Billings
                  in excess of costs and estimated earnings
              
              
              (36,434
              )
              
              (35,007
              )$
              (549
              )
              
              (7,366
              )
  **10.
        Commitments and Contingencies**
  ***Litigation***
  From
        time
        to time, the Company is a party to various legal matters in the normal course
        of
        business, the outcome of which, in the opinion of management, will not have
        a
        material adverse effect on the financial position, results of operations
        or cash
        flows of the Company.
  -
            12 -
  ***Lease
        commitments***
 
 The
        Company occupies its premises on a month to month lease.
 
 ***Employment
        agreements***
 
 The
        Company has entered into several two year employment agreements with certain
        employees providing for severance arrangements. The severance arrangements
        become Company obligations if the Company terminates such a contract without
        “cause” or if the covered employee terminates his contract with “good reason”
(as such terms are defined in the relevant agreement) and vary in amount
        (based
        on the salary in effect on such termination date) and duration from three
        months
        to the remainder of the contract term.
  **11.
        Fair Value Measurements**
  Effective
        January 1, 2008, the Company implemented Statement of Financial Accounting
        Standard No. 157, *Fair
        Value Measurement* ,
        or SFAS
        157, for its financial assets and liabilities that are re-measured and reported
        at fair value at each reporting period, and non-financial assets and liabilities
        that are re-measured and reported at fair value at least annually. In accordance
        with the provisions of FSP No. FAS 157-2, *Effective
        Date of FASB Statement No. 157,* the
        Company has elected to defer implementation of SFAS 157 as it relates to
        its
        non-financial assets and non-financial liabilities that are recognized and
        disclosed at fair value in the financial statements on a nonrecurring basis
        until January 1, 2009. The Company is evaluating the impact, if any, this
        standard will have on its non-financial assets and liabilities.
  The
        adoption of SFAS 157 to the Company’s financial assets and liabilities and
        non-financial assets and liabilities that are re-measured and reported at
        fair
        value at least annually did not have an impact on the Company’s financial
        results.
  In
        general, fair values determined by Level 1 inputs utilize quoted prices
        (unadjusted) in active markets for identical asssets or liabilities. Fair
        values
        determined by Level 2 inputs utilize data points that are observable such
        as quoted prices, interest rates and yield curves. Fair values determined
        by
        Level 3 inputs are unobservable data points for the asset or liability, and
        include situations where there is little, if any, market activity for the
        asset
        or liability. At March 31, 2008, the Company had approximately $3,372,000
        in
        cash and cash equivalents, which is a Level 1 input.
  **Item
        2.**  **Management’s
        Discussion and Analysis o** **f
        Financial Condition and Results of Operations.**
  *This
        discussion should be read in conjunction with our unaudited condensed
        consolidated financial statements included in this Quarterly Report on Form
        10-Q
        and the notes thereto, as well as the other sections of this Quarterly Report
        on
        Form 10-Q and our Annual Report for the year ended December 31, 2007 on Form
        10-KSB, including the “Certain Risks and Uncertainties” and “Description of
        Business” sections thereof. This discussion contains a number of forward-looking
        statements, all of which are based on our current expectations and could
        be
        affected by the uncertainties and risk factors described throughout this
        Quarterly Report and our Annual Report for the year ended December 31, 2007
        on
        Form 10-KSB. Our actual results may differ materially.*
  **Overview**
 
 We
        deliver turnkey solar electricity installations and renewable energy technology
        solutions to commercial and residential developer customers. Our primary
        business is the design and installation of photovoltaic (sometimes called
“solar
        electric” or “PV” for short) solar power systems for the commercial and
        residential developer markets. We have developed certain proprietary
        photovoltaic panel mounting systems and trade secrets that we believe reduce
        the
        required man-hours on system installations. We have also developed XTRAX®, our
        patented remote monitoring solution for measuring the production of renewable
        energy systems, among other things. We currently serve customers in California,
        New York and New Jersey. We also plan to expand to other locations where
        the
        amount of sunshine, the cost of electricity and/or the availability of
        governmental rebate makes prospects of solar energy system sales appear
        attractive.
  -
            13 -
  Clear
        Skies Group, Inc. was incorporated in New York on September 23, 2003 and
        began
        operations in August 2005. As a result of the reverse merger transaction
        that we
        consummated on December 20, 2007, our historical financial statements for
        periods prior to the reverse merger are those of Clear Skies Group, Inc.
  Since
        we
        began operations, we have incurred annual net losses. As of March 31, 2008,
        we
        had an accumulated deficit of $6,408,948 and we expect to incur additional
        losses in the foreseeable future. Our revenue during the three months ended
        March 31, 2008 and 2007 was $153,224 and $236,233, respectively. We recognized
        net losses of $1,735,968 (or a basic and diluted loss of $.06 per share)
        for the
        three months ended March 31, 2008 and a net loss of $281,161 (or a basic
        and
        diluted loss of $.06 per share) for the comparable period in 2007.
  Since
        our
        inception, we have financed our operations primarily through sales of equity
        and
        debt securities. From inception through March 31, 2008, we received net offering
        proceeds from private sales of equity and debt securities (after deducting
        placement agents’ discounts, commissions and expenses, and our offering
        expenses) of approximately $6,843,126 in the aggregate.
  Based
        on
        current plans and assumptions, we believe that our current financial resources,
        together with our expected net revenues from operations, will be adequate
        to
        fund our operations in 2008. Beyond 2008, we may require further financing
        of
        our operations before we are able to achieve positive cash flow. There can
        be no
        assurance that we will ever generate sufficient revenues to provide positive
        cash flows from operations. Depending on our actual future results of operations
        and whether we engage in any strategic transaction or other activities that
        may
        consume funds, we may need to raise additional funds through additional public
        or private offerings of our securities. No assurance can be given that
        additional sources of funds will be available to us on reasonable terms or
        at
        all.
  Depending
        upon the needs of our customers, we may have to increase our installation
        staff
        significantly in 2008 to ensure that installations can be completed while
        applicable rebates remain in effect. We expect that our selling and general
        and
        administrative expenses will increase in future periods, as we expand our
        administrative, sales and installation workforce.
  Facilities
        requirements are a pressing issue for us, as we have already outgrown our
        current offices. We are looking for new office space in Long Island as our
        headquarters that can accommodate our expected needs for the next three years.
        In addition, we anticipate establishing regional field offices for our sales
        teams. Accordingly, we expect the rental expense component of our general
        and
        administrative expenses to increase in future periods.
  We
        expect
        our immediate capital expenditures, which we do not expect to exceed $100,000,
        will be related to completing the Beta tests and initial launch of XTRAX®.
        Subject to industry and governmental approvals we expect to be able to have
        a
        commercial product during the third quarter of 2008. Cranes and other
        installation equipment are generally available for rental on reasonable terms,
        and we do not have plans to acquire any.
  **Results
        of Operations: Comparison of Three Month Periods Ended March 31, 2008 and
        2007**
 
 Generally,
        we anticipate that our operating costs and expenses will increase in the
        future
        to support a higher level of revenues. Increased costs will be attributable
        to
        increased personnel, principally sales personnel and support staff for a
        multi-office infrastructure and increased marketing expenditures to promote
        our
        services. In addition, as a public reporting entity, compliance with Securities
        and Exchange Commission regulations will substantially increase our general
        and
        administrative costs.
  -
            14 -
  Revenue
        in the first quarter of 2008 was $153,224, a decrease of $83,009 (or 35%)
        from
        the $236,233 of revenue for the three months ended March 31, 2007. In the
        2008
        period, Revenues declined as we had large sub-contract work in the first
        quarter
        of 2007 that was completed during calendar 2007. In the first quarter of
        2008 we
        focused on completing smaller residential jobs and management’s attention was
        mainly directed to planning for the future of the Company. Cost of revenue
        in
        the first three months of 2008 was $193,348, down $64,245 (or 25%) from the
        cost
        of sales of $257,593 in the three months ended March 31, 2007. The gross
        margin
        loss in the three months ended March 31, 2008 was $40,124, a decrease of
        $18,764
        (or 88%) from the gross margin loss of $21,360 in the comparable 2007 quarter.
        This equates to a 26% gross margin loss in the first quarter of 2008 compared
        to
        a negative gross margin of 9% in the first quarter of 2007. The increased
        loss
        was primarily caused by the smaller jobs and the inherent inefficiencies
        in
        completing smaller contracts not allowing us to take advantage of economies
        of
        scale in purchasing or in completing the jobs. In the first quarter of 2007,
        our
        work on subcontracts generated grater margin.
 
 Selling
        expenses increased by $172,146 (or 278%) from the $61,813 incurred in the
        first
        quarter of 2007 to $233,959 in the comparable 2008 quarter. The increase
        is
        largely accounted for by (a) the $63,930 of public relations and consulting
        costs in the 2008 quarter compared to none in the 2007 quarter, (b) an increase
        in wages, taxes and benefits of $69,612 in 2008 over the level of the first
        quarter of 2007 and (c) an increase of $34,375 in travel and advertising
        costs
        in 2008 over the amount incurred in the three months ended March 31,
        2007.
 
 General
        and administrative expenses were $1,488,302 for the three months ended March
        31,
        2008 compared to $198,517 in the three months ended March 31, 2007, for an
        increase of $1,289,785. This increase is largely accounted for by (a) and
        increase in legal fees of $283,211, (b) incurring $459,948 of investor relations
        expenses in the 2008 quarter compared to none in the 2007 quarter, (c) an
        increase in compensation, salaries and related benefits of $303,515, (d)
        an
        increase in accounting fees of $25,351, (e) an increase in engineering expenses
        of $40,610, (f) an increase in general office expenses and travel related
        costs
        of $41,477 and (g) recording the amortization of the value of employee stock
        options of $132,239 in the 2008 quarter compared to none in the 2007
        quarter.
 
 **Liquidity
        and Capital Resources**
  At
        March
        31, 2008, we had an accumulated deficit of $6,408.948, and we expect to incur
        additional losses in the foreseeable future. While we have funded our operations
        since inception through private placements of equity and bridge loans, there
        can
        be no assurance that adequate financing will continue to be available to
        us and,
        if available, on terms that are favorable to us.
  At
        March
        31, 2008, we had approximately $3,372,000 in cash and cash equivalents. We
        believe that our existing funds will be sufficient to fund our currently
        planned
        operations at least through December 31, 2008. If we are unable to successfully
        implement our business plan, or if our plans are modified, then our current
        resources may be exhausted sooner.
  Clear
        Skies Group, Inc. began operations in August 2005, and raised $310,000 of
        gross
        proceeds from a private placement offering of securities to Rudd-Klein
        Alternative Energy, LLC (“Rudd-Klein”) that closed on September 30, 2005. On
        April 18, 2006, Rudd-Klein funded the remaining $100,000 of the purchase
        price
        in such private placement. On April 25, 2006, Clear Skies Group, Inc. sold
        its
        common stock in an additional private placement transaction that raised gross
        proceeds of $100,000. From April 26, 2007 through July 26, 2007, Clear Skies
        Group, Inc. sold its common stock and warrants to two separate purchasers
        in a
        series of private placement transactions that raised aggregate gross proceeds
        of
        $95,000. In the quarter ended September 30, 2007, Clear Skies Group, Inc.
        issued
        an aggregate of $745,000 principal amount of bridge notes in a private placement
        transaction. The purchasers of such bridge notes paid an aggregate gross
        purchase price of $745,000 for such bridge notes and shares of common stock
        of
        Clear Skies Group, Inc. In accordance with the terms of the bridge notes,
        the
        holders of all $745,000 of outstanding principal amount of bridge notes invested
        in our private placement that closed in December 2007 by exchanging such
        bridge
        notes for an aggregate of 1,490,000 shares of our common stock (i.e. the
        number
        of shares of our common stock offered for sale in the Private Placement for
        an
        aggregate purchase price of $745,000). The accrued interest on such bridge
        notes
        was paid out of the proceeds of the December 2007 private placement. In the
        fourth quarter of 2007, Clear Skies Group, Inc. borrowed an aggregate of
        $250,000 and issued 8% promissory notes to evidence such borrowing, which
        notes
        were repaid upon closing of the private placement in December 2007. In closings
        on December 20, 2007 and December 24, 2007, we raised an aggregate of
        approximately $5,931,000 in net proceeds (in addition to eliminating $745,000
        of
        indebtedness) from the private placement of 16,000,000 shares of our common
        stock.
  -
            15 -
  Several
        of our officers and directors, or their affiliates, have from time to time
        extended loans to Clear Skies Group, Inc. or agreed to defer compensation
        payable to them in order to fund our operating expenses. In this regard:
        (i)
        Quixotic Systems, Inc. (“Quixotic”), an affiliate of Richard Klein, who is a
        member of our board of directors, loaned $285,000 ($175,000 of which constitute
        amounts Quixotic has paid in connection with a settlement agreement described
        below under “Legal Proceedings”), which loan had been repaid in full, together
        with 10% interest compounded daily, by December 31, 2007; and (ii) Gelvin
        Stevenson, our Secretary and Treasurer loaned $20,000, which had been repaid
        in
        full as of December 31, 2007. Furthermore, Ezra Green, our Chairman and Chief
        Executive Officer, agreed to the deferral of $73,259 of his compensation,
        of
        which $69,366 remained unpaid as of December 31, 2007 (and was booked as
        a
        balance due to related party at December 31, 2007). As of March 18, 2008,
        Mr.
        Green’s deferred compensation had been paid in full. In addition, Mr. Green had
        advanced $30,275 to us in 2006 and an additional $70,037 to us in 2007 (which
        has been booked as a balance of $100,312 due to related party at December
        31,
        2007). This related party transaction was also repaid in full by March 18,
        2008.
        Such loans and other arrangements were interest free (except for Quixotic)
        and
        had not been memorialized by written promissory notes. In consideration for
        the
        extension and maintenance of such credit and deferral of salary, on May 7,
        2007,
        Clear Skies Group, Inc. granted Mr. Green, Quixotic and Dr. Stevenson securities
        that were exchanged for 610,452, 290,691 and 77,517 shares of our common
        stock,
        respectively, in our reverse merger.
  We
        may
        need to raise additional funds through either the licensing or sale of our
        technologies, products and services or the additional public or private
        offerings of our securities. There can be no assurance that we will be able
        to
        obtain further financing, do so on reasonable terms, or do so on terms that
        would not substantially dilute our current stockholders’ equity interests in us.
        If we are unable to raise additional funds on a timely basis, or at all,
        we may
        not be able to continue our operations.
  We
        expect
        to put our capital resources, which included $3,372,000 of cash and cash
        equivalents at March 31, 2008, to the following uses:
 
 ·
              towards
                  our $500,000 budget for the engagement of investor relations and
                  public
                  relations firms for the twelve months following the closing of
                  the reverse
                  merger;
 ·
              possibly
                  for strategic acquisitions, if and to the extent we determine appropriate;
 ·
              completion
                  of beta testing and commercialization of XTRAX®; and
 ·
              for
                  general working capital purposes.
 
 **Commitments
        and Contingencies**
  We
        rent
        office space for $3,400 per month at 5020 Sunrise Highway, Massapequa Park,
        New
        York 11762-2900 and additional storage space at $400 per month. There is
        no
        annual contract or lease obligation with respect to our rented
        properties.
  -
            16 -
  **Recently
        Issued Accounting Pronouncements**
 
 In
        December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”). SFAS
        No. 141(R) provides companies with principles and requirements on how an
        acquirer recognizes and measures in its financial statements the identifiable
        assets acquired, liabilities assumed, and any non-controlling interest in
        the
        acquiree as well as the recognition and measurement of goodwill acquired
        in a
        business combination. SFAS No. 141(R) also requires certain disclosures to
        enable users of the financial statements to evaluate the nature and financial
        effects of the business combination. Acquisition costs associated with the
        business combination will generally be expensed as incurred. SFAS No. 141(R)
        is
        effective for business combinations occurring in fiscal years beginning after
        December 15, 2008, which will require the Company to adopt these provisions
        for
        business combinations occurring in fiscal 2009 and thereafter. Early adoption
        of
        SFAS No. 141(R) is not permitted.
  In
        December 2007, the FASB issued SFAS No. 160,
“Noncontrolling Interests in Consolidated Financial Statements - An Amendment
        of
        ARB No. 51”. SFAS No. 160 requires reporting entitities to present
        noncontrolling (minority) interests as equity as opposed to as a liability
        or
        mezzanine equity and provides guidance on the accounting for transactions
        between an entity and noncontrolling interests. SFAS No. 160 is effective
        the
        first fiscal year beginning after December 15, 2008, and interim periods
        within
        that fiscal year. SFAS No. 160 applies prospectively as of the beginning
        of the
        fiscal year SFAS No. 160 is initially applied, except for the presentation
        and
        disclosure requirements which are applied retrospectively for all periods
        presented subsequent to adoption. The adoption of SFAS No. 160 will not have
        a
        material impact on our financial statements; however, it could impact future
        transactions entered into by us.
 
 **Certain
        Risks and Uncertainties**
 
 Our
        Annual Report on Form 10-KSB for the year ended December 31, 2007 includes
        a
        detailed discussion of our risk factors under the heading “Certain Risks and
        Uncertainties.” The information presented in this 10-Q should be read in
        conjunction with the risk factors and information disclosed in such Form
        10-KSB.
  **Off-Balance
        Sheet Arrangements**
  We
        did
        not engage in any off-balance sheet arrangements during the three month periods
        ended March 31, 2008 and 2007.
 
 **Item
        3. Quantitative and Qualitative Disclosures About Market
        Risk.**
 
 Due
        to
        our status as a smaller reporting company, this Item is not
        required.
 
 **Item
        4T. Controls and Procedures.**
 
 Under
        the
        supervision and with the participation of management, including our Chief
        Executive Officer and Chief Financial Officer, we conducted an evaluation
        of the
        effectiveness of our disclosure controls and procedures (as defined in Rule
        13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
        Act”)) as of the end of the period covered by this Quarterly Report on Form
        10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial
        Officer concluded that our disclosure controls and procedures have not been
        operating effectively as of the end of the period covered by this
        report.
 
 In
        connection with the preparation of our Annual Report of Form 10-KSB, management
        identified a material weakness, due to insufficient resources in our account
        and
        finance department, resulting in (i) an ineffective review, monitoring and
        analysis of schedules, reconciliations and financial statement disclosures,
        and
        (ii) the misapplication of U.S. GAAP and SEC reporting requirements. Due
        to the
        effect of the lack of resources, including a lack of resources that are
        appropriately qualified in the areas of U.S. GAAP and SEC reporting, and
        the
        potential impact on the financial statements and disclosures and the importance
        of the annual and interim financial closing and reporting process, in the
        aggregate, there is more than a remote likelihood that a material misstatement
        of the financial statements would not have been prevented or detected for
        the
        year ended December 31, 2007.
 
 *Remediation
        Plans*
 
 Management
        is in the process of remediating the above-mentioned weakness in our internal
        control over financial reporting and is implementing the following
        steps:
  -
            17 -
 ·
              Hiring
                  additional accounting personnel (a full time CFO was hired January
                  21,
                  2008 and another full time senior level accountant was hired February
                  11,
                  2008);
  ·
              Establish
                  a detailed timeline for review and completion of financial reports
                  to be
                  included in our Forms 10-Q and 10-K (established in connection
                  with this
                  Form 10-Q);
  ·
              Engage
                  the use of a third party accounting service provider as needed
                  to further
                  support and supplement our internal staff in accounting and related
                  areas
                  when necessary; and
  ·
              Employ
                  the use of appropriate supplemental SEC and U.S. GAAP checklists
                  in
                  connection with our closing process and the preparation of our
                  Forms 10-Q
                  and 10-K.
 
 The
        implementation of these remediation plans has been initiated and will continue
        during the remainder of fiscal 2008. The material weakness will not be
        considered remediated until the applicable remedial procedures are tested
        and
        management has concluded that the procedures are operating effectively.
        Management recognizes that use of our financial resources will be required
        not
        only for implementation of these measures, but also for testing their
        effectiveness and may seek the assistance of an outside service provider
        to
        assist in this process.
 
 If
        we are
        not able to implement controls to avoid the occurrence of material weaknesses
        in
        our internal control over financial reporting in the future, then we might
        report results that are not consistent with our actual results and we may
        need
        to restate results that will have been previously reported.
 
 *Changes
        in Internal Control over Financial Reporting*
 
 The
        following changes in our internal control over financial reporting were
        implemented during the quarter ended March 31, 2008 that have materially
        affected, or are reasonably likely to materially affect, our internal control
        over financial reporting:
 
 ·
              The
                  hiring of a full time CFO on January 21, 2008 and another full
                  time senior
                  level accountant on February 11, 2008;
                  and
 ·
              Establishing
                    a timeline for review and completion of the financial reports
                    to be
                    included in our Forms 10-Q and
                    10-K.
  **PART
        II**
 **OTHER
        INFORMATION**
 
 **Item
        2. Unregistered Sales of Equity Securities and Use of
        Proceeds.**
 
 During
        the three months ended March 31, 2008, we have issued unregistered securities
        to
        the person, as described below. This transaction did not involve any
        underwriters, underwriting discounts or commissions, or any public offering.
        The
        sale of these securities was deemed to be exempt from the registration
        requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof,
        and/or Rule 506 of Regulation D promulgated thereunder, as a transaction
        by an
        issuer not involving a public offering.
 
 On
        March
        24, 2008, we issued 41,374 shares to a public relations consulting firm as
        required by our contract with such firm. Such shares represented compensation
        under the applicable consulting agreement for the period from October 1,
        2007
        through March 31, 2008.
  -
            18 -
 **Item
          4. Submission of Matters to a Vote of Security Holders.**
 On
        January 22, 2008, a majority of our stockholders took action via written
        consent
        to approve an amendment to our Certificate of Incorporation in order to change
        our name from “Clear Skies Holdings, Inc.” to “Clear Skies Solar, Inc.”
Stockholders holding an aggregate of 18,743,331 shares of our common stock
        (representing a total of 60.69% of the shares entitled to vote thereon) executed
        and delivered to us consents approving such name change.
 
 **Item
        6. Exhibits** **.**
 
 The
        following exhibits are filed as part of, or incorporated by reference into,
        this
        Report:
  Exhibit
                  No.
              
              Description3.1
              (a)
              
              Certificate
                  of Incorporation (1)3.1
              (b)
              
              Certificate
                  of Amendment to Certificate of Incorporation (3)10.1
              
              
              Form
                  of Directors and Officers Indemnification Agreement (2)10.2
              
              
              Summary
                  sheet of amendment, dated February 6, 2008, to the terms of Employment
                  Agreement, dated December 20, 2007, by and between Clear Skies
                  Holdings,
                  Inc. and Ezra J. Green (4)10.3
              
              
              Employment
                  Agreement, dated March 19 2008, by and between Clear Skies Solar,
                  Inc. and
                  Thomas J. Oliveri (5)31.1
              *
              
              Section
                  302 Certification of Principal Executive Officer31.2
              *
              
              Section
                  302 Certification of Principal Financial Officer32.1
              *
              
              Section
                  906 Certification of Principal Executive Officer and Principal
                  Financial
                  Officer
  
 *  Filed
        herewith.
  (1)  Incorporated
        herein by reference to the copy of such document included as an exhibit to
        our
        Current Report on Form 8-K filed on December 19, 2007.
  (2)  Incorporated
        herein by reference to the copy of such document included as an exhibit to
        our
        Current Report on Form 8-K filed on December 26, 2007.
  (3)  Incorporated
        herein by reference to the copy of such document included as an exhibit to
        our
        Current Report on Form 8-K filed on January 30, 2008.
  (4)  Incorporated
        herein by reference to the copy of such document included as an exhibit to
        our
        Registration Statement on Form S-1 filed on March 27, 2008.
  (5)  Incorporated
        herein by reference to the copy of such document included as an exhibit to
        our
        Annual Report on Form 10-KSB filed on March 31, 2008.
  -
            19 -
  **SIGNATURES**
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the Registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
 **CLEAR
                    SKIES SOLAR, INC.**Date:****May
                    14, 2008
                By:
                /s/Ezra J. GreenName:
                    Ezra J. Green
                  Title:
                    Chairman & Chief Executive Officer (Principal
                  Executive
                    Officer)Date:****May
                    14, 2008
                By:
                /s/ Arthur
                  L.
                  GoldbergName:
                    Arthur L. Goldberg
                  Chief
                    Financial Officer (Principal Financial and Accounting
                  Officer)
  -
            20 -
  **EXHIBIT
        INDEX**
  Exhibit
                  No.
              
              Description3.1
              (a)
              
              Certificate
                  of Incorporation (1)3.1
              (b)
              
              Certificate
                  of Amendment to Certificate of Incorporation (3)10.1
              
              
              Form
                  of Directors and Officers Indemnification Agreement (2)10.2
              
              
              Summary
                  sheet of amendment, dated February 6, 2008, to the terms of Employment
                  Agreement, dated December 20, 2007, by and between Clear Skies
                  Holdings,
                  Inc. and Ezra J. Green (4)10.3
              
              
              Employment
                  Agreement, dated March 19 2008, by and between Clear Skies Solar,
                  Inc. and
                  Thomas J. Oliveri (5)31.1
              *
              
              Section
                  302 Certification of Principal Executive Officer31.2
              *
              
              Section
                  302 Certification of Principal Financial Officer32.1
              *
              
              Section
                  906 Certification of Principal Executive Officer and Principal
                  Financial
                  Officer
  
 *  Filed
        herewith.
  (1)  Incorporated
        herein by reference to the copy of such document included as an exhibit to
        our
        Current Report on Form 8-K filed on December 19, 2007.
  (2)  Incorporated
        herein by reference to the copy of such document included as an exhibit to
        our
        Current Report on Form 8-K filed on December 26, 2007.
  (3)  Incorporated
        herein by reference to the copy of such document included as an exhibit to
        our
        Current Report on Form 8-K filed on January 30, 2008.
  (4)  Incorporated
        herein by reference to the copy of such document included as an exhibit to
        our
        Registration Statement on Form S-1 filed on March 27, 2008.
  (5)  Incorporated
        herein by reference to the copy of such document included as an exhibit to
        our
        Annual Report on Form 10-KSB filed on March 31, 2008.
  -
            21 -