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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended:June 30, 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.
  DELAWARE
    
    30-0401535(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)200 Old Country Road, Suite 610
Mineola, New York
    
    11501-4241(Address of Principal Executive Offices)
    
    (Zip code)
 (516) 282-7652  (Registrants Telephone Number, Including Area Code)
 Former address  5020 Sunrise Highway, Suite 227, Massapequa Park, NY 11762  (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
  þ o
  o þ
   Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)




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Table of Contents
 PagePART I FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheet as at June 30, 2008 (unaudited) and Condensed Consolidated Balance Sheet as at December 31, 2007
    
    
    1Unaudited
Condensed Consolidated Statements of Operations for the three months ended June 30, 2008 and June 30, 2007 and for the
six-months ended June 30, 2008 and June 30, 2007
    
    
    2Unaudited Condensed Consolidated Statements of Cash Flows for the six-months ended June 30, 2008 and June 30, 2007
    
    
    3Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    16Item 4T. Controls and Procedures
    
    
    16PART II OTHER INFORMATION
    
    
    17Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17Item 6. Exhibits
    
    
    18Signatures
    
    
    192008 Equity Incentive PlanSummary sheet for Goldberg Employment AgreementSummary sheet for Oliveri Employment AgreementSection 302 Certification of Principal Executive OfficerSection 302 Certification of Principal Financial OfficerSection 906 Certification of Principal Executive Officer and Principal Financial Officer




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 CLEAR SKIES SOLAR, INC.
 
 Condensed Consolidated Balance Sheets
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)
    
    
    (Restated)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    1,031,043
    
    
    $
    4,866,842Accounts receivable, less allowance for doubtful
accounts of $41,775 and $32,775 at June 30, 2008
and December 31, 2007, respectively
    
    
    129,462
    
    
    
    92,291Inventories
    
    
    957,848
    
    
    
    25,120Costs and estimated earnings in excess of billings
    
    
    466,087
    
    
    
    27,641Total current assets
    
    
    2,584,440
    
    
    
    5,011,894Property and equipment, net
    
    
    174,348
    
    
    
    13,293Prepaid expenses and investor relations fees
    
    
    420,152
    
    
    
    645,644Security deposits
    
    
    116,934
    
    
    
    3,300Other assets
    
    
    39,414
    
    
    
    25,597$
    3,335,288
    
    
    $
    5,699,728LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable and accrued expenses
    
    $
    748,778
    
    
    $
    788,469Billings in excess of costs and estimated earnings
    
    
    42,284
    
    
    
    35,007Due to related parties
    
    
    
    
    
    
    104,410Customer deposits
    
    
    10,000
    
    
    
    5,000Obligation to issue options and warrants
    
    
    41,363
    
    
    
    9,401Payroll liabilities
    
    
    19,251
    
    
    
    140,729Provision for estimated warranty liability
    
    
    32,900
    
    
    
    7,742Estimated loss on uncompleted contracts
    
    
    41,842Total current liabilities
    
    
    936,418
    
    
    
    1,090,758Commitments
and ContingenciesStockholders EquityPreferred stock, $.001 par value, 10,000,000 shares
authorized, none issued and outstandingCommon stock, $.001 par value, 100,000,000 shares
authorized, 31,434,221 and 30,883,723 shares
issued and outstanding at June 30, 2008 and
December 31, 2007, respectively
    
    
    31,434
    
    
    
    30,883Additional paid-in capital
    
    
    10,194,075
    
    
    
    9,247,682Accumulated deficit
    
    
    (7,826,639
    )
    
    
    (4,669,595
    )Total stockholders equity
    
    
    2,398,870
    
    
    
    4,608,970$
    3,335,288
    
    
    $
    5,699,728
   1




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Clear Skies Solar, Inc.
 
 Unaudited Condensed Consolidated Statements of Operations
 For the three months
    
    
    For the six monthsended June 30,
    
    
    ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007RevenueContract revenue
    
    $
    1,133,440
    
    
    $
    5,200
    
    
    $
    1,271,664
    
    
    $
    17,800Subcontract revenue
    
    
    
    
    
    
    26,000
    
    
    
    
    
    
    
    249,633Other
    
    
    
    
    
    
    
    
    
    
    15,000Total revenue
    
    
    1,133,440
    
    
    
    31,200
    
    
    
    1,286,664
    
    
    
    267,433Cost of revenue
    
    
    852,554
    
    
    
    28,408
    
    
    
    1,045,902
    
    
    
    286,001Gross margin (loss)
    
    
    280,886
    
    
    
    2,792
    
    
    
    240,762
    
    
    
    (18,568
    )Operating expensesSelling expenses
    
    
    251,137
    
    
    
    52,685
    
    
    
    484,814
    
    
    
    114,498General and administrative expenses
    
    
    1,535,714
    
    
    
    72,712
    
    
    
    2,940,565
    
    
    
    271,229Total operating expenses
    
    
    1,786,851
    
    
    
    125,397
    
    
    
    3,425,379
    
    
    
    385,727Loss from operations
    
    
    (1,505,965
    )
    
    
    (122,605
    )
    
    
    (3,184,617
    )
    
    
    (404,295
    )Other revenue (expense)Interest income
    
    
    9,968
    
    
    
    
    
    
    
    42,315Interest expense
    
    
    (8,811
    )
    
    
    
    
    
    
    (14,741
    )Net loss
    
    $
    (1,504,808
    )
    
    $
    (122,605
    )
    
    $
    (3,157,043
    )
    
    $
    (404,295
    )Loss per
common share, basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.02
    )
    
    $
    (0.10
    )
    
    $
    (0.08
    )Weighted average common shares
outstanding
    
    
    31,324,412
    
    
    
    6,140,980
    
    
    
    31,093,778
    
    
    
    5,115,486
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Clear Skies Solar, Inc.
 
 Unaudited Condensed Consolidated Statements of Cash Flows
 For the six months ended June 30,2008
    
    
    2007Net Loss
    
    $
    (3,157,043
    )
    
    $
    (404,295
    )Adjustment to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    5,319Stock-based compensation
    
    
    501,019Estimated loss on contracts
    
    
    41,842Bad debt expense
    
    
    9,000
    
    
    
    68,000Increase
(decrease) in cash and cash equivalents attributable to changes in operating assets and liabilitiesAccounts receivable
    
    
    (46,171
    )
    
    
    (52,419
    )Inventories
    
    
    (932,728
    )Costs and estimated earnings in excess of billings
    
    
    (438,446
    )Prepaid expenses and investor relations fees
    
    
    225,492
    
    
    
    (280
    )Security deposits
    
    
    (113,634
    )Other assets
    
    
    (13,819
    )
    
    
    (12,895
    )Accounts payable and accrued expenses
    
    
    406,235
    
    
    
    187,989Provision
for estimated warranty liability
    
    
    25,158Customer deposits
    
    
    5,000Billings in excess of costs and estimated earnings
    
    
    7,277Payroll liabilities
    
    
    (121,478
    )
    
    
    71,989Obligation to issue option and warrant
    
    
    31,962Net cash used in operating activities:
    
    
    (3,565,015
    )
    
    
    (141,911
    )Net cash used in investing activities:Purchases of equipment
    
    
    (166,374
    )Net cash
provided by (used in) financing activities:Advances
received from (paid to) related party
    
    
    (104,410
    )
    
    
    31,000Net decrease in cash and cash equivalents
    
    
    (3,835,799
    )
    
    
    (110,911
    )Cash and cash equivalents, beginning of period
    
    
    4,866,842
    
    
    
    111,439Cash and
cash equivalents, end of period
    
    $
    1,031,043
    
    
    $
    528Supplemental Disclosures of cash flow information:Cash paid for interest
    
    $
    14,741
    
    
    $
    25,199Supplemental disclosure of non-cash financing and investment activities:Value of shares of common stock issued to consultants
    
    $
    525,250Reclassification of prepaid investor relations to other receivable
    
    $
    167,988Issuance of
shares to satisfy common stock to be issued
    
    
    
    
    
    $
    894,000
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Explanatory Note
  1. Basis of presentation and nature of operations
    Nature of Operations
 ®
   4




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2. Business combination and subsequent financing
 The reverse merger
       The private placement
   5




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3. Summary of significant accounting policies
 Accounts Receivable and Allowance for Doubtful Accounts
  Inventories
  Revenue Recognition
    6




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Cost Recognition
   Loss Per Share
  Recent Accounting Pronouncements
    7




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Stock Based Compensation
  4. Liquidity and capital resources
  5. Prepaid expenses and investor relations fees
  June 30,
    
    
    December 31,2008
    
    
    2007Payments to US public and investor relations firms
    
    $
    389,098
    
    
    $
    14,000Payment to a European investor relations firm
    
    
    
    
    
    
    394,790Prepayment of compensation to be amortized over
the periods in which the services will be
rendered
    
    
    
    
    
    
    201,610Prepaid insurance premiums
    
    
    31,054
    
    
    
    35,244Total
    
    $
    420,152
    
    
    $
    645,644
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6. Stock-based compensation and common stock issued and agreed to be issued
     7. Related party transactions
   9




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8. Stock Options and Warrants
    WeightedWeighted
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    ContractualNumber of
    
    
    Price per
    
    
    TermOptions
    
    
    Option
    
    
    (Years)Employees:Outstanding, January 1, 2008
    
    
    Granted  February 6, 2008
    
    
    1,045,000
    
    
    $
    1.58
    
    
    
    8.47Granted  March 31, 2008
    
    
    500,000
    
    
    $
    1.25
    
    
    
    7.75Granted  April 14,2008
    
    
    225,000
    
    
    $
    1.52
    
    
    
    9.92Granted  May 1, 2008
    
    
    50,000
    
    
    $
    1.30
    
    
    
    9.83Cancelled/forfeited
    
    
    (200,000
    )
    
    $
    1.54
    
    
    
    n/aOutstanding, June 30, 2008
    
    
    1,620,000Non-employee:Granted  June 20, 2008
    
    
    50,000
    
    
    $
    1.21
    
    
    
    1.50Outstanding, June 30, 2008
    
    
    50,000
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Risk free rate
    
    
    2.67%  3.08
    %Stock price volatility
    
    
    121
    %Dividend yield
    
    
    0
   9. Contracts
  As of June 30, 2008 and December 31, 2007
    
    2008
    
    
    2007Costs Incurred on Contracts
    
    $
    1,341,200
    
    
    $
    355,183Estimated Earnings, less foreseeable losses
    
    
    305,010
    
    
    
    30,6101,646,210
    
    
    
    385,793Billings to Date
    
    
    (1,222,407
    )
    
    
    (393,159
    )Net costs and estimated earnings/losses in excess of billings
    
    $
    423,803
    
    
    $
    (7,366
    )These amounts are included in the accompanyingJune 30, 2008 balance sheet under the following captions:Costs and estimated earnings in excess of billings
    
    $
    466,087
    
    
    $
    27,641Billings in excess of costs and estimated earnings
    
    
    (42,284
    )
    
    
    (35,007
    )$
    423,803
    
    
    $
    (7,366
    )
  11




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10. Commitments and Contingencies
 Litigation
  Lease commitments
  Employment agreements
 
 11. Subsequent Event
  
 Item 2. Managements Discussion and Analysis of 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 as amended, 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 as amended. Our actual results
may differ materially.
 Overview
 ®
  12




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® ®
  Results of Operations: Comparison of Three Month Periods Ended June 30, 2008 and 2007
   13




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Results of Operations: Comparison of Six Month Periods Ended June 30, 2008 and 2007
     Liquidity and Capital Resources
    14




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
    
    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;
furnishing our new offices;
    
    completion of beta testing and commercialization of XTRAX®; and
    
    for general working capital purposes.
  15




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Commitments and Contingencies
   2009
    
    $
    100,0532010
    
    $
    103,3992011
    
    $
    104,6432012
    
    $
    106,0072013
    
    $
    109,717
 Certain Risks and Uncertainties
  Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4T. Controls and Procedures.
   Remediation Plans
  
    
    Hire additional accounting personnel (a full time CFO was hired in
January 2008 and another full time senior level accountant was
hired in February 2008 who was replaced by an experienced
controller in June 2008);
    
    Purchase and install new accounting software;
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
    
    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.
   Changes in Internal Control over Financial Reporting
  
    
    Hired additional accounting personnel;
    
    The purchase and installation of new accounting software; and
    
    Established 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.
         17




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Item 6. Exhibits.
  Exhibit No.
    
    Description10.1
    *
    
    Clear Skies Solar, Inc. 2008 Equity Incentive Plan10.2
    *
    
    Summary sheet of amendment, dated July 28, 2008, to the terms of Employment Agreement,
dated December 31, 2007, by and between Clear Skies Holdings, Inc. and Arthur L.
Goldberg10.3
    *
    
    Summary sheet of amendment, dated July 28, 2008, to the terms of Employment Agreement,
dated March 19, 2008, by and between Clear Skies Solar, Inc. and Thomas J. Oliveri10.4
    
    
    Clear Skies Solar, Inc. 2008 Non-Employee Director Compensation Plan (1)10.5
    
    
    Lease between Hub Properties Trust and Clear Skies Solar, Inc., dated May 30, 2008 (2)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 Amendment No. 1 to our Registration Statement on Form
S-1 filed on May 23, 2008.(2)
    
    Incorporated herein by reference to the copy of such document included
as an exhibit to Amendment No. 2 to our Registration Statement on Form
S-1 filed on June 24, 2008.  18




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SIGNATURES
  CLEAR SKIES SOLAR, INC.Date: August 12, 2008
    
    By:
    
    /s/ Ezra J. GreenName:
    
    Ezra J. GreenTitle:
    
    Chairman & Chief Executive Officer(Principal Executive Officer)Date: August 12, 2008
    
    By:
    
    /s/ Arthur L. GoldbergName:
    
    Arthur L. GoldbergTitle:
    
    Chief Financial Officer(Principal Financial and Accounting Officer)
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EXHIBIT INDEX
 Exhibit No.
    
    Description10.1
    *
    
    Clear Skies Solar, Inc. 2008 Equity Incentive Plan10.2
    *
    
    Summary sheet of amendment, dated July 28, 2008, to the terms of Employment Agreement,
dated December 31, 2007, by and between Clear Skies Holdings, Inc. and Arthur L.
Goldberg10.3
    *
    
    Summary sheet of amendment, dated July 28, 2008, to the terms of Employment Agreement,
dated March 19, 2008, by and between Clear Skies Solar, Inc. and Thomas J. Oliveri10.4
    
    
    Clear Skies Solar, Inc. 2008 Non-Employee Director Compensation Plan (1)10.5
    
    
    Lease between Hub Properties Trust and Clear Skies Solar, Inc., dated May 30, 2008 (2)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 Amendment No. 1 to our Registration Statement on Form
S-1 filed on May 23, 2008.(2)
    
    Incorporated herein by reference to the copy of such document included
as an exhibit to Amendment No. 2 to our Registration Statement on Form
S-1 filed on June 24, 2008.  20