**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**







**FORM
      10-KSB**





(Mark
                one)R
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934****For
                the fiscal year ended December 31, 2007****OR**£
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                EXCHANGE****ACT
                OF 1934****For
                the transition period from _____________****to
                _____________**


**Commission
      file number: 001-33695**







**AKEENA
      SOLAR, INC.**


(Name
      of
      Small Business Issuer in Its Charter)





**Delaware**
            **90-0181035**(State
                or Other Jurisdiction of Incorporation or
                Organization)
            (I.R.S.
                Employer Identification No.)**16005
                Los Gatos Boulevard****Los
                Gatos, California**
            **95032**(Address
                of Principal Executive Offices)
            (Zip
                Code)





**(408)
      402-9400**


(Issuers
      Telephone Number, Including Area Code)





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


**Common
                  Stock, par value $0.001 per
                  share**
              **The
                  NASDAQ Stock Market
                  LLC**(Title
                  of Class)****
              (Name
                  of Exchange)


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


**None**





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. £





Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Exchange Act during the past 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 R No £





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. £





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes £ No R





The
      registrant’s revenues for the fiscal year ended December 31, 2007 were
      $32,211,761.





The
      aggregate market value of the common stock of the registrant as of March 10,
      2008 (based upon the $5.76 per share closing price of the common stock at that
      date as reported on the NASDAQ), excluding 7,758,000 outstanding shares
      beneficially owned by directors and executive officers, was
      $118,868,746.





As
      of
      March 10, 2008, 28,394,935 shares of common stock of the registrant were
      outstanding.





Transitional
      Small Business Disclosure Format (check one): Yes £ No R











**TABLE
      OF CONTENTS**





PagePART
                IItem
                1.
            Description
                of Business and Risk Factors
            
            3Item
                2.
            Description
                of Property
            
            18Item
                3.
            Legal
                Proceedings
            
            18Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            18PART
                IIItem
                5.
            Market
                for Common Equity, Related Stockholder Matters and Small Business
                Issuer
                Purchases of Equity Securities
            
            19Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operation
            
            19Item
                7.
            Financial
                Statements
            
            25Item
                8.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            46Item
                8A.
            Controls
                And Procedures
            
            46Item
                8A(T).
            Controls
              And Procedures
            
            46Item
                8B.
            Other
                Information
            
            47PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance with Section 16(a) of the Exchange Act
            
            48Item
                10.
            Executive
                Compensation
            
            51Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            54Item
                12.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            
            56Item
                13.
            Exhibits
            
            57Item
                14.
            Principal
                Accountant Fees and Services
            
            58SIGNATURES
            
            59Exhibit
              Index
            
            60




2


**PART
      I**





As
      used
      in this Annual Report on Form 10-KSB, unless otherwise indicated, the terms
      “we,” “us,” “our” and “the Company” refer to Akeena Solar, Inc. and its
      subsidiaries.





Our
      Annual Report on Form 10-KSB for 2007, and information we provide in our Annual
      Report to Stockholders, press releases, telephonic reports and other investor
      communications, including those on our website, may contain forward-looking
      statements with respect to anticipated future events and our projected financial
      performance, operations and competitive position that are subject to risks
      and
      uncertainties that could cause our actual results to differ materially from
      those forward-looking statements and our expectations.





Forward-looking
      statements can be identified by the use of words such as “expects,” “plans,”
“will,” “may,” “anticipates,” “believes,” “should,” “intends,” “estimates” and
      other words of similar meaning. These statements constitute forward-looking
      statements within the meaning of the Safe Harbor Provisions of the Private
      Securities Litigation Reform Act of 1995. These statements are subject to risks
      and uncertainties that may cause actual results to differ materially from those
      expressed or implied by these forward-looking statements. These forward-looking
      statements reflect our then current beliefs, projections and estimates with
      respect to future events and our projected financial performance, operations
      and
      competitive position.




Such
      risks and uncertainties include, without limitation, our ability to raise
      capital to finance our operations, the effectiveness, profitability and the
      marketability of our services, our ability to protect our proprietary
      information, general economic and business conditions, the impact of
      technological developments and competition, adverse results of any legal
      proceedings, the impact of current, pending or future legislation and regulation
      of the solar power industry, our ability to enter into acceptable relationships
      with one or more manufacturers for solar panel components and the ability of
      such contract manufacturers to manufacture products or components of an
      acceptable quality on a cost-effective basis, our ability to attract or retain
      qualified senior management personnel, including sales and marketing and
      technical personnel and other risks detailed from time to time in our filings
      with the SEC, including those described at the end of Item 1 below. We do not
      undertake any obligation to update any forward-looking statements.





**Item
      1.**  **Description
      of Business.**





**Overview**





We
      are a
      designer, integrator and installer of solar power systems. We market, sell,
      design and install systems for residential and commercial customers, sourcing
      components (such as solar panels and inverters) from manufacturers such as
      Fronius, Kyocera, Sharp, SunPower and Suntech. We currently serve customers
      in
      California, New York, New Jersey, Pennsylvania and Connecticut. According to
      data compiled by the California Energy Commission, the Solar Electric Power
      Association and the New Jersey Clean Energy Program, over the past four years
      we
      have been one of the largest national integrators of residential and commercial
      solar electric power systems in the United States. We are a member of the Solar
      Energy Industry Association, the California Solar Energy Industries Association,
      the Northern California Solar Energy Association, the Independent Power
      Providers, the Solar Energy Business Association of New England, and the New
      York Solar Energy Industries Association. To date, we have installed over 1,300
      solar power systems and since the commencement of our operations in 2001, our
      sales have steadily grown to approximately $32.2 million in 2007.





We
      were
      formed as a Nevada corporation on July 29, 2005, under the name Fairview Energy
      Corporation, Inc. (“Fairview”), and on August 4, 2006, were reincorporated in
      the State of Delaware. On August 11, 2006, we consummated a reverse merger
      (the
“Merger”) with a privately-held company called Akeena Solar, Inc.
      (“Akeena-Private”), pursuant to which the privately-held company, renamed Akeena
      Corp., became a wholly-owned subsidiary of ours and we renamed our company
      Akeena Solar, Inc. We had been in the development stage since our inception
      and
      had not commenced business operations prior to the Merger. Akeena-Private was
      incorporated in the State of California on February 23, 2001 under the name
      Akeena, Inc., and on June 2, 2006, was reincorporated in the State of Delaware
      under the name Akeena Solar, Inc. As a result of the Merger, we succeeded to
      Akeena-Private’s line of business as our sole line of business.





As
      of
      March 10, 2008, we had ten offices. Our offices are located in Los Gatos, Fresno
      (Clovis), Lake Forest, Bakersfield, Manteca, Santa Rosa, Palm Springs, San
      Diego
      and Thousand Oaks (Westlake Village), California, as well as Fairfield, New
      Jersey. Our corporate headquarters are located at 16005 Los Gatos Boulevard,
      Los
      Gatos, California 95032. We maintain installation offices at all of our
      facilities. Our
      telephone number is (408) 402-9400. Additional information about our
      company is available on our website at http://www.akeena.com. The
      information on our web site is not incorporated herein by
      reference.





3





**Strategy**





Our
      philosophy is simple: “we believe that producing clean electricity directly from
      the sun is the right thing to do for our environment and economy.” Since our
      founding, we have concentrated on serving the solar power needs of residential
      and commercial customers tied to the electric power grid.





The
      solar
      power industry is at an early stage of its growth and is highly fragmented
      with
      many smaller companies. The prospects for long-term worldwide demand for solar
      power have attracted many new solar panel manufacturers, as well as a multitude
      of design/integration companies in our market segment. We expect the
      manufacturing segment of the industry to consolidate when and if the current
      silicon shortage mitigates and more solar panel manufacturing capacity comes
      online. We also expect there to be consolidation in the design/integration
      segment of the industry based mostly on branding, development of new technology
      and business process improvements.





Accordingly,
      our growth strategy primarily includes:


·
            Developing
                and commercializing our solar panel technology optimized for the
                residential and commercial markets.





·
            Reducing
                installation costs and improving the aesthetics and performance of
                solar
                systems compared to ordinary, commercially available solar
                equipment.





·
            Promoting
                and enhancing our company'sbrand
                name and reputation.





·
            Developing
                and utilizing a process-driven approach to sell and install our solar
                power systems in diverse geographic
                markets.





Based
      on
      our experience as a solar power designer and integrator over the past seven
      years, we believe we understand certain areas in which costs for installations
      can be significantly reduced. We have introduced a new “plug and play” solar
      panel technology (“Andalay”) which we believe will significantly reduce the
      installation time, parts and costs, as well as provide superior reliability
      and aesthetics for customers, when compared to other solar panel mounting
      products and technology.





We
      believe the proceeds (before commissions and expenses) from our 2007 private
      placements will enhance our ability to purchase equipment on favorable terms
      from international manufacturers, accelerating our introduction of this panel
      technology to our customers. We also believe that being a public company will
      improve our ability to grow both internally and by means of expansions, enhance
      our reputation in the minds of customers and enhance our ability to attract
      and
      retain experienced management.





**Industry**





Electric
      power is used to operate businesses and industries, provides the power needed
      for homes and offices, and provides the power for our communications,
      entertainment, transportation and medical needs. As our energy supply and
      distribution mix changes, electricity is likely to be used more for local
      transportation (electric vehicles) and space/water heating needs. According
      to
      the Edison Electric Institute, the electric power industry in the U.S. is over
      $218 billion in size, and will continue to grow with our economy.





According
      to the U.S. Department of Energy (DOE), electricity is generated from the
      following: coal - 51%, nuclear -21%, gas - 16%, hydro - 6%, and oil - 3%, with
      renewable energy contributing 3%. “Renewable Energy” typically refers to
      non-traditional energy sources, including solar energy. Due to continuously
      increasing energy demands, we believe the electric power industry faces the
      following challenges:





·
            *Limited
                Energy Supplies.*The
                primary fuels that have supplied this industry, fossil fuels in the
                form
                of oil, coal and natural gas, are limited. Worldwide demand is increasing
                at a time that industry experts have concluded that supply is limited.
                Therefore, the increased demand will probably result in increased
                prices,
                making it more likely that long-term average costs for electricity
                will
                continue to increase.




4




·
            *Generation,
                Transmission and Distribution Infrastructure Costs.*Historically, electricity has been generated in centralized power
                plants
                transmitted over high voltage lines, and distributed locally through
                lower
                voltage transmission lines and transformer equipment. As electricity
                needs
                increase, these systems will need to be expanded. Without further
                investments in this infrastructure, the likelihood of power shortages
                (“brownouts” and “blackouts”) may
                increase.





·
            *Stability
                of Suppliers.*Since
                many of the major countries who supply fossil fuel are located in
                unstable
                regions of the world, purchasing oil and natural gas from these countries
                may increase the risk of supply shortages and cost
                increases.





·
            *Environmental
                Concerns and Climate Change*.
                Concerns about global warming and greenhouse gas emissions has resulted
                in
                the Kyoto Protocol various states enacting stricter emissions control
                laws
                and utilities in several states being required to comply with Renewable
                Portfolio Standards, which require the purchase of a certain amount
                of
                power from renewable sources.





Solar
      energy is the underlying energy source for renewable fuel sources, including
      biomass fuels and hydroelectric energy. By extracting energy directly from
      the
      sun and converting it into an immediately usable form, either as heat or
      electricity, intermediate steps are eliminated. We believe, in this sense,
      solar
      energy is one of the most direct and unlimited energy sources.





Solar
      energy can be converted into usable forms of energy either through the
      photovoltaic effect (generating electricity from photons) or by generating
      heat
      (solar thermal energy). Solar thermal systems include traditional domestic
      hot
      water collectors (DHW), swimming pool collectors, and high temperature thermal
      collectors (used to generate electricity in central generating systems). DHW
      thermal systems are typically distributed on rooftops so that they generate
      heat
      for the building on which they are situated. High temperature thermal collectors
      typically use concentrating mirror systems and are typically located in remote
      sites.





According
      to SolarBuzz, a research and consulting firm, the global solar power market,
      as
      defined by solar power system installations, had an estimated $17.2 billion
      in
      revenue in 2007. The U.S. solar power installation market comprised
      approximately 8% of the total global market installations, reaching
      approximately 220 megawatts installed during 2007. According to Solarbuzz,
      the residential and small commercial market segments represent approximately
      65%
      of the U.S. market and are expected to continue to do so through
      2010.





**Anatomy
      of a Solar Power System**





Solar
      power systems convert the energy in sunlight directly into electrical energy
      within solar cells based on the photovoltaic effect. Multiple solar cells,
      which
      produce DC power, are electrically interconnected into solar panels. A typical
      180 watt solar panel may have 72 individual solar cells. Multiple solar panels
      are electrically wired together. The number of solar panels installed on a
      building are generally selected to meet that building’s annual electrical usage,
      or selected to fill available unshaded roof or ground space. Solar panels are
      electrically wired to an inverter, which converts the power from DC to AC and
      interconnects with the utility grid. The following diagram schematically shows
      a
      typical solar power system:







5




***Solar
      Electric Cells.*** Solar
      electric cells convert light energy into electricity at the atomic level. The
      conversion efficiency of a solar electric cell is defined as the ratio of the
      sunlight energy that hits the cell divided by the electrical energy that is
      produced by the cell. By improving this efficiency, we believe solar electric
      energy becomes competitive with fossil fuel sources. The earliest solar electric
      devices converted about 1%-2% of sunlight energy into electric energy. Current
      solar electric devices convert 5%-25% of light energy into electric energy
      (the
      overall efficiency for solar panels is lower than solar cells because of the
      panel frame and gaps between solar cells), and current mass produced panel
      systems are substantially less expensive than earlier systems. Effort is the
      industry is currently being directed towards the development of new solar cell
      technology to reduce per watt costs and increase area efficiencies.





***Solar
      Panels.*** Solar
      electric panels are composed of multiple solar cells, along with the necessary
      internal wiring, aluminum and glass framework, and external electrical
      connections. Although panels are usually installed on top of a roof or on an
      external structure, certain designs include the solar electric cells as part
      of
      traditional building materials, such as shingles and rolled out roofing. Solar
      electric cells integrated with traditional shingles is usually most compatible
      with masonry roofs and, while it may offset costs for other building materials
      and be aesthetically appealing, it is generally more expensive than traditional
      panels.





***Inverters.*** Inverters
      convert the DC power from solar panels to the AC power used in buildings.
      Grid-tie inverters synchronize to utility voltage and frequency and only operate
      when utility power is stable (in the case of a power failure these grid-tie
      inverters shut down to safeguard utility personnel from possible harm during
      repairs). Inverters also operate to maximize the power extracted from the solar
      panels, regulating the voltage and current output of the solar array based
      on
      sun intensity.





***Monitoring.*** There
      are
      two basic approaches to access information on the performance of a solar power
      system. We believe that the most accurate and reliable approach is to collect
      the solar power performance data locally from the inverter with a hard-wired
      connection and then transmit that data via the internet to a centralized
      database. Data on the performance of a system can then be accessed from any
      device with a web browser, including personal computers and cell phones. As
      an
      alternative to web-based remote monitoring, most commercial inverters have
      a
      digital display on the inverter itself that shows performance data and can
      also
      display this data on a nearby personal computer with a hard-wired or wireless
      connection.





***Net
      Metering.*** The
      owner
      of a grid-connected solar electric system may not only buy, but may also sell,
      electricity each month. This is because electricity generated by the solar
      electric system can be used on-site or fed through a meter into the utility
      grid. Utilities are required to buy power from owners of solar electric systems
      (and other independent producers of electricity) under the Public Utilities
      Regulatory Policy Act of 1978 (PURPA). California’s net metering law provides
      that all utilities must allow customers with solar electric systems rated up
      to
      1.5 megawatts (“ mW”) to interconnect with the local utility grid and receive
      retail value for the electricity produced. When a home or business requires
      more
      electricity than the solar power array is generating (for example, in the
      evening), the need is automatically met by power from the utility grid. When
      a
      home or business requires less electricity than the solar electric system is
      generating, the excess is fed (or sold) back to the utility and the electric
      meter actually spins backwards. Used this way, the utility serves as a backup
      to
      the solar electric similar to the way in which batteries serve as a backup
      in
      stand-alone systems.




6





**Solar
      Power Benefits**





The
      direct conversion of light into energy offers the following benefits compared
      to
      conventional energy sources:





·
            *Economic*—
                Once a solar power system is installed, the cost of generating electricity
                is fixed over the lifespan of the system. There are no risks that
                fuel
                prices will escalate or fuel shortages will develop. In addition,
                cash
                paybacks for systems range from 5 to 25 years, depending on the level
                of
                state and federal incentives, electric rates, annualized sun intensity
                and
                installation costs. Solar power systems at customer sites generally
                qualify for net metering to offset a customer’s highest electric rate
                tiers, at the retail, as opposed to the wholesale, electric
                rate.





·
            *Convenience*—
                Solar power systems can be installed on a wide range of sites, including
                small residential roofs, the ground, covered parking structures and
                large
                industrial buildings. Solar power systems also have few, if any,
                moving
                parts and are generally guaranteed to operate for 25 years resulting,
                we
                believe, in low maintenance and operating costs and reliability compared
                to other forms of power generation.





·
            *Environmental*—
                We believe solar power systems are one of the most environmentally
                friendly way of generating electricity. There are no harmful greenhouse
                gas emissions, no wasted water, no noise, no waste generation and
                no
                particulates. Such benefits continue for the life of the
                system.





·
            *Security*—
                Producing solar power improves energy security both on an international
                level (by reducing fossil energy purchases from hostile countries)
                and a
                local level (by reducing power strains on local electrical transmission
                and distribution systems).





·
            *Infrastructure*—
                Solar power systems can be installed at the site where the power
                is to be
                used, thereby reducing electrical transmission and distribution costs.
                Solar power systems installed and operating at customer sites may
                also
                save the cost of construction of additional energy infrastructure
                including power plants, transmission lines, distribution systems
                and
                operating costs.





7


We
      believe escalating fuel costs, environmental concerns and energy security make
      it likely that the demand for solar power systems will continue to grow. The
      federal government, and several states (primarily California and New Jersey),
      have put a variety of incentive programs in place that directly spur the
      installation of grid-tied solar power systems, so that customers will “purchase”
their own power generating system rather than “renting” power from a local
      utility. These programs include:





·
            *Rebates*—
                to customers (or to installers) to reduce the initial cost of the
                solar
                power system, generally based on the size of the system. California,
                New
                Jersey, New York, Connecticut and other states have rebates that
                can
                substantially reduce initial costs.





·
            *Tax
                Credits*—
                federal and state income tax offsets, directly reducing ordinary
                income
                tax. New York and California currently offer state tax credits. There
                is
                currently a 10% federal tax credit up to $2,000 for residential systems,
                and a 30% federal tax credit (with no cap) for business
                systems.




·
            *Accelerated
                Depreciation*—
                solar power systems installed for businesses (including applicable
                home
                offices) are generally eligible for accelerated
                depreciation.





·
            *Net
                Metering*—
                provides a full retail credit for energy generated.





·
            *Feed-in
                Tariffs*—
                are additional credits to consumers based on how much energy their
                solar
                power system generates. Feed-in Tariffs set at appropriate rates
                have been
                successfully used in Europe to accelerate
                growth.





·
            *Renewable
                Portfolio Standards*—
                require utilities to deliver a certain percentage of power generated
                from
                renewable energy sources.





·
            *Renewable
                Energy Credits (RECs)*—
                are additional credits provided to customers based on the amount
                of
                renewable energy they produce.





·
            *Solar
                Rights Acts*—
                state laws to prevent unreasonable restrictions on solar power systems.
                California’s Solar Rights Act has been updated several times in past years
                to make it easier for customers of all types and in all locations
                to
                install a solar power system.




·
              *PPA's*—
                  Power Purchase Agreements, or agreements between a solar power
                  system
                  purchaser and an electricity user under which electricity is
                  sold/purchased on a long-term
                  basis.


According
      to PV News, California and New Jersey account for approximately 90% of the
      U.S.
      residential market. We believe this is largely attributable to the fact that
      they currently have the most attractive incentive programs. The California
      Solar
      Initiative provides $3.2 billion of incentives toward solar development over
      11
      years. In addition, recently approved regulations in New Jersey require solar
      photovoltaic power to provide 2% of New Jersey’s electricity needs by 2020,
      requiring the installation of 1,500 megawatts of solar electric power. According
      to DSIRE (the Database of State Incentives for Renewable Energy) at least 18
      other states also have incentive programs. We expect that such programs, as
      well
      as Federal tax rebates and other incentives, will continue to drive growth
      in
      the solar power market for the near future.





**Challenges
      Facing The Solar Power Industry**





We
      believe the solar power industry faces three key challenges:





·
            *Improve
                Customer Economics*—
                In most cases, the cost to customers for electricity produced by
                a solar
                power system at the customer’s site is comparable to conventional,
                utility-generated power. We believe lower equipment (primarily solar
                panels) and installation costs would reduce the total cost of a system
                and
                increase the potential market for solar
                power.





·
            *Increase
                System Performance and Reliability*—
                We believe that a design that incorporates factory assembly of an
                integrated solar power system versus field assembly provides a more
                reliable solution. A system with these characteristics will deliver
                improved system performace and allow the customer to achieve the
                shortest
                possible payback.





·
            *Improve
                Aesthetics*—
                We believe that customers prefer solar panels that blend into existing
                roof surfaces with fewer shiny parts, mounted closely to the roof
                surface
                and have more of a “skylight” appearance than the traditional rooftop
                metal framed solar panels raised off the
                roof.





8


**Competition**





The
      solar
      power design and integration industry is in its early stages of development
      and
      is highly fragmented, consisting of many small privately-held companies with
      limited operating histories and information available to us. We believe our
      major competitors in the California market include, SPG (formerly SunPower
      and
      Geothermal), ReGrid, Borrego and Solarcity. Several companies have expanded
      their market share in the California market by opening multiple offices within
      the state. Rather than expand within California, we decided in 2003 to expand
      into New Jersey. We believe our major competitors in the New Jersey market
      include: Trinity Heating and Air, NJ Solar Power, The Solar Center, Energy
      Enterprises, 1st Light Energy, GeoGenix, SunFarm, and Advanced Solar Products.
      We believe our major national competitors include REC Solar (formerly Renewable
      Energy Concepts), Suntechnics and PowerLight.





We
      believe the principal competitive factors in the solar power services industry
      include:





·
            quality
                of service;





·
            price;





·
            company
                reputation;





·
            installation
                technology; and





·
            responsiveness
                to customer needs





We
      believe that our competitive advantages as a national designer and integrator
      of
      solar power systems include:





·
            *Reduced
                System Installation Costs*.
                Our proprietary panel technology enables us to simplify and reduce
                the
                cost of installation.





·
            *Brand
                Recognition*.
                According to a Solar Electric Dealer study conducted in 2004, we
                ranked as
                the best known installation brand in northern California. We believe
                that
                the strength of the Akeena brand and reputation along with being
                a public
                company are key factors in the decision process as consumers consider
                solutions to their solar power
                needs.





·
            *Experienced
                Management Team*.
                Our management has been involved in solar power development since
                the
                1970s and has been in the solar power industry since its infancy.
                We
                believe this experience enables us to anticipate trends and identify
                superior products and technologies for our
                customers.





·
            *Superior
                Product*. We
                have introduced our Andalay technology which we believe will significantly
                reduce the installation time, parts and costs, as well as provide
                superior
                reliability and aesthetics for customers when compared to other solar
                panel mounting products and technology. The advantages to the customer
                are
                (i) an integrated system (factory installed versus field installed),
                (ii)
                reliable grounding and (iii) aesthetically pleasing. The Company
                benefits
                from a faster installation time as there is less time spent on the
                roof.





9


**Our
      Services and Products**





A
      solar
      power system generally includes companies specializing in the
      following:





·
            Silicon
                Refiners — companies that produce refined silicon, a material that has
                historically been used as the primary ingredient for solar panels.
                In
                light of the current shortage of silicon, it is possible that other
                materials may be used as the primary ingredient in the
                future.





·
            Wafer
                and Cell Manufacturers — companies that manufacture the electricity
                generating solar cells.





·
            Panel
                Manufacturers — companies that assemble solar cells into solar panels,
                generally laminating the cells between glass and plastic film, and
                attaching the wires and panel
                frame.





·
            Distributors
                — companies that purchase from manufacturers and resell to designers/
                integrators and other equipment
                resellers.





·
            Designer/Installer
                — companies that sell products to end user
                customers.





We
      are
      active in the solar power industry as a designer and installer.





***Solar
      Power System Design and Installation***





We
      provide marketing, sales, design, construction, installation, maintenance,
      support and related solar power system services to residential and small
      commercial customers in the United States in locations in which the economics
      are favorable to solar power. We provide our customers with a single point
      of
      contact for their system design, engineering work, building permit, rebate
      approval, utility hookup and subsequent maintenance. We use our own crews or
      contractors, and perform engineering and design work with in-house staff and
      outside engineering firms. We concentrate on solar power systems.





We
      concentrate on the design and installation of grid-tied solar power systems.
      These systems are electrically connected to the utility grid so that excess
      energy produced during the day flows backwards through the utility’s electric
      meter, actually running the electric meter backwards. The meter will run
      backwards when the power produced by the solar system is greater than the power
      needs of the building. During the evenings or on cloudy days, energy is drawn
      from the grid normally and the meter runs forwards. Most utilities serving
      the
      areas in which we install systems allow for “net metering.” Customers on net
      metering only pay for the net amount of energy they consume during the year,
      essentially getting full retail credit for the energy they transmit back onto
      the utility grid during the day. We typically do not install off-grid systems
      (systems in which there is no utility service, such as a remote cabin), nor
      do
      we typically install battery backup systems or solar thermal
      systems.





***Andalay
      Solar Panel Technology***





Based
      on
      our experience as a solar power designer and integrator over the past seven
      years, we believe we understand certain areas in which costs for installations
      can be significantly reduced. We have introduced a new “plug and play” solar
      panel technology (“Andalay”) which we believe will significantly reduce the
      installation time and costs, as well as provide superior reliability and
      aesthetics, when compared to other solar panels. Andalay offers the following
      features: (i) mounts closer to the roof with less space in between panels;
      (ii)
      all black appearance with no unsightly racks underneath or beside panels; (iii)
      built-in wiring connections; (iv) 70% fewer roof-assembled parts and 50% less
      labor required; (v) 25% fewer roof attachment points; (vi) complete compliance
      with the National Electric Code and UL wiring and grounding requirements. We
      have applied for U.S. and international patents for Andalay.





Installation
      costs for a solar power system are generally proportional to the area of panels
      installed. Thin film and amorphous solar cell technologies, although less
      expensive on a cost per watt basis, are generally less efficient (producing
      fewer watts per square foot) and more expensive to install. Therefore, we
      believe that Andalay becomes even more useful for the new generation of less
      expensive but lower efficiency solar panels. Andalay is generally applicable
      to
      all framed rooftop solar cell technologies, including silicon, amorphous, thin
      film and concentrators.





10


**Customers**





Our
      current residential customers are generally highly educated, high-income
      professionals who are concerned about the environment and also have the
      disposable income to install a solar power system. We have installed solar
      power
      systems in some of the most affluent counties in California and New Jersey.
      Installation sizes range from 1.5 kW up to 35 kW. Average residential size
      systems are approximately 5 kW.





Our
      current commercial customers are owner occupied businesses, including wineries
      and small commercial offices in California. We have or are in the process of
      installing commercial systems ranging in size from 10 kW to 300
      kW.





**Suppliers**





The
      components used in our systems are purchased from a limited number of
      manufacturers. Kyocera, Sharp, SunPower and Suntech accounted for over 90%
      of
      our purchases of photovoltaic panels during 2007. Pursuant to our agreement
      with
      Suntech Power Holdings Co. Ltd. (“Suntech”), Suntech will provide us with volume
      manufacturing and delivery of our Andalay product. We are subject to market
      price fluctuations for the components that we purchase for our installations.
      We
      also entered into an agreement with Kyocera Solar Inc. (“Kyocera”) during March
      2008. Under the Kyocera agreement, Kyocera will manufacture Andalay panels
      utilizing their high efficiency solar cells and will deliver approximately
      1.6
      megawatts of panels to us during 2008. Kyocera will be our preferred supplier
      for our commercial installations.





**Sales
      and Marketing**





Our
      sales
      and marketing program incorporates a mix of print, web and radio advertisements
      as well as participation in industry trade shows and individual consultations
      with prospective customers. In addition, we rely heavily on the skill of our
      sales team. Our residential sales staff are trained to design a system that
      best
      meets a customer’s needs, taking into account the unique installation and
      economic requirements for each location. Our commercial sales people take a
      more
      consultative, long-term selling approach to meet the varying needs of larger
      customers. Our sales process typically includes, a determination that a
      potential customer’s site has the required exposure for solar power, a site
      visit and a survey with our proprietary software that analyzes current utility
      rate options, current electric rates, system performance, tax rate scenarios,
      equipment costs, installation costs, incentives and other factors applicable
      to
      a specific customer’s circumstances.





We
      currently provide a five-year and ten-year guarantee on a system
      installation other than solar panels and inverters, which are covered under
      the
      manufacturer’s warranty (generally 25 years and 10 years,
      respectively).





We
      regularly evaluate the effectiveness of our sales team and marketing efforts
      using sales management software and make tactical marketing and sales changes
      as
      indicated to achieve and maintain cost effectiveness. Solar system design work
      is facilitated by our proprietary software which provides certain controls
      on
      price, margins, performance estimates, financial analyses and contract terms
      so
      that we can standardize our product offerings while still customizing a system
      for each application.





**Intellectual
      Property**





*Andalay
      Solar Panel*





We
      have
      applied for patent protection relating to technology included in our integrated
      Andalay solar panel. Our application is currently pending with the United States
      Patent and Trademark Office. However, we have been notified by the United States
      Patent and Trademark Office that certain claims of our application directed
      to
      the mounting system are allowable and have responded by accepting those
      allowable claims. Therefore, we expect to receive a Notice of Allowance to
      receive patents for those claims shortly.





*Trademarks*





We
      have
      registered the trademark “Akeena” with the United States Patent and Trademark
      Office for providing consulting services in the field of energy systems and
      technical information via a global computer network in the field of renewable
      energy systems. We have applied to expand the class of goods for the trademark
      “Akeena” to include renewable energy systems, namely, photovoltaic systems
      composed of photovoltaic solar panels, batteries, voltage regulators, inverters,
      racks and electrical controls, as well as the installation of such systems.
      This
      application is currently pending.




11





We
      have
      also registered the trademarks “Double Your Power” and “Andalay” with the United
      States Patent and Trademark Office for two goods classes: providing computer
      software for photovoltaic systems for evaluating electric consumption,
      determining system sizing, estimating electrical output, estimating customer
      costs, and estimating financial life cycle savings, for use by consumers and
      businesses; and, installation of renewable energy systems, namely photovoltaic
      systems composed of solar panels, batteries, voltage regulators, inverters,
      racks and electrical controls. Additionally, we have applications currently
      pending with the United States Patent and Trademark Office to expand the goods
      classes for “Double Your Power” and “Andalay,” and to register the trademark
“Run Your Electric Meter Backwards,” which we have used in conjunction with our
      logo since we established our business.





*Proprietary
      Design Software*





We
      have
      developed solar design proprietary software to perform the necessary site
      survey, initial design work, system performance, financial analysis, report
      generation and contract preparation required for installation of a solar power
      system in a single visit, for most residential customers. This software analyzes
      current utility rate options, current electric rates, system performance, tax
      rate scenarios, equipment costs, installation costs, incentives and other
      factors applicable to a specific customer’s circumstances. By using this
      software, we are able to standardize our product offerings, improve consistency
      in our project pricing, improve accuracy and consistency in cost estimates,
      and
      differentiate our customer presentations from that of our
      competitors.





**Employees**





As
      of
      February 29, 2008, Akeena Solar has 207 employees: 101 operations employees,
      85
      sales and marketing employees, 16 general and administrative employees and
      5
      research and development employees. Of our total employees, 199 are full-time
      employees.





**RISK
      FACTORS**





Our
      business faces numerous risks, known and unknown. If any of these risks actually
      occurs, our business, financial condition or results of operations may be
      materially adversely affected. In that case, the trading price of our common
      stock could decline and investors in our common stock could lose all or part
      of
      their investment.





Our
      Annual Report on Form 10-KSB for 2007, and information we provide in our press
      releases, telephonic reports and other investor communications, may contain
      forward-looking statements with respect to anticipated future events and our
      projected financial performance, operations and competitive position that are
      subject to risks and uncertainties that could cause our actual results to differ
      materially from those forward-looking statements and our expectations. Future
      economic and industry trends that could potentially impact revenue,
      profitability, and growth remain difficult to predict. The factors underlying
      our forecasts forward-looking statements are dynamic and subject to change.
      As a
      result, any forecasts or forward-looking statements speak only as of the date
      they are given and do not necessarily reflect our outlook at any other point
      in
      time.





**Risks
      Relating to Our Business**





***The
      success of our business depends on the continuing contributions
      of***  ***Barry
      Cinnamon and other key personnel who may terminate their employment
      with***  ***us
      at any time, and we will need to hire additional qualified
      personnel.***





We
      rely
      heavily on the services of Barry Cinnamon, our Chief Executive Officer, as
      well
      as several other management personnel. Loss of the services of any of such
      individuals would adversely impact our operations. In addition, we believe
      our
      technical personnel represent a significant asset and provide us with a
      competitive advantage and that our future success will depend upon our ability
      to retain these key employees and our ability to attract and retain other
      skilled financial, engineering, technical and managerial personnel. None of
      our
      key personnel are party to any employment agreements with us, other than at-will
      employment offer letters, and management and other employees may voluntarily
      terminate their employment at any time. We do not currently maintain any “key
      man” life insurance with respect to any of such individuals.




12





***We
      are dependent upon our suppliers for the components used in the
      systems***  ***we
      design and install; and our major suppliers are dependent upon the
      continued***  ***availability
      and pricing of silicon and other raw materials used in
      solar***  ***panels.***





Key
      components used in our systems are purchased from a limited number of
      manufacturers. In particular, Kyocera, Sharp, SunPower and Suntech account
      for
      over 90% of our purchases of solar panels. Pursuant to our Suntech agreement,
      Suntech will provide us with volume manufacturing and delivery of our Andalay
      product used in our solar systen installations. We are subject to market prices
      for the components that we purchase for our installations, which are subject
      to
      fluctuation. We cannot ensure that the prices charged by our suppliers will
      not
      increase because of changes in market conditions or other factors beyond our
      control. An increase in the price of components used in our systems could result
      in an increase in costs to our customers and could have a material adverse
      effect on our revenues and demand for our services. Our suppliers are dependent
      upon the availability and pricing of silicon, one of the main materials used
      in
      manufacturing solar panels. The world market for solar panels recently
      experienced a shortage of supply due to insufficient availability of silicon.
      This shortage caused the prices for solar panels to increase. Interruptions
      in
      our ability to procure needed components for our systems, whether due to
      discontinuance by our suppliers, delays or failures in delivery, shortages
      caused by inadequate production capacity or unavailability, or for other
      reasons, would adversely affect or limit our sales and growth. In addition,
      increases in the prices of panels could make systems that have been sold but
      not
      yet installed unprofitable for us. There is no assurance that we will continue
      to find qualified manufacturers on acceptable terms and, if we do, there can
      be
      no assurance that product quality will continue to be acceptable, which could
      lead to a loss of sales and revenues.





***Geographical
      business expansion efforts we make could result in***  ***difficulties
      in successfully managing our business and consequently harm
      our***  ***financial
      condition.***





As
      part
      of our business strategy, we may seek to expand by acquiring competing
      businesses or customer contracts in our current or other geographic markets,
      or
      we may open offices in the geographical markets we desire to operate within.
      We
      face challenges in managing expanding product and service offerings and in
      integrating acquired businesses with our own. We commenced operations in six
      new
      offices during 2007 and we currently intend to seek additional locations for
      expansion. We cannot accurately predict the timing, size and success of our
      expansion efforts and the associated capital commitments that might be required.
      We expect to face competition for expansion candidates, which may limit the
      number of expansion opportunities available to us and may lead to higher
      expansion costs. There can be no assurance that we will be able to identify,
      acquire or profitably manage additional businesses/contracts or successfully
      integrate acquired businesses/contracts, if any, into our company, without
      substantial costs, delays or other operational or financial difficulties. In
      addition, expansion efforts involve a number of other risks,
      including:





·
            Failure
                of the expansion efforts to achieve expected results;





·
            Diversion
                of management’s attention and resources to expansion efforts;





·
            Failure
                to retain key customers or personnel of the acquired businesses;
                and





·
            Risks
                associated with unanticipated events, liabilities or
                contingencies.





Client
      dissatisfaction or performance problems at a single acquired business could
      negatively affect our reputation. The inability to acquire businesses on
      reasonable terms or successfully integrate and manage acquired companies, or
      the
      occurrence of performance problems at acquired companies, could result in
      dilution, unfavorable accounting charges and difficulties in successfully
      managing our business.





***Our
      limited operating history, including the uncertainty of our
      future***  ***performance
      and ability to maintain or improve our financial and
      operating***  ***systems,
      makes it difficult to evaluate our business.***





We
      were
      organized in February 2001. Our limited operating history makes it difficult
      to
      evaluate our business. In addition, the limited performance history of our
      management and sales team and the uncertainty of our future performance and
      ability to maintain or improve our financial, sales and operating systems,
      procedures and controls increase the risk that we may be unable to continue
      to
      successfully operate our business. In the event that we are not able to manage
      our growth and operate as a public company due to our limited experience, our
      business may suffer uncertainty and failures, which makes it difficult to
      evaluate our business.





***We
      may be unable to attain profitability or increase net sales, expand
      the***  ***range
      of our services or enter new markets.***





Various
      factors, including demand for our solar panel systems and services and our
      ability to expand the range of our product and service offerings and to
      successfully enter new markets, may affect our ability to maintain or increase
      the net sales of our business or any subsequently acquired businesses. There
      can
      be no assurance that we will be able to attain profitability and/or expand
      the
      sales of our business or any subsequently acquired businesses.




13





***Because
      our industry is highly competitive and has low barriers to
      entry,***  ***we
      may lose market share to larger companies that are better equipped
      to***  ***weather
      a deterioration in market conditions due to increased
      competition.***





Our
      industry is highly competitive and fragmented, is subject to rapid change and
      has low barriers to entry. We may in the future compete for potential customers
      with solar and HVAC systems installers and servicers, electricians, utilities
      and other providers of solar power equipment or electric power. Some of these
      competitors may have significantly greater financial, technical and marketing
      resources and greater name recognition than we have.





We
      believe that our ability to compete depends in part on a number of factors
      outside of our control, including:





·
            the
                ability of our competitors to hire, retain and motivate qualified
                technical personnel;





·
            the
                ownership by competitors of proprietary tools to customize systems
                to the
                needs of a particular customer;





·
            the
                price at which others offer comparable services and equipment;





·
            the
                extent of our competitors’ responsiveness to client needs;




·
              risk
                  of local economy decline; and


·
            installation
                technology.





Competition
      in the solar power services industry may increase in the future, partly due
      to
      low barriers to entry, as well as from other alternative energy resources now
      in
      existence or developed in the future. Increased competition could result in
      price reductions, reduced margins or loss of market share and greater
      competition for qualified technical personnel. There can be no assurance that
      we
      will be able to compete successfully against current and future competitors.
      If
      we are unable to compete effectively, or if competition results in a
      deterioration of market conditions, our business and results of operations
      would
      be adversely affected.





***Our
      failure to meet a client’s expectations in the performance of
      our***  ***services,
      and the risks and liabilities associated with placing our
      employees***  ***and
      technicians in our customers’ homes and businesses, could give rise
      to***  ***claims
      against us.***





Our
      engagements involve projects that are critical to our customers’ business or
      home. Our failure or inability to meet a customer’s expectations in the
      provision of our products and services could damage or result in a material
      adverse change to their premises or property and therefore could give rise
      to
      claims against us or damage our reputation. In addition, we are exposed to
      various risks and liabilities associated with placing our employees and
      technicians in the homes and workplaces of others, including possible claims
      of
      errors and omissions, including harassment, theft of client property, criminal
      activity and other claims.





***Our
      profitability depends, in part, on our success on brand
      recognition***  ***and
      we could lose our competitive advantage if we are not able to protect
      our***  ***trademark
      against infringement, and any related litigation could
      be***  ***time-consuming
      and costly.***





We
      believe our brand has gained substantial recognition by customers in certain
      geographic areas. We have registered the trademark “Akeena” with the United
      States Patent and Trademark Office for providing consulting services in the
      field of energy systems and technical information via a global computer network
      in the field of renewable energy systems. We have also registered the trademarks
      “Double Your Power” and “Andalay” with the United States Patent and Trademark
      Office for two goods classes: providing computer software for photovoltaic
      systems for evaluating electric consumption, determining system sizing,
      estimating electrical output, estimating customer costs, and estimating
      financial life cycle savings, for use by consumers and businesses; and,
      installation of renewable energy systems, namely photovoltaic systems composed
      of photovoltaic solar panels, batteries, voltage regulators, inverters, racks
      and electrical controls. Use of our name or a similar name by competitors in
      geographic areas in which we have not yet operated could adversely affect our
      ability to use or gain protection for our brand in those markets, which could
      weaken our brand and harm our business and competitive position. In addition,
      any litigation relating to protecting our trademark against infringement could
      be time consuming and costly.




14





***If
      we are unable to attract, train and retain highly qualified
      personnel,***  ***the
      quality of our services may decline and we may not successfully execute
      our***  ***internal
      growth strategies.***





Our
      success depends in large part upon our ability to continue to attract, train,
      motivate and retain highly skilled and experienced employees, including
      technical personnel. Qualified technical employees periodically are in great
      demand and may be unavailable in the time frame required to satisfy our
      customers’ requirements. While we currently have available technical expertise
      sufficient for the requirements of our business, expansion of our business
      could
      require us to employ additional highly skilled technical personnel. We expect
      competition for such personnel to increase as the market for solar power systems
      expands. There can be no assurance that we will be able to attract and retain
      sufficient numbers of highly skilled technical employees in the future. The
      loss
      of personnel or our inability to hire or retain sufficient personnel at
      competitive rates of compensation could impair our ability to secure and
      complete customer engagements and could harm our business.





***Unexpected
      warranty expenses or service claims could reduce our
      profits.***





We
      maintain a warranty reserve on our balance sheet for potential warranty or
      service claims that could occur in the future. This reserve is adjusted based
      on
      our ongoing operating experience with equipment and installations. It is
      possible, perhaps due to bad supplier material or defective installations,
      that
      we would have actual expenses substantially in excess of the reserves we
      maintain. Our failure to accurately predict future warranty claims could result
      in unexpected profit volatility.





***Our
      Panel technology is untested and may not be effective or
      patentable***  ***or
      may encounter other unexpected problems, which could adversely affect
      our***  ***business
      and results of operations.***





Our
      Andalay technology is new and has not been tested in installation settings
      for a
      sufficient period of time to prove its long-term effectiveness and benefits.
      Problems may occur with Andalay that are unexpected and could have a material
      adverse effect on our business or results of operations. We have applied for
      patent protection for our integrated Andalay solar panel technology. Our
      application is currently pending with the United States Patent and Trademark
      Office. However, we have been notified by the United States Patent and Trademark
      Office that certain claims of our application directed to the mounting system
      are allowable and have responded by accepting those allowable claims. Therefore,
      we expect to receive a Notice of Allowance to receive patent protection of
      those
      claims shortly. A patent may not be issued on such technology or we may not
      be
      able to realize the benefits from any patent that is issued.





***Our
      inability to obtain capital, use internally generated cash, or
      use***  ***shares
      of our common stock or debt to finance future expansion efforts
      could***  ***impair
      the growth and expansion of our business.***





Reliance
      on internally generated cash or debt to finance our operations or complete
      business expansion efforts could substantially limit our operational and
      financial flexibility. The extent to which we will be able or willing to use
      shares of common stock to consummate expansions will depend on our market value
      from time to time and the willingness of potential sellers to accept it as
      full
      or partial payment. Using shares of common stock for this purpose also may
      result in significant dilution to our then existing stockholders. To the extent
      that we are unable to use common stock to make future expansions, our ability
      to
      grow through expansions may be limited by the extent to which we are able to
      raise capital for this purpose through debt or equity financings. No assurance
      can be given that we will be able to obtain the necessary capital to finance
      a
      successful expansion program or our other cash needs. If we are unable to obtain
      additional capital on acceptable terms, we may be required to reduce the scope
      of any expansion. In addition to requiring funding for expansions, we may need
      additional funds to implement our internal growth and operating strategies
      or to
      finance other aspects of our operations. Our failure to (i) obtain additional
      capital on acceptable terms, (ii) use internally generated cash or debt to
      complete expansions because it significantly limits our operational or financial
      flexibility, or (iii) use shares of common stock to make future expansions
      may
      hinder our ability to actively pursue any expansion program we may decide to
      implement.





***Our
      obligations under our credit facility are secured by all of
      our***  ***assets,
      so if the lender forecloses on its security interest, we may have
      to***  ***liquidate
      some or all of our assets, which may cause us to cease
      operations.***





Our
      obligations under the 2007 loan and security agreement with Comerica Bank are
      secured by all of our assets. (See “Management’s Discussion and Analysis or Plan
      of Operation — Liquidity and Capital Resources). If we default under the credit
      facility we could be required to repay all of our borrowings thereunder. In
      addition, Comerica could foreclose its security interest and liquidate some
      or
      all of our assets, which could cause us to cease operations.




15





***We
      are subject to restrictive covenants in connection with our
      credit***  ***facility
      that may limit our ability to borrow additional funds or to
      raise***  ***additional
      equity as may be required to fund our future
      operations.***





The
      terms
      of the 2007 credit facility with Comerica may limit our ability, without
      Comerica’s consent, to, among other things, enter into certain transactions and
      create additional liens on our assets and could adversely affect our liquidity
      and our ability to attract additional funding if required for our
      business.





**Risks
      Relating to Our Industry**





***We
      have experienced technological changes in our industry.
      New***  ***technologies
      may prove inappropriate and result in liability to us or may
      not***  ***gain
      market acceptance by our customers.***





The
      solar
      power industry (and the alternative energy industry, in general) is subject
      to
      technological change. Our future success will depend on our ability to
      appropriately respond to changing technologies and changes in function of
      products and quality. If we adopt products and technologies that are not
      attractive to consumers, we may not be successful in capturing or retaining
      a
      significant share of our market. In addition, some new technologies are
      relatively untested and unperfected and may not perform as expected or as
      desired, in which event our adoption of such products or technologies may cause
      us to lose money.





***A
      drop in the retail price of conventional energy or non-solar
      alternative***  ***energy
      sources may negatively impact our profitability.***





We
      believe that a customer’s decision to purchase or install solar power
      capabilities is primarily driven by the cost and return on investment resulting
      from solar power systems. Fluctuations in economic and market conditions that
      impact the prices of conventional and non-solar alternative energy sources,
      such
      as decreases in the prices of oil and other fossil fuels, could cause the demand
      for solar power systems to decline, which would have a negative impact on our
      profitability. Changes in utility electric rates or net metering policies could
      also have a negative effect on our business.





***Existing
      regulations, and changes to such regulations, may
      present***  ***technical,
      regulatory and economic barriers to the purchase and use of
      solar***  ***power
      products, which may significantly reduce demand for our
      products.***





Installation
      of solar power systems are subject to oversight and regulation in accordance
      with national and local ordinances, building codes, zoning, environmental
      protection regulation, utility interconnection requirements for metering and
      other rules and regulations. We attempt to keep up-to-date about these
      requirements on a national, state, and local level, and must design systems
      to
      comply with varying standards. Certain cities may have ordinances that prevent
      or increase the cost of installation of our solar power systems. In addition,
      new government regulations or utility policies pertaining to solar power systems
      are unpredictable and may result in significant additional expenses or delays
      and, as a result, could cause a significant reduction in demand for solar energy
      systems and our services. For example, there currently exist metering caps
      in
      certain jurisdictions which effectively limit the aggregate amount of power
      that
      may be sold by solar power generators into the power grid.





***Our
      business depends on the availability of rebates, tax credits and
      other***  ***financial
      incentives; reduction or elimination of which would reduce the
      demand***  ***for
      our services.***





Many
      states, including California and New Jersey, offer substantial incentives to
      offset the cost of solar power systems. These systems can take many forms,
      including direct rebates, state tax credits, system performance payments and
      Renewable Energy Credits (RECs). Moreover, the Federal government currently
      offers a 30% tax credit for the installation of solar power systems scheduled
      to
      expire at the end of 2008 (unlimited for businesses, capped at $2,000 for
      residences) unless extended. Businesses may also elect to accelerate the
      depreciation on their system over five years. Reduction in or elimination of
      such incentives or delays or interruptions in the implementation of favorable
      federal or state laws could substantially increase the cost of our systems
      to
      our customers, resulting in significant reductions in demand for our services,
      which would negatively impact our sales.




16





***If
      solar power technology is not suitable for widespread adoption
      or***  ***sufficient
      demand for solar power products does not develop or takes longer
      to***  ***develop
      than we anticipate, our sales would decline and we would be unable
      to***  ***achieve
      or sustain profitability.***





The
      market for solar power products is emerging and rapidly evolving, and its future
      success is uncertain. Many factors will influence the widespread adoption of
      solar power technology and demand for solar power products,
      including:





·
            cost
                effectiveness of solar power technologies as compared with conventional
                and non-solar alternative energy
                technologies;





·
            performance
                and reliability of solar power products as compared with conventional
                and
                non-solar alternative energy
                products;





·
            capital
                expenditures by customers that tend to decrease if the U.S. economy
                slows;
                and





·
            availability
                of government subsidies and incentives.





If
      solar
      power technology proves unsuitable for widespread commercial deployment or
      if
      demand for solar power products fails to develop sufficiently, we would be
      unable to generate enough revenue to achieve and sustain profitability. In
      addition, demand for solar power products in the markets and geographic regions
      we target may not develop or may develop more slowly than we
      anticipate.





**Risks
      Relating to our Common Stock**





***Our
      stock price may be volatile, which could result in substantial losses
      for***  ***investors.***





The
      market price of our common stock is likely to be highly volatile and could
      fluctuate widely in response to various factors, many of which are beyond our
      control, including the following:





·
            technological
                innovations or new products and services by us or our
                competitors;





·
            announcements
                or press releases relating to the energy sector or to our business
                or
                prospects;





·
            additions
                or departures of key personnel;





·
            regulatory,
                legislative or other developments affecting us or the solar power
                industry
                generally;





·
            our
                ability to execute our business plan;





·
            operating
                results that fall below expectations;





·
            volume
                and timing of customer orders;





·
            industry
                developments;





·
            economic
                and other external factors; and





·
            period-to-period
                fluctuations in our financial results.





In
      addition, the securities markets have from time to time experienced significant
      price and volume fluctuations that are unrelated to the operating performance
      of
      particular companies. These market fluctuations may also significantly affect
      the market price of our common stock.





17




**Risks
      Relating to Our Company**





***Our
      Chief Executive Officer, Barry Cinnamon, beneficially owns a significant number
      of shares of our common stock, which gives him significant influence over
      decisions on which our stockholders may vote and which may discourage
      an***  ***acquisition
      of the Company.***





Barry
      Cinnamon, our Chief Executive Officer, beneficially owns, in the aggregate,
      approximately 26.8% of our outstanding common stock. The interests of our Chief
      Executive Officer may differ from the interests of other stockholders. As a
      result, Mr. Cinnamon’s voting power may have a significant influence on the
      outcome of virtually all corporate actions requiring stockholder approval,
      irrespective of how our other stockholders may vote, including the following
      actions:





·
            election
                of our directors;





·
            the
                amendment of our Certificate of Incorporation or By-laws;





·
            the
                merger of our company or the sale of our assets or other corporate
                transaction; and





·
            the
                outcome of any other matter submitted to the stockholders for
                vote.





Mr.
      Cinnamon’s stock ownership may discourage a potential acquirer from seeking to
      acquire shares of our common stock or otherwise attempting to obtain control
      of
      our company, which in turn could reduce our stock price or prevent our
      stockholders from realizing a premium over our stock price.





***We
      are subject to the reporting requirements of the federal
      securities***  ***laws,
      which impose additional burdens on us.***





We
      are a
      public reporting company and, accordingly, subject to the information and
      reporting requirements of the Exchange Act and other federal securities laws,
      including compliance with the Sarbanes-Oxley Act of 2002. As a public company,
      we expect these rules and regulations to result in increased compliance costs
      in
      2008 and beyond and to make certain activities more time consuming and
      costly.





***Our
      Certificate of Incorporation authorizes our board to create new
      series***  ***of
      preferred stock without further approval by our stockholders, which
      could***  ***adversely
      affect the rights of the holders of our common stock.***





Our
      Board
      of Directors has the authority to fix and determine the relative rights and
      preferences of preferred stock. Our Board of Directors also has the authority
      to
      issue preferred stock without further stockholder approval. As a result, our
      Board of Directors could authorize the issuance of a series of preferred stock
      that would grant to holders the preferred right to our assets upon liquidation,
      the right to receive dividend payments before dividends are distributed to
      the
      holders of common stock and the right to the redemption of the shares, together
      with a premium, prior to the redemption of our common stock. In addition, our
      Board of Directors could authorize the issuance of a series of preferred stock
      that has greater voting power than our common stock or that is convertible
      into
      our common stock, which could decrease the relative voting power of our common
      stock or result in dilution to our existing stockholders.





**Item
      2.**  **Description
      of Property**





As
      of
      March 10, 2008, we had ten offices. Our offices are located in Los Gatos, Fresno
      (Clovis), Lake Forest, Bakersfield, Manteca, Santa Rosa, Palm Springs, San
      Diego
      and Thousand Oaks (Westlake Village), California, as well as Fairfield, New
      Jersey. Our corporate headquarters are located at 16005 Los Gatos Boulevard,
      Los
      Gatos, California 95032. We
      maintain installation offices at all of our facilities. The following table
      indicates the approximate square footage for each of our leased office
      locations.




**Property
                  Location**
              
              **Approximate
                  Square Footage**Los
                  Gatos, California
              
              
              27,000Fresno
                  (Clovis), California
              
              
              10,300Lake
                  Forest, California
              
              
              2,400Bakersfield,
                  California
              
              
              1,500Manteca,
                  California
              
              
              3,000Santa
                  Rosa, California
              
              
              2,900Palm
                  Springs, California
              
              
              3,200San
                  Diego, California
              
              
              3,000


**Item
      3.**  **Legal
      Proceedings.**





We
      are
      not presently a party to any material pending litigation.





**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders.**





No
      matters were submitted during the fourth quarter of 2007 to a vote of our
      stockholders.




18





**PART
      II**





**Item
      5.**  **Market
      for Common Equity, Related Stockholder Matters and Small**  **Business
      Issuer Purchases of Equity Securities.**





Our
      common stock has been quoted on the NASDAQ capital market since September 2007
      under the symbol AKNS and was previously quoted on the OTC Bulletin Board since
      August 31, 2006 under the symbol AKNS.OB. Prior to that date, there was no
      active market for our common stock. The following table sets forth the high
      and
      low bid prices for our common stock for the periods indicated, as reported
      by
      the NASDAQ and the OTC Bulletin Board. The OTC Bulletin Board quotations reflect
      inter-dealer prices, without retail mark-up, mark-down or commission, and may
      not represent actual transactions.





High
            
            Low**Fiscal
                Year 2006**Third
                Quarter (from August 31, 2006)
            
            $
            4.45
            
            $
            2.10Fourth
                Quarter
            
            $
            3.21
            
            $
            1.95**Fiscal
                Year 2007**First
                Quarter
            
            $
            3.07
            
            $
            1.85Second
                Quarter
            
            $
            3.95
            
            $
            2.44Third
                Quarter (Represents both OTC Bulletin Board and NASDAQ
                Quotations)
            
            $
            8.40
            
            $
            3.87Fourth
                Quarter
            
            $
            10.05
            
            $
            4.00





The
      last
      reported sale price of our common stock on the NASDAQ on March 14, 2008, was
      $6.14 per share. As of March 14, 2008, there were approximately 175 holders
      of
      record of our common stock.





We
      have
      not declared or paid any cash dividends on our common stock and do not
      anticipate declaring or paying any cash dividends in the foreseeable future.
      We
      currently expect to retain future earnings, if any, for the development of
      our
      business. Dividends may be paid on our common stock only if and when declared
      by
      our board of directors.





**Equity
      Compensation Plan Information**





We
      maintain a 2006 Incentive Stock Plan (the “Stock Plan”). As of December 31,
      2007, we have granted 1,011,150 shares
      of restricted stock under the Stock Plan, of which restrictions have lapsed
      as
      to 381,984 shares.
      As of December 31, 2007 2,065,000 non-qualified stock options have been
      granted under the Stock Plan of which none are vested (See “Executive
      Compensation — Stock Incentive Plan” for a detailed description of our equity
      compensation plan.)





**Recent
      Sales of Unregistered Securities**





During
      the period covered by this Annual Report, we have issued the following
      unregistered securities which have not been previously reported. None of these
      transactions involved any underwriters, underwriting discounts or commissions,
      except as specified below, or any public offering, and we believe that each
      transaction was exempt from the registration requirements of the Securities
      Act
      by virtue of Section 4(2) thereof and/or Regulation D promulgated
      thereunder.





During
      January 2007, we issued 54,621 shares of our common stock pursuant to the terms
      of an Account Purchase agreement. We believe that this issuance did not involve
      any public offering and was exempt from the registration requirements of the
      Securities Act by virtue of Section 4(2) thereof and/or Regulation D promulgated
      thereunder.




On
      October 7, 2007, we issued an aggregate of 5,000 shares of our restricted common
      stock under our Stock Plan to certain of our consultants. The securities were
      not sold for cash and were issued to persons who had provided services to us.
      Because each recipient of the restricted common stock is or was an employee
      or
      other service provider to the Company, we believe that each issuance did not
      involve any public offering and was exempt from the registration requirements
      of
      the Securities Act by virtue of Section 4(2) thereof and/or
      Regulation D promulgated thereunder.





The
      information under Item 11 of this Annual Report on Form 10-KSB under the caption
      “Equity Compensation Plan Information as of December 31, 2007” is incorporated
      herein by reference.





**Item
      6.**  **Management’s
      Discussion and Analysis or Plan of Operation.**





The
      following discussion highlights what we believe are the principal factors that
      have affected our financial condition and results of operations as well as
      our
      liquidity and capital resources for the periods described. This discussion
      should be read in conjunction with our financial statements and related notes
      appearing elsewhere in this Annual Report. This discussion contains
“forward-looking statements,” which can be identified by the use of words such
      as “expects,” “plans,” “will,” “may,” “anticipates,” “believes,” “should,”
“intends,” “estimates” and other words of similar meaning. These forward-looking
      statements are subject to risks and uncertainties that may cause actual results
      to differ materially from those expressed or implied by these forward-looking
      statements. Such risks and uncertainties include, without limitation, the risks
      described on page 1 of this Annual Report, and the risks described at the end
      of
      Item 1 above.




19





**Company
      Overview**




We
        are a
        designer, integrator and installer of solar power systems. We market, sell,
        design and install systems for residential and commercial customers, sourcing
        components (such as solar panels and inverters) from manufacturers such as
        Fronius, Kyocera, Sharp, SunPower and Suntech. We currently serve customers
        in
        California, New York, New Jersey, Pennsylvania and Connecticut. According
        to
        data compiled by the California Energy Commission, the Solar Electric Power
        Association and the New Jersey Clean Energy Program, over the past four years
        we
        have been one of the largest national integrators of residential and commercial
        solar electric power systems in the United States. We are a member of the
        Solar
        Energy Industry Association, the California Solar Energy Industries Association,
        the Northern California Solar Energy Association, the Independent Power
        Providers, the Solar Energy Business Association of New England, and the
        New
        York Solar Energy Industries Association. To date, we have installed over
        1,300
        solar power systems and since the commencement of our operations in 2001,
        our
        sales have steadily grown to approximately $32.2 million in 2007.
  Akeena
        Solar was formed in February 2001 as a California corporation under the
        name “Akeena, Inc.” and reincorporated as a Delaware corporation in
        June 2006, at which time its name was changed to “Akeena Solar, Inc.” As of
        March 10, 2008, we had ten offices. Our offices are located in Los Gatos,
        Fresno
        (Clovis), Lake Forest, Bakersfield, Manteca , Santa Rosa, Palm Springs, San
        Diego and Thousand Oaks (Westlake Village), California, as well as Fairfield,
        New Jersey. Our Corporate headquarters are located at 16005 Los Gatos Boulevard,
        Los Gatos, California 95032. We maintain installation offices at all of our
        facilities. Our telephone number is (408) 402-9400. Additional information
        about
        Akeena Solar is available on our website at http://www.akeena.com. The
        information on our web site is not incorporated herein by
        reference.




On
      August 11, 2006, we entered into a reverse merger transaction (the
“Merger”) with Fairview Energy Corporation, Inc. (“Fairview”). Since the
      stockholders of Akeena Solar owned a majority of the outstanding shares of
      Fairview common stock immediately following the Merger, and the management
      and
      board of Akeena Solar became the management and board of Fairview immediately
      following the Merger, the Merger was accounted for as a reverse merger
      transaction and Akeena Solar was deemed to be the acquirer.




During
      September 2007, we introduced our new solar panel technology (“Andalay”), which
      we believe will significantly reduce the installation time and costs, as well
      as
      provide superior reliability and aesthetics, when compared to other solar panel
      mounting products and technology. Andalay offers the following features: (i)
      mounts closer to the roof with less space in between panels; (ii) all black
      appearance with no unsightly racks underneath or beside panels; (iii) built-in
      wiring connections; (iv) 70% fewer roof-assembled parts and 50% less roof-top
      labor required; (v) 25% fewer roof attachment points; (vi) complete compliance
      with the National Electric Code and UL wiring and grounding
      requirements. Pursuant
      to an agreement with Suntech Power Holdings Co. Ltd. (“Suntech”), Suntech will
      provide us with volume manufacturing and delivery of our Andalay product used
      in
      our solar systen installations. During January 2008, we also entered into a
      Licensing Agreement with Suntech. The terms of the Licensing Agreement authorize
      Suntech to distribute our Andalay product in Europe, Japan, and Australia
      commencing in January 2008.





During
      November 2007, we raised approximately $26.1 million through a private
      placement offering to accredited investors. We will utilize portions of this
      additional working capital to fund our growth objectives and inventory needs
      relating to Andalay.





20


**Results
      of Operations**





The
      following table sets forth, for the periods indicated, certain information
      related to our operations as a percentage of our net sales:





**Year
                Ended December 31,****2007**
            ****
            **%**
            ****
            **2006**
            ****
            **%**Net
                sales
            
            $
            32,211,761
            
            
            100.0
            %
            $
            13,390,139
            
            
            100.0
            %Cost
                of sales
            
            
            25,372,691
            
            
            78.8
            %
            
            10,444,539
            
            
            78.0
            %Gross
                profit
            
            
            6,839,070
            
            
            21.2
            %
            
            2,945,600
            
            
            22.0
            %**Operating
                Expenses**Sales
                and marketing
            
            
            5,978,799
            
            
            18.5
            %
            
            1,562,732
            
            
            11.7
            %General
                and administrative
            
            
            11,941,700
            
            
            37.1
            %
            
            3,124,454
            
            
            23.3
            %Total
                operating expenses
            
            
            17,920,499
            
            
            55.6
            %
            
            4,687,186
            
            
            35.0
            %Loss
                from operations
            
            
            (11,081,429
            )
            
            (34.4
            )%
            
            (1,741,586
            )
            
            (13.0
            )%**Other
                income (expense)**Interest
                income (expense), net
            
            
            34,650
            
            
            0.1
            %
            
            (67,655
            )
            
            (0.5
            )%Total
                other income (expense)
            
            
            34,650
            
            
            0.1
            %
            
            (67,655
            )
            
            (0.5
            )%Loss
                before provision for income taxes
            
            
            (11,046,779
            )
            
            (34.3
            )%
            
            (1,809,241
            )
            
            (13.5
            )%Provision
                for income taxes
            
            
            —
            
            
            0.0
            %
            
            —
            
            
            0.0
            %**Net
                loss**
            
            $
            (11,046,779
            )
            
            (34.3)
            %
            $
            (1,809,241
            )
            
            (13.5)
            %





**Year
      Ended December 31, 2007 as compared to Year Ended December 31,
      2006**





*Net
      sales*





Net
      sales
      totaled $32.2 million for the year ended December 31, 2007, as compared to
      $13.4
      million in 2006, or an increase of 140.6%. The increase was due to a higher
      volume of both residential and commercial installations for the year ended
      December 31, 2007 as compared to 2006. The increased volume reflects both
      widening acceptance of photovoltaic technology on the consumer level, and a
      steadily accelerating pace of installation throughout the year ended December
      31, 2007. At
      December 31, 2007, we were operating eight offices in California and one office
      in New Jersey, as compared to two offices in California and one office in New
      Jersey at December 31, 2006.





*Cost
      of sales*





Cost
      of
      sales, including all installation expenses, during the year ended December
      31,
      2007 was 78.8% of sales, as compared to 78.0% in 2006. Gross profit for the
      year
      ended December 31, 2007 was 21.2% of net sales, as compared to 22.0% in 2006.
      This slight decline over the same period of the prior year is the result of
      higher panel costs and parts and supplies costs as a percentage of revenue.
      Our
      average sales price decreased to approximately $7,900 per kilowatt installed
      for
      2007 as compared to approximately $8,700 per kilowatt installed during
      2006.





*Sales
      and marketing expenses*





Sales
      and
      marketing expenses for the year ended December 31, 2007 were 18.5% of net sales
      as compared to 11.7% of net sales during the prior year. Sales and marketing
      expenses were approximately $6.0 million for the year ended December 31, 2007
      as
      compared to approximately $1.6 million in 2006. This increase is mainly due
      to
      higher sales and marketing payroll and sales commissions related to 55
      additional sales and marketing employees hired during 2007 to support our
      increased sales levels. Advertising, public relations, internet marketing
      expenditures, trade shows, conferences and marketing expenditures also increased
      over 2006. We added an additional 55 sales and marketing employees during 2007
      in order to support our increased sales levels.





*General
      and administrative expenses*





General
      and administrative expenses for the year ended December 31, 2007 were 37.1%
      of
      net sales as compared to 23.3% of net sales during the prior year. General
      and
      administrative expenses increased to approximately $11.9 million in 2007
      compared to approximately $3.1 million for the year ended December 31, 2006.
      We
      increased our general and administrative headcount by 10 positions during 2007
      and payroll expenses increased by approximately $2.8 million. Stock-based
      compensation increased approximately $2.3 million during the year ended December
      31, 2007. Research and development costs increased by $958,000 for the year
      ended December 31, 2007 as compared to the prior year. General and
      administrative expenses for legal, accounting and other professional services
      increased approximately $830,000 due primarily to investor relations costs
      and
      costs associated with Sarbanes-Oxley implementation costs. Rent expense
      increased by $441,000 as a result of expanding our infrastructure and opening
      six additional offices during the year ended December 31, 2007.




21




*Interest
      expense, net*





A
      credit
      line of $25.0 million is available to us under our credit facility with Comerica
      Bank (the “2007 Credit Facility”), as evidenced by a loan and security agreement
      with Comerica Bank, entered into on January 29, 2007 and subsequently amended.
      Interest expense was approximately $112,000 for the year ended December 31,
      2007, related primarily to our 2007 Credit Facility, including credit facility
      loan fees of approximately $4,000. Interest expense was offset by interest
      income of approximately $147,000 during the year ended December 31, 2007.
      Interest expense was approximately $68,000 during the same period in 2006,
      which
      related primarily to our previous credit facility with Citibank (West)
      FSB.





*Income
      taxes*




During
      the years ended December 31, 2007 and 2006, there was no income tax expense
      or
      benefit for federal and state income taxes in the Company’s consolidated
      statements of operations due to the Company’s net loss and a valuation allowance
      on the resulting deferred tax asset





**Liquidity
      and Capital Resources**





In
      connection with the Merger, we completed the closing of a private placement
      of
      our common stock in which we sold an aggregate of 128.7 units to accredited
      investors (the “Merger Private Placement”). Each unit consisted of 25,000 shares
      of our common stock. As a result of the Merger Private Placement, we issued
      a
      total of 3,217,500 shares of our common stock. Some units were offered by
      Westminster Securities Corporation, pursuant to the terms of a placement agent
      agreement dated July 21, 2006. The placement agent received (i) a cash fee
      of $61,500 (representing 6% of the gross proceeds of the units sold by it in
      the
      Merger Private Placement) and (ii) three-year warrants to purchase an
      aggregate of 61,500 shares of our common stock (representing 6% of the shares
      sold by it in the Merger Private Placement) at an exercise price of $1.00 per
      share, of which warrants to purchase 27,675 shares were exercised. We realized
      gross proceeds of approximately $3.2 million from the Merger Private Placement
      before commissions and expenses.





On
      December 19, 2006, we issued a master revolving note between us and Comerica
      Bank (the “Master Revolving Note”, or the “2006 Credit Facility”). On January
      29, 2007, we replaced the 2006 Credit Facility with the 2007 Credit Facility.
      Using proceeds from the 2007 Credit Facility, we satisfied all of our
      outstanding obligations under the Master Revolving Note resulting in the
      termination of the Master Revolving Note and related security agreement.




The
      2007
      Credit Facility is evidenced by a loan and security agreement with Comerica
      Bank, entered into on January 29, 2007 and subsequently amended (the “Security
      Agreement”). Borrowings under the 2007 Credit Facility bear interest at
      prime minus 0.5%, payable on the first of each month. The
      2007
      Credit Facility matures on July 1, 2009, at which time all outstanding
      amounts will become due and payable. The Security Agreement grants Comerica
      Bank
      a first priority security interest in all of our assets, now owned or later
      acquired, to secure timely repayment of the 2007 Credit Facility. As
      of
      December 31, 2007, nothing was outstanding under the 2007 Credit Facility and
      approximately $24.8 million in additional borrowing capacity was available
      at
      December 31, 2007.




On
      March 8, 2007, we closed a private placement offering to accredited
      investors (the “March 2007 Private Placement”) in which we realized gross
      proceeds of approximately $4.1 million, before commissions and expenses. In
      connection with the March 2007 Private Placement closing, we issued to investors
      an aggregate of 2,062,304 shares of common stock and (i) three-year
      warrants to purchase 206,230 shares of common stock with an exercise price
      of
      $2.75 per share, and (ii) three-year warrants to purchase 206,230 shares of
      common stock with an exercise price of $3.00 per share. Empire Financial Group,
      Inc. acted as placement agent with respect to the offering and received
      (i) a cash fee of $149,250 and
      (ii) a three-year warrant to purchase 53,250 shares of common stock at an
      exercise price of $2.75 per share. The Westly Group acted as a finder with
      respect to the offering and received (i) a cash fee of $35,000 and
      (ii) a three-year warrant to purchase 15,000 shares of common stock at an
      exercise price of $2.75 per share. Westminster Securities Corporation also
      received a finder’s fee of $21,000 and a three-year warrant to purchase 11,726
      shares of common stock at an exercise price of $1.97 per share. On April 6,
      2007
      we filed a registration statement with the SEC covering the shares of common
      stock issued in the March 2007 Private Placement and the shares of common stock
      issuable upon exercise of the warrants issued in the March 2007 Private
      Placement. Such registration statement became effective on April 16, 2007.




22




On
      June
      4, 2007, we closed a private placement offering to accredited investors (the
      “June 2007 Private Placement”) in which we realized gross proceeds of
      approximately $12.6 million, before commissions and expenses. In connection
      with
      the closing of the June 2007 Private Placement, we issued to investors an
      aggregate of 4,567,270 shares of common stock and three-year warrants to
      purchase 913,455 shares of common stock with an exercise price of $3.95 per
      share. Empire Financial Group, Inc. acted as placement agent with respect to
      the
      June 2007 Private Placement and received (i) a cash fee of $633,850 and
      (ii) a three-year warrant to purchase 376,800 shares of common stock at an
      exercise price of $3.95 per share. Westminster Securities Corporation also
      received a finder’s fee of $21,000 and a three-year warrant to
      purchase 9,164 shares of common stock at an exercise price of $2.75 per
      share. On July 3, 2007, we filed a registration statement with the SEC covering
      the shares of common stock sold in the June 2007 Private Placement and shares
      of
      common stock underlying the warrants issued in the June 2007 Private Placement.
      Such registration statement was declared effective on July 24, 2007.





On
      November 6, 2007, we closed a private placement offering to accredited investors
      (the “November 2007 Private Placement”) in which we realized gross proceeds of
      approximately $26.1 million, before commissions and expenses. In connection
      with
      the November 2007 Private Placement, we issued to investors an aggregate of
      3,728,572 shares of common stock and five-year warrants to purchase 745,716
      shares of common stock with an exercise price of $10.08 per share. Cowen and
      Company, LLC acted as the sole placement agent with respect to the November
      2007
      Private Placement and received (i) a cash fee of $1,246,500 which included
      a placement agent fee of $1,171,500 and $75,000 for legal and out-of-pocket
      expenses and (ii) a three-year warrant to purchase 83,679 shares of common
      stock at an exercise price of $10.08 per share. Empire Financial Group, Inc.
      received (i) a cash fee of $460,250 and (ii) a five-year warrant to
      purchase 197,250 shares of common stock at an exercise price of $10.08 per
      share
      as a finder’s fee in connection with the November 2007 Private Placement. On
      November 29, 2007, we filed a registration statement on Form S-3 with the SEC
      covering the shares of common stock sold in the November 2007 Private Placement
      and shares of common stock underlying the warrants issued in the November 2007
      Private Placement. Such registration statement was declared effective on
      December 14, 2007.





Cash
      paid
      for placement agent fees and finders fees for the March 2007 Private Placement
      were $180,250. Cash paid for placement agent fees and finders fees for the
      June
      2007 Private Placement were $654,850. Cash paid for placement agent fees and
      finders fees for the November 2007 Private Placement were $1,706,750. Cash
      paid
      for other direct professional and registration fees incurred relating to the
      March 2007 Private Placement, the June 2007 Private Placement, the November
      2007
      Private Placement and other registration statements totaled $484,196 during
      the
      year ended December 31, 2007. In connection with the Merger, we also completed
      a
      private placement during 2006. Cash paid for placement agent fees during 2006
      were $61,500.




Our
      primary capital requirement is to fund purchases of solar panels and inverters.
      Significant sources of liquidity are cash on hand, cash flows from operating
      activities, working capital, borrowings from our revolving line of credit and
      equity proceeds raised. As of December 31, 2007 we had approximately $22.3
      million in cash on hand and approximately $24.8 million in additional borrowing
      capacity was available under our 2007 Credit Facility at December 31,
      2007.




Cash
      flows used in operating activities were approximately $18.8 million and
      approximately $2.3 million for the years ended December 31, 2007 and 2006,
      respectively. Large purchases of solar panel inventory occurred during 2007
      in
      preparation for installation on various residential and commercial jobs, in
      addition to an increase in our overall state rebates receivable balances.
      Similarly, accounts payable rose in response to the increase in inventory
      purchases as a result of the increase in overall revenue levels. We believe
      a
      high level of inventory is a significant benefit in our industry. Panels may
      be
      difficult to procure and are generally immediately fungible.




Cash
      flows used in investing activities were approximately $1.8 million and
      approximately $174,000, respectively, for the years ended December 31, 2007
      and
      2006. During the year ended December 31, 2007, we acquired vehicles, office
      equipment, office furniture and other fixed assets primarily for our new
      corporate office location and for our most recently added Lake Forest,
      Bakersfield, Manteca, Santa Rosa, Palm Springs and San Diego office
      locations.




Cash
      flows provided by financing activities were approximately $41.9 million and
      approximately $3.2 million, respectively, for the year ended December 31, 2007
      and 2006. During the year ended December 31, 2007, we raised proceeds of
      approximately $42.7 million, before cash paid for placement agent fees and
      registration fees of approximately $3.0 million, from the issuance of our common
      stock under three private placements. We received proceeds of approximately
      $2.0
      million during 2007 from the exercise of warrants for shares of our common
      stock. In addition, we repaid $500,000 under our 2007 Credit Facility during
      the
      year ended December 31, 2007. During the year ended December 31, 2006, we raised
      proceeds of approximately $3.2 million from the issuance of our common stock
      under a private placement.




23





**Contractual
      obligations**





**Payments
                Due****Obligation**
            
            **Total**
            
            **Less
                than**
              **1
                year**
            
            **1-3
                years**
            
            **4-5
                years**
            
            **More
                than**
              **5
                years**Operating
                leases
            
            $
            1,948,056
            
            $
            773,011
            
            $
            1,097,995
            
            $
            77,050
            
            $
            —Capital
                leases
            
            
            70,799
            
            
            24,130
            
            
            46,669
            
            
            —
            
            
            —$
            2,018,855
            
            $
            797,141
            
            $
            1,144,664
            
            $
            77,050
            
            $
            —




**Application
      of critical accounting policies and estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires estimates and assumptions
      that
      affect the reporting of assets, liabilities, sales and expenses, and the
      disclosure of contingent assets and liabilities. Note 2 to our consolidated
      financial statements for the years ending December 31, 2007 and 2006 as filed
      in
      this Annual Report on Form 10-KSB provides a summary of our significant
      accounting policies, which are all in accordance with generally accepted
      accounting policies in the United States. Certain of our accounting policies
      are
      critical to understanding our consolidated financial statements, because their
      application requires management to make assumptions about future results and
      depends to a large extent on management’s judgment, because past results have
      fluctuated and are expected to continue to do so in the future.





We
      believe that the application of the accounting policies described in the
      following paragraphs is highly dependent on critical estimates and assumptions
      that are inherently uncertain and highly susceptible to change. For all these
      policies, we caution that future events rarely develop exactly as estimated,
      and
      the best estimates routinely require adjustment. On an ongoing basis, we
      evaluate our estimates and assumptions, including those discussed
      below.





*Revenue
      recognition.* Revenue
      from sales of products is recognized when: (1) persuasive evidence of an
      arrangement exists, (2) delivery has occurred or services have been
      rendered, (3) the sale price is fixed or determinable, and (4) collection
      of the related receivable is reasonably assured. We recognize revenue upon
      completion of a system installation for residential installations and we
      recognize revenue under the percentage-of-completion method for commercial
      installations.




*Long-lived
      assets.* We
      periodically review our property and equipment and identifiable intangible
      assets for possible impairment whenever facts and circumstances indicate that
      the carrying amount may not be fully recoverable. Assumptions and estimates
      used
      in the evaluation of impairment may affect the carrying value of long-lived
      assets, which could result in impairment charges in future periods. Significant
      assumptions and estimates include the projected cash flows based upon estimated
      revenue and expense growth rates and the discount rate applied to expected
      cash
      flows. In addition, our depreciation and amortization policies reflect judgments
      on the estimated useful lives of assets.





*Goodwill
      and other intangible assets.* We do
      not amortize goodwill, but rather test goodwill for impairment at least
      annually. A customer list is being amortized over the estimated useful life
      of
      the list, which was determined to be eighteen months.





*Stock-based
      compensation.* We
      measure the cost of services received in exchange for equity-based awards based
      on the grant date fair value. Pre-vesting forfeitures are estimated at the
      time
      of grant and we periodically revise those estimates in subsequent period if
      actual forfeitures differ from those estimates. Equity-based compensation is
      recognized for equity-based awards expected to vest.





*Warranty
      Provision.*  We
      warrant our products for various periods against defects in material or
      installation workmanship. The manufacturer warranty on the solar panels and
      the
      inverters have a warranty period range of 5-25 years. We assist the customer
      in
      the event that the manufacturer warranty needs to be used to replace a defective
      panel or inverter. We provide for a 5-year warranty on the installation of
      a
      system and all equipment and incidental supplies other than solar panels and
      inverters that are covered under the manufacturer warranty. We record a
      provision for the installation warranty, within cost of sales, based on
      historical experience and future expectations of the probable cost to be
      incurred in honoring its warranty commitment.




24




**Seasonality**




Our
      quarterly installation and operating results may vary significantly from quarter
      to quarter as a result of seasonal changes in weather as well as state or
      Federal subsidies . Historically, sales are highest during the third and fourth
      quarters as a result of good weather and robust bookings in the second
      quarter.





**Item
      7.**  **Financial
      Statements.**





See
      the
      Company’s Financial Statements beginning on page 26.


25


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Board of Directors and Stockholders


of
      Akeena
      Solar, Inc.





We
      have
      audited the accompanying consolidated balance sheets of Akeena Solar, Inc.
      and
      its subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the
      related consolidated statements of operations, changes in stockholders’ equity
      and cash flows for the years then ended. These financial statements are the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these consolidated financial statements based on our
      audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company is not required to
      have, nor have we been engaged to perform an audit of the Company’s internal
      control over financial reporting. Our audits included consideration of internal
      control over financial reporting as a basis for designing audit procedures
      that
      are appropriate in the circumstances, but not for the purpose of expressing
      an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Akeena Solar, Inc. and
      its
      subsidiaries as of December 31, 2007 and 2006, and the results of their
      operations, and their cash flows for the years then ended in conformity with
      accounting principles generally accepted in the United States of
      America.







/s/
      Burr,
      Pilger and Mayer LLP


San
      Francisco, CA


March
      17,
      2008


26


**AKEENA
      SOLAR, INC.**


**Consolidated
      Balance Sheets**


**December
      31, 2007 and 2006**





**2007**
            
            **2006****Assets**Current
                assetsCash
                and cash equivalents
            
            $
            22,313,717
            
            $
            992,376Accounts
                receivable, net
            
            
            9,465,055
            
            
            3,434,569Other
                receivables
            
            
            278,636
            
            
            5,000Inventory
            
            
            8,848,467
            
            
            1,791,816Prepaid
                expenses and other current assets, net
            
            
            3,055,787
            
            
            833,192Total
                current assets
            
            
            43,961,662
            
            
            7,056,953Property
                and equipment, net
            
            
            1,796,567
            
            
            194,867Due
                from related party
            
            
            —
            
            
            21,825Customer
                list, net
            
            
            84,698
            
            
            230,988Goodwill
            
            
            318,500
            
            
            —Other
                assets
            
            
            162,880
            
            
            24,751Total
                assets
            
            $
            46,324,307
            
            $
            7,529,384**Liabilities
                and Stockholders’ Equity**Current
                liabilitiesAccounts
                payable
            
            $
            6,716,475
            
            $
            2,053,567Customer
                rebate payable
            
            
            346,097
            
            
            1,196,363Accrued
                liabilities
            
            
            1,431,880
            
            
            622,184Accrued
                warranty
            
            
            647,706
            
            
            508,655Common
                stock issuable
            
            
            —
            
            
            175,568Deferred
                purchase price payable
            
            
            20,000
            
            
            —Deferred
                revenue
            
            
            1,442,834
            
            
            981,454Credit
                facility
            
            
            —
            
            
            500,000Current
                portion of capital lease obligations
            
            
            24,130
            
            
            12,205Current
                portion of long-term debt
            
            
            191,845
            
            
            17,307Total
                current liabilities
            
            
            10,820,967
            
            
            6,067,303Capital
                lease obligations, less current portion
            
            
            46,669
            
            
            42,678Long-term
                debt, less current portion
            
            
            644,595
            
            
            28,673Total
                liabilities
            
            
            11,512,231
            
            
            6,138,654Commitments,
                contingencies and subsequent events (Notes 17 and 20)Stockholders’
                equity:Preferred
                stock, $0.001 par value; 1,000,000 shares authorized; none issued
                and
                outstanding
            
            
            —
            
            
            —Common
                stock, $0.001 par value; 50,000,000 shares authorized; 27,410,684
                and
                15,877,751 shares issued and outstanding at December 31, 2007 and
                December
                31, 2006, respectively
            
            
            27,411
            
            
            15,878Additional
                paid-in capital
            
            
            47,412,518
            
            
            2,955,926Accumulated
                deficit
            
            
            (12,627,853
            )
            
            (1,581,074
            )Total
                stockholders’ equity
            
            
            34,812,076
            
            
            1,390,730Total
                liabilities and stockholders’ equity
            
            $
            46,324,307
            
            $
            7,529,384





*The
      accompanying notes are an integral part of these consolidated financial
      statements.*


27


**AKEENA
      SOLAR, INC.**


**Consolidated
      Statements of Operations**


**Years
      Ended December 31, 2007 and 2006**





**2007**
            
            **2006**Net
                sales
            
            $
            32,211,761
            
            $
            13,390,139Cost
                of sales
            
            
            25,372,691
            
            
            10,444,539Gross
                profit
            
            
            6,839,070
            
            
            2,945,600**Operating
                expenses**Sales
                and marketing
            
            
            5,978,799
            
            
            1,562,732General
                and administrative
            
            
            11,941,700
            
            
            3,124,454Total
                operating expenses
            
            
            17,920,499
            
            
            4,687,186Loss
                from operations
            
            
            (11,081,429
            )
            
            (1,741,586
            )**Other
                income (expense)**Interest
                income (expense), net
            
            
            34,650
            
            
            (67,655
            )Total
                other income (expense)
            
            
            34,650
            
            
            (67,655
            )Loss
                income before provision for income taxes
            
            
            (11,046,779
            )
            
            (1,809,241
            )Provision
                for income taxes
            
            
            —
            
            
            —**Net
                loss**
            
            $
            (11,046,779
            )
            $
            (1,809,241
            )**Loss
                per common and common equivalent share:**Basic
            
            $
            (0.52
            )
            $
            (0.16
            )Diluted
            
            $
            (0.52
            )
            $
            (0.16
            )Weighted
                average shares used in computing loss per common and common equivalent
                share:Basic
            
            
            21,117,399
            
            
            11,193,143Diluted
            
            
            21,117,399
            
            
            11,193,143





*The
      accompanying notes are an integral part of these consolidated financial
      statements.*


28


**AKEENA
      SOLAR, INC.**


**Consolidated
      Statements of Changes in Stockholders’ Equity**





**Common
                Stock**
            
            **Additional****Number**
              **of
                Shares**
            
            **Amount**
            
            **Paid-in**
              **Capital**
            
            **Accumulated**
              **Deficit**
            
            **Stockholders’**
              **Equity****Balance
                at January 1, 2006**
            
            
            8,000,000
            
            $
            8,000
            
            $
            (7,000
            )
            $
            (519
            )
            $
            481Net
                equity of Fairview Energy Corporation, Inc. at date of reverse
                merger
            
            
            3,656,466
            
            
            3,656
            
            
            3,015
            
            
            —
            
            
            6,671Proceeds
                from issuance of common stock at $1.00 under private placement, $0.001
                par
                value
            
            
            3,217,500
            
            
            3,218
            
            
            3,214,282
            
            
            —
            
            
            3,217,500Total
                placement agent fees
            
            
            —
            
            
            —
            
            
            (131,539
            )
            
            —
            
            
            (131,539
            )Warrants
                issued to placement agent
            
            
            —
            
            
            —
            
            
            70,039
            
            
            —
            
            
            70,039Stock-based
                compensation expense
            
            
            3,785
            
            
            4
            
            
            37,815
            
            
            —
            
            
            37,819Distribution
                to stockholder
            
            
            —
            
            
            —
            
            
            —
            
            
            (11,000
            )
            
            (11,000
            )Reclassification
                of S corporation accumulated deficit to additional paid-in
                capital
            
            
            —
            
            
            —
            
            
            (239,686
            )
            
            239,686
            
            
            —Exercise
                of warrants for common shares at an exercise price of $0.01, $0.001
                par
                value
            
            
            1,000,000
            
            
            1,000
            
            
            9,000
            
            
            —
            
            
            10,000Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (1,809,241
            )
            
            (1,809,241
            )**Balance
                at December 31, 2006**
            
            
            15,877,751
            
            
            15,878
            
            
            2,955,926
            
            
            (1,581,074
            )
            
            1,390,730Proceeds
                from issuance of common stock at $1.97 under private placement, $0.001
                par
                value
            
            
            2,062,304
            
            
            2,062
            
            
            4,060,677
            
            
            —
            
            
            4,062,739Proceeds
                from issuance of common stock at $2.75 under private placement, $0.001
                par
                value
            
            
            4,567,270
            
            
            4,567
            
            
            12,555,426
            
            
            —
            
            
            12,559,993Proceeds
                from issuance of common stock at $7.00 under private placement, $0.001
                par
                value
            
            
            3,728,572
            
            
            3,729
            
            
            26,096,275
            
            
            —
            
            
            26,100,004Total
                placement agent fees and registration fees
            
            
            —
            
            
            —
            
            
            (5,462,376
            )
            
            —
            
            
            (5,462,376
            )Warrants
                issued to placement agent and warrants issued for finders
                fees
            
            
            —
            
            
            —
            
            
            2,436,330
            
            
            —
            
            
            2,436,330Issuance
                of common shares at $3.21, as per an account purchase agreement,
                $0.001
                par value
            
            
            54,621
            
            
            55
            
            
            175,513
            
            
            —
            
            
            175,568Issuance
                of common shares at $3.14, as per an asset purchase agreement, $0.001
                par
                value
            
            
            100,000
            
            
            100
            
            
            313,900
            
            
            —
            
            
            314,000Exercise
                of warrants for common shares, $0.001 par value
            
            
            641,967
            
            
            642
            
            
            2,033,129
            
            
            —
            
            
            2,033,771Release
                of restricted common shares, $0.001 par value, and stock-based
                compensation expense
            
            
            378,199
            
            
            378
            
            
            2,247,718
            
            
            —
            
            
            2,248,096Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (11,046,779
            )
            
            (11,046,779
            )**Balance
                at December 31, 2007**
            
            
            27,410,684
            
            $
            27,411
            
            $
            47,412,518
            
            $
            (12,627,853
            )
            $
            34,812,076





*The
      accompanying notes are an integral part of these consolidated financial
      statements.*





29


**AKEENA
      SOLAR, INC.**


**Consolidated
      Statements of Cash Flows**


**Years
      Ended December 31, 2007 and 2006**





**2007**
            
            **2006****Cash
                flows from operating activities**Net
                loss
            
            $
            (11,046,779
            )
            $
            (1,809,241
            )Adjustments
                to reconcile net loss to net cash used in operationsDepreciation
            
            
            201,245
            
            
            36,953Amortization
                of customer list and customer contracts
            
            
            319,233
            
            
            101,391Bad
                debt expense
            
            
            53,677
            
            
            41,743Non
                cash stock-based compensation expense
            
            
            2,248,096
            
            
            37,819Loss
                on asset disposal
            
            
            1,388
            
            
            —Changes
                in assets and liabilities:Accounts
                receivable
            
            
            (6,084,163
            )
            
            (1,798,123
            )Other
                receivables
            
            
            (273,636
            )
            
            (4,249
            )Inventory
            
            
            (7,056,651
            )
            
            (1,251,948
            )Prepaid
                expenses and other current assets
            
            
            (2,221,538
            )
            
            (452,681
            )Other
                assets
            
            
            (138,129
            )
            
            (20,824
            )Accounts
                payable
            
            
            4,662,908
            
            
            914,584Customer
                rebate payable
            
            
            (850,266
            )
            
            878,178Accrued
                liabilities and accrued warranty
            
            
            939,747
            
            
            560,243Deferred
                revenue
            
            
            461,380
            
            
            507,422Net
                cash used in operating activities
            
            
            (18,783,488
            )
            
            (2,258,733
            )**Cash
                flows from investing activities**Acquisition
                of property and equipment
            
            
            (1,680,661
            )
            
            (88,585
            )Acquisition
                of customer list
            
            
            (77,000
            )
            
            (101,618
            )Cash
                acquired in reverse merger transaction
            
            
            —
            
            
            16,871Increase
                (decrease) in amount due from related party
            
            
            21,825
            
            
            (800
            )Acquisition
                of Alternative Energy, Inc.
            
            
            (80,000
            )
            
            —Net
                cash used in investing activities
            
            
            (1,815,836
            )
            
            (174,132
            )**Cash
                flows from financing activities**Borrowing
                on long-term debt
            
            
            819,468
            
            
            21,084Repayment
                of long-term debt
            
            
            (90,542
            )
            
            (17,661
            )Repayments
                on line of credit, net
            
            
            (500,000
            )
            
            —Distributions
                to stockholder
            
            
            —
            
            
            (11,000
            )Payment
                of capital lease obligations
            
            
            (38,722
            )
            
            (3,228
            )Issuance
                of common stock under private placement
            
            
            42,722,736
            
            
            3,217,500Proceeds
                from exercise of warrants
            
            
            2,033,771
            
            
            10,000Payment
                of placement agent fees and registration fees
            
            
            (3,026,046
            )
            
            (61,500
            )Net
                cash provided by financing activities
            
            
            41,920,665
            
            
            3,155,195Net
                increase in cash and cash equivalents
            
            
            21,321,341
            
            
            722,330**Cash
                and cash equivalents**Beginning
                of year
            
            
            992,376
            
            
            270,046End
                of year
            
            $
            22,313,717
            
            $
            992,376**Supplemental
                cash flows disclosures:**Cash
                paid during the year forInterest
            
            $
            112,474
            
            $
            59,129**Non
                cash investing and financing activities**Issuance
                of common stock warrants for placement agent fees and finders
                fees
            
            $
            2,436,330
            
            $
            70,039Issuance
                of common stock under an account purchase agreement
            
            $
            175,568
            
            $
            —Issuance
                of common stock for purchase of net assets under an asset purchase
                agreement
            
            $
            314,000
            
            $
            —Common
                stock issuable pursuant to an account purchase agreement
            
            $
            —
            
            $
            175,568Assets
                acquired under capital lease
            
            $
            54,638
            
            $
            58,111Vehicle
                loans assumed under asset purchase agreement
            
            $
            61,534
            
            $
            —





*The
      accompanying notes are an integral part of these consolidated financial
      statements.*


30


**AKEENA
      SOLAR, INC.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**





**1.
      Description of Business**





Akeena
      Solar, Inc. (the “Company” or “Akeena Solar”) was incorporated in February 2001
      as a Subchapter S corporation in the State of California. During June 2006,
      the
      Company became a C corporation in the State of Delaware. On August 11, 2006,
      the
      Company entered into a reverse merger transaction (the “Merger”) with Fairview
      Energy Corporation, Inc. (“Fairview”). Pursuant to the merger agreement, the
      stockholders of Akeena Solar received one share of Fairview common stock for
      each issued and outstanding share of Akeena Solar common stock, which totaled
      8,000,000 shares. Akeena Solar’s common shares were also adjusted from $0.01 par
      value to $0.001 par value at the time of the Merger. Subsequent to the closing
      of the Merger, the closing of a private placement of 3,217,500 shares of the
      Company’s common stock (the “2006 Private Placement”) at an issue price of $1.00
      per share for a total of $3,217,500, net of placement agent fees of $131,539,
      and the cancellation of 3,877,477 shares of Fairview common stock, the former
      stockholders of Akeena Solar held a majority of Fairview’s outstanding common
      stock. The $131,539 of placement agent fees were comprised of $61,500 in cash
      fees paid and warrants to purchase 61,500 shares of the Company’s common stock
      valued at $70,039 (see Note 14). Since the stockholders of Akeena Solar own
      a
      majority of the outstanding shares of Fairview common stock immediately
      following the Merger, and the management and board of Akeena Solar became the
      management and board of Fairview immediately following the Merger, the Merger
      is
      being accounted for as a reverse merger transaction and Akeena Solar is deemed
      to be the acquirer. The assets, liabilities and the historical operations prior
      to the Merger are those of Akeena Solar. Subsequent to the Merger, the
      consolidated financial statements include the assets and liabilities of Akeena
      Solar and Fairview, and the historical operations of Akeena Solar and the
      operations of Fairview from the closing date of the Merger.





The
      Company is engaged in the design and installation of solar panel systems to
      residential and commercial markets.





**2.
      Summary of Significant Accounting Policies**





**Cash
      and Cash Equivalents**





The
      Company considers all highly liquid investments with maturities of three months
      or less, when purchased, to be cash equivalents. The Company maintains cash
      and
      cash equivalents which consist principally of demand deposits with high credit
      quality financial institutions. At certain times, such amounts exceed FDIC
      insurance limits. The Company has not experienced any losses on these
      investments.





**Accounts
      Receivable**





The
      Company regularly evaluates the collectibility of its accounts receivable.
      An
      allowance for doubtful accounts is maintained for estimated credit losses,
      and
      such losses have been minimal and within management’s expectations. When
      estimating credit losses, the Company considers a number of factors including
      the aging of a customer’s account, creditworthiness of specific customers,
      historical trends and other information. Accounts receivable consist of trade
      receivables and amounts due from state agencies for rebates on state-approved
      solar systems installed. These rebate amounts are passed on to the customer,
      either at the time the customer is billed, or when the money is received from
      the states by the Company. Included within customer rebate payable at December
      31, 2007 and 2006 is approximately $346,000 and approximately $1.2 million,
      respectively, of rebates payable to customers. Usually, the various states
      remit
      the rebate amounts to the Company within 90-120 days.





**Inventory**





Inventory
      is stated at the lower of cost (on an average basis) or market value.





**Property
      and Equipment**





Property
      and equipment are stated at cost less accumulated depreciation and amortization.
      Depreciation and amortization are provided for using the straight-line method
      over the estimated useful lives of the respective assets.




31


Estimated
      useful lives are as follows:





Category
            
            Useful
                LivesFurniture
                and Fixtures
            
            7-10
                yearsOffice
                Equipment
            
            3-10
                yearsVehicles
            
            5
                yearsLeasehold
                Improvements
            
            5
                years





Maintenance
      and repairs are expensed as incurred. Expenditures for significant renewals
      or
      betterments are capitalized. Upon disposition, the cost and related accumulated
      depreciation are removed from the accounts and the resulting gain or loss is
      reflected in current operations.





**Long-Lived
      Assets**





The
      Company reviews long-lived assets for impairment whenever events or changes
      in
      circumstances indicate that the carrying value of a long-lived asset may not
      be
      recoverable. The Company periodically evaluates whether events and circumstances
      have occurred that may warrant revision of the estimated useful lives of its
      long-lived assets or whether the remaining balance of long-lived assets should
      be evaluated for possible impairment. The Company does not believe that there
      were any indicators of impairment that would require an adjustment to such
      assets or their estimated periods of recovery at December 31, 2007 and
      2006.





**Goodwill
      and Other Intangible Assets**





The
      Company does not amortize goodwill, but rather tests goodwill for impairment
      at
      least annually. The
      Company does not believe that there were any indicators of impairment that
      would
      require an adjustment at December 31, 2007. A
      customer list is being amortized over the estimated useful life of the list,
      which was determined to be eighteen months.




**Manufacturer
      and Installation Warranties**





The
      Company warrants its products for various periods against defects in material
      or
      installation workmanship. The manufacturer warranty on the solar panels and
      the
      inverters have a warranty period range of 5-25 years. The Company assists the
      customer in the event that the manufacturer warranty needs to be used to replace
      a defective panel or inverter. The Company provides for a 5-year warranty on
      the
      installation of a system and all equipment and incidental supplies other than
      solar panels and inverters that are covered under the manufacturer warranty.
      The
      Company records a provision for the installation warranty, within cost of sales,
      based on historical experience and future expectations of the probable cost
      to
      be incurred in honoring its warranty commitment. The provision for the
      installation warranty of approximately $648,000 and approximately $509,000
      at
      December 31, 2007 and 2006, respectively, is included within “Accrued warranty”
in the accompanying consolidated balance sheets.





**Fair
      Value of Financial Instruments**





The
      carrying values reported for cash equivalents, accounts receivable, accounts
      payable and accrued liabilities approximated their respective fair values at
      each balance sheet date due to the short-term maturity of these financial
      instruments.





**Revenue
      Recognition and Deferred Revenue**





Revenue
      from installation of a system is recognized when (1) persuasive evidence of
      an
      arrangement exists, (2) delivery has occurred or services have been rendered,
      (3) the sales price is fixed or determinable, and (4) collection of the related
      receivable is reasonably assured. The Company recognizes revenue for residential
      installations upon completion of a system installation. The Company utilizes
      the
      percentage-of-completion method to recognize revenue on commercial
      installations.





Defective
      solar panels or inverters are covered under the manufacturer warranty. In the
      event that a panel or inverter needs to be replaced, the Company will replace
      the defective item within the manufacturer’s warranty period (between 5-25
      years). See the “Manufacturer and installation warranties” discussion
      above.





Deferred
      revenue consists of installations initiated but not completed within the
      reporting period.


32





**Stock-based
      Compensation**





The
      Company applies the fair value method under Statement of Financial Accounting
      Standards (“SFAS”) No. 123(revised 2004), “Share-Based Payment” (“SFAS 123R”) in
      accounting for its Stock Incentive Plan. Under SFAS 123R, compensation cost
      is
      measured at the grant date based on the fair value of the equity instruments
      awarded and is recognized over the period during which an employee is required
      to provide service in exchange for the award, or the requisite service period,
      which is usually the vesting period. The fair value of the equity award granted
      is estimated on the date of the grant.





**Advertising**





The
      Company expenses advertising costs as incurred. Advertising expense, included
      in
“Sales and marketing expenses,” for the years ended December 31, 2007 and 2006
      was approximately $1.0 million and $150,000, respectively.





**Shipping
      and Handling Costs**





Shipping
      and handling costs associated with inbound freight are included in cost of
      inventory and expensed as cost of sales when the related inventory is sold.
      Amounts billed to customers for shipping and handling are recorded as revenue
      and were not significant for the years ended December 31, 2007 and
      2006.





**Income
      Taxes**





As
      the
      Company was a Subchapter S corporation until June 2006, any taxable income
      or
      loss of the S corporation through June 2006 was included within the sole
      stockholder’s income for federal and state income tax purposes.





Deferred
      income taxes arise from timing differences resulting from income and expense
      items reported for financial accounting and tax purposes in different periods.
      A
      deferred tax asset valuation allowance is recorded when it is more likely than
      not that deferred tax assets will not be realized. Utilization of net operating
      loss carryforwards may be subject to a substantial annual limitation due to
      ownership change limitations provided by the Internal Revenue Code. The annual
      limitation may result in the expiration of net operating loss carryforwards
      before utilization.




The
      Company adopted the provisions of FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* (“FIN
      48”), on January 1, 2007. Previously, the Company had accounted for tax
      contingencies in accordance with SFAS No. 5, *Accounting
      for Contingencies* .
      As
      required by Interpretation 48, which clarifies SFAS No. 109, *Accounting
      for Income Taxes* ,
      the
      Company recognizes the financial statement benefit of a tax position only after
      determining that the relevant tax authority would more likely than not sustain
      the position following an audit. For tax positions meeting this standard, the
      amount recognized in the financial statements is the largest benefit that has
      a
      greater than 50 percent likelihood of being realized upon ultimate settlement
      with the relevant tax authority. At the adoption date, the Company applied
      Interpretation 48 to all tax positions for which the statute of limitations
      remained open. The adoption of FIN 48 did not have a material impact in the
      consolidated financial statements during the year ended December 31,
      2007.




**Earnings
      Per Share**





Basic
      earnings per share is computed by dividing net income by the weighted average
      number of common shares outstanding during the period presented. Diluted
      earnings per share is computed using the weighted average number of common
      shares outstanding during the periods plus the effect of dilutive securities
      outstanding during the periods. For the years ended December 31, 2007 and 2006,
      basic earnings per share is the same as diluted earnings per share as a result
      of the Company’s common stock equivalents being anti-dilutive due to the
      Company’s net loss.





At
      December 31, 2007, warrants to purchase 2,238,033 shares of the Company’s common
      stock and 623,166 non-vested restricted shares, net of forfeitures (see Notes
      13
      and 14), are dilutive securities that may dilute future earnings per share.
      At
      December 31, 2006, warrants to purchase 61,500 shares of the Company’s common
      stock and 354,622 non-vested restricted shares, net of forfeitures (see Notes
      13
      and 14), are dilutive securities that may dilute future earnings per
      share.




33





The
      weighted-average number of common shares outstanding were 21,117,399 and
      11,193,143 for the years ended December 31, 2007 and 2006, respectively. The
      weighted-average number of common shares used to calculate basic earnings per
      share for the year ended December 31, 2006 includes 1,000,000 contingently
      issuable warrants to purchase shares of the Company’s common stock in accordance
      with SFAS No. 128, “Earnings Per Share.” The 1,000,000 warrants were exercised
      for 1,000,000 common shares during 2006.





**Segment
      Reporting**





The
      Company has determined it operates in one operating segment. Operating segments,
      are components of an enterprise for which separate financial information is
      available and is evaluated regularly by the Company in deciding how to allocate
      resources and in assessing performance. The Company’s chief operating decision
      maker assesses the Company’s performance, and allocates its resources as a
      single operating segment.





**Use
      of Estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.





**Principles
      of Consolidation**





The
      accompanying consolidated financial statements include the accounts of Akeena
      Solar and Fairview, pursuant to the Merger as described in Note 1. The Company
      also has two wholly-owned subsidiaries as of December 31, 2007. Akeena Corp.
      is
      a wholly-owned subsidiary of Akeena Solar and Andalay Solar, Inc. is a
      wholly-owned subsidiary of Akeena Solar. All inter-company accounts have been
      eliminated in consolidation.





**Reclassifications**





Certain
      prior year amounts have been reclassified to conform with the current year
      presentation.





**Recent
      Accounting Pronouncements**





In
      July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income
      Taxes, an interpretation of FASB Statement No. 109, Accounting for Income
      Taxes.” FIN 48 clarifies the accounting for income taxes by prescribing the
      minimum recognition threshold a tax position is required to meet before being
      recognized in the financial statements. FIN 48 also provides guidance on
      de-recognition, measurement, classification, interest and penalties, accounting
      in interim periods, disclosure and transition. The interpretation applies to
      all
      tax positions related to income taxes subject to FASB Statement No. 109. FIN
      48
      is effective for fiscal years beginning after December 15, 2006.
      Differences between the amounts recognized in the statements of financial
      position prior to the adoption of FIN 48 and the amounts reported after adoption
      should be accounted for as a cumulative-effect adjustment recorded to the
      beginning balance of retained earnings. The adoption of FIN 48 did not have
      a
      material impact on the Company’s consolidated financial statements.




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines
      fair value, establishes a framework for measuring fair value in accordance
      with
      GAAP, and expands disclosures about fair value measurements. This statement
      does
      not require any new fair value measurements in accounting pronouncements where
      fair value is the relevant measurement attribute. However, for some entities,
      the application of this statement will change current practice for financial
      statements issued for fiscal years beginning after November 15, 2007. The
      Company is currently evaluating the impact of the adoption of SFAS 157 on its
      definition and measurement of fair value and disclosure
      requirements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
      for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 allows
      entities the option to measure eligible financial instruments at fair value
      as
      of specified dates. Such election, which may be applied on an instrument by
      instrument basis, is typically irrevocable once elected. SFAS 159 is effective
      for fiscal years beginning after November 15, 2007, and early application
      is allowed under certain circumstances. The Company does not expect the adoption
      of SFAS 159 to have a material impact on its consolidated financial position
      or
      consolidated results of operations.




34





In
      June 2007, the FASB’s Emerging Issues Task Force reached a consensus on
      EITF Issue No. 07-3, “Accounting for Nonrefundable Advance Payments for
      Goods or Services to Be Used in Future Research and Development Activities” that
      would require nonrefundable advance payments made by the Company for future
      R&D activities to be capitalized and recognized as an expense as the goods
      or services are received by the Company. The Company does not expect EITF Issue
      No. 07-3 to have a material impact on the Company’s consolidated results of
      operations or financial condition.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations” (“SFAS 141R”) which replaces SFAS No. 141. SFAS 141R retains the
      purchase method of accounting for acquisitions, but requires a number of
      changes, including changes in the way assets and liabilities are recognized
      in
      the purchase accounting. It also changes the recognition of assets acquired
      and
      liabilities assumed arising from contingencies, requires the capitalization
      of
      in-process research and development at fair value, and requires the expensing
      of
      acquisition-related costs as incurred. SFAS 141R is effective for the Company
      beginning March 31, 2009 and will apply prospectively to business combinations
      completed on or after that date. The Company does not expect the adoption of
      SFAS 141R to have a material impact on its consolidated financial position
      or
      consolidated results of operations.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements, an amendment of ARB 51” (“SFAS 160”) which
      changes the accounting and reporting for minority interests. Minority interests
      will be recharacterized as noncontrolling interests and will be reported as
      a
      component of equity separate from the parent’s equity, and purchases or sales of
      equity interests that do not result in a change in control will be accounted
      for
      as equity transactions. In addition, net income attributable to the
      noncontrolling interest will be included in consolidated net income on the
      face
      of the income statement and, upon a loss of control, the interest sold, as
      well
      as any interest retained, will be recorded at fair value with any gain or loss
      recognized in earnings. SFAS No. 160 is effective for the Company beginning
      March 31, 2009 and will apply prospectively, except for the presentation and
      disclosure requirements, which will apply retrospectively. The
      Company does not expect the adoption of SFAS 160 to have a material impact
      on
      its consolidated financial position or consolidated results of
      operations.





In
      December 2007, the FASB ratified the Emerging Issues Task Force consensus
      on EITF Issue No. 07-1, “Accounting for Collaborative Arrangements” that
      discusses how parties to a collaborative arrangement (which does not establish
      a
      legal entity within such arrangement) should account for various activities.
      The
      consensus indicates that costs incurred and revenues generated from transactions
      with third parties (i.e., parties outside of the collaborative arrangement)
      should be reported by the collaborators on the respective line items in their
      income statements pursuant to EITF Issue No. 99-19, “Reporting Revenue
      Gross as a Principal Versus Net as an Agent.”  Additionally, the consensus
      provides that income statement characterization of payments between the
      participants in a collaborative arrangement should be based upon existing
      authoritative pronouncements; analogy to such pronouncements if not within
      their
      scope; or a reasonable, rational, and consistently applied accounting policy
      election. EITF Issue No. 07-1 is effective beginning January 1, 2009
      and is to be applied retrospectively to all periods presented for collaborative
      arrangements existing as of the date of adoption. The Company is currently
      evaluating the impacts and disclosures of this standard, but would not expect
      EITF Issue No. 07-1 to have a material impact on the Company’s consolidated
      results of operations or financial condition.




**3.**  **Accounts
      Receivable**





Accounts
      receivable consists of the following:





**December****31,**
              **2007**
            
            **December****31,**
              **2006**State
                rebates receivable
            
            $
            5,121,754
            
            $
            1,746,975Trade
                accounts
            
            
            4,389,425
            
            
            1,671,237Rebate
                receivable assigned to vendor
            
            
            30,135
            
            
            44,939Other
                accounts receivable
            
            
            21,000
            
            
            15,000Less:
                Allowance for doubtful accounts
            
            
            (97,259
            )
            
            (43,582
            )$
            9,465,055
            
            $
            3,434,569





35





**4.**  **Inventory**





Inventory
      consists of the following:





**December****31,**
              **2007**
            
            **December****31,**
              **2006**Work
                in process
            
            $
            394,280
            
            $
            —Finished
                goods
            
            
            8,464,519
            
            
            1,791,816Less:
                provision for obsolete inventory
            
            
            (10,332
            )
            
            —$
            8,848,467
            
            $
            1,791,816





**5.**  **Property
      and Equipment, Net**





Property
      and equipment, net consist of the following:





**December****31,**
              **2007**
            
            **December
                31,**
              **2006**Vehicles
            
            $
            1,278,507
            
            $
            272,785Office
                equipment
            
            
            519,750
            
            
            4,089Leasehold
                improvements
            
            
            224,247
            
            
            4,013Furniture
                and fixtures
            
            
            74,191
            
            
            13,2842,096,695
            
            
            294,171Less:
                Accumulated depreciation and amortization
            
            
            (300,128
            )
            
            (99,304
            )$
            1,796,567
            
            $
            194,867




Depreciation
      expense for the years ended December 31, 2007 and 2006 was approximately
      $201,000 and $37,000, respectively. Accumulated
      depreciation related to approximately $94,000 of assets under capital leases
      was
      approximately $16,000 at December 31, 2007. Accumulated
      depreciation related to approximately $64,000 of assets under capital leases
      was
      approximately $4,000 at December 31, 2006.




36





**6.**  **Assets
      Acquired**





On
      September 29, 2006, the Company executed an Account Purchase Agreement (the
      “Purchase Agreement”), whereby the Company purchased customer contracts, fixed
      assets and a customer listing from an individual (the “Seller”) who, subsequent
      to the execution of the Purchase Agreement, became an employee of the Company.
      This employee was hired to expand the Company’s operations into Fresno,
      California. The customer contracts of approximately $109,000 are included within
      “Prepaid expenses and other current assets, net” in the accompanying
      consolidated balance sheets at December 31, 2007 and 2006, net of accumulated
      amortization of approximately $109,000 at December 31, 2007 and approximately
      $55,000 at December 31, 2006. The customer contracts were amortized over the
      period during which the respective installations were completed. Fixed assets
      purchased of approximately $37,000 are included within “Property and equipment,
      net” at December 31, 2007 and 2006. A
      customer listing valued at approximately $354,000 is included within “Customer
      list, net” in the accompanying consolidated balance sheets at December 31, 2007,
      net of accumulated amortization of approximately $269,000 at December 31, 2007
      and approximately $46,000 at December 31, 2006. T he
      customer list is being amortized over an eighteen month period. Upon execution
      of the Purchase Agreement, the Seller received approximately $196,000 and during
      January 2007, received approximately $176,000 in the Company’s common stock,
      based upon the weighted-average closing price of the shares. The
      $176,000 was settled in 54,621 shares of the Company’s common stock . The
      total
      assets purchased under the Purchase Agreement were approximately $500,000 which
      consisted of the customer contracts valued at approximately $109,000, property
      and equipment of approximately $37,000, and a customer list valued at
      approximately $354,000. Customer
      deposit liabilities of approximately $51,000 were assumed by the Company at
      the
      time of the purchase of the customer contracts, fixed assets and a customer
      list.





Additionally,
      under the terms of the Purchase Agreement, the Seller received cash of $77,000
      during April 2007. Certain revenue milestone amounts were attained during
      2007 and the Seller received 29,481 shares of the Company’s common stock during
      January 2008 (see Note 20). If certain revenue milestone amounts are attained
      during 2008, then the Seller may receive 27,143 shares of the Company’s common
      stock. Additionally, per the terms of the Purchase Agreement, the Seller is
      entitled to receive 14,286 shares of the Company’s common stock on
      December 31, 2008, as long as the Seller remains employed by the Company at
      that time. The 29,481 shares of the Company’s common stock are treated as
      compensation expense during the year ended December 31, 2007. The additional
      shares of the Company’s common stock that may be issued to the Seller based upon
      the Seller’s attainment of certain revenue milestone amounts will be treated as
      compensation expense and are limited to a maximum of 200,000 shares pursuant
      to
      the terms of the Purchase Agreement.




Concurrent
      with the execution of the Purchase Agreement, the Company entered into an
      employment agreement with the Seller which provides for, among other things,
      an
      annual base salary of $120,000 and expires December 31, 2008. There are
      automatic one-year renewals unless written notice is given within 30 days
      of the end of the term by either party. Under the terms of the employment
      agreement, the Seller has also agreed not to compete with the Company in Fresno,
      California, in the solar installation business for one year upon termination
      of
      employment.




**7.**  **Acquisitions**





On
      May 3, 2007, the Company purchased customer contracts and fixed assets, and
      assumed certain liabilities, from Alternative Energy, Inc. (“AEI”), a California
      corporation, pursuant to an asset purchase agreement with AEI and its principal
      shareholders (the “Asset Purchase Agreement”) for approximately $100,000 and
      100,000 shares of the Company’s common stock (see Note 12).





The
      assets acquired were determined to have all inputs and processes necessary
      for
      the transferred assets to continue to conduct normal operations after
      acquisition; accordingly, the purchase was treated as a business combination
      pursuant to SFAS No. 141, “Business Combinations.” The Company assumed AEI
      vehicle loans and leases and also assumed an operating lease for AEI’s offices
      located in Santa Rosa, California, which expires in September 2008 and provides
      for monthly rent payments of approximately $2,600. As per the terms of the
      Asset
      Purchase Agreement, the Company purchased fixed assets valued at approximately
      $102,000 and customer contracts valued at approximately $97,000. The Company
      recorded approximately $319,000 of goodwill acquired in connection with the
      AEI
      transaction. The Company assumed approximately $94,000 in vehicle loans and
      leases, which includes approximately $31,000 for a capital lease, and also
      assumed customer deposit liabilities of approximately $9,000 relating to the
      customer contracts purchased. Fixed assets purchased of approximately $102,000
      are included within “Property and equipment, net” in the accompanying
      consolidated balance sheets at December 31, 2007. Customer contracts of
      approximately $97,000 are included within “Prepaid expenses and other current
      assets, net” in the accompanying consolidated balance sheets at December 31,
      2007, net of accumulated amortization of approximately $42,000. The customer
      contracts are being amortized over the period during which the respective
      installations are completed, which will range from 3-12 months from the
      purchase date of these contracts. Goodwill of approximately $319,000 is included
      within “Goodwill” in the accompanying consolidated balance sheets at December
      31, 2007.




37





Concurrent
      with the execution of the business combination under the Asset Purchase
      Agreement, the Company entered into a two-year employment agreement with one
      of
      the principal shareholders of AEI, as regional sales manager of its Santa Rosa,
      California office. The employment agreement, which expires on June 1, 2009,
      provides for an annual base salary of $120,000, performance-based bonus
      compensation if certain sales goals are achieved payable in shares of our common
      stock and severance payments. This Santa Rosa regional sales manager has also
      agreed not to compete with the Company in the solar installation business for
      four years in Marin, Lake and Sonoma counties, and parts of Napa and Mendocino
      counties, in the State of California. As this transaction with AEI does not
      meet
      the significant asset test, pro forma financial information is not being
      provided within this Form 10-KSB.





**8.**  **Accrued
      Liabilities**





Accrued
      liabilities consist of the following:





**December
                31,**
              **2007**
            
            **December
                31,**
              **2006**Accrued
                salaries, wages and benefits
            
            $
            600,742
            
            $
            72,048Customer
                deposits
            
            
            362,390
            
            
            308,802Accrued
                accounting and legal fees
            
            
            146,000
            
            
            35,200Other
                accrued liabilities
            
            
            322,748
            
            
            206,134$
            1,431,880
            
            $
            622,184




**9.**  **Credit
      Facility**





On
      December 19, 2006, the Company entered into a master revolving note with
      Comerica Bank (the “2006 Credit Facility”), with a maturity date of
      January 1, 2008, to replace the Company’s previous credit facility with
      Citibank West FSB dated August 31, 2005. On January 29, 2007, the
      Company entered into a Loan and Security Agreement (the “Loan Agreement”) with
      Comerica Bank for a $2.0 million line of credit (the “2007 Credit
      Facility”) to replace the Company’s 2006 Credit Facility dated December 19,
      2006. On June 26, 2007, the 2007 Credit Facility was amended to, among other
      things, (i) increase the line of credit from $2.0 million to $7.5 million,
      (ii)
      reduce the interest rate to the prime rate (“Prime”) minus 0.5% and (iii) change
      the maturity date of the 2007 Credit Facility from January 1, 2008 to August
      1,
      2008, at which time all amounts under the 2007 Credit Facility will become
      due
      and payable. Effective December 31, 2007, the Second Modification to Loan and
      Security Agreement (the “Second Modification”) to the Credit Facility (i)
      increased the Company’s line of credit from $7.5 million to $25.0 million and
      (ii) changed the maturity date of the 2007 Credit Facility to July 1, 2009.
      Pursuant to the amended terms, the first $17.5 million borrowed under the 2007
      Credit Facility will not be governed by any formula restrictions but is subject
      to satisfaction by the Company of a cash collateral balance requirement.
      Additional borrowing above $17.5 million will be subject to the same borrowing
      formula as set forth in the Loan Agreement, except that 80% of the Company’s
      Prefiling Rebates (as such term is defined in the Second Modification) are
      now
      eligible under the borrowing formula.




As
      of
      December 31, 2007, nothing was borrowed under the 2007 Credit Facility and
      $24.8
      million of additional borrowing capacity was available at December 31, 2007.
      Under the amended terms of the 2007 Credit Facility, the Company can borrow
      up
      to $17.5 million with no formula restriction. Borrowing above $17.5 million
      would be limited to 80% of Eligible Accounts Receivable plus 55% of Inventory
      Availability (as such terms are defined in the monthly borrowing base report
      provided to Comerica Bank as per the terms of the 2007 Credit Facility), up
      to a
      maximum amount of $7.5 million that is governed by the borrowing formula.
      As of December 31, 2007, 80% of the Company’s Eligible Accounts Receivable was
      approximately $5.6 million, and 55% of Inventory Availability was
      approximately $4.6 million. All of the existing property and assets of the
      Company are pledged as collateral for the 2007 Credit Facility.




38




**10.**  **Capital
      Lease Obligations**





The
      Company’s capital lease obligations consist of three forklifts and two vehicles
      under capital leases. The Company’s scheduled principal maturities relating to
      capital lease obligations at December 31, 2007 are as follows:





2008
            
            $
            24,1302009
            
            
            23,2922010
            
            
            18,4762011
            
            
            4,9012012
            
            
            —$
            70,799Less:
                current portion
            
            
            (24,130
            )$
            46,669





**11.**  **Long-Term
      Debt**





The
      Company’s long-term debt consists of thirty-six vehicle loans. The interest
      rates on these vehicle loans range from 1.9 %
      to
      10.5 %.
      The
      scheduled principal maturities of long-term debt at December 31, 2007 are as
      follows:





2008
            
            $
            191,8452009
            
            
            195,8212010
            
            
            197,1702011
            
            
            164,1482012
            
            
            84,9452013
            
            
            2,511$
            836,440Less:
                current portion
            
            
            (191,845
            )$
            644,595





**12.**  **Stockholders’
      Equity**





The
      Company was incorporated in 2001 as a Subchapter S corporation. During June
      2006, the Company became a C corporation in the State of Delaware. On August
      11,
      2006, the Company entered into a reverse merger transaction with Fairview as
      discussed in Note 1. Pursuant to the Merger, the stockholders of Akeena Solar
      received one share of Fairview common stock for each issued and outstanding
      share of Akeena Solar common stock, which totaled 8,000,000 shares. In addition,
      in connection with the reverse merger, the Company’s 1,000,000 outstanding
      warrants were exchanged for warrants of Fairview. The warrants to purchase
      1,000,000 shares of the Company’s common stock were exercised and 1,000,000
      shares of common stock were issued during 2006 at the exercise price of $0.01,
      for approximately $10,000. Akeena Solar’s common shares were also adjusted from
      $0.01 par value to $0.001 par value at the time of the Merger. Subsequent to
      the
      closing of the Merger, the closing of the 2006 Private Placement of 3,217,500
      shares of the Company’s common stock at an issue price of $1.00 per share for a
      total of $3,217,500, net of placement agent fees of $131,539, and the
      cancellation of 3,877,477 shares of Fairview common stock, the former
      stockholders of Akeena Solar held a majority of Fairview’s outstanding common
      stock. The $131,539 of placement agent fees were comprised of $61,500 in cash
      fees paid and warrants to purchase 61,500 shares of the Company’s common stock
      valued at $70,039 (see Note 14). Since the stockholders of Akeena Solar own
      a
      majority of the outstanding shares of Fairview common stock immediately
      following the Merger, and the management and board of Akeena Solar became the
      management and board of Fairview immediately following the Merger, the Merger
      is
      being accounted for as a reverse merger transaction and Akeena Solar is deemed
      to be the acquirer. The assets, liabilities and the historical operations prior
      to the Merger are those of Akeena Solar. Subsequent to the Merger, the
      consolidated financial statements include the assets and liabilities of Akeena
      Solar and Fairview, and the historical operations of Akeena Solar and the
      operations of Fairview from the closing date of the Merger.





During
      January 2007, 54,621 shares of the Company’s common stock were issued at a
      value of approximately $176,000 in accordance with the terms of the Purchase
      Agreement as described in Note 5. During March 2007, the Company issued
      2,062,304 shares of common stock and raised approximately $4.1 million
      under a private placement offering (the “March 2007 Private Placement”).
      Placement agent fees and registration fees relating to the March 2007
      Private Placement include warrants to purchase 79,976 shares of the Company’s
      common stock valued at $122,308 (see Note 14). During May 2007, 100,000 shares
      of the Company’s common stock were issued at a value of approximately $314,000
      in accordance with the terms of the business combination under the Asset
      Purchase Agreement as described in Note 7. During June 2007, the Company issued
      4,567,270 shares of common stock and raised approximately $12.6 million under
      a
      private placement offering (the “June 2007 Private Placement”). Placement agent
      fees and registration fees relating to the June 2007 Private Placement include
      warrants to purchase 385,964 shares of the Company’s common stock valued at
      $880,219 (see Note 14). Placement agent fees and registration fees relating
      to
      the March 2007 Private Placement and the June 2007 Private Placement include
      cash fees paid of approximately $1.0 million.




39





On
      November 6, 2007, the Company closed a private placement offering to accredited
      investors (the “November 2007 Private Placement”) in which approximately $26.1
      million of gross proceeds were raised, before commissions and expenses. In
      connection with the November 2007 Private Placement, 3,728,572 shares of common
      stock were issued to investors and five-year warrants to purchase 745,716 shares
      of common stock with an exercise price of $10.08 per share were issued to
      investors. Cowen and Company, LLC acted as the sole placement agent with respect
      to the November 2007 Private Placement and received (i) a cash fee of
      $1,246,500 which included a placement agent fee of $1,171,500 and $75,000 for
      legal and out-of-pocket expenses and (ii) a three-year warrant valued at
      $361,805 to purchase 83,679 shares of common stock at an exercise price of
      $10.08 per share. Empire Financial Group, Inc. received (i) a cash fee of
      $460,250 and (ii) a five-year warrant valued at $1,071,999 to purchase
      197,250 shares of common stock at an exercise price of $10.08 per share as
      a
      finder’s fee in connection with the November 2007 Private
      Placement.





If
      the
      registration statements covering the March 2007 Private Placement and the June
      2007 Private Placement cease for any reason to remain continuously effective
      for
      up to two years, or if the holders of the securities covered by the registration
      statements are otherwise not permitted to utilize the prospectus’ included in
      the registration statements to resell any securities covered by the registration
      statements for more than 15 consecutive calendar days or more than 20 calendar
      days during any 12-month period (which need not be consecutive calendar days),
      then each investor in the March 2007 Private Placement and the June 2007 Private
      Placement will be entitled to liquidated damages equal to 1% of the aggregate
      subscription amount paid by that investor, and an additional 1% for each month
      of delinquency. In no event, however, will liquidated damages exceed 9% of
      the
      gross proceeds of the March 2007 Private Placement and the June 2007 Private
      Placement. The Company believes it is unlikely to incur any liquidated damages
      and has not made an accrual for such damages.




**13.
      Stock Option Plan and Stock Incentive Plan**




The
        Company’s 2001 Stock Option Plan (the “2001 Plan”) provides for the issuance of
        incentive stock options and non-statutory stock options. The Company’s Board of
        Directors, which, subject to the terms of the 2001 Plan, determines to whom
        grants are made, and the vesting, timing, amounts and other terms of such
        grants. Incentive stock options may be granted only to employees of the Company,
        while non-statutory stock options may be granted to the Company’s employees,
        officers, directors, consultants and advisors. Options under the Plan vest
        as
        determined by the Board of Directors, but in no event at a rate less than
        20%
        per year. The term of the options granted under the 2001 Plan may not exceed
        10
        years and the maximum aggregate shares that may be issued upon exercise of
        such
        options is 4,000,000 shares of common stock. No options were granted under
        the
        2001 Plan as of December 31, 2007 and 2006.


On
      August 8, 2006, Akeena Solar adopted the Akeena Solar, Inc. 2006 Stock
      Incentive Plan (the “Stock Plan”) pursuant to which 450,000 shares of common
      stock were available for issuance to employees, directors and consultants under
      the Stock Plan as restricted stock and/or options to purchase common stock.
      On
      December 20, 2006, the Stock Plan was amended to increase the number of
      shares available for issuance under the Stock Plan from 450,000 shares to
      1,000,000 shares. On August 24, 2007, the Stock Plan was amended to increase
      the
      number of shares available for issuance under the Stock Plan from 1,000,000
      shares to 4,000,000 shares.




Restricted
      stock and options to purchase common stock may be issued under the Stock Plan.
      The restriction period on the restricted shares granted shall generally expire
      at a rate of 25% a year over four years, unless decided otherwise by the
      Company’s Compensation Committee. Upon the lapse of the restriction period, the
      restricted stock grantee shall become entitled to receive a stock certificate
      evidencing the common shares, and the restrictions shall cease to exist.





The
      Company recognized stock-based compensation expense of approximately $2.3
      million and approximately $38,000 during the years ended December 31, 2007
      and
      2006, respectively, relating to compensation expense calculated in accordance
      with SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”) for
      restricted stock and stock options granted under the Stock Plan.





The
      following table sets forth a summary of restricted stock activity for the years
      ended December 31, 2007 and 2006:




**Number
                of**
              **Restricted**
              **Shares
                2007**
            
            **Number
                of**
              **Restricted**
              **Shares
                2006**Outstanding
                and not vested beginning balance
            
            
            354,622
            
            
            —Granted
                during the year
            
            
            761,488
            
            
            407,305Forfeited/cancelled
                during the year
            
            
            (114,745
            )
            
            (48,898
            )Released/vested
                during the year
            
            
            (378,199
            )
            
            (3,785
            )Outstanding
                and not vested at December 31, 2007 and 2006
            
            
            623,166
            
            
            354,622




40




The
      restricted stock is valued at the grant date fair value of the common stock
      and
      expensed over the requisite service period or vesting period. SFAS 123R requires
      the estimation of forfeitures when recognizing compensation expense and that
      this estimate of forfeitures be adjusted over the requisite service period
      should actual forfeitures differ from such estimates. At December 31, 2007,
      there was approximately $1.5 million of unrecognized stock-based compensation
      expense associated with the non-vested restricted shares granted. Stock-based
      compensation expense relating to these restricted shares is being recognized
      over a weighted-average period of 2.7 years. SFAS 123R requires the cash flows
      as a result of the tax benefits resulting from tax deductions in excess of
      the
      compensation cost recognized (excess tax benefits) to be classified as financing
      cash flows. There are no excess tax benefits relating to restricted stock for
      the years ended December 31, 2007 and 2006, respectively, and therefore, there
      is no impact on the accompanying consolidated statements of cash
      flows.





The
      following table sets forth a summary of stock option activity for the twelve
      months ended December 31, 2007:





**Number
                of Shares**
              **Subject
                To Option**Outstanding
                at January 1, 2007
            
            
            —Granted
                during 2007
            
            
            2,065,000Forfeited/cancelled
                during 2007
            
            
            —Exercised
                during 2007
            
            
            —Outstanding
                at December 31, 2007
            
            
            2,065,000Exercisable
                at December 31, 2007
            
            
            —




The
      stock
      options are valued at the grant date fair value of the common stock and expensed
      over the requisite service period or vesting period. The fair value of stock
      option grants during the year ended December 31, 2007 was estimated on the
      date
      of grant using the Black-Scholes option-pricing model with the following
      weighted average assumptions: risk-free interest rates ranging from 3.4% to
      4.2%, an expected life of 3.5 years, an expected volatility factor of 96.9%
      and
      a dividend yield of 0.0%. The weighted-average fair value per share of the
      stock
      options as determined on the date of grant was $3.51 and the
      weighted-average exercise price is $5.31 for the 2,065,000 stock options
      outstanding as of Decemeber 31, 2007. SFAS 123R requires the estimation of
      forfeitures when recognizing compensation expense and that this estimate of
      forfeitures be adjusted over the requisite service period should actual
      forfeitures differ from such estimates. At December 31, 2007, there was
      approximately $4.5 million of unrecognized stock-based compensation expense
      associated with stock options granted. Stock-based compensation expense relating
      to these stock options is being recognized over a weighted-average period of
      three years. SFAS 123R requires the cash flows as a result of the tax benefits
      resulting from tax deductions in excess of the compensation cost recognized
      (excess tax benefits) to be classified as financing cash flows. There are no
      excess tax benefits for years ended December 31, 2007 and 2006, respectively,
      and therefore, there is no impact on the accompanying consolidated statements
      of
      cash flows.




41


**14. 
        Stock Warrants**


In
      March
      2001, the Company issued a warrant to purchase 1,000,000 shares of the Company’s
      common stock at an exercise price per share of $0.01 in exchange for the
      purchase of assets from Akeena Wireless, Inc. (“AWI”), (see Note 16). The
      warrants to purchase 1,000,000 shares of the Company’s common stock were
      exercised and 1,000,000 shares of common stock were issued during 2006 at the
      exercise price of $0.01, for approximately $10,000.





During
      August and September 2006, the Company issued warrants to purchase 61,500
      shares of the Company’s common stock at an exercise price per share of $1.00 to
      the placement agent that sold 41 units under the Private Placement. The fair
      value of these warrants was estimated using the Black-Scholes pricing model
      with
      the following weighted average assumptions: a risk-free interest rate of 4.9%,
      an expected life of three years, an expected volatility factor or 103.3% and
      a
      dividend yield of 0.0%. The value assigned to these warrants under the
      Black-Scholes estimate is approximately $70,000.





During
      March 2007, the Company issued warrants to purchase 79,976 shares of the
      Company’s common stock at exercise prices ranging from $1.97 - $2.75 per share
      in connection with the March 2007 Private Placement. The fair value of
      these warrants was estimated using the Black-Scholes pricing model with the
      following weighted average assumptions: a risk-free interest rate of 4.5%,
      an
      expected life of three years, an expected volatility factor or 103.3% and a
      dividend yield of 0.0%. The value assigned to these warrants under the
      Black-Scholes estimate is approximately $122,000. In connection with the
      $4.1 million raised under the March 2007 Private Placement and the
      issuance of 2,062,304 shares of common stock to the investors, the Company
      also
      issued to the investors in the March 2007 Private Placement warrants to
      purchase 412,460 shares of the Company’s common stock, with exercise prices
      ranging from $2.75 - 3.00 per share. Using the Black-Scholes pricing model,
      the
      relative fair value of the warrants issued to the investors under the
      March 2007 Private Placement was approximately $779,000. The total relative
      fair value of the common stock and the warrants issued to investors under the
      March 2007 Private Placement was approximately
      $4.7 million.




During
      June 2007, the Company issued warrants to purchase 385,964 shares of the
      Company’s common stock at exercise prices ranging from $2.75 - $3.95 per share
      in connection with the June 2007 Private Placement. The fair value of these
      warrants was estimated using the Black-Scholes pricing model with the following
      weighted average assumptions: a risk-free interest rate of 4.9%, an expected
      life of three years, an expected volatility factor of 96.9% and a dividend
      yield
      of 0.0%. The value assigned to these warrants under the Black-Scholes estimate
      is approximately $880,000. In connection with the $12.6 million raised
      under the June 2007 Private Placement and the issuance of 4,567,270 shares
      of common stock to the investors, the Company also issued to the investors
      in
      the June 2007 Private Placement warrants to purchase 913,455 shares of the
      Company’s common stock, with an exercise price of $3.95 per share. Using the
      Black-Scholes pricing model, the relative fair value of the warrants issued
      to
      the investors under the June 2007 Private Placement was approximately $2.4
      million. The total relative fair value of the common stock and the warrants
      issued to investors under the June 2007 Private Placement was approximately
      $14.6 million.




During
      November 2007, the Company issued warrants to purchase 280,929 shares of
      the Company’s common stock at an exercise price of $10.08 per share in
      connection with the November 2007 Private Placement. The fair value of
      these warrants was estimated using the Black-Scholes pricing model with the
      following weighted average assumptions: risk-free interest rates ranging from
      3.7% to 4.0%, expected lives ranging from three to five years, an expected
      volatility factor of 96.9% and a dividend yield of 0.0%. The value assigned
      to
      these warrants under the Black-Scholes estimate is approximately $1.4 million.
      In connection with the $26.1 million raised under the November 2007
      Private Placement and the issuance of 3,728,572 shares of common stock to the
      investors, the Company also issued to the investors in the November 2007
      Private Placement warrants to purchase 745,716 shares of the Company’s common
      stock, with an exercise price of $10.08 per share. Using the Black-Scholes
      pricing model, the relative fair value of the warrants issued to the investors
      under the November 2007 Private Placement was approximately $5.0 million.
      The total relative fair value of the common stock and the warrants issued to
      investors under the November 2007 Private Placement was approximately
      $30.2 million.





During
      the years ended December 31, 2007 and 2006, warrants to purchase 641,967 and
      1,000,000 shares of the Company’s common stock were exercised, respectively. As
      of December 31, 2007, warrants to purchase 2,238,033 shares of the Company’s
      common stock were outstanding and exercisable. As
      of
      December 31, 2006, warrants to purchase 61,500 shares of the Company’s common
      stock were outstanding and exercisable.





**15.
      Income Taxes**





As
      the
      Company was a Subchapter S corporation until June 2006, any taxable income
      or
      loss of the S corporation through June 2006 was included within the sole
      stockholder’s income for federal and state income tax purposes. During the years
      ended December 31, 2007 and 2006, respectively, there was no income tax expense
      or benefit for federal and state income taxes in the accompanying consolidated
      statements of operations due to the Company’s net loss and a valuation allowance
      on the resulting deferred tax asset.




42





The
      actual tax expense differs from the “expected” tax expense for the years ended
      December 31, 2007 and 2006 (computed by applying the U.S. Federal Corporate
      tax
      rate of 34% to income before taxes) as follows:





**December
                31,**
              **2007**
            
            **December
                31,**
              **2006**Tax
                at Federal statutory rate
            
            $
            (3,755,905
            )
            $
            (553,376
            )State
                taxes, net of Federal benefit
            
            
            (679,239
            )
            
            (86,959
            )Research
                credits
            
            
            (44,919
            )
            
            —Other
                permanent items
            
            
            24,195
            
            
            —Valuation
                allowance
            
            
            4,455,868
            
            
            640,335Income
                tax provision
            
            $
            —
            
            $
            —




The
      tax
      effects of temporary differences that give rise to significant portions of
      deferred tax assets and liabilities at December 31, 2007 are as
      follows:





**December
                31,**
              **2007**
            
            **December
                31,**
              **2006**Deferred
                tax assets:Net
                operating loss and credit carryforwards
            
            $
            3,306,347
            
            $
            640,335Stock-based
                compensation
            
            
            921,085
            
            
            —Accruals
            
            
            727,116
            
            
            —Basis
                difference for fixed assets and intangibles
            
            
            141,655
            
            
            —Total
                gross deferred tax assets
            
            
            5,096,203
            
            
            640,335Valuation
                allowance
            
            
            (5,096,203
            )
            
            (640,335
            )Net
                deferred tax assets
            
            $
            —
            
            $
            —




A
      valuation allowance is provided when it is more likely than not that some
      portion of the deferred tax assets will not be realized. The Company established
      a 100% valuation allowance due to the uncertainty of realizing future tax
      benefits from its net operating loss carryforwards and other deferred tax
      assets. At December 31, 2007, the Company had useable net operating loss
      carryforwards of approximately $8.1 million for federal and state income tax
      purposes, available to offset future taxable income expiring in 2017 and 2027,
      respectively. At December 31, 2006, the Company had useable net operating loss
      carryforwards of approximately $1.6 million for federal and state income tax
      purposes, available to offset future taxable income expiring in 2016 and 2026,
      respectively. The net change in the valuation allowance during the years ended
      December 31, 2007 and 2006 was an increase of approximately $4.5 million due
      primarily to current year losses and approximately $640,000,
      respectively.





Internal
      Revenue Code Section 382 places a limitation (the “Section 382 Limitation”) on
      the amount of taxable income which can be offset by net operating loss
      carryforwards after a change in control (generally greater than a 50% change
      in
      ownership) of a loss corporation. Generally, after a control change, a loss
      corporation cannot deduct operating loss carryforwards in excess of the Section
      382 Limitation. Due to these “change in ownership” provisions, utilization of
      the net operating loss and tax credit carryforwards may be subject to an annual
      limitation regarding their utilization against taxable income in future periods.
      The Company has not concluded its analysis of Section 382 through December
      31,
      2007, but believes that these provisions will not limit the availability of
      losses to offset future income.




43




**16.
      Related Party Transactions**





The
      Chief
      Executive Officer of the Company is a director of AWI and is currently a
      custodian for AWI. The Company previously issued a warrant to purchase 1,000,000
      shares of the Company’s common stock at an exercise price per share of $0.01 in
      exchange for the purchase of assets from AWI. The Company did not enter into
      any
      transactions with AWI during 2007.





At
      December 31, 2006, the Company had an amount due from Andalay Solar, Inc.
      (“Andalay Solar”) for expenses of approximately $22,000 paid by the Company on
      behalf of Andalay Solar recorded as “Due from related party” within the
      accompanying consolidated balance sheet. The
      Chief
      Executive Officer of the Company is a director of Andalay Solar .
      Andalay
      Solar became a
      wholly-owned subsidiary of the Company during October 2007.





During
      September 2006, the Company entered into the Purchase Agreement as described
      in
      Note 6. After the Purchase Agreement was executed, the Seller transferred
      ownership of Solahart All Valley Energy Systems (“Solahart”), a Fresno-based
      installer of solar energy systems, solar hot water systems and solar pool
      heaters, to a family member and became an employee of the Company. Solahart
      no
      longer installs solar energy systems, but continues to operate focusing on
      solar
      water heating installations used in swimming pool and residential water heating.
      From time to time, the Company utilizes subcontractor labor provided by
      Solahart. The Company paid approximately $22 ,000
      & $159 ,000
      to
      Solahart relating primarily to subcontracted installers during the years ended
      December 31, 2007 and 2006, respectively.





**17.
      Commitments and Contingencies**





**Non-Cancelable
      Operating Leases**





The
      Company’s operating lease for its Los Gatos, California corporate office
      facility expires during November 2009. Total rent expense amounted to
      approximately $528,000 and $87,000 for the years ended December 31, 2007 and
      2006, respectively. The Company also has operating leases relating to its Fresno
      (Clovis), Orange County (Lake Forest), Bakersfield, Manteca, Santa Rosa, Palm
      Springs, and San Diego, California offices. The Company rents office and
      warehouse space in New Jersey on a month-to-month basis and also rents office
      and warehouse space in Thousand Oaks (Westlake Village), California on a
      month-to-month basis.





Future
      minimum lease payments on operating leases at December 31, 2007 are as
      follows:





2008
            
            $
            773,0112009
            
            
            690,5462010
            
            
            263,9552011
            
            
            143,4942012
            
            
            77,050Thereafter
            
            
            —Total
                minimum lease payments
            
            $
            1,948,056





**Litigation**





The
      Company is involved in certain legal proceedings arising in the ordinary course
      of business. In the opinion of management, the outcome of such proceedings
      will
      not materially affect the Company’s financial position, results of operations or
      cash flows.





**Employment
      Agreement**





The
      Company has employment agreements with three employees. One employment agreement
      provides for an annual base salary of $120,000, expires December 31, 2008,
      and includes automatic one-year renewals unless written notice is given within
      30 days of the end of the term by either party. A second employment
      agreement, which provides for an annual base salary of $120,000, expires June
      1,
      2009. A third employment agreement, which provides for an annual based salary
      of
      $120,000, expires October 1, 2009.




44




**18.
      Significant Concentrations of Business and Credit Risk**





Financial
      instruments that potentially subject the Company to credit risk are comprised
      of
      cash and cash equivalents, which are maintained at high quality financial
      institutions. At December 31, 2007 and 2006, there was approximately $21.5
      million and approximately $1.0 million, respectively, in excess of the Federal
      Deposit Insurance Corporation limit of $100,000.





The
      Company maintains reserves for potential credit losses and such losses, in
      the
      aggregate, have generally not exceeded management’s estimates. The Company has
      three vendors that accounted for approximately 71.9% of and 79.6%, respectively,
      of materials purchases during the years ended December 31, 2007 and 2006. At
      December 31, 2007, accounts payable included amounts owed to the 2007 top three
      vendors of approximately $5.1 million. At December 31, 2006, accounts payable
      included amounts owed to the 2006 top three vendors of approximately $1.3
      million.





**19.
      Employee Benefit Plan**





On
      December 14, 2007, the Board of Directors approved that the Company will
      establish a 401(k) profit sharing plan (the “401(k) Plan”) effective January 1,
      2008. Employees may begin deferring a portion of their compensation into the
      401(k) Plan commencing on January 1, 2008 and the Company is not matching
      employee deferrals.





**20.
      Subsequent Events**





During
      January 2008, the Company entered into a Licensing Agreement with Suntech Power
      Holdings Co., Ltd. (“Suntech”). The terms of the Licensing Agreement authorize
      Suntech to distribute the Company’s Andalay product in Europe, Japan, and
      Australia commencing in January 2008.





During
      January 2008, the Company’s Board of Directors approved the granting of an
      aggregate of 94,275 restricted common stock and an aggregate of 131,871 stock
      options to employees and consultants under the Company’s Stock Plan. Pursuant to
      the Purchase Agreement (see Note 6), the Company issued 29,481
      shares of the Company’s common stock at a value of approximately $236,000. The
      $236,000 was treated as compensation expense during the year ended December
      31,
      2007 and is included within "Additional paid-in capital,” in the accompanying
      consolidated balance sheets.





During
      March 2008, the Company entered into a letter of intent with Kyocera Solar
      Inc.
      (“Kyocera”). Under the Kyocera agreement, Kyocera will manufacture Andalay
      panels utilizing their high efficiency solar cells and will deliver
      approximately 1.6 megawatts of panels to the Company during 2008. Kyocera will
      be the Company’s preferred supplier for commercial installations.




45




**Item
      8.**  **Changes
      in and Disagreements with Accountants on Accounting and**  **Financial
      Disclosure.**





There
      were no changes in or disagreements with our Accountants during 2007.





**Item
      8A.**  **Controls
      And Procedures.**




Reference
      is made to the disclosures below under Item 8A(T) Controls and
      Procedures.





**Item
      8A(T). Controls And Procedures.**





**Disclosure
      Controls and Procedures**





Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, conducted an evaluation of the effectiveness of our
      disclosure controls and procedures as of the end of the period covered by this
      Annual Report (December 31, 2007), as is defined in
      Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934,
      as amended. Our disclosure controls and procedures are intended to ensure that
      the information we are required to disclose in the reports that we file or
      submit under the Securities Exchange Act of 1934 is (i) recorded,
      processed, summarized and reported within the time periods specified in the
      Securities and Exchange Commission's rules and forms and
      (ii) accumulated and communicated to our management, including the Chief
      Executive Officer and Chief Financial Officer, as the principal executive and
      financial officers, respectively, to allow timely decisions regarding required
      disclosures.





Based
      on
      that evaluation, our Chief Executive Officer and Chief Financial Officer
      concluded that, as of the end of the period covered by this Annual Report,
      our
      disclosure controls and procedures were effective.





Our
      management has concluded that the financial statements included in this
      Form 10-KSB present fairly, in all material respects our financial
      position, results of operations and cash flows for the periods presented in
      conformity with generally accepted accounting principles.





It
      should
      be noted that any system of controls, however well designed and operated, can
      provide only reasonable, and not absolute, assurance that the objectives of
      the
      system will be met. In addition, the design of any control system is based
      in
      part upon certain assumptions about the likelihood of future
      events.





**Management’s
      Annual Report on Internal Control Over Financial Reporting**





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting, as defined in Exchange Act Rule 13a-15(f).
      Our
      internal control over financial reporting is designed to provide reasonable
      assurance regarding the reliability of financial reporting and the preparation
      of consolidated financial statements for external purposes in accordance with
      generally accepted accounting principles.





Under
      the
      supervision and with the participation of our management, including our Chief
      Executive Officer and Chief Financial Officer, we conducted an evaluation of
      the
      effectiveness of our internal control over financial reporting based on the
      framework established by the Committee of Sponsoring Organizations of the
      Treadway Commission (COSO) as set forth in Internal Control - Integrated
      Framework. Based on our evaluation under the framework in Internal Control
      -
      Integrated Framework, our management concluded that our internal control over
      financial reporting was effective as of December 31, 2007.





This
      annual report does not include an audit or attestation report of our registered
      public accounting firm regarding our internal control over financial reporting.
      Our management’s report was not subject to audit or attestation by our
      registered public accounting firm pursuant to temporary rules of the SEC that
      permit us to provide only management’s report in this annual
      report.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. It should be noted that any system of controls,
      however well designed and operated, can provide only reasonable, and not
      absolute, assurance that the objectives of the system will be met. In addition,
      the design of any control system is based in part upon certain assumptions
      about
      the likelihood of future events. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.




46





**Evaluation
      of Changes in Internal Control over Financial Reporting**





Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, also conducted an evaluation of our internal control over
      financial reporting to determine whether any change occurred during the fourth
      quarter of 2007 that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting. Based on
      that
      evaluation, our management concluded that the improvements described below
      were
      the only such changes during the quarter. As of
      the end of the period covered by this Annual Report, no deficiencies were
      identified in our internal controls over financial reporting which constitute
      a
“material weakness.”





**Remediation
      Plan for Previously Identified Material Weaknesses**





During
      the process of preparing our Annual Report on Form 10-KSB for the year ended
      December 31, 2006, our management identified the following material weakness
      as
      of December 31, 2006. The material weakness was an insufficient number of
      personnel having adequate knowledge, experience and training to provide
      effective oversight and review over our financial and reporting
      process.





Management
      initiated the following activities intended to improve our internal control
      over
      financial reporting during 2007.





·
            
            In
                September of 2007, we hired a new Chief Financial Officer, Gary Effren.
                Additionally, since September of 2006, we expanded our accounting
                department with the addition of a purchasing and inventory control
                position. A full-time clerical position was added, in addition to
                adding a
                payroll position and an invoicing position. By December of 2006,
                a senior
                accountant position was filled. Since May of 2006, we have retained
                an
                independent consultant trained in accounting and financial reporting
                who
                is a certified public accountant and who became a full-time employee
                during December 2007.·
            
            We
                have developed improved policies and procedures to monitor and track
                sales
                and installations by product, date of sale and customer. Installation
                performance logs, identifying key product and installation type
                information, are now maintained and analyzed by management on a monthly
                basis.·
            
            We
                have developed improved policies and procedures regarding installation
                milestones to monitor when the risk of ownership of our products
                and
                services is transferred to our customers. Monthly sales and installation
                completion documents are reviewed by management to determine when
                the risk
                of ownership has been transferred to the customer and revenue has
                been
                appropriately recognized.





**Item
              8B.**
            **Other
                Information.**





None




47




**PART
      III**





**Item
              9.**
            **Directors,
                Executive Officers, Promoters, Control Persons and****Corporate
                Governance; Compliance with Section 16(a) of the****Exchange
                Act.**





**Directors
      and Executive Officers**





Our
      directors and our executive officers are as follows:





Name
            
            Age
            
            PositionBarry
                Cinnamon
            
            50
            
            President,
                Chief Executive Officer, Secretary, Treasurer and
                DirectorJames
                Curran
            
            57
            
            Chief
                Operating OfficerGary
                Effren
            
            52
            
            Chief
                Financial OfficerSteve
                Daniel
            
            49
            
            Executive
                Vice President Sales and MarketingEdward
                Roffman
            
            58
            
            DirectorGeorge
                Lauro
            
            49
            
            DirectorJon
                Witkin
            
            54
            
            Director





Each
      director holds office until the next annual meeting of stockholders or until
      their successors have been duly elected and qualified. Executive officers are
      elected annually and serve at the discretion of our board of
      directors.





***Barry
      Cinnamon, Chairman, President, Chief Executive Officer, Secretary, Treasurer
      and
      Director*** .
      Our
      founder, Barry Cinnamon, has served as director since the Company began in
      2001.
      Mr. Cinnamon is a long-time advocate of solar energy and widely recognized
      solar
      energy expert. He started his career in solar energy in the late 1970s as a
      researcher into new flat plate and concentrating collector designs at the
      Massachusetts Institute of Technology (MIT). During the late 1970s and early
      1980s, Mr. Cinnamon designed and installed active solar, passive solar and
      ground coupled heat pump systems. Mr. Cinnamon’s work in solar energy
      computer modeling led him into the software industry, where he served as Chief
      Executive Officer of Software Publishing Corporation, and founded Allegro New
      Media, a multimedia software publisher, which he led to an IPO in 1995. Mr.
      Cinnamon earned a BS Degree in Mechanical Engineering from MIT and a MBA degree
      in Marketing from Wharton School of the University of Pennsylvania.
      Mr. Cinnamon is a NABCEP-Certified Solar Installer, a licensed California
      C-46 Solar Contractor, a member of the board of directors of CALSEIA and SEIA,
      and an active member of the Silicon Valley Leadership Group.





***James
      Curran, Chief Operating Officer.*** Mr.
      Curran joined the Company during May 2007. Mr. Curran most recently founded
      Shamrock Partners, LLP, a consulting firm specializing in e-commerce, business
      strategy and business planning for financial management and operations. Prior
      to
      founding Shamrock Partners, Mr. Curran was General Manager of International
      Business Management and Operations at Exodus Communications, a provider of
      Internet hosting for enterprises. Additionally, he served as the Executive
      Vice
      President of Information and Product Systems at Visa International. Prior to
      joining Visa, Mr. Curran spent over 20 years at IBM Corporate, where he held
      various executive positions in the software and personal computer business
      groups. Mr. Curran brings over 25 years of operations experience to the Company.
      Mr. Curran received a Bachelors degree in Philosophy from Cathedral College
      Seminary in New York.





***Gary
      Effren, Chief Financial Officer.*** From
      1980
      to 2006, Mr. Effren held various executive financial positions at Knight Ridder,
      Inc., a Fortune 500 media company. Mr.
      Effren served as the Vice President/Finance of Knight Ridder since January
      2005.
      Prior to that, Mr. Effren served as Senior Vice President/Finance and Chief
      Financial Officer of Knight Ridder from 2001 to 2004, and as Vice
      President/Controller of Knight Ridder from 1995 to 2001. During his tenure
      at
      Knight Ridder, Mr. Effren’s overall responsibilities included corporate
      accounting and financial reporting, strategic business development, tax,
      treasury, risk management and investor relations. Prior to joining Knight
      Ridder, Mr. Effren worked as an auditor at Peat Marwick Mitchell. Mr. Effren
      is
      a CPA with 30 years of experience in accounting and finance. Mr. Effren earned
      his MBA from the University of Miami and earned his Bachelors degree in Commerce
      from Rider College in New Jersey





***Steve
      Daniel, Executive Vice President Sales and Marketing.*** Mr.
      Daniel joined the Company during January 2007. Mr.
      Daniel provides over 25 years experience in high-tech sales and business
      development management. Most recently, he was at BEA Systems, Inc. managing
      sales in the western U.S. with Global Systems Integrators such as Accenture
      and
      Deloitte. Mr. Daniel also worked at MarketFirst as Vice President of Western
      Sales and as Senior Sales Director at Exodus Communications. Mr. Daniel holds
      a
      B.S. in Industrial Engineering and Operations Research from the University
      of
      Massachusetts at Amherst.




48





***Ed
      Roffman, Director.*** **** Mr.
      Roffman has been a director since August 2006. Mr. Roffman ** served
      as
      Chief Financial Officer of Red Mile Entertainment, Inc. from January 2005
      until April 2006 and at Fluent Entertainment, Inc. from February 2003
      to December 2004. Both companies are consumer software developers and
      publishers. Mr. Roffman has also been a principal of Creekside, LLC, a
      consulting firm which specializes in the software, internet and consumer
      products industries. From August 1995 to January 1999,
      Mr. Roffman served as Chief Financial Officer and Chief Operating Officer
      at Palladium Interactive, Inc., a consumer software company. Mr. Roffman
      currently serves on the board and audit committee of Silverstar Holdings
      (NASDAQ: SSTR), a publicly traded publisher and developer of interactive
      entertainment software. Mr. Roffman is a CPA with over 30 years
      of experience in accounting and finance. Mr. Roffman earned his BBA in
      accounting from Temple University.





***George
      Lauro, Director*** *.* Mr.
      Lauro has been a director since July 2007. Mr. Lauro has been a senior partner
      at Alteon Capital Partners since January 2007, a Silicon Valley firm that
      provides direct venture investment and advisory services to private companies
      in
      the semiconductors, MEMS, nanotech and photonics sectors. From May 2006 to
      January 2007, Mr. Lauro was Managing Director at Techfarm Ventures, a Silicon
      Valley venture capital firm with approximately $250M under management. He was
      also Managing Director at Wasserstein Venture Capital from May 1999 to May
      2005
      and was one of two partners managing over $300M across two venture funds. Before
      joining Wasserstein, Mr. Lauro was Director of Rapid Commercialization at IBM
      Headquarters from September 1995 to May 1999. At Motorola (NASDAQ: MOT), he
      conceived the world's first consumer handheld Global Positioning Product (Traxar
      GPS), invented new classes of RF transponders, and launched Motorola's
      businesses in these spaces. He completed a Bachelors degree in Electrical
      Engineering from Brown, a Master of Business Administration from Wharton, and
      graduate work in Astronautics at MIT. Mr. Lauro currently serves as a Director
      on ChipX and Pinyon Technologies.





***Jon
      Witkin, Director.*** **** Mr.
      Witkin has been a director since July 2007. Mr. Witkin is a co-owner of Western
      States Glass, the largest independent flat glass distributor in Northern
      California, which he co-founded in 1991. Mr. Witkin oversees Western States
      Glass's operations, including its fleet of delivery vehicles and remote offices
      throughout California. Prior to founding Western States Glass, Mr. Witkin was
      a
      Partner at Bay Mirror and an Area Sales Manager at ACI Glass Distribution
      (“ACI”). He also served in various sales and management roles at the Havlin
      Witkin Corporation which was sold to ACI. Mr. Witkin earned a Bachelors of
      Science degree in 1976 from the University of Utah.





There
      are no family relationships among our directors, nominees for director and
      executive officers. The Company encourages but does not require members of
      the
      Board of Directors to attend the annual meetings of the stockholders.




**Committees
      of the Board of Directors**




The
      Board
      of Directors held one meeting during 2007 and acted by unanimous written consent
      twenty-three times during 2007. The Board of Directors did not hold any meetings
      in 2006, instead acting by unanimous written consent sixteen times. In 2006,
      the
      Board of Directors was comprised of Ed Roffman and Barry Cinnamon. Mr. Roffman
      and Mr. Cinnamon were joined by George Lauro and Jon Witkin on July 18, 2007,
      increasing the size of the Board from two to four persons.




The
      Company has standing Nominating, Audit and Compensation committees of the Board
      of Directors. These committees were formed on July 18, 2007. In 2006, the
      Company did not have any committees.





*The
      Nominating Committee.* The
      Nominating Committee is comprised of Messrs. Witkin and Lauro. ** The
      Nominating Committee of the Board of Directors performs the functions typical
      of
      a nominating committee, including: (i) developing and recommending corporate
      governance principles and procedures applicable to the Board of Directors and
      the Company’s employees; (ii) recommending committee composition and
      assignments; (iii) identifying individuals qualified to become directors; (iv)
      recommending director nominees; (v) recommending whether incumbent directors
      should be nominated for re-election to the Board of Directors and (vi) reviewing
      the adequacy of the Nominating Committee charter. The Nominating Committee
      has
      established a charter, which is available on the investor relations section
      of
      our website at www.akeena.com.




*The
      Audit Committee.* The
      Audit Committee is comprised of Messrs. Roffman, Lauro and Witkin. Our Board
      has
      designated Mr. Roffman our audit committee financial expert as defined in Item
      407(d)(5)(ii) of Regulation S-B. The Audit Committee of the Board of Directors
      has the authority and responsibility to select, evaluate and, when appropriate,
      replace the company’s independent registered public accounting firm. The Audit
      Committee monitors the activities of the Company’s external auditors, including
      the audit scope, the external audit fees, auditor independence matters and
      the
      extent to which the independent auditors may be retained to perform advisory
      services. The Audit Committee also reviews the results of the external audit
      work to assess the adequacy and appropriateness of the Company’s financial and
      accounting controls. The Audit Committee reviews changes in accounting standards
      that impact the Company’s financial statements and discusses with management
      major events, including legal matters and tax audits, which may have significant
      financial impact or are the subject of discussions with the independent
      auditors. In addition, the Audit Committee oversees the Company’s internal
      compliance programs. The Audit Committee has established a charter, which is
      available on the investor relations section of our website at www.akeena.com.




49




*The
      Compensation Committee.* The
      Compensation Committee is comprised of Messrs. Lauro, Witkin and Roffman. The
      Compensation Committee administers the Company’s stock option plan, including
      the review and grant of stock options to officers, directors and other employees
      under the Company’s stock option plan. The Compensation Committee also reviews
      and approves various other Company compensation policies and matters, and
      reviews and approves salaries and other matters relating to compensation of
      the
      executive officers of the Company. The Compensation Committee has established
      a
      charter, which is available on the investor relations section of our website
      at
      www.akeena.com.





The
      Compensation Committee meets in person, telephonically or otherwise at least
      twice during each fiscal year for, among other things, the consideration and
      determination of executive and director compensation. The Compensation Committee
      may also hold special meetings or act by unanimous written consent as required.
      The Compensation Committee may request any officer or employee of the Company
      or
      the Company’s outside counsel to attend a meeting of the Compensation Committee
      or to meet with any members of, or consultants to, the Compensation Committee;
      provided, however, that the chief executive officer may not be present during
      any discussions or deliberations of the Compensation Committee regarding the
      chief executive officer’s compensation.




The
      chairperson of the Compensation Committee presides at each meeting of the
      Compensation Committee and, in consultation with the other members of the
      Compensation Committee, shall set the frequency and length of each meeting
      and
      the agenda of items to be addressed at each meeting. The chairperson will ensure
      that the agenda for each meeting is circulated in advance of the meeting. The
      Compensation Committee shall keep minutes of each of its meetings and conference
      calls and report its actions and any recommendations to the Board after each
      of
      the Compensation Committee’s meeting.




The
      Compensation Committee meetings are governed by the quorum and other procedures
      generally applicable to meetings of the Board under the Company’s bylaws, unless
      otherwise stated in the bylaws or by resolution of the Board or the Compensation
      Committee. The Compensation Committee shall have the authority to delegate
      any
      of its responsibilities to subcommittees as the Compensation Committee may
      deem
      appropriate.




The
      Compensation Committee reviews and approves on an annual basis the corporate
      goals and objectives with respect to the compensation for the Company’s chief
      executive officer and other executive officers. The Committee shall evaluate
      at
      least once a year the chief executive officer and other executive officers’
performance in light of these established goals and objectives and based upon
      these evaluations shall recommend to the full Board the chief executive officer
      and other executive officers’ annual compensation, including salary, bonus,
      incentive and equity compensation. In reviewing and recommending the
      compensation of the chief executive officer and other executive officers, the
      Committee may consider the compensation awarded to officers of similarly
      situated companies, the Company’s performance, the individuals’ performance,
      compensation given to the Company’s officers in past years or any other fact the
      Committee deems appropriate. The chief executive officer shall not be permitted
      to participate in any discussions or processes concerning his compensation,
      but
      may participate in a non-voting capacity in discussions or processes concerning
      the compensation of other executive officers.




The
      Compensation Committee develops and periodically assesses the Compensation
      Committee’s compensation policies applicable to the Company’s executive officers
      and directors, including the relationship of corporate performance to executive
      compensation. The Compensation Committee will review and recommend to the Board
      appropriate director compensation programs for service as directors, committee
      chairs and committee members.





**The
      Board of Advisors**





The
      Company has a Board of Advisors which provides general business advice and
      sales
      and marketing strategy advisory services. The Company’s Board of Advisors is
      comprised of the following members.




***Steve
      Westly*** .
      Mr.
      Westly is founder of The Westly Group, which helps entrepreneurs build great
      companies in clean technology. Previously he served as controller and chief
      fiscal officer for the State of California. As controller, he chaired the State
      Lands Commission and served on 63 other boards and commissions, including
      CalPERS and CalSTRS, the nation’s two largest public pension funds. He also led
      an effort to commit more than $1 billion to clean technology investments. Westly
      began his career in  Washington,
      D.C., where he worked first on Capitol Hill and later in the Office of
      Conservation and Solar at the U.S. Department of Energy. Westly then returned
      to
      California to become special assistant to the President of the California Public
      Utilities Commission. While there, he published two books on alternative energy
      and the utilities.




50




***Joe
      Abrams*** *.* Mr.
      Abrams specializes in working with small technology companies to build
      shareholder value in the public markets. As a direct result of his efforts,
      he
      has completed merger and acquisition transactions in excess of $1 billion and
      small cap market equity raises in excess of $200 million. Abrams co-founded
      Intermix in 1998, the predecessor company to MySpace, which was sold to News
      Corp. in 2005 for $580 million. In 1983, Abrams co-founded The Software
      Toolworks, Inc., a publicly held developer, publisher, and distributor of
      educational and entertainment software, which was sold to Pearson, Plc. in
      1994
      for $462 million.




**Section
      16(a) Beneficial Ownership Reporting Compliance**




Section
      16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
      requires the Company’s executive officers, directors and persons who own more
      than 10% of the Company’s outstanding common stock to file initial reports of
      ownership and changes in ownership with the Securities and Exchange Commission.
      Based solely upon a review of Forms 3, 4 and 5 and amendments thereto furnished
      to the Company, none of the Company’s directors, officers or beneficial owners
      of more than 10% of its common stock failed to file on a timely basis any
      reports required by Section 16(a) of the Exchange Act during the year ended
      December 31, 2007, except that Barry Cinnamon, Steve Daniel, John Witkin, George
      Lauro, Gary Effren, Jim Curran and Ed Roffman each filed one late Form 4
      describing a change in ownership of our securities and George Lauro, Gary Effren
      and John Witkin each filed one late Form 3 describing an initial statement
      of
      beneficial ownership of our securities.





**Code
      of Ethics and Corporate Governance**




The
      Company adopted a Code of Business Conduct and Ethics (the “Code”) on July 18,
      2007 that applies to all of the Company’s directors and employees, including its
      chief executive officer and chief financial officer. The purpose of the Code
      is
      to, among other things, focus the Company’s directors, officers and employees on
      areas of ethical risk, provide guidance to help them recognize and deal with
      ethical issues, provide mechanisms to report unethical or unlawful conduct
      and
      to help enhance and formalize the Company’s culture of integrity, respect and
      accountability. The full text of the Code is posted on the investor relations
      section of our website at www.akeena.com. A printed copy of the Code may also
      be
      obtained free of charge by writing to Akeena Solar, Inc., 16005 Los Gatos Blvd.,
      Los Gatos, CA 95032, Attention: In-House Counsel. The Company intends to
      disclose any amendment to or waiver from, a provision of the Code by posting
      such information on its web site.





**Item
      10. Executive Compensation**





The
      following Summary Compensation Table sets forth certain information about
      compensation paid, earned or accrued for services by our Chief Executive
      Officers (“Named Executive Officers”).




**Summary
      Compensation Table**





Name
                and Principal Position
            
            Year
            
            Salary
            
            Bonus
            
            Restricted
              Stock
                Awards(1)
            
            Stock
              Option
                Awards(1)
            
            All
              OtherCompensation
            
            TotalBarry
                Cinnamon Chief Executive Officer, President, Treasurer, Secretary
                and
                Director
            
            
            2007
            
            $
            203,750
            
            $
            —
            
            $
            —
            
            $
            89,756
            
            $
            —
            
            $
            293,506
            (2)2006
            
            $
            132,392
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            11,000
            (3)
            $
            143,392James
                Curran Chief Operating Officer
            
            
            2007
            
            $
            130,827
            
            $
            —
            
            $
            16,284
            
            $
            116,545
            
            $
            —
            
            $
            263,656
            (4)Gary
                Effren Chief Financial Officer
            
            
            2007
            
            $
            68,750
            
            $
            —
            
            $
            —
            
            $
            112,792
            
            $
            —
            
            $
            181,542
            (5)Steve
                Daniel Executive Vice President of Sales and Marketing
            
            
            2007
            
            $
            133,371
            
            $
            —
            
            $
            19,682
            
            $
            80,580
            
            $
            143,980
            (6)
            $
            377,613
            (7)







(1) Amount
      expensed for the year ended December 31, 2007 is based upon the
      aggregate grant date fair value calculated in accordance with Statement of
      Financial Accounting Standards (“SFAS”) No. 123R, Share Based Payments. The
      Company’s policy and assumptions made in the valuation of share based payments
      are contained in Note 13 to the Company’s December 31, 2007 financial
      statements.  Stock options awarded vest over a three-year period from the
      date of grant and restricted stock awarded vests over a four-year period from
      the date of grant.




(2)  Mr.
        Cinnamon was not compensated for his service on the Board of Directors of
        the
        Company.
 
 (3)
        Represents distributions on Mr. Cinnamon’s common stock paid by Akeena Solar,
        Inc. prior to the Merger.
 
 (4)  Mr.
        Curran joined the Company during May 2007.
 
 (5)  Mr.
        Effren joined the Company during September 2007.
 
 (6)  All
        Other
        Compensation for Mr. Daniel includes sales commissions paid during
        2007.
 
 (7)
        Mr.
        Daniel joined the Company during January 2007.




51




**Outstanding
      Equity Awards at Fiscal Year-End**





**Restricted
      Stock Awards**





Restricted
      stock awards pursuant to the Stock
      Plan held
      by
      the Named Executive Officers as of December 31, 2007 are set forth in the table
      below.





Name
                and Principal Position
            
            Year
                Granted
            
            Number
                of Restricted Stock Awards Not Vested
            
            Aggregate
                Market Value of Restricted Stock Awards Not VestedJames
                Curran Chief Operating Officer
            
            
            2007
            
            
            35,000
            (1)
            $
            278,600Steve
                Daniel Executive Vice President of Sales and Marketing
            
            
            2007
            
            
            35,000
            (2)
            $
            278,600




(1)   On
      May 29, 2007, Mr. Curran was granted 35,000 shares of restricted stock, which
      restriction lapses as to 8,750 shares on each anniversary of the date of grant
      commencing on May 29, 2008. Mr. Curran is entitled to vote such restricted
      shares, subject to forfeiture in accordance with the terms of the
      grant.




(2)   On
      April 27, 2007, Mr. Daniel was granted 35,000 shares of restricted stock,
      which restriction lapses as to 6,250 shares on each one-year anniversary
      beginning on January 30, 2008 and which restriction lapses as to 2,500 shares
      on
      each anniversary of the date of grant commencing on April 27, 2008.
      Mr. Daniel is entitled to vote such restricted shares, subject to
      forfeiture in accordance with the terms of the grant.




**Option
      Grants**





Options
      granted pursuant to the Stock Plan to our Named Executive Officers as of
      December 31, 2007 are set forth in the table below.





Name
                and Principal Position
            
            Date
                Granted
            
            Number
                of Vested, Unexercised Options
            
            Number
                of Options
              Not
                Vested
            
            Option
                Exercise Price
            
            Option
              Expiration
                DateBarry
                Cinnamon - Chief Executive Officer, President, Treasurer, Secretary
                and
                Director
            
            
            September
                7, 2007
            
            
            —
            
            
            313,000
            (1)
            
            $4.94
            
            
            September
                7, 2012James
                Curran - Chief Operating Officer
            
            
            September
                  7, 2007
            
            
            —
            
            
            406,000
            (1)
            
            $4.94
            
            
            September
                7, 2012Gary
                Effren - Chief Financial Officer
            
            
            September
                  21, 2007
            
            
            —
            
            
            350,000
            (2)
            
            $6.30
            
            
            September
                21, 2012Steve
                Daniel - Executive Vice President of Sales and Marketing
            
            
            September
                  7, 2007
            
            
            —
            
            
            281,000
            (1)
            
            $4.94
            
            
            September
                7, 2012




(1)   Options
      were granted on September 7, 2007 and vest over a three-year vesting period
      beginning on each one-year anniversary of the date of grant commencing on
      September 7, 2008.




(2)Options were granted on September 21, 2007 and vest over a three-year vesting
      period beginning on each one-year anniversary of the date of grant commencing
      on
      September 21, 2008.




52




**Employment
      Agreements**





We
      currently do not have employment agreements with any of our executive officers,
      other than at-will employment offer letters.





**Stock
      Incentive Plan**





On
      August 8, 2006, our board of directors and stockholders adopted the 2006
      Stock Incentive Plan (the “Stock Plan”). On December 20, 2006, we amended
      the Stock Plan to increase the number of shares of common stock reserved for
      issuance under the Plan as restricted stock or options to Akeena Solar’s
      employees, directors and consultants, from 450,000 shares to 1,000,000 shares.
      On August 24, 2007 our shareholders approved the Second Modification to the
      Plan
      to increase the number of common shares reserved for issuance under the Plan
      from 1,000,000 to 4,000,000. The purpose of the Stock Plan is to provide an
      incentive to retain and attract as directors, officers, consultants, advisors
      and employees of our company, persons of training, experience and ability,
      to
      encourage the sense of proprietorship and to stimulate the active interest
      of
      such persons into our development and financial success. Under the Stock Plan,
      we are authorized to issue incentive stock options intended to qualify under
      Section 422 of the Code, non-qualified stock options and restricted stock.
      The Stock Plan is administered by our board of directors. As of December 31,
      2007, there have been 2,065,000 grants of stock options and an aggregate of
      1,011,150 shares of restricted stock have been granted under the Stock Plan,
      of
      which restrictions have lapsed on 381,984 shares.





**Director
      Compensation**




In
      addition to reimbursement for reasonable expenses incurred in the performance
      of
      their duties as directors, including participation on the Board of Directors
      and
      its committees, as of July 18, 2007, the Company now compensates its
      non-employee directors as follows:




·
            10,000
                shares of restricted stock under the Company’s Stock Plan, which
                restriction lapses as to approximately 833 shares monthly for twelve
                months commencing on the date of grant. Directors are entitled to
                vote
                such restricted stock, subject to forfeiture, in accordance with
                the terms
                of the grant; and




·
            travel
                and lodging expenses for any activities related to the performance
                of
                their duties on the Board of
                Directors.




Prior
      to
      July 18, 2007, members of the Board of Directors included only Barry Cinnamon
      and Ed Roffman. Mr. Cinnamon received no remuneration for his services as a
      director. On August 29, 2006, Mr. Roffman was granted 20,000 shares of
      restricted stock under our Stock Plan, which restrictions lapse as to 5,000
      shares on each of the first four anniversaries of the date of grant, commencing
      on August 30, 2007, subject to Mr. Roffman serving on our board of
      directors on each such anniversary date. This grant of 20,000 shares received
      by
      Mr. Roffman includes the 10,000 shares of restricted stock the Company now
      awards to non-employee directors. On April 2, 2007, Mr. Roffman received 48,000
      shares of the Company’s restricted common stock under our Stock Plan, which
      restrictions lapse as to 4,000 shares monthly for twelve months commencing
      on
      the date of grant, subject to Mr. Roffman serving as the Board’s Audit Committee
      Chairman. Mr. Roffman is entitled to vote such restricted shares, subject
      to forfeiture in accordance with the terms of the grant.




The
      following table sets forth certain information concerning compensation earned
      by
      the Directors who were not Named Executive Officers during the year ended
      December 31, 2007.




Name
            
            Fees
                Earned or Paid in Cash
            
            Restricted
                Stock
              Awarded
                (1)
            
            Option
                Awards
            
            Total
              ($)Ed
                Roffman
            
            $
            —
            
            $
            142,417
            (2)
            $
            —
            
            $
            142,417George
                Lauro
            
            $
            —
            
            $
            21,263
            
            $
            —
            
            $
            21,263Jon
                Witkin
            
            $
            —
            
            $
            21,263
            
            $
            —
            
            $
            21,263




(1) Amount
        expensed for the year ended December 31, 2007, based upon the aggregate
        grant date fair value calculated in accordance with Statement of Financial
        Accounting Standards (“SFAS”) No. 123R, Share Based Payments. The Company’s
        policy and assumptions made in the valuation of share based payments are
        contained in Note 13 to the Company’s December 31, 2007 financial statements.
  53
  (2)
        On
        August 30, 2006, Mr. Roffman was granted 20,000 shares of restricted stock,
        which restriction lapses as to 5,000 shares, on each anniversary of the date
        of
        grant commencing on August 30, 2007, subject to Mr. Roffman serving on the
        Company’s board of directors on each such anniversary. At December 31, 2006,
        20,000 shares of restricted stock were held by Mr. Roffman. On April 2, 2007,
        Mr. Roffman received 48,000 shares of the Company’s restricted common stock
        under our Stock Plan, which restrictions lapse as to 4,000 shares monthly
        for
        twelve months commencing on the date of grant, subject to Mr. Roffman serving
        as
        the Board’s Audit Committee Chairman. Mr. Roffman is entitled to vote such
        restricted shares, subject to forfeiture in accordance with the terms of
        the
        grant.
  (3)
        On
        July 18, 2007, Mr. Lauro and Mr. Witkin each received 10,000 shares of the
        Company’s restricted common stock under our Stock Plan, which restrictions lapse
        as to approximately 833 shares monthly for twelve months commencing on the
        date
        of grant, subject to serving on the Company’s Board of Directors. Mr. Lauro and
        Mr. Witkin are entitled to vote such restricted shares, subject to forfeiture
        in
        accordance with the terms of the grant.





**Item
      11.**  **Security
      Ownership of Certain Beneficial Owners and Management**  **and
      Related Stockholder Matters and Director Independence.**





**Equity
      Compensation Plan Information as of December 31, 2007**





**Number
                of securities to be issued upon exercise of outstanding
                options**
            
            **Weighted-average
                exercise price of outstanding options**
            
            **Number
                of securities remaining available for issuance under equity compensation
                plans (excluding securities reflected in column (a) and excluding
                restricted stock awards)*****(a)***
            
            ***(b)***
            
            ***(c)***Equity
                compensation plans:2006
                Stock Incentive Plan and
            
            
            2,065,000
            
            **$**
            5.31
            
            
            923,8502001
              Stock Option Plan
            
            
            —
            
            
            —
            
            
            4,000,000




54




**Beneficial
      Ownership Table**





The
      following table sets forth information concerning ownership of the Company's
      Shares, as of March 10, 2008, by (i) each person known by the Company to be
      the
      beneficial owner of more than five percent of the outstanding Shares, (ii)
      each
      director (iii) each of the Named Executive Officers listed in the Summary
      Compensation Table included in our Annual Report on Form 10-KSB and (iv) all
      directors and executive officers of the Company as a group. Unless otherwise
      indicated, the Company believes that each stockholder has sole voting power
      and
      sole dispositive power with respect to the Shares beneficially owned by
      him.




**Name
                of Beneficial Owner(1)**
            
            **Amount
                and**
              **Nature
                of**
              **Beneficial**
              **Owner
                (2)**
            
            **Percent
                of**
              **Class
                (2)**Barry
                Cinnamon
            
            
            7,600,000
            
            
            26.8
            %Ed
                Roffman
            
            
            68,000
            (3)
            
            *
            %George
                Lauro
            
            
            10,000
            
            
            *
            %Jon
                Witkin
            
            
            10,000
            
            
            *
            %James
                Curran
            
            
            35,000
            
            
            *
            %Steve
                Daniel
            
            
            35,000
            
            
            *
            %All
                directors and executive officersas
                a group (6 persons)
            
            
            7,758,000
            
            
            27.3
            %5%
                holders:Angeleno
                Group, LLC (4)2029
                Century Park East, Suite 2980, Los Angeles, California
                90067
            
            
            1,527,272
            (4)
            
            5.4
            %9,285,272
            
            
            32.7
            %







*
            Less
                than 1%




(1)
            Unless
                otherwise indicated the address for each of the stockholders is c/o
                Akeena
                Solar, Inc. 16005 Los Gatos Blvd., Los Gatos, CA
                95032.




(2)
            The
                applicable percentage of ownership for each beneficial owner is based
                on28,394,935shares of Common Stock outstanding as of March 10, 2008. In calculating
                the number of Shares beneficially owned by a stockholder and the
                percentage of ownership of that stockholder, shares of Common Stock
                issuable upon the exercise of options, warrants or the conversion
                of other
                securities held by that stockholder that are exercisable within 60
                days,
                are deemed outstanding for these Shares, however, are not deemed
                outstanding for computing the percentage ownership of any other
                stockholder.




(3)
            Includes 20,000
                shares of restricted common stock granted to Mr. Roffman on
                August 30, 2006, under Akeena’s Stock Plan. Restrictions on the
                20,000 shares lapse as to 5,000 shares on each anniversary of the
                date of grant, commencing August 30, 2007. Also includes 48,000
                shares of restricted common stock granted to Mr. Roffman on April
                2, 2007,
                under the Akeena Stock Plan. Restrictions on the 48,000 shares lapse
                as to
                4,000 shares monthly for twelve months commencing on the date of
                grant.
                 Mr. Roffman is entitled to vote such restricted shares, subject
                to forfeiture in accordance with the terms of the
                grant.




55




(4)
            Includes
                currently exercisable warrants to purchase 254,545 shares of common
                stock.
                Voting and dispositive power is shared by Angeleno Group LLC, Angeleno
                Group Management II, LLC and Angeleno Investors II, LP. Yaniv Tepper,
                a
                managing member, has voting and dispositive power over these securities.
                Mr. Tepper disclaims beneficial ownership of such
                securities.







**Item
      12.**  **Certain
      Relationships and Related Transactions, and Director**  **Independence.**





On
      March
      30, 2001, Akeena, Inc. (the former name of Akeena Solar, Inc.) purchased certain
      infrastructure and harvester technology from Akeena Wireless, Inc., a Delaware
      corporation (“AWI”), of which Barry Cinnamon, our President and Chief Executive
      Officer, is a director, principal stockholder and chief executive officer,
      in
      exchange for warrants to purchase an aggregate of 1,000,000 shares of Akeena,
      Inc.’s common stock at an exercise price of $0.01 per share. On July 18, 2006,
      AWI sold warrants to purchase 750,000 shares of Akeena, Inc.’s common stock to
      The Cinnamon 2006 Irrevocable Children’s Trust, and warrants to purchase 90,000
      shares of Akeena, Inc.’s common stock to Mr. Cinnamon, for an aggregate price of
      $30,000. On August 11, 2006, we assumed the obligations of Akeena Solar under
      the warrants in the Merger, so that each warrant was converted into a warrant
      to
      purchase one share of our common stock. On November 30, 2006, Mr. Cinnamon
      gifted his warrants to purchase 90,000 shares to various adult family members,
      all of which were exercised by December 31, 2006. The Company did not enter
      into
      any transactions with AWI during 2007.





The
      Board
      of Directors is presently comprised of Barry Cinnamon, Ed Roffman, George Lauro
      and Jon Witkin. Of such directors, Ed Roffman, George Lauro and Jon Witkin
      are
      each an “independent director” as such term is defined in Marketplace Rule
      4200(a)(15) of the listing standards of the NASDAQ Stock Market. The Company
      was
      not a party to any transaction, relationship or other arrangement with any
      of
      its “independent directors” that was considered by our Board of Directors under
      Marketplace Rule 4200(a)(15) in the determination of such director’s
      independence.





Each
      member of the Nominating, Compensation and Audit committees of the Board of
      Directors meets the independence requirements applicable to those committees
      prescribed by the NASDAQ Stock Market and, for purposes of the Audit Committee,
      Section 10A of The Securities Exchange Act of 1934, as amended (the “Exchange
      Act”).




56


**Item
      13.**  **Exhibits.**




Exhibit
              Number
            
            Description2.1
            
            Agreement
                of Merger and Plan of Reorganization, dated August 11, 2006, by and
                among
                Fairview Energy Corporation, Inc., ASI Acquisition Sub, Inc. and
                Akeena
                Solar, Inc. (incorporated herein by reference to Exhibit 2.1 to our
                Current Report on Form 8-K, dated August 11, 2006 (the “August 2006
                8-K”))3.1
            
            Certificate
                of Incorporation (incorporated herein by reference to Exhibit 3.1
                to our
                Current Report on Form 8-K, dated August 3, 2006)3.2
            
            By-laws
                (incorporated herein by reference to Exhibit 3.2 to our Current Report
                on
                Form 8-K, dated August 3, 2006)3.3
            
            Certificate
                of Amendment to the Certificate of Incorporation (incorporated herein
                by
                reference to Exhibit 3.3 to the August 2006 8-K)4.1
            
            Form
                of Restricted Stock Agreement (incorporated herein by reference to
                Exhibit
                4.1 to our Annual Report on Form 10-KSB filed with the SEC on March
                29,
                2007)4.2
            
            Form
                of Class B Common Stock Purchase Warrant, dated March 8, 2007
                (incorporated herein by reference to Exhibit 10.3 to our Current
                Report on
                Form 8-K, dated March 8, 2007 (“March 8, 2007 8-K”))4.3
            
            Form
                of Class A Common Stock Purchase Warrant, dated March 8, 2007
                (incorporated herein by reference to Exhibit 10.4 to the March 8,
                2007
                8-K)4.4
            
            Registration
                Rights Agreement (incorporated herein by reference to Exhibit 10.2
                to the
                March 8, 2007 8-K)4.5
            
            Form
                of Class C Common Stock Purchase Warrant, dated May 25, 2007 (incorporated
                herein by reference to Exhibit 10.3 toour
                Current Report on Form 8-K, dated June 4, 2007)4.6
            
            Form
                of Warrant to Purchase Common Stock, dated November 2007 (incorporated
                herein by reference to Exhibit 4.1 toour
                Current Report on Form 8-K, dated November 1, 2007)10.1
            
            Akeena
                Solar, Inc. 2006 Stock Incentive Plan (incorporated herein by reference
                to
                Exhibit 10.1 to the August 2006 8-K)10.2
            
            First
                Amendment to the Akeena Solar, Inc. 2006 Incentive Stock Plan
                (incorporated herein by reference to Exhibit 10.1 to our Current
                Report on
                Form 8-K, dated December 20, 2006)10.3
            
            Form
                of Subscription Agreement (incorporated herein by reference to Exhibit
                10.2 to the August 2006 8-K)10.4
            
            Form
                of Registration Rights Agreement (incorporated herein by reference
                to
                Exhibit 10.3 to the August 2006 8-K)10.5
            
            Form
                of Lockup Agreement (incorporated herein by reference to Exhibit
                10.4 to
                the August 2006 8-K)10.6
            
            Loan
                and Security Agreement, dated January 29, 2007, between the Company
                and
                Comerica Bank (incorporated herein by reference to Exhibit 10.1 to
                our
                Current Report on Form 8-K, dated January 29, 2007)10.7
            
            First
                Modification to Loan and Security Agreement, dated June 26, 2007,
                between
                the Company and Comerica Bank (incorporated herein by reference to
                Exhibit
                10.1 to our Current Report on Form 8-K, dated June 26,
                2007.10.8
            
            Second
                Modification to Loan and Security Agreement, dated January 11, 2008
                and
                effective as of December 31, 2007, between the Company and Comerica
                Bank
                (incorporated herein by reference to Exhibit 10.1 to our Current
                Report on
                From 8-K, dated January 11, 2008)10.9
            
            Restricted
                Stock Agreement, dated December 29, 2006, between the Company and
                Edward
                Roffman (incorporated herein by reference to Exhibit 10.8 to our
                Annual
                Report on Form 10-KSB filed with the SEC on March 29,
                2007)10.10
            
            Form
                of Director and Officer Indemnification Agreement (incorporated herein
                by
                reference to Exhibit 10.9 to the August 2006 8-K)10.11*
            
            Second
                Amendment to the Akeena Solar, Inc. 2006 Incentive Stock
                Plan10.12
            
            Standard
                Industrial/Commercial Single-Tenant Lease - Net, dated September
                30, 2002,
                between Mattiuz Children’s Trust and the Company, as amended by First
                Addendum to Standard Industrial/Commercial Single-Tenant Lease — Net,
                dated April 26, 2004, Second Addendum Standard Industrial/Commercial
                Single-Tenant Lease — Net, dated April 30, 2005 and Third Addendum to
                Standard Industrial/Commercial Single-Tenant Lease, dated July 7,
                2006
                (incorporated herein by reference to Exhibit 10.11 to our Current
                Report
                on Form 8-K/A, dated August 11, 2006 (the “August 2006
                8-K/A”))10.13
            
            Securities
                Purchase Agreement, dated March 8, 2007, between the Company and
                the
                purchasers signatory thereto (incorporated herein by reference to
                Exhibit
                10.1 to the March 8, 2007 8-K)




57




10.14
            
            Securities
                Purchase Agreement, dated May 25, 2007, between the Company and the
                purchasers signatory thereto (incorporated herein by reference to
                Exhibit
                10.1 to our Current Report on Form 8-K, dated June 4,
                2007)10.15
            
            Registration
                Rights Agreement (incorporated herein by reference to Exhibit 10.2
                to our
                Current Report of Form 8-K, dated June 4, 2007)10.16
            
            Securities
                Purchase Agreement, dated November 1, 2007, between the Company and
                the investors signatory thereto (incorporated herein by reference
                to
                Exhibit 10.1 toour
                Current Report on Form 8-K, dated November 1, 2007)21.1*
            
            List
                of Subsidiaries23.1*
            
            Consent
              of Independent Registered Accounting Firm Burr, Pilger & Mayer
              LLP31.1*
            
            Section
                302 Certification of Principal Executive Officer31.2*
            
            Section
                302 Certification of Principal Financial Officer32.1*
            
            Section
                906 Certification of Principal Executive Officer32.2*
            
            Section
                906 Certification of Principal Financial
                Officer







*  filed
      herewith





**Item
      14.**  **Principal
      Accountant Fees and Services.**





Burr,
      Pilger and Mayer LLP (“BPM”) has served as our independent registered public
      accounting firm since December 19, 2006. The following table sets forth the
      aggregate fees billed to us for the fiscal years ended December 31, 2007 and
      2006 by BPM.





2007
            
            2006Audit
                Fees(1)
            
            $
            219,145
            (1)
            $
            34,000
            (2)Tax
                Fees
            
            
            —
            
            
            —







(1)  Comprised
      of the audit of our annual financial statements, reviews of our quarterly
      financial statements and reviews of our various registration statements
      throughout 2007.




(2)
      Comprised of the audit of our annual financial statements for 2006.





The
      Audit
      Committee reviews and pre-approves all proposed audit and non-audit engagements
      and related fees of BPM. In addition, any audit and non-audit fees for newly
      proposed professional services to be provided by BPM that arise during the
      year,
      or changes to previously approved BPM work, are reviewed and approved in advance
      of commencement of such services by the Audit Committee at their regularly
      scheduled meetings throughout the fiscal year. Should a situation arise that
      requires approval between meetings, the Audit Committee has delegated authority
      to its Chairman to authorize such pre-approval and to report on same at the
      following regularly scheduled meeting.





58


**SIGNATURES**





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





Dated:
      March 19, 2008




**AKEENA
              SOLAR, INC.**/s/
                Barry CinnamonBarry
              CinnamonPresident
              and
              Chief Executive Officer(Principal
                Executive Officer)




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities indicated
      on
      March 19, 2008.








**Signature**
            
            **Title**/s/
                Barry Cinnamon
            
            President,
                Chief Executive Officer and Director**Barry
                Cinnamon**
            
            (Principal
                Executive Officer)/s/
                Gary Effren
            
            Chief
                Financial Officer**Gary
                Effren**
            
            (Principal
                Financial and Accounting Officer)/s/
                Ed Roffman
            
            Director**Ed
                Roffman**/s/
                George Lauro
            
            Director**George
                Lauro**/s/
                Jon Witkin
            
            Director**Jon
                Witkin**





59


**Exhibit
      Index**




Exhibit
              Number
            
            Description2.1
            
            Agreement
                of Merger and Plan of Reorganization, dated August 11, 2006, by and
                among
                Fairview Energy Corporation, Inc., ASI Acquisition Sub, Inc. and
                Akeena
                Solar, Inc. (incorporated herein by reference to Exhibit 2.1 to our
                Current Report on Form 8-K, dated August 11, 2006 (the “August 2006
                8-K”))3.1
            
            Certificate
                of Incorporation (incorporated herein by reference to Exhibit 3.1
                to our
                Current Report on Form 8-K, dated August 3, 2006)3.2
            
            By-laws
                (incorporated herein by reference to Exhibit 3.2 to our Current Report
                on
                Form 8-K, dated August 3, 2006)3.3
            
            Certificate
                of Amendment to the Certificate of Incorporation (incorporated herein
                by
                reference to Exhibit 3.3 to the August 2006 8-K)4.1
            
            Form
                of Restricted Stock Agreement (incorporated herein by reference to
                Exhibit
                4.1 to our Annual Report on Form 10-KSB filed with the SEC on March
                29,
                2007)4.2
            
            Form
                of Class B Common Stock Purchase Warrant, dated March 8, 2007
                (incorporated herein by reference to Exhibit 10.3 to our Current
                Report on
                Form 8-K, dated March 8, 2007 (“March 8, 2007 8-K”))4.3
            
            Form
                of Class A Common Stock Purchase Warrant, dated March 8, 2007
                (incorporated herein by reference to Exhibit 10.4 to the March 8,
                2007
                8-K)4.4
            
            Registration
                Rights Agreement (incorporated herein by reference to Exhibit 10.2
                to the
                March 8, 2007 8-K)4.5
            
            Form
                of Class C Common Stock Purchase Warrant, dated May 25, 2007 (incorporated
                herein by reference to Exhibit 10.3 toour
                Current Report on Form 8-K, dated June 4, 2007)4.6
            
            Form
                of Warrant to Purchase Common Stock, dated November 2007 (incorporated
                herein by reference to Exhibit 4.1 toour
                Current Report on Form 8-K, dated November 1, 2007)10.1
            
            Akeena
                Solar, Inc. 2006 Stock Incentive Plan (incorporated herein by reference
                to
                Exhibit 10.1 to the August 2006 8-K)10.2
            
            First
                Amendment to the Akeena Solar, Inc. 2006 Incentive Stock Plan
                (incorporated herein by reference to Exhibit 10.1 to our Current
                Report on
                Form 8-K, dated December 20, 2006)10.3
            
            Form
                of Subscription Agreement (incorporated herein by reference to Exhibit
                10.2 to the August 2006 8-K)10.4
            
            Form
                of Registration Rights Agreement (incorporated herein by reference
                to
                Exhibit 10.3 to the August 2006 8-K)10.5
            
            Form
                of Lockup Agreement (incorporated herein by reference to Exhibit
                10.4 to
                the August 2006 8-K)10.6
            
            Loan
                and Security Agreement, dated January 29, 2007, between the Company
                and
                Comerica Bank (incorporated herein by reference to Exhibit 10.1 to
                our
                Current Report on Form 8-K, dated January 29, 2007)10.7
            
            First
                Modification to Loan and Security Agreement, dated June 26, 2007,
                between
                the Company and Comerica Bank (incorporated herein by reference to
                Exhibit
                10.1 to our Current Report on Form 8-K, dated June 26,
                2007.10.8
            
            Second
                Modification to Loan and Security Agreement, dated January 11, 2008
                and
                effective as of December 31, 2007, between the Company and Comerica
                Bank
                (incorporated herein by reference to Exhibit 10.1 to our Current
                Report on
                From 8-K, dated January 11, 2008)10.9
            
            Restricted
                Stock Agreement, dated December 29, 2006, between the Company and
                Edward
                Roffman (incorporated herein by reference to Exhibit 10.8 to our
                Annual
                Report on Form 10-KSB filed with the SEC on March 29,
                2007)10.10
            
            Form
                of Director and Officer Indemnification Agreement (incorporated herein
                by
                reference to Exhibit 10.9 to the August 2006 8-K)10.11*
            
            Second
                Amendment to the Akeena Solar, Inc. 2006 Incentive Stock
                Plan10.12
            
            Standard
                Industrial/Commercial Single-Tenant Lease - Net, dated September
                30, 2002,
                between Mattiuz Children’s Trust and the Company, as amended by First
                Addendum to Standard Industrial/Commercial Single-Tenant Lease — Net,
                dated April 26, 2004, Second Addendum Standard Industrial/Commercial
                Single-Tenant Lease — Net, dated April 30, 2005 and Third Addendum to
                Standard Industrial/Commercial Single-Tenant Lease, dated July 7,
                2006
                (incorporated herein by reference to Exhibit 10.11 to our Current
                Report
                on Form 8-K/A, dated August 11, 2006 (the “August 2006
                8-K/A”))10.13
            
            Securities
                Purchase Agreement, dated March 8, 2007, between the Company and
                the
                purchasers signatory thereto (incorporated herein by reference to
                Exhibit
                10.1 to the March 8, 2007 8-K)




60




10.14
            Securities
                Purchase Agreement, dated May 25, 2007, between the Company and the
                purchasers signatory thereto (incorporated herein by reference to
                Exhibit
                10.1 to our Current Report on Form 8-K, dated June 4,
                2007)10.15
            Registration
                Rights Agreement (incorporated herein by reference to Exhibit 10.2
                to our
                Current Report of Form 8-K, dated June 4, 2007)10.16
            Securities
                Purchase Agreement, dated November 1, 2007, between the Company and
                the investors signatory thereto (incorporated herein by reference
                to
                Exhibit 10.1 toour
                Current Report on Form 8-K, dated November 1, 2007)21.1*
            List
                of Subsidiaries23.1*
            Consent
              of
              Independent Registered Accounting Firm Burr, Pilger & Mayer
              LLP31.1*
            Section
                302 Certification of Principal Executive Officer31.2*
            Section
                302 Certification of Principal Financial Officer32.1*
            Section
                906 Certification of Principal Executive Officer32.2*
            Section
                906 Certification of Principal Financial
                Officer





*
      filed
      herewith




61