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United States

Securities and Exchange Commission

Washington, D.C. 20549





Form 10-Q







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

For the quarterly period ended June 30, 2010

OR



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

Commission File Number 001-34044





REAL GOODS
SOLAR, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|COLORADO                                                       |  | 26-1851813                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

833 W. SOUTH BOULDER ROAD

LOUISVILLE, COLORADO 80027-2452

(Address of principal executive offices)

(303) 222-8400

(Registrants telephone number, including area code)





Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the
Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90
days.    YES  x    NO   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    YES   ̈    NO   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (check one):



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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    YES   ̈    NO  x

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date:





|                                        |  |                              
|--------------------------------------- |  | -----------------------------
|Class                                   |  | Outstanding at August
5, 2010
|Class A Common Stock ($.0001 par value) |  | 16,152,048                   
|Class B Common Stock ($.0001 par value) |  | 2,153,293                    









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REAL GOODS SOLAR, INC.

FORM 10-Q

INDEX



|                              |  |                                                                                                           |  |   
|----------------------------- |  | --------------------------------------------------------------------------------------------------------- |  | --
|PART I. FINANCIAL INFORMATION |  | 2                                                                                                        
|                              |  |                                                                                                          
|Item 1.                       |  | Financial Statements (Unaudited):                                                                         |  | 2 
|                              |  | Condensed consolidated balance sheets at June 30, 2010 and December 31, 2009                              |  | 3 
|                              |  | Condensed consolidated statements of operations For the Three and Six Months Ended June 30, 2010 and 2009 |  | 4 
|                              |  | Condensed consolidated statements of cash flows For the Six Months Ended June 30, 2010 and 2009           |  | 5 
|                              |  | Notes to interim condensed consolidated financial statements                                              |  | 6 
|                              |  |                                                                                                          
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                     |  | 8 
|                              |  |                                                                                                          
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                |  | 11
|                              |  |                                                                                                          
|Item 4T.                      |  | Controls and Procedures                                                                                   |  | 11
|                              | 
|PART II. OTHER INFORMATION    |  | 12                                                                                                       
|                              |  |                                                                                                          
|Item 1.                       |  | Legal Proceedings                                                                                         |  | 12
|                              |  |                                                                                                          
|Item 1A.                      |  | Risk Factors                                                                                              |  | 12
|                              |  |                                                                                                          
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                               |  | 12
|                              |  |                                                                                                          
|Item 3                        |  | Defaults Upon Senior Securities                                                                           |  | 12
|                              |  |                                                                                                          
|Item 4.                       |  | Reserved                                                                                                  |  | 12
|                              |  |                                                                                                          
|Item 5.                       |  | Other Information                                                                                         |  | 12
|                              |  |                                                                                                          
|Item 6.                       |  | Exhibits                                                                                                  |  | 12
|                              |  |                                                                                                          
|                              |  | SIGNATURES                                                                                                |  | 13



1



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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report may contain forward-looking statements that involve risks and uncertainties. The words anticipate, believe,
plan, estimate, expect, strive, future, intend and similar expressions as they relate to us are intended to identify such forward-looking statements. Our actual results could
differ materially from the results anticipated in these forward-looking statements as a result of certain factors set forth under Managements Discussion and Analysis of Financial Condition and Results of Operations,
Quantitative and Qualitative Disclosures about Market Risk, Risk Factors and elsewhere in this report. Risks and uncertainties that could cause actual results to differ include, without limitation, general economic
conditions, competition, adoption of solar energy technologies, loss of key personnel, pricing including pricing of conventional energy sources, the level of government subsidies and economic incentives for solar energy, changing energy
technologies, our geographic concentration, brand reputation, consumer trends, acquisitions, new initiatives we undertake, security and information systems, legal liability for website content, merchandise and solar panel supply problems, product
liabilities, failure of third parties to provide adequate service, our reliance on centralized customer service, overstocks and merchandise returns, our reliance on a centralized fulfillment center, increases in postage and shipping costs,
E-commerce trends, future Internet related taxes, our majority shareholders control of us, our dependence on Gaiam, Inc. for certain services, fluctuations in quarterly operating results, customer interest in our products, the effect of
government regulation and other risks and uncertainties included in our filings with the Securities and Exchange Commission. We caution you that no forward-looking statement is a guarantee of future performance, and you should not place undue
reliance on these forward-looking statements which reflect our view only as of the date of this report. We undertake no obligation to update any forward-looking information.

PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements (Unaudited)
|------- | --------------------------------

Unaudited Interim Condensed Consolidated Financial Statements

We have prepared our unaudited interim condensed consolidated financial statements included herein pursuant to the rules and regulations of the
United States Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed
or omitted pursuant to these rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In our opinion, the unaudited interim condensed financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly, in all material respects, our consolidated financial position as of June 30, 2010, the interim results of operations for the three and six months ended June 30,
2010 and 2009, and cash flows for the six months ended June 30, 2010 and 2009. These interim statements have not been audited. The balance sheet as of December 31, 2009 was derived from our audited consolidated financial statements
included in our annual report on Form 10-K. The interim condensed consolidated financial statements contained herein should be read in conjunction with our audited financial statements, including the notes thereto, for the year ended
December 31, 2009.



2



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REAL GOODS SOLAR, INC.

Condensed consolidated balance sheets



|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ----------------- | - | ------- | -
|(in thousands, except share and per share data)                                                                                                                                     |  | June 30, 2010 |         |   | December 31, 2009 |  
|                                                                                                                                                                                    |  | (Unaudited)   |         |   |                   |  
|ASSETS                                                                                                                                                                              |  |               |         |   |                   |   |         |  
|Current assets:                                                                                                                                                                     |  |               |         |   |                   |   |         |  
|Cash and cash equivalents                                                                                                                                                           |  | $             | 11,858  |   |                   | $ | 12,206  |  
|Accounts receivable, net                                                                                                                                                            |  |               | 17,325  |   |                   |   | 13,996  |  
|Inventory, net                                                                                                                                                                      |  |               | 5,787   |   |                   |   | 4,769   |  
|Deferred costs on uncompleted contracts                                                                                                                                             |  |               | 226     |   |                   |   | 1,024   |  
|Deferred advertising costs                                                                                                                                                          |  |               | 135     |   |                   |   | 114     |  
|Receivable and deferred tax assets                                                                                                                                                  |  |               | 821     |   |                   |   | 833     |  
|Other current assets                                                                                                                                                                |  |               | 388     |   |                   |   | 598     |  
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|Total current assets                                                                                                                                                                |  |               | 36,540  |   |                   |   | 33,540  |  
|                                                                                                                                                                                    |  |              
|Property and equipment, net                                                                                                                                                         |  |               | 5,173   |   |                   |   | 5,145   |  
|Deferred tax assets                                                                                                                                                                 |  |               | 3,067   |   |                   |   | 3,064   |  
|Goodwill                                                                                                                                                                            |  |               | 732     |   |                   |   | 732     |  
|Other assets                                                                                                                                                                        |  |               | 575     |   |                   |   | 813     |  
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|Total assets                                                                                                                                                                        |  | $             | 46,087  |   |                   | $ | 43,294  |  
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|                                                                                                                                                                                    |  |              
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                                |  |               |         |   |                   |   |         |  
|Current liabilities:                                                                                                                                                                |  |               |         |   |                   |   |         |  
|Accounts payable                                                                                                                                                                    |  | $             | 9,525   |   |                   | $ | 8,821   |  
|Accrued liabilities                                                                                                                                                                 |  |               | 2,048   |   |                   |   | 2,500   |  
|Payable to Gaiam                                                                                                                                                                    |  |               | 3,742   |   |                   |   | 1,636   |  
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|Total current liabilities                                                                                                                                                           |  |               | 15,315  |   |                   |   | 12,957  |  
|                                                                                                                                                                                    |  |              
|Commitments and contingencies                                                                                                                                                       |  |               |         |   |                   |   |         |  
|                                                                                                                                                                                    |  |              
|Shareholders equity:                                                                                                                                                               |  |               |         |   |                   |   |         |  
|Class A common stock, $.0001 par value, 150,000,000 shares authorized, 16,152,048 and 16,136,299 shares issued and
outstanding at June 30, 2010 and December 31, 2009, respectively |  |               | 1       |   |                   |   | 1       |  
|Class B common stock, $.0001 par value, 50,000,000 shares authorized, 2,153,293 shares issued and outstanding at
June 30, 2010 and December 31, 2009                                |  |               |        |   |                   |   |        |  
|Additional paid-in capital                                                                                                                                                          |  |               | 60,518  |   |                   |   | 60,368  |  
|Accumulated deficit                                                                                                                                                                 |  |               | (29,747 | ) |                   |   | (30,032 | )
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|Total shareholders equity                                                                                                                                                          |  |               | 30,772  |   |                   |   | 30,337  |  
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  
|Total liabilities and shareholders equity                                                                                                                                          |  | $             | 46,087  |   |                   | $ | 43,294  |  
|                                                                                                                                                                                    |  |               |         |   |                   |   |         |  

See accompanying notes to the interim condensed consolidated financial statements.



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REAL GOODS SOLAR, INC.

Condensed consolidated statements of operations



|                                                                                        |  |                                     |        |      |                                   |        |      |  |      |        |  |   |        |  
|--------------------------------------------------------------------------------------- |  | ----------------------------------- | ------ | ---- | --------------------------------- | ------ | ---- |  | ---- | ------ |  | - | ------ | -
|                                                                                        |  | For the Three Months Ended June 30, |        |      | For the Six Months Ended June 30, |       
|(in thousands, except per share data)                                                   |  | 2010                                |        | 2009 |                                   |        | 2010 |  | 2009 |       
|                                                                                        |  | (unaudited)                         |        |      | (unaudited)                       |       
|Net revenue                                                                             |  | $                                   | 17,531 |      | $                                 | 12,713 |      |  | $    | 32,536 |  | $ | 22,244 |  
|Cost of goods sold                                                                      |  |                                     | 12,493 |      |                                   | 9,435  |      |  |      | 23,467 |  |   | 16,664 |  
|                                                                                        |  |                                     |        |      |                                   |        |      |  |      |        |  |   |        |  
|Gross profit                                                                            |  |                                     | 5,038  |      |                                   | 3,278  |      |  |      | 9,069  |  |   | 5,580  |  
|                                                                                        |  |                                     |        |      |                                   |        |      |  |      |        |  |   |        |  
|                                                                                        |  |                                     |        |     
|Expenses:                                                                               |  |                                     |        |      |                                   |        |      |  |      |        |  |   |        |  
|Selling and operating                                                                   |  |                                     | 3,930  |      |                                   | 3,666  |      |  |      | 7,282  |  |   | 7,783  |  
|General and administrative                                                              |  |                                     | 686    |      |                                   | 551    |      |  |      | 1,337  |  |   | 988    |  
|                                                                                        |  |                                     |        |      |                                   |        |      |  |      |        |  |   |        |  
|Total expenses                                                                          |  |                                     | 4,616  |      |                                   | 4,217  |      |  |      | 8,619  |  |   | 8,771  |  
|                                                                                        |  |                                     |        |      |                                   |        |      |  |      |        |  |   |        |  
|                                                                                        |  |                                     |        |     
|Income (loss) from operations                                                           |  |                                     | 422    |      |                                   | (939   | )    |  |      | 450    |  |   | (3,191 | )
|                                                                                        |  |                                     |        |     
|Interest income                                                                         |  |                                     | 3      |      |                                   |       |      |  |      | 3      |  |   |       |  
|                                                                                        |  |                                     |        |      |                                   |        |      |  |      |        |  |   |        |  
|                                                                                        |  |                                     |        |     
|Income (loss) before income taxes                                                       |  |                                     | 425    |      |                                   | (939   | )    |  |      | 453    |  |   | (3,191 | )
|                                                                                        |  |                                     |        |     
|Income tax expense (benefit)                                                            |  |                                     | 157    |      |                                   | (358   | )    |  |      | 168    |  |   | (1,239 | )
|                                                                                        |  |                                     |        |      |                                   |        |      |  |      |        |  |   |        |  
|                                                                                        |  |                                     |        |     
|Net income (loss) attributable to Real Goods Solar, Inc                                 |  | $                                   | 268    |      | $                                 | (581   | )    |  | $    | 285    |  | $ | (1,952 | )
|                                                                                        |  |                                     |        |      |                                   |        |      |  |      |        |  |   |        |  
|                                                                                        |  |                                     |        |     
|Net income (loss) per share attributable to Real Goods Solar, Inc. common shareholders: |  |                                     |        |      |                                   |        |      |  |      |        |  |   |        |  
|Basic                                                                                   |  | $                                   | 0.02   |      | $                                 | (0.03  | )    |  | $    | 0.02   |  | $ | (0.11  | )
|                                                                                        |  |                                     |        |      |                                   |        |      |  |      |        |  |   |        |  
|Diluted                                                                                 |  | $                                   | 0.02   |      | $                                 | (0.03  | )    |  | $    | 0.02   |  | $ | (0.11  | )
|                                                                                        |  |                                     |        |      |                                   |        |      |  |      |        |  |   |        |  
|                                                                                        |  |                                     |        |     
|Weighted-average shares outstanding:                                                    |  |                                     |        |      |                                   |        |      |  |      |        |  |   |        |  
|Basic                                                                                   |  |                                     | 18,299 |      |                                   | 18,270 |      |  |      | 18,295 |  |   | 18,081 |  
|                                                                                        |  |                                     |        |      |                                   |        |      |  |      |        |  |   |        |  
|Diluted                                                                                 |  |                                     | 18,399 |      |                                   | 18,270 |      |  |      | 18,381 |  |   | 18,081 |  
|                                                                                        |  |                                     |        |      |                                   |        |      |  |      |        |  |   |        |  

See accompanying notes to the interim condensed consolidated financial statements.



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REAL GOODS SOLAR, INC.

Condensed consolidated statements of cash flows



|                                                                                                                                          |  |                                  |        |   |      |   |        |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                                                                          |  | For the Six Months EndedJune 30, |       
|(in thousands)                                                                                                                            |  | 2010                             |        |   | 2009 |  
|                                                                                                                                          |  | (unaudited)                      |       
|Operating activities                                                                                                                      |  |                                  |        |   |      |   |        |  
|Net income (loss) attributable to Real Goods Solar, Inc.                                                                                  |  | $                                | 285    |   |      | $ | (1,952 | )
|Adjustments to reconcile net income (loss) attributable to Real Goods Solar, Inc. to net cash (used in) provided by
operating activities: |  |                                  |        |   |      |   |        |  
|Depreciation                                                                                                                              |  |                                  | 249    |   |      |   | 209    |  
|Deferred income tax benefit                                                                                                               |  |                                  | (3     | ) |      |   | (1,358 | )
|Share-based compensation expense                                                                                                          |  |                                  | 130    |   |      |   | 150    |  
|Changes in operating assets and liabilities:                                                                                              |  |                                  |        |   |      |   |        |  
|Accounts receivable, net                                                                                                                  |  |                                  | (3,329 | ) |      |   | 802    |  
|Inventory, net                                                                                                                            |  |                                  | (1,018 | ) |      |   | 4,796  |  
|Deferred costs on uncompleted contracts and advertising                                                                                   |  |                                  | 777    |   |      |   | 379    |  
|Other assets                                                                                                                              |  |                                  | 481    |   |      |   | (420   | )
|Accounts payable                                                                                                                          |  |                                  | 703    |   |      |   | (2,552 | )
|Accrued liabilities and deferred revenue                                                                                                  |  |                                  | (452   | ) |      |   | 358    |  
|Payable to Gaiam                                                                                                                          |  |                                  | 2,106  |   |      |   | (187   | )
|                                                                                                                                          |  |                                  |        |   |      |   |        |  
|Net cash (used in) provided by operating activities                                                                                       |  |                                  | (71    | ) |      |   | 225    |  
|                                                                                                                                          |  |                                  |        |   |      |   |        |  
|                                                                                                                                          |  |                                 
|Investing activities                                                                                                                      |  |                                  |        |   |      |   |        |  
|Purchase of property and equipment                                                                                                        |  |                                  | (277   | ) |      |   | (21    | )
|                                                                                                                                          |  |                                  |        |   |      |   |        |  
|Net cash used in investing activities                                                                                                     |  |                                  | (277   | ) |      |   | (21    | )
|                                                                                                                                          |  |                                  |        |   |      |   |        |  
|                                                                                                                                          |  |                                 
|Net change in cash and cash equivalents                                                                                                   |  |                                  | (348   | ) |      |   | 204    |  
|Cash and cash equivalents at beginning of period                                                                                          |  |                                  | 12,206 |   |      |   | 12,339 |  
|                                                                                                                                          |  |                                  |        |   |      |   |        |  
|                                                                                                                                          |  |                                 
|Cash and cash equivalents at end of period                                                                                                |  | $                                | 11,858 |   |      | $ | 12,543 |  
|                                                                                                                                          |  |                                  |        |   |      |   |        |  
|                                                                                                                                          |  |                                 
|Supplemental cash flow information                                                                                                        |  |                                  |        |   |      |   |        |  
|Common stock issued for acquisitions                                                                                                      |  | $                                |       |   |      | $ | 732    |  
|Income taxes paid                                                                                                                         |  | $                                | 6      |   |      | $ |       |  

See accompanying notes
to the interim condensed consolidated financial statements



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Notes to interim condensed consolidated financial statements

1. Organization, Nature of Operations, and Principles of Consolidation

We are a leading residential solar energy integrator. We were incorporated in Colorado on January 29, 2008 under the name Real Goods Solar, Inc.
(Real Goods Solar, we, us, or our). As of June 30, 2010, we were 54.6% owned by Gaiam, Inc. (Gaiam). Our initial public offering of common stock occurred on May 7, 2008.

We have prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with accounting principles
generally accepted in the United States, or GAAP, and they include our accounts and those of our subsidiaries. Intercompany transactions and balances have been eliminated.

The unaudited condensed consolidated financial position, results of operations and cash flows for the interim periods disclosed in this report are not
necessarily indicative of future financial results.

2. Significant Accounting Policies

No changes were made to our significant accounting policies during the three and six months ended June 30, 2010.

Use of Estimates and Reclassifications

The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the
accompanying financial statements and disclosures. Although we base these estimates on our best knowledge of current events and actions that we may undertake in the future, actual results may be different from the estimates. We have made certain
reclassifications to prior period amounts to conform to the current period presentations.

3. Shareholders Equity

During the six months ended June 30, 2010, we issued 15,749 of our Class A common shares to our independent directors, in lieu of cash
compensation, for services rendered during 2010. Following this transaction, Gaiam owned 54.6% of our stock.

4. Share-Based Payments

During the first half of 2010, we granted 519,000 and cancelled 8,000 stock options under the Real Goods Solar 2009 Long-Term Incentive Plan.
The new stock options commence vesting 2% over 50 months only upon the attainment of a certain amount of pre-tax income for the year ending December 31, 2010. For these performance based stock options, the attainment of the performance
condition was not probable as of June 30, 2010 and, therefore, no compensation expense for these grants has been recorded.

Total
share-based compensation expense recognized was $0.1 million for each of the three months ended June 30, 2010 and 2009, and $0.1 million and $0.2 million for the six months ended June 30, 2010 and 2009, respectively, and is shown in
general and administrative expenses on our condensed consolidated statements of operations.

5. Net Income (Loss) Per Share Attributable to
Real Goods Solar, Inc. Common Shareholders

Basic net income (loss) per share attributable to Real Goods Solar, Inc. common shareholders
excludes any dilutive effects of options and warrants. We compute basic net income (loss) per share attributable to Real Goods Solar, Inc. common shareholders using the weighted average number of common shares outstanding during the period. We
compute diluted net income (loss) per share attributable to Real Goods Solar, Inc. common shareholders using the weighted average number of common shares and common stock equivalents outstanding during the period. We excluded common equivalents of
635,000 and 926,000 for the three months ended June 30, 2010 and 2009, respectively, and 467,000 and 812,000 for the six months ended June 30, 2010 and 2009, respectively, from the computation of diluted net income (loss) per share
attributable to Real Goods Solar, Inc. common shareholders because their effect was antidilutive.



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##### Table of Contents

The following table sets forth the computation of basic and diluted net income (loss) per share attributable
to Real Goods Solar, Inc. common shareholders:



|                                                                                                                         |  |                            |        |      |                          |        |      |  |      |        |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------ |  | -------------------------- | ------ | ---- | ------------------------ | ------ | ---- |  | ---- | ------ |  | - | ------ | -
|                                                                                                                         |  | Three Months EndedJune 30, |        |      | Six Months EndedJune 30, |       
|(in thousands, except per share data)                                                                                    |  | 2010                       |        | 2009 |                          |        | 2010 |  | 2009 |       
|Numerator for basic and diluted net income (loss) per share attributable to Real Goods Solar, Inc. common
shareholders   |  | $                          | 268    |      | $                        | (581   | )    |  | $    | 285    |  | $ | (1,952 | )
|Denominator:                                                                                                             |  |                            |        |      |                          |        |      |  |      |        |  |   |        |  
|Weighted average shares for basic net income (loss) per share attributable to Real Goods Solar, Inc. common
shareholders |  |                            | 18,299 |      |                          | 18,270 |      |  |      | 18,295 |  |   | 18,081 |  
|Effect of dilutive securities:                                                                                           |  |                            |        |      |                          |        |      |  |      |        |  |   |        |  
|Weighted average of stock options and warrants                                                                           |  |                            | 100    |      |                          |       |      |  |      | 86     |  |   |       |  
|                                                                                                                         |  |                            |        |      |                          |        |      |  |      |        |  |   |        |  
|Denominators for diluted net income (loss) per share attributable to Real Goods Solar, Inc. common shareholders          |  |                            | 18,399 |      |                          | 18,270 |      |  |      | 18,381 |  |   | 18,081 |  
|                                                                                                                         |  |                            |        |      |                          |        |      |  |      |        |  |   |        |  
|                                                                                                                         |  |                            |        |     
|Net income (loss) per share attributable to Real Goods Solar, Inc. common shareholders - basic                           |  | $                          | 0.02   |      | $                        | (0.03  | )    |  | $    | 0.02   |  | $ | (0.11  | )
|                                                                                                                         |  |                            |        |      |                          |        |      |  |      |        |  |   |        |  
|Net income (loss) per share attributable to Real Goods Solar, Inc. common shareholders - diluted                         |  | $                          | 0.02   |      | $                        | (0.03  | )    |  | $    | 0.02   |  | $ | (0.11  | )
|                                                                                                                         |  |                            |        |      |                          |        |      |  |      |        |  |   |        |  



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##### Table of Contents

|Item 2. | Managements discussion and analysis of financial condition and results of operations
|------- | -------------------------------------------------------------------------------------

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed consolidated
financial statements and related notes included elsewhere in this document. This section is designed to provide information that will assist in understanding our condensed consolidated financial statements, changes in certain items in those
statements from period to period, the primary factors that caused those changes and how certain accounting principles, policies and estimates affect the condensed consolidated financial statements.

Overview

We are a leading residential
solar energy integrator. We offer turnkey services to our solar energy system customers, including design, procurement, permitting, build-out, grid connection, financing referrals and warranty and customer satisfaction activities. Our solar energy
systems use high-quality solar PV modules from manufacturers such as Sharp, Kyocera, Sanyo and SunPower. We use proven technologies and techniques to help customers achieve meaningful savings by reducing their utility costs. In addition, we help
customers lower their emissions output and reliance upon fossil fuel energy sources.

We have over 30 years of experience in residential solar
energy, beginning with our sale in 1978 of the first solar photovoltaic, or PV, panels in the United States. We have sold a variety of solar products to more than 30,000 customers since our founding and have installed over 6,000 systems.

Our focused customer acquisition approach and our efficiency in converting leads into customers enable us to have what we believe are low customer
acquisition costs. We believe that our Real Goods Solar brand has a national reputation for high quality customer service in the solar energy market, which leads to a significant number of word-of-mouth referrals and new customers. In addition, our
majority shareholder, Gaiam, is a leader in the sustainable and renewable energy lifestyle market and has a base of over 10 million direct customers, providing us additional lead generation for potential solar energy customers. We also broaden
our brand exposure by selling solar and other renewable energy and sustainable living products and resources through our nationally distributed catalog and website, including books and DVDs on renewable energy and sustainable living, products for
solar, green building products and systems, air purification products, water conservation and purification products and other solar and sustainable living related products. Our Solar Living Center in Hopland, California features interactive
demonstrations for renewable energy and environmentally sensible technologies and is the largest facility of its kind, with more than 2 million visitors since it opened in 1996.

Results of Operations

The following
table sets forth certain financial data as a percentage of revenue for the periods indicated:



|                                                         |  |                             |   |  |                           |    |  |       |   |  |       |   
|-------------------------------------------------------- |  | --------------------------- | - |  | ------------------------- | -- |  | ----- | - |  | ----- | --
|                                                         |  | Three Months Ended June 30, |   |  | Six Months EndedJune 
30, |   
|                                                         |  | 2010                        |   |  | 2009                      |    |  | 2010  |   |  | 2009  |   
|Net revenue                                              |  | 100.0                       | % |  | 100.0                     | %  |  | 100.0 | % |  | 100.0 | % 
|Cost of goods sold                                       |  | 71.3                        | % |  | 74.2                      | %  |  | 72.1  | % |  | 74.9  | % 
|                                                         |  |                             |   |  |                           |    |  |       |   |  |       |   
|Gross profit                                             |  | 28.7                        | % |  | 25.8                      | %  |  | 27.9  | % |  | 25.1  | % 
|                                                         |  |                             |   |  |                           |    |  |       |   |  |       |   
|                                                         |  |                             |   | 
|Expenses:                                                |  |                             |   |  |                           |    |  |       |   |  |       |   
|Selling and operating                                    |  | 22.4                        | % |  | 28.9                      | %  |  | 22.4  | % |  | 35.0  | % 
|General and administrative                               |  | 3.9                         | % |  | 4.3                       | %  |  | 4.1   | % |  | 4.5   | % 
|                                                         |  |                             |   |  |                           |    |  |       |   |  |       |   
|Total expenses                                           |  | 26.3                        | % |  | 33.2                      | %  |  | 26.5  | % |  | 39.5  | % 
|                                                         |  |                             |   |  |                           |    |  |       |   |  |       |   
|                                                         |  |                             |   | 
|Income (loss) from operations                            |  | 2.4                         | % |  | (7.4                      | )% |  | 1.4   | % |  | (14.4 | )%
|                                                         |  |                             |   | 
|Interest income                                          |  | 0.0                         | % |  | 0.0                       | %  |  | 0.0   | % |  | 0.0   | % 
|                                                         |  |                             |   | 
|Income tax expense (benefit)                             |  | 0.9                         | % |  | (2.8                      | )% |  | 0.5   | % |  | (5.6  | )%
|                                                         |  |                             |   | 
|                                                         |  |                             |   |  |                           |    |  |       |   |  |       |   
|Net income (loss) attributable to Real Goods Solar, Inc. |  | 1.5                         | % |  | (4.6                      | )% |  | 0.9   | % |  | (8.8  | )%
|                                                         |  |                             |   |  |                           |    |  |       |   |  |       |   



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##### Table of Contents

Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009

Net revenue. Net revenue increased $4.8 million, or 37.9%, to $17.5 million during the second quarter of 2010 from $12.7
million during the second quarter of 2009. All the revenue growth was organic and was primarily driven by an increase in marketing and sales initiatives.

Gross profit. Gross profit increased $1.8 million, or 53.7%, to $5.0 million during the second quarter of 2010 from $3.3 million during the second
quarter of 2009. As a percentage of net revenue, gross profit increased to 28.7% during the second quarter of 2010 from 25.8% during the second quarter of 2009. The increase in gross profit percentage partially reflects improved installation
efficiencies as well as declines in solar module prices over the last year.

Selling and operating expenses. Selling and operating
expenses increased $0.3 million, or 7.2%, to $3.9 million during the second quarter of 2010 from $3.7 million during the second quarter of 2009. As a percentage of net revenue, selling and operating expenses decreased to 22.4% during the second
quarter of 2010 from 28.9% during the second quarter of 2009. The decrease in selling and operating expenses as a percentage of net revenue primarily reflects the significant cost savings achieved by integrating previously acquired businesses onto a
single set of systems and a unified brand.

General and administrative expenses. General and administrative expenses increased $0.1
million, or 24.5%, to $0.7 million during the second quarter of 2010 from $0.6 million during the second quarter of 2009. As of percentage of net revenue, general and administrative expenses decreased to 3.9% during the second quarter of 2010 from
4.3% during the second quarter of 2009, reflecting our leveraging of fixed costs.

Net income (loss) attributable to Real Goods Solar,
Inc. As a result of the above factors, net income attributable to Real Goods Solar, Inc. was $0.3 million during the second quarter of 2010 compared to a net loss of $0.6 million during the second quarter of 2009. Net income per share
attributable to our shareholders was $0.02 per share during the second quarter of 2010 compared to a net loss of $0.03 per share during the second quarter of 2009.

Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009

Net revenue. Net revenue increased $10.3 million, or 46.3%, to $32.5 million during the first half of 2010 from $22.2 million during the first half
of 2009. All the revenue growth was organic and was primarily driven by an increase in marketing and sales initiatives.

Gross profit.
Gross profit increased $3.5 million, or 62.5%, to $9.1 million during the first half of 2010 from $5.6 million during the first half of 2009. As a percentage of net revenue, gross profit increased to 27.9% during the first half of 2010 from 25.1%
during the first half of 2009. The increase in gross profit percentage partially reflects improved installation efficiencies as well as declines in solar module prices over the last year.

Selling and operating expenses. Selling and operating expenses decreased $0.5 million, or 6.4%, to $7.3 million during the first half of 2010 from
$7.8 million during the first half of 2009. As a percentage of net revenue, selling and operating expenses decreased to 22.4% during the first half of 2010 from 35.0% during the first half of 2009. The decrease in selling and operating expenses
primarily reflects the significant cost savings achieved by integrating previously acquired businesses onto a single set of systems and a unified brand.

General and administrative expenses. General and administrative expenses increased $0.3 million, or 35.3%, to $1.3 million during the first half
of 2010 from $1.0 million during the first half of 2009. As of percentage of net revenue, general and administrative expenses decreased to 4.1% during the first half of 2010 from 4.5% during the first half of 2009, reflecting our leveraging of fixed
costs.

Net income (loss) attributable to Real Goods Solar, Inc. As a result of the above factors, net income attributable to Real
Goods Solar, Inc. was $0.3 million during the first half of 2010 compared to a net loss of $2.0 million during the first half of 2009. Net income per share attributable to our shareholders was $0.02 per share during the first half of 2010 compared
to a net loss of $0.11 per share during the first half of 2009.

Seasonality

Our quarterly net revenue and operating results for solar energy system installations are difficult to predict and have in the past and may in the future
fluctuate from quarter to quarter as a result of changes in state, federal, or private utility company subsidies, as well as weather, economic trends and other factors. We have historically experienced seasonality in our solar installation business,
with the first quarter representing our slowest installation quarter of the year. Much of the seasonality in our business in past years has been offset by the timing of government activities as well as strong organic growth.



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##### Table of Contents

Liquidity and Capital Resources

Our capital needs arise from working capital required to fund our purchases of solar PV modules and inverters, capital related to acquisitions of new
businesses, development of renewable energy products, replacements, expansions and improvements to our infrastructure, and future growth. These capital requirements depend on numerous factors, including business acquisitions, the ability to attract
new solar energy system installation customers, market acceptance of our product offerings, the cost of ongoing upgrades to our product offerings, the level of expenditures for sales and marketing, the level of investment in support systems and
facilities and other factors. The timing and amount of these capital requirements are variable and cannot accurately be predicted. We did not have any material commitments for capital expenditures as of June 30, 2010, and we do not presently
have any plans for future material capital expenditures. During 2007 and 2008, we acquired four solar energy system installation businesses. We plan to continue to pursue business acquisition and other opportunities to expand our sales territories,
technologies, and products and increase our sales and marketing programs as needed.

Cash Flows

The following table summarizes our primary sources (uses) of cash during the periods presented:



|                                        |  |                           |      |   |      |   |     |  
|--------------------------------------- |  | ------------------------- | ---- | - | ---- | - | --- | -
|                                        |  | Six Months Ended June 30, |     
|(in thousands)                          |  | 2010                      |      |   | 2009 |  
|Net cash provided by (used in):         |  |                           |      |   |      |   |     |  
|Operating activities                    |  | $                         | (71  | ) |      | $ | 225 |  
|Investing activities                    |  |                           | (277 | ) |      |   | (21 | )
|                                        |  |                           |      |   |      |   |     |  
|Net change in cash and cash equivalents |  | $                         | (348 | ) |      | $ | 204 |  
|                                        |  |                           |      |   |      |   |     |  

Operating activities. Our operating activities used net cash of $0.1 million and provided net cash of $0.2 million
during the first halves of 2010 and 2009, respectively. Our net cash used in operating activities during the first half of 2010 was primarily attributable to increased accounts receivable and inventory of $3.3 million and $1.0 million, respectively,
and decreased accrued liabilities of $0.5 million, partially offset by increased payable to Gaiam and accounts payable of $2.1 million and $0.7 million, respectively, decreased deferred costs on uncompleted contracts and advertising of $0.8 million,
decreased other assets of $0.5 million, noncash adjustments of $0.4 million and net income of $0.3 million. Our net cash provided by operating activities during the first half of 2009 was primarily attributable to decreased inventory of $4.8
million, accounts receivable of $0.8 million, and deferred costs of $0.4 million and increased accrued liabilities and deferred revenue of $0.4 million, partially offset by decreased accounts payable of $2.6 million, net loss of $2.0 million, and
noncash adjustments to our net loss and other uses of $1.6 million.

Investing activities. Our investing activities used net cash of
$0.3 million and $21,000 during the first halves of 2010 and 2009, respectively. Our cash used in investing activities during the first halves of 2010 and 2009 was used to acquire property and equipment.

We believe our available cash and cash expected to be generated from operations should be sufficient to fund our business for the foreseeable future.
However, our projected cash needs may change as a result of possible acquisitions, unforeseen operational difficulties, or other factors.

In
the normal course of our business, we investigate, evaluate and discuss acquisition, joint venture, minority investment, strategic relationship and other business combination opportunities in the solar energy markets. For any future investment,
acquisition, or joint venture opportunities, we may consider using then-available liquidity, issuing equity securities, or incurring additional indebtedness.

Contractual Obligations

We have
commitments under operating leases and various service agreements with Gaiam, but do not have any outstanding commitments under long-term debt obligations or purchase obligations. The following table shows our commitments to make future payments
under our operating leases:



|                            |  |       |     |          |   |           |  |           |     |         |   |   |  |   |  
|--------------------------- |  | ----- | --- | -------- | - | --------- |  | --------- | --- | ------- | - | - |  | - | -
|(in thousands)              |  | Total |     | < 1 year |   | 1-3 years |  | 3-5 years |     | > 5 yrs
|Operating lease obligations |  | $     | 710 |          | $ | 456       |  | $         | 254 |         | $ |  |  | $ | 

To the extent we become
entitled to utilize certain loss carryforwards from our separate tax returns, we will distribute to Gaiam the tax effect (estimated to be 34% for federal income tax purposes) of the amount of such tax loss carryforwards so utilized. Accordingly, we
recognized a valuation allowance against all of our deferred tax assets as of the effective date of our tax sharing agreement with Gaiam, May 13, 2008. These net operating loss carryforwards expire beginning in 2018 if not utilized. Due to
Gaiams step acquisitions of our company, we experienced ownership changes as defined in Section 382 of the Internal Revenue Code. Accordingly, our use of the net operating loss carryforwards is limited by annual limitations
described in Sections 382 and 383 of the Internal Revenue Code. As of June 30, 2010, $4.9 million of these net operating loss carryforwards are available for utilization, meaning that potential future payments to Gaiam, which would be made over
a period of several years, could therefore aggregate to approximately $1.7 million. Based upon our estimated utilization of some of these loss carryforwards on our 2010 tax returns, we have recorded as of June 30, 2010 a payable to Gaiam of
$0.2 million.



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##### Table of Contents

Risk Factors

We wish to caution you that there are risks and uncertainties that could cause our actual results to be materially different from those indicated by
forward looking statements that we make from time to time in filings with the Securities and Exchange Commission, news releases, reports, proxy statements, registration statements and other written communications as well as oral forward looking
statements made from time to time by our representatives. These risks and uncertainties include, but are not limited to, those risks listed in our Annual Report on Form 10-K for the year ended December 31, 2009. Additional risks and
uncertainties that we currently deem immaterial may also impair our business operations, and historical results are not necessarily an indication of the future results. Except for the historical information contained herein, the matters discussed in
this analysis are forward-looking statements that involve risk and uncertainties, including, but not limited to, general economic and business conditions, competition, pricing, brand reputation, consumer trends, and other factors which are often
beyond our control. We do not undertake any obligation to update forward-looking statements except as required by law.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

We are exposed to market risks, which include changes in U.S. interest rates and foreign exchange rates. We do not engage in financial transactions for
trading or speculative purposes.

We purchase a significant amount of renewable energy and organic product inventory from vendors outside of
the United States in transactions that are primarily U.S. dollar denominated transactions. Since the percentage of our international purchases denominated in currencies other than the U.S. dollar is small, any currency risks related to these
transactions are immaterial to us. However, a decline in the relative value of the U.S. dollar to other foreign currencies could lead to increased purchasing costs. In order to mitigate this exposure, we make virtually all of our purchase
commitments in U.S. dollars.



|Item 4T. | Controls and Procedures
|-------- | -----------------------

Evaluation of
Disclosure Controls and Procedures

Our management, with the participation of our President and Chief Financial Officer, evaluated the
effectiveness of the disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) of Real Goods Solar at the end of the period covered by this report. Based on such evaluation, our President and Chief Financial Officer concluded
that, at the end of such period, the disclosure controls and procedures of Real Goods Solar were effective in alerting them, on a timely basis, to material information required to be disclosed in the reports that we file or furnish under the
Securities Exchange Act of 1934.

Changes in Internal Control over Financial Reporting

No changes in our internal control over financial reporting occurred during the three and six months ended June 30, 2010 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

From time to time, we
are involved in legal proceedings that we consider to be in the normal course of business. We do not believe that any of these proceedings will have a material adverse effect on our business.



|Item 1A. | Risk Factors
|-------- | ------------

No material changes.



|Item 2. | Sales of Unregistered Securities and Use of Proceeds
|------- | ----------------------------------------------------

None.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None.



|Item 4. | Reserved
|------- | --------



|Item 5. | Other Information
|------- | -----------------



| | (a) | On May 12, 2010, Real Goods Solar held an annual meeting of shareholders. The shareholders elected six directors to serve until the next annual meeting of
shareholders to be held in 2011 or until their successors are duly elected and qualified. The results of this vote follow:
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                   |  |      |  |            |  |  |  |           |  |          
|------------------ |  | ---- |  | ---------- |  |  |  | --------- |  | ---------
|Jirka Rysavy       |  | For: |  | 32,657,709 |  |  |  | Withheld: |  | 2,612,856
|Lynn Powers        |  | For: |  | 32,657,409 |  |  |  | Withheld: |  | 2,613,156
|John Schaeffer     |  | For: |  | 32,657,164 |  |  |  | Withheld: |  | 2,613,401
|James Argyropoulos |  | For: |  | 32,640,795 |  |  |  | Withheld: |  | 2,629,770
|Scott Lehman       |  | For: |  | 33,878,416 |  |  |  | Withheld: |  | 1,392,149
|Barbara Mowry      |  | For: |  | 32,642,795 |  |  |  | Withheld: |  | 2,627,770

No broker nonvotes or abstentions were recorded.



| | (b) | None
| | --- | ----



|Item 6. | Exhibits
|------- | --------



|a) | Exhibits.
|-- | ---------



|            |  |                                                                                                                                                                            
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                
|            | 
|31.1        |  | Certification of the President pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 (filed herewith).                                                      
|            | 
|31.2        |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 (filed herewith).                                        
|            | 
|32.1        |  | Certification of the President pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).              
|            | 
|32.2        |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished
herewith).



12



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##### Table of Contents

Signatures

In accordance with the requirements of the Securities and Exchange Act, the registrant caused this report to be signed on its behalf, by the undersigned,
thereunto duly authorized.



Real Goods Solar, Inc.(Registrant)August 6, 2010By:

/s/ John SchaefferJohn SchaefferPresident (principal
executive officer)By:

/s/ Erik ZechErik ZechChief Financial Officer(principal financial and accounting officer)




13