UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q




(Mark
One)


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


For the
quarterly period ended September 30,
2010





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




Commission
File No. 333-140637





PREMIER
POWER RENEWABLE ENERGY, INC.


(Exact
name of registrant as specified in it charter)





Delaware
                
                13-4343369(State or other jurisdiction of incorporation or
                  organization)
                
                (IRS Employer Identification No.)





4961
Windplay Drive, Suite 100


El
Dorado Hills, CA 95762




(Address
of principal executive offices) (Zip Code)





(916)
939-0400




(Registrant's
telephone number, including area code)





N/A




(Former
name, former address and former fiscal year, if changed since last
report)





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


x
 Yes        ̈ 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 than 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
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.




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  x No





APPLICABLE
ONLY TO CORPORATE ISSUERS:





29,099,750
shares of the issuer’s common stock are issued and outstanding as of November
15, 2010.







PREMIER
POWER RENEWABLE ENERGY, INC.


TABLE OF
CONTENTS


TO
QUARTERLY REPORT ON FORM 10-Q


FOR
QUARTER ENDED SEPTEMBER 30, 2010





PagePART I – FINANCIAL
      INFORMATIONItem
      1.
                  Financial
      Statements
                  
                  3Item
      2.
                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  
                  4Item
      4.
                  Controls
      and Procedures
                  
                  14PART
      II – OTHER INFORMATIONItem
      1.
                  Legal
      Proceedings
                  
                  14Item
      2.
                  Unregistered
      Sales of Equity Securities and Use of Proceeds
                  
                  15Item
      3.
                  Defaults
      Upon Senior Securities
                  
                  15Item
      5.
                  Other
      Information
                  
                  15Item
      6.
                  Exhibits
                  
                  15Signatures
                  
                  16


2





PART
I – FINANCIAL INFORMATION





Item
1.  Financial Statements.





Our
financial statements start on the following page, beginning with page
F-1.





3


PREMIER
POWER RENEWABLE ENERGY, INC.
 CONSOLIDATED
BALANCE SHEETS
 AS
OF SEPTEMBER 30, 2010 AND DECEMBER 31, 2009
 (in
thousands, except share data)
 
 September
      30,
                      
                      
                      December
      31,2010
                      
                      
                      2009(unaudited)
                      
                      
                      (audited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                      
                      $
                      2,592
                      
                      
                      $
                      3,792Accounts
      receivable, net of allowance for doubtful accounts of
       $230  and  $137  at September 30, 2010
      and December 31, 2009, respectively
                      
                      
                      19,565
                      
                      
                      
                      7,676Inventory
                      
                      
                      3,335
                      
                      
                      
                      1,824Prepaid
      expenses and other current assets
                      
                      
                      2,785
                      
                      
                      
                      310Costs
      and estimated earnings in excess of billings on uncompleted
      contracts
                      
                      
                      8,542
                      
                      
                      
                      13,674Other
      receivables
                      
                      
                      748
                      
                      
                      
                      297Deferred
      tax assets
                      
                      
                      253
                      
                      
                      
                      473Total
      current assets
                      
                      
                      37,820
                      
                      
                      
                      28,046Property
      and equipment, net
                      
                      
                      534
                      
                      
                      
                      615Intangible
      assets, net
                      
                      
                      838
                      
                      
                      
                      970Goodwill
                      
                      
                      11,663
                      
                      
                      
                      12,254Deferred
      tax assets
                      
                      
                      410
                      
                      
                      
                      1,295Total
      assets
                      
                      $
                      51,265
                      
                      
                      $
                      43,180LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
                      
                      
                      29,930
                      
                      
                      
                      18,347Accrued
      liabilities
                      
                      
                      2,403
                      
                      
                      
                      2,043Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
                      
                      
                      4,425
                      
                      
                      
                      374Taxes
      payable
                      
                      
                      71
                      
                      
                      
                      293Customer
      deposits
                      
                      
                      1,036
                      
                      
                      
                      -Borrowings,
      current
                      
                      
                      248
                      
                      
                      
                      1,692Total
      current liabilities
                      
                      
                      38,113
                      
                      
                      
                      22,749Borrowings,
      non-current
                      
                      
                      538
                      
                      
                      
                      548Contingent
      consideration liability
                      
                      
                      1,901
                      
                      
                      
                      7,725Deferred
      tax liabilities
                      
                      
                      -
                      
                      
                      
                      -Total
      liabilities
                      
                      
                      40,552
                      
                      
                      
                      31,022Commitments
      and contingencies (Note 11)Stockholders'
      equity:Series
      A convertible preferred stock, par value $.0001 per share: 5,000,000
      shares  designated; 20,000,000 shares of preferred stock
      authorized; 3,500,000 shares issued and outstanding at September 30, 2010
      and December 31, 2009
                      
                      
                      -
                      
                      
                      
                      -Series
      B convertible preferred stock, par value $.0001 per share: 2,800,000
      shares designated; 20,000,000 shares of preferred stock authorized;
      2,800,000 shares issued and outstanding at September 30, 2010 and December
      31, 2009
                      
                      
                      -
                      
                      
                      
                      -Common
      stock, par value $.0001 per share; 500,000,000 shares authorized;
      29,099,750 and 29,050,250 shares issued and outstanding at September 30,
      2010 and December 31, 2009, respectively
                      
                      
                      3
                      
                      
                      
                      3Additional
      paid-in-capital
                      
                      
                      18,535
                      
                      
                      
                      17,822Accumulated
      deficit
                      
                      
                      (6,652
                      )
                      
                      
                      (5,385
                      )Accumulated
      other comprehensive loss
                      
                      
                      (1,173
                      )
                      
                      
                      (282
                      )Total
      stockholders' equity
                      
                      
                      10,713
                      
                      
                      
                      12,158Total
      liabilities and stockholders' equity
                      
                      $
                      51,265
                      
                      
                      $
                      43,180
 
 The
accompanying notes are an integral part of these financial
statements.
  F-1
 
 PREMIER
POWER RENEWABLE ENERGY, INC.
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND SEPTEMBER 30,
2009
 (in
thousands, except per share data)
 
 For the Three Months ended
                          September 30,
                        
                        
                        For the Nine Months ended
                          September 30,2010
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2009(unaudited)
                        
                        
                        (unaudited)
                        
                        
                        (unaudited)
                        
                        
                        (unaudited)Revenues
                        
                        $
                        28,289
                        
                        
                        $
                        6,285
                        
                        
                        $
                        40,714
                        
                        
                        $
                        15,192Cost
      of revenues
                        
                        
                        (26,770
                        )
                        
                        
                        (4,901
                        )
                        
                        
                        (38,715
                        )
                        
                        
                        (12,902
                        )Gross
      margin
                        
                        
                        1,519
                        
                        
                        
                        1,384
                        
                        
                        
                        1,999
                        
                        
                        
                        2,290Operating
      expenses:Selling
      and marketing
                        
                        
                        1,436
                        
                        
                        
                        601
                        
                        
                        
                        2,948
                        
                        
                        
                        1,973General
      and administrative
                        
                        
                        1,666
                        
                        
                        
                        1,842
                        
                        
                        
                        4,847
                        
                        
                        
                        4,245Total
      operating expenses
                        
                        
                        3,102
                        
                        
                        
                        2,443
                        
                        
                        
                        7,795
                        
                        
                        
                        6,218Operating
      loss
                        
                        
                        (1,583
                        )
                        
                        
                        (1,059
                        )
                        
                        
                        (5,796
                        )
                        
                        
                        (3,928
                        )Other
      income (expense):Interest
      expense
                        
                        
                        (38
                        )
                        
                        
                        (30
                        )
                        
                        
                        (113
                        )
                        
                        
                        (38
                        )Other
      expense
                        
                        
                        21
                        
                        
                        
                        -
                        
                        
                        
                        (43
                        )
                        
                        
                        -Change
      in fair value of contingent consideration liability
                        
                        
                        48
                        
                        
                        
                        -
                        
                        
                        
                        5,824
                        
                        
                        
                        -Change
      in fair value of financial instruments
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        2,183Interest
      income
                        
                        
                        -
                        
                        
                        
                        2
                        
                        
                        
                        6
                        
                        
                        
                        31Total
      other income (expense), net
                        
                        
                        31
                        
                        
                        
                        (28
                        )
                        
                        
                        5,674
                        
                        
                        
                        2,176Loss
      before income taxes
                        
                        
                        (1,552
                        )
                        
                        
                        (1,087
                        )
                        
                        
                        (122
                        )
                        
                        
                        (1,752
                        )Income
      tax (expense ) benefit
                        
                        
                        364
                        
                        
                        
                        92
                        
                        
                        
                        (1,145
                        )
                        
                        
                        1,218Net
      loss
                        
                        
                        (1,188
                        )
                        
                        
                        (995
                        )
                        
                        
                        (1,267
                        )
                        
                        
                        (534
                        )Less:
      Net loss attributable to noncontrolling interest
                        
                        
                        -
                        
                        
                        
                        9
                        
                        
                        
                        -
                        
                        
                        
                        9Net
      loss attributable to Premier
      Power Renewable Energy, Inc.
                        
                        $
                        (1,188
                        )
                        
                        $
                        (986
                        )
                        
                        $
                        (1,267
                        )
                        
                        $
                        (525
                        )Loss
      Per Share:Basic
                        
                        $
                        (0.04
                        )
                        
                        $
                        (0.04
                        )
                        
                        $
                        (0.05
                        )
                        
                        $
                        (0.02
                        )Diluted
                        
                        $
                        (0.04
                        )
                        
                        $
                        (0.04
                        )
                        
                        $
                        (0.05
                        )
                        
                        $
                        (0.02
                        )Weighted
      Average Shares Outstanding:Basic
                        
                        
                        26,602
                        
                        
                        
                        26,049
                        
                        
                        
                        26,588
                        
                        
                        
                        26,049Diluted
                        
                        
                        26,602
                        
                        
                        
                        26,049
                        
                        
                        
                        26,588
                        
                        
                        
                        26,049
 
 The
accompanying notes are an integral part of these financial
statements.
  F-2
  PREMIER
POWER RENEWABLE ENERGY, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND SEPTEMBER 30, 2009
 (in
thousands)
 
 September
      30,
                                2010
                              
                              
                              September
      30,
                                2009(unaudited)
                              
                              
                              (unaudited)Cash
      flows from operating activities:Net
      loss
                              
                              $
                              (1,267
                              )
                              
                              $
                              (534
                              )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Share-based
      compensation
                              
                              
                              713
                              
                              
                              
                              377Depreciation
      and amortization
                              
                              
                              269
                              
                              
                              
                              309Share
      registration costs for terminated offering
                              
                              
                              251
                              
                              
                              
                              -Change
      in fair value of contingent consideration liability
                              
                              
                              (5,824
                              )
                              
                              
                              -Change
      in fair value of warrant liability
                              
                              
                              -
                              
                              
                              
                              (2,183
                              )Deferred
      taxes
                              
                              
                              1,100
                              
                              
                              
                              (1,436
                              )Changes
      in operating assets and liabilities:Accounts
      receivable
                              
                              
                              (11,800
                              )
                              
                              
                              1,906Inventory
                              
                              
                              (1,508
                              )
                              
                              
                              (373
                              )Prepaid
      expenses and other current assets
                              
                              
                              (2,445
                              )
                              
                              
                              (23
                              )Costs
      and estimated earnings in excess of billingson uncompleted
      contracts
                              
                              
                              4,348
                              
                              
                              
                              (866
                              )Project
      assets
                              
                              
                              -
                              
                              
                              
                              (3,068
                              )Other
      receivables
                              
                              
                              (379
                              )
                              
                              
                              -Taxes
      receivable
                              
                              
                              (71
                              )
                              
                              
                              (64
                              )Accounts
      payable
                              
                              
                              12,002
                              
                              
                              
                              146Accrued
      liabilities
                              
                              
                              362
                              
                              
                              
                              (538
                              )Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
                              
                              
                              4,003
                              
                              
                              
                              (361
                              )Taxes
      payable
                              
                              
                              (201
                              )
                              
                              
                              (146
                              )Customer
      deposits
                              
                              
                              1,003
                              
                              
                              
                              -Net
      cash provided by (used in) operating activities
                              
                              
                              556
                              
                              
                              
                              (6,854
                              )Cash
      flows from investing activities:Acquisition
      of property and equipment
                              
                              
                              (72
                              )
                              
                              
                              (113
                              )Net
      cash paid for Rupinvest acquisition
                              
                              
                              (3
                              )
                              
                              
                              (2
                              )Net
      cash used in investing activities
                              
                              
                              (75
                              )
                              
                              
                              (115
                              )Cash
      flows from financing activities:Principal
      payments on borrowings
                              
                              
                              (239
                              )
                              
                              
                              (34
                              )Sale
      of noncontrolling interest
                              
                              
                              -
                              
                              
                              
                              176Payments
      on line of credit
                              
                              
                              (1,346
                              )
                              
                              
                              -Proceeds
      from borrowings
                              
                              
                              166
                              
                              
                              
                              2,152Proceeds
      from issuance of preferred stock and warrants
                              
                              
                              -
                              
                              
                              
                              3,000Cost
      related to share registration
                              
                              
                              (251
                              )
                              
                              
                              (461
                              )Net
      cash (used in) provided by financing activities
                              
                              
                              (1,670
                              )
                              
                              
                              4,833Effect
      of foreign currency
                              
                              
                              (11
                              )
                              
                              
                              15Decrease
      in cash and cash equivalents
                              
                              
                              (1,200
                              )
                              
                              
                              (2,121
                              )Cash
      and cash equivalents at beginning of period
                              
                              
                              3,792
                              
                              
                              
                              5,787Cash
      and cash equivalents at end of period
                              
                              $
                              2,592
                              
                              
                              $
                              3,666Supplemental
      cash flow information:Interest
      paid
                              
                              $
                              113
                              
                              
                              $
                              35Taxes
      paid
                              
                              $
                              262
                              
                              
                              $
                              141
 
 The
accompanying notes are an integral part of these financial
statements.
  F-3
  PREMIER
POWER RENEWABLE ENERGY, INC.
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2010
 (in
thousands and unaudited)
 
 CommonStock
                        
                        
                        SeriesA-
                          PreferredStock
                        
                        
                        SeriesB-
                          PreferredStock
                        
                        
                        Additional
                          Paid
                        
                        
                        Accumulated
                        
                        
                        Accumulated
                          Other
                          Comprehensive
                        
                        
                        Total
                          Stockholders'Shares
                        
                        
                        Amount
                        
                        
                        Shares
                        
                        
                        Amount
                        
                        
                        Shares
                        
                        
                        Amount
                        
                        
                        InCapital
                        
                        
                        Deficit
                        
                        
                        Loss
                        
                        
                        EquityBalance
      December 31, 2009
                        
                        
                        29,050
                        
                        
                        $
                        3
                        
                        
                        
                        3,500
                        
                        
                        $
                        -
                        
                        
                        
                        2,800
                        
                        
                        $
                        -
                        
                        
                        $
                        17,822
                        
                        
                        $
                        (5,385
                        )
                        
                        $
                        (282
                        )
                        
                        $
                        12,158Net
      loss
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (1,267
                        )
                        
                        
                        
                        
                        
                        
                        (1,267
                        )Foreign
      currency translation adjustment
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (891
                        )
                        
                        
                        (891
                        )Comprehensive
      loss
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (2,158
                        )Share-based
      compensation
                        
                        
                        50
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        713
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        713Balance
      September 30, 2010
                        
                        
                        29,100
                        
                        
                        $
                        3
                        
                        
                        
                        3,500
                        
                        
                        $
                        -
                        
                        
                        
                        2,800
                        
                        
                        $
                        -
                        
                        
                        $
                        18,535
                        
                        
                        $
                        (6,652
                        )
                        
                        $
                        (1,173
                        )
                        
                        $
                        10,713
 
 The
accompanying notes are an integral part of these financial
statements.


F-4


PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)





1.
            ORGANIZATION
      AND NATURE OF BUSINESS




Premier
Power Renewable Energy, Inc., a Delaware corporation (the “Parent”), through its
wholly owned subsidiaries, Premier Power Renewable Energy, Inc., a California
corporation (“Premier Power California”), and Rupinvest Sarl (“Rupinvest”), and
Premier Power California’s two wholly owned subsidiaries, Bright Future
Technologies LLC (“Bright Future”) and Premier Power Sociedad Limitada (“Premier
Power Spain”), and Rupinvest’s wholly owned subsidiaries, Premier Power Italy
S.p.A. (“Premier Power Italy”) and Premier Power Development S.r.l. (“Premier
Power Development”) (collectively the “Company”), distributes solar components
and designs, engineers, and installs photovoltaic systems in the United States
and Europe.




On June
16, 2009, the Company sold to Vision Opportunity Master Fund (“Vision”) 2.8
million shares of Series B Convertible Preferred Stock (bearing no liquidation
preference, no coupon payments, and no redemption rights) in exchange for the
cancellation of 3.5 million Series A and Series B warrants held by Vision, and
$3 million in cash.  The cancellation of warrants resulted in the
elimination of all the Company’s issued and outstanding warrants.




On July
31, 2009, the Company purchased 100% of the issued and outstanding equity
ownership of Rupinvest, a corporation duly organized and existing under the laws
of Luxembourg, from Esdras Ltd., a corporation duly organized and existing under
the laws of Cyprus (“Esdras”).  Rupinvest distributes, develops, and
integrates ground mount and rooftop solar power systems in Italy through its
then majority-owned subsidiary, Premier Power Italy (formerly known as ARCO
Energy, SRL), a private limited liability company organized under the laws of
Italy.  Prior to the closing, Rupinvest was a wholly owned subsidiary of
Esdras.  The Company acquired 100% of the issued and outstanding equity
ownership interest in Rupinvest from Esdras in exchange for: (a) a cash payment
by us to Esdras in the amount of twelve thousand five hundred Euros (€12,500, or
approximately $18,292); and (b) the potential transfer to Esdras of up to three
million shares of the Company’s restricted common stock, with the number of
shares to be transferred, if any, to be calculated based on achieving certain
sales by Premier Power Italy over a three-year period.  Pursuant to the
closing of this transaction, the Company conducts operations in Italy through
Premier Power Italy.  On December 31, 2009, Rupinvest purchased the
remaining 10% interest of Premier Power Italy from Esdras at Esdras’ initial
capital contribution per the Share Exchange Agreement, and Premier Power Italy
became the wholly owned subsidiary of Rupinvest.





On July
23, 2010, the Company formed Premier Power Development to enhance its European
project development efforts.


F-5




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)





2.
            SIGNIFICANT
      ACCOUNTING POLICIES




Basis of Presentation – The
accompanying consolidated financial statements are unaudited and have been
prepared in accordance with generally accepted accounting principles for interim
financial information.  They should be read in conjunction with the
consolidated financial statements and related notes to the Company’s
consolidated financial statements for the years ended December 31, 2009 and
2008 appearing in the Company’s Form 10-K for the fiscal year ended December 31,
2009 that is filed with the Securities and Exchange Commission.  The
2010 and 2009 unaudited interim consolidated financial statements on Form
10-Q have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission for smaller reporting companies.  Certain
information and note disclosures normally included in the annual financial
statements have been condensed or omitted pursuant to those rules and
regulations, although the Company’s management believes the disclosures made are
adequate to make the information presented not misleading.  In the
opinion of management, all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the results of operations for the interim
periods presented have been reflected herein.  The results of
operations for the interim periods are not necessarily indicative of the results
to be expected for the entire year.




The
consolidated financial statements include the accounts of the Parent and its
subsidiaries.  Intercompany balances, transactions, and cash flows are
eliminated on consolidation.




Concentrations and Credit Risk
– Three customers accounted for 31.3%, 15.0%, and 10.6%, respectively, of
the Company’s revenues for the three months ended September 30,
2010.  Three customers accounted for 19.0%, 15.0%, and 10.3%,
respectively, of the Company’s revenues for the three months ended September 30,
2009.  Two customers accounted for 21.9% and 10.4% of the
Company’s revenues, respectively, for the nine months ended September 30,
2010.  For the nine months ending September 30, 2009, no single
customer accounted for more than 10% of the Company’s revenues.





Accounts
receivable primarily consist of trade receivables and amounts due from state
agencies and utilities for rebates on solar systems installed.  At
September 30, 2010, the Company had three customers that accounted for 23.6%,
22.2%, and 21.1% of the Company’s accounts receivable,
respectively.  At December 31, 2009, the Company had two customers
that accounted for 22.9% and 10.9% of the Company’s accounts receivable,
respectively.  The Company monitors account balances and follows up
with accounts that are past due as defined in the terms of the contract with the
customer. The Company maintains an allowance for doubtful accounts receivable
based on the expected collectability of its accounts receivable. The allowance
for doubtful accounts is based on assessments of the collectability of specific
customer accounts and the aging of the accounts receivable. If there is a
deterioration of a major customer’s credit worthiness or actual defaults are
higher than historical experience, the allowance for doubtful accounts is
increased. The allowance for doubtful accounts was $230 thousand and $137
thousand as of September 30, 2010 and December 31, 2009,
respectively.




The
Company purchases its solar modules from a limited number of suppliers but
believes that in the event it is unable to purchase solar panels from these
suppliers that alternative sources of solar modules may be
available.





Use of Estimates – The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Significant estimates include revenue recognition, allowance for doubtful
accounts, valuation of goodwill, warranty reserves, the estimated useful life of
property and equipment, valuation of the contingent consideration liability
and derivative instrument, and income taxes. Actual results could differ
from those estimates.


F-6


PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)





Cash and Cash Equivalents –
Cash and cash equivalents include cash on hand or in the bank and short-term
investment securities with remaining maturities of 90 days or less at date of
purchase. The Company maintains its cash in bank deposit accounts that, at
times, may exceed the statutory insured limits of the jurisdiction in which the
accounts are held.  The Company has not experienced any losses on
these investments.  At September 30, 2010, the Company had $1.6
million in cash in bank accounts in excess of the various deposit insurance
limits of the jurisdictions in which the balances were held.




Inventories – Inventories,
consisting of raw materials and finished goods, are recorded using the average
cost method and are carried at the lower of cost or market.




Property and Equipment –
Property and equipment are stated at cost and depreciated using
the straight-line method over estimated useful lives of 5 years, or in the
case of leasehold improvements, the lease term, if shorter. Maintenance and
repairs are expensed as they occur.  Upon disposition, the cost and
related accumulated depreciation are removed from the accounts, and the
resulting gain or loss is reflected in current operations.




Share-Based Compensation – The
Company accounts for share-based compensation under the provisions
of Financial Accounting Standards Board (FASB) Accounting Standards
Codification (ASC) 718 (Statement of Financial Accounting Standards No. 123
(revised 2004),“Share-Based
Payment”), which requires the Company to measure the share-based
compensation costs of share-based compensation arrangements based on the grant
date fair value and generally recognizes the costs in the financial statements
over the employee’s requisite service period.  Share-based
compensation expense for all share-based compensation awards granted was based
on the grant date fair value estimated in accordance with the provisions of FASB
ASC 718.




Goodwill and Other Intangible Assets
– The Company does not amortize goodwill, but rather tests goodwill for
impairment at least annually. We determine the fair value using a weighted
market and income approach. Under the income approach, we calculate the fair
value of a reporting unit based on the present value of estimated future cash
flows. Under the market approach, we calculate the fair value of the reporting
unit using selected comparable companies’ revenue multiples and apply an average
of such companies’ multiples to the Company’s revenue. If the fair value of the
reporting unit exceeds the carrying value of the net assets including goodwill
assigned to that unit, goodwill is not impaired. If the carrying value of the
reporting unit’s net assets including goodwill exceeds the fair value of the
reporting unit, then we determine the implied fair value of the reporting unit’s
goodwill. If the carrying value of a reporting unit’s goodwill exceeds its
implied fair value, then an impairment of goodwill has occurred, and we
recognize an impairment loss for the difference between the carrying amount and
the implied fair value of goodwill as a component of operating income. In the
second quarter of 2010, due to the reduction in forecasted revenue since the
purchase of our Italian operations, the Company performed an impairment test of
the goodwill recorded from the acquisition of Rupinvest, which totaled $11.7
million at September 30, 2010. The Company's testing approach utilized a
discounted cash flow analysis and comparative market multiples to determine the
entity's (single reporting unit) fair value for comparison to its carrying
value.  We did not recognize any goodwill impairment charges for the
nine months ended September 30, 2010 and 2009 and any change in goodwill is a
result of changes in foreign currency rates.  Intangible assets,
consisting of a customer list, trademarks, and an employee contract, are
amortized over their estimated useful lives ranging from 2-17
years.




Fair Value of Financial Instruments
– The carrying value reported for cash equivalents, accounts receivable,
prepaid expenses, other receivables, costs and estimated earnings in excess of
billings, accounts payable, billings in excess of costs and estimated earnings
on uncompleted contracts, and accrued liabilities approximated their
respective fair values at each balance sheet date due to the short-term maturity
of these financial instruments.  The fair values of the contingent
consideration liability and our borrowings have been determined in accordance
with the methodology as disclosed in Notes 12 and 16.


F-7




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)





Revenue Recognition – Revenue
on solar power projects installed by the Company for customers under
installation contracts is recognized using the percentage of completion method
of accounting. At the end of each period, the Company measures the cost incurred
on each project and compares the result against its estimated total costs at
completion. The percent of cost incurred determines the amount of revenue to be
recognized. Payment terms are generally defined by the installation contract and
as a result may not match the timing of the costs incurred by the Company and
the related recognition of revenue. Such differences are recorded as either
costs or estimated earnings in excess of billings on uncompleted contracts or
billings in excess of costs and estimated earnings on uncompleted contracts. The
Company determines a customer’s credit worthiness at the time an order is
accepted. Sudden and unexpected changes in a customer’s financial condition
could put recoverability at risk.




Contract
costs include all direct material and labor costs attributable to a project as
well as certain indirect costs related to contract performance, such as indirect
labor, supplies, tools, repairs, and depreciation costs. Selling, general, and
administrative costs are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in job performance, job conditions, and estimated
profitability, including those arising from contract penalty provisions and
final contract settlements, may result in revisions to costs and income and are
recognized in the period in which the revisions are determined. Profit
incentives are included in revenues when their realization is reasonably
assured.




The
percentage of completion method requires the ability to estimate several
factors, including the ability of the customer to meet its obligations under the
contract, including the payment of amounts when due. If we determine that
collectability is not assured, we will defer revenue recognition and use methods
of accounting for the contract such as completed contract method until such time
we determine that collectability is reasonably assured or through the completion
of the project.




The
Company recognized revenue on a percentage of completion basis on a 1 megawatt
solar project in Italy in 2009 and in 2010 as the project was being
completed.  The Company completed the project in May 2010 and invoiced
the customer in accordance with the related contract.  Subsequently,
the customer informed the Company that it intended to resell the project, but
the buyer requested that the Company enter into an operating and maintenance
(O&M) contract for the solar facility and wanted to purchase the project
from the Company in its role as the builder.  The Company agreed to
retake title to the project and transfer it to the buyer.  The Company
did not receive any additional compensation for the transaction, took on a
minimal increase in its warranty exposure that was limited to the de minimis
amount of fees of the O&M contract, and did not assume other obligations
with its assumption and passage of title to the buyer contemporaneously in June
2010.  Prior to June 2010, there was no agreement to enter into this
transaction and payment of the original contract amount was not contingent on
the sale to the buyer.  In July 2010, the Company received full
payment for the total outstanding accounts receivable, which equals the original
contract amount.  The Company determined the assumption of title and
sale did not cause a change in the previous accounting recognition, and
accordingly there was no effect on the accompanying financial
statements.




Revenue
related to distribution sales is recognized when we have received either a
purchase order or contract, product is delivered to the customer or a third
party shipper takes possession, the title and risk of ownership have passed to
the buyer, and we determine that collection is probable.  The Company
considers the risk of ownership to have passed when the customer has assumed the
risk of loss.


F-8




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)





Advertising – The Company
expenses advertising costs as they are incurred.  Advertising costs
were $95 thousand and $198 thousand for the three months ended September 30,
2010 and 2009, respectively.  Advertising costs were $270 thousand and
$596 thousand for the nine months ended September 30, 2010 and 2009,
respectively.





Product Warranties – The
Company warrants its projects for labor and materials associated with its
installations.  The Company’s warranty is ten years in California and
generally five to ten years elsewhere in the U.S. depending upon each state’s
specific requirements.  Premier Power Italy provides a ten year
warranty covering the labor and materials associated with its
installations.  Premier Power Spain provides a one year warranty for
all contracts signed after December 31, 2006.  Since the Company does
not have sufficient historical data to estimate its exposure, we have looked to
our historical data and the historical data reported by a peer company solar
system installer.  Solar panels and inverters are warranted by the
manufacturer for 25 years and 10 years, respectively.  Activity in the
Company’s accrued warranty reserve for the three and nine months ended
September 30, 2010 and 2009 were as follows:




ThreeMonths
                    EndedSeptember30,
                  
                  
                  NineMonths
                    EndedSeptember30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009(in
      thousands)
                  
                  
                  (in
      thousands)Beginning
      accrued warranty balance
                  
                  $
                  351
                  
                  
                  $
                  268
                  
                  
                  $
                  359
                  
                  
                  $
                  367Accruals
      related to warranties issued during period
                  
                  
                  55
                  
                  
                  
                  (50
                  )
                  
                  
                  80
                  
                  
                  
                  83Reduction
      for labor payments and claims made under warranty
                  
                  
                  (10
                  )
                  
                  
                  75
                  
                  
                  
                  (43
                  )
                  
                  
                  (157
                  )Ending
      accrued warranty balance
                  
                  $
                  396
                  
                  
                  $
                  293
                  
                  
                  $
                  396
                  
                  
                  $
                  293




For
certain European solar projects, we enter into warranties for the performance of
a solar system upon completion of the project.  We warrant that the solar
system will perform at certain performance ratios based on the energy generated
versus irradiance levels.  Our exposure under these warranties is currently
limited to the amount of fees we are to receive for performing maintenance
services over a limited period of time (usually two years) and that would be
forgone by us in the event the system did not perform as expected.  To
date, we have not incurred lost revenue under these arrangements, and the total
of future revenues subject to forfeiture is not material.





The
Company provides no warranty to its customers related to distribution
sales.  Any warranties provided are provided directly to the customer
by the manufacturer.




Foreign Currency – The
functional currency of Premier Power Italy and Premier Power Spain is the Euro.
Their assets and liabilities are translated at period-end exchange rates,
including goodwill, except for certain non-monetary balances, which are
translated at historical rates. All income and expense amounts of Premier Power
Italy and Premier Power Spain are translated at average exchange rates for the
respective period. Translation gains and losses are not included in determining
net income but are accumulated in a separate component of stockholders’ equity.
Foreign currency transaction gains and losses are included in the determination
of net income (loss) in the period in which they occur. For the three and nine
months ended September 30, 2010, the foreign currency transaction loss was $11
thousand and $43 thousand, respectively.  For the three and nine
months ended September 30, 2009, the foreign currency transaction gain was $215
thousand and $299 thousand, respectively.


F-9





PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)




Comprehensive Income – FASB
ASC Topic 220 (Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive
Income”) establishes standards for reporting comprehensive income and its
components in a financial statement that is displayed with the same prominence
as other financial statements. Comprehensive income, as defined, includes all
changes in equity during the period from non-owner sources, such as foreign
currency translation adjustments.




Income Taxes – The Company
accounts for income taxes under the liability method. Under this method,
deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax reporting bases of assets and liabilities and
are measured using enacted tax rates and laws that are expected to be in effect
when the differences are expected to reverse. Realization of deferred tax assets
is dependent upon the weight of available evidence, including expected future
earnings. A valuation allowance is recognized if it is more likely than not that
some portion or all of a deferred tax asset will not be realized. At
September 30, 2010, the Company has a full valuation allowance for the net
deferred tax asset associated with its U.S. operations.  Prior to
September 2008, the Company was not subject to federal income tax.




Effective
September 1, 2008, the Company adopted FASB ASC 740-10 (Financial Accounting
Standards Interpretation FIN No. 48, “Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement No. 109” (FIN 48)). FASB ASC
740-10 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of uncertain tax positions taken
or expected to be taken in a company’s income tax return and provides guidance
on derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition.  As a result of the
implementation of FASB ASC 740-10, the Company recognized no change in the
liability for unrecognized tax benefits related to tax positions taken in prior
periods and no corresponding change in retained earnings.   As a
result of the implementation of FASB ASC 740-10, the Company recognized no
material adjustment in the liability for unrecognized income tax benefits as of
the September 2008 adoption date and at December 31, 2009. Also, the Company had
no amounts of unrecognized tax benefits that, if recognized, would affect its
effective tax rate.




Premier
Power Italy is organized under the laws of Italy and is subject to federal and
provincial taxes.  Premier Power Spain is organized under the laws of
Spain and is subject to federal and provincial taxes.




Contingent Consideration Liability
– In connection with the acquisition of Rupinvest, contingent
consideration liability of approximately $12 million was recorded at the time of
the purchase. The contingent consideration liability relates to the contingent
issuance of 3 million shares to the sellers of Rupinvest. In accordance with
FASB ASC 820, the Company estimates the fair value of the contingent
consideration liability at each reporting period, with changes in the estimated
fair value recorded in income.




The fair
value measurement assumes that the contingent consideration liability is
transferred to a market participant at the valuation date and that the
nonperformance risk related to the contingent consideration liability remains
constant. The Company estimates the fair value using the market price of its
shares since it believes this represents the present value of its future stock
returns, discounted at the Company’s required rate of return. The Company also
estimates the number of shares to be issued based on a number of financial
scenarios weighted based on their relative probability. The Company considers
the effect of counterparty performance risk in its fair value estimate. The
Company estimates the counterparty performance risk by comparing its quoted
borrowing rates offered to it to those of U.S. treasury notes and uses the
underlying spread to discount the estimated fair value.





Reclassifications– Certain
reclassifications were made to prior year amounts to conform with the current
year presentation.


F-10




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)





Recently
Issued Accounting Pronouncements




In
January 2010, the FASB issued Accounting Standards Update No. 2010-06,Improving Disclosures about Fair
Value Measurements (Topic 820) —Fair Value Measurements and
Disclosures (ASU 2010-06) to add additional disclosures about the
different classes of assets and liabilities measured at fair value, the
valuation techniques and inputs used, the activity in Level 3 fair value
measurements, and the transfers between Levels 1, 2, and 3. Levels 1, 2, and 3
of fair value measurements are defined in Note 16 below.  The Company
has adopted the provisions of this guidance, except for those pertaining to
Level 3 fair value measurements, which it will adopt on January 1, 2011, as
required. There was no material impact on the Company’s results of operations,
cash flows, or financial position resulting from the adoption of this guidance.
Further, the Company expects that adoption of the provisions pertaining to Level
3 fair value measurements on January 1, 2011 will not have a material impact on
its results of operations, cash flows, or financial position.




In
April 2010, the FASB issued an update toCompensation-Stock Compensation
(ASC 718),which clarifies that an
employee share-based payment award with an exercise price denominated in the
currency of a market in which a substantial portion of the entity’s equity
shares trades should not be considered to contain a condition that is not a
market, performance or service condition. Therefore, an entity would not
classify such an award as a liability if the award otherwise qualifies as
equity.  The standard is effective for interim and annual periods ending
after December 15, 2010 and should be applied prospectively. The adoption
of this standard is not expected to have a material impact to our consolidated
financial statements.




In June
2009, the FASB issued FASB ASC 810 (SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R)”). FASB ASC 810 applies to FASB ASC 105 entities and is
effective for annual financial periods beginning after November 15, 2009 and for
interim periods within those years. Earlier application is prohibited. A
calendar year-end company must adopt this statement as of January 1, 2010. The
Company adopted this guidance with no material impact to our consolidated
financial statements.





In June
2009, the FASB issued FASB ASC 860 (SFAS No. 166,“Accounting for Transfers of
Financial Assets-an amendment of FASB Statement No. 140”). FASB ASC 860
applies to all entities and is effective for annual financial periods beginning
after November 15, 2009 and for interim periods within those years. Earlier
application is prohibited. A calendar year-end company must adopt this statement
as of January 1, 2010. This statement retains many of the criteria of FASB ASC
860 (FASB 140, “Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities”) to determine whether a transfer of financial assets
qualifies for sale accounting, but there are some significant changes as
discussed in the statement. Its disclosure and measurement requirements apply to
all transfers of financial assets occurring on or after the effective date. Its
disclosure requirements, however, apply to transfers that occurredboth before and after the
effective date. In addition, because FASB ASC 860 eliminates the consolidation
exemption for Qualifying Special Purpose Entities, a company will have to
analyze all existing QSPEs to determine whether they must be consolidated under
FASB ASC 810. The Company adopted this guidance with no material impact to our
consolidated financial statements.


F-11




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)





In August
2009, the FASB issued ASU 2009-05, “Measuring Liabilities at Fair
Value.”ASU
2009-05 applies to all entities that measure liabilities at fair value within
the scope of FASB ASC 820, “Fair Value Measurements and
Disclosures.” ASU 2009-05 is
effective for the first reporting period (including interim periods) beginning
after issuance, October 1, 2009 for the Company. The Company adopted this
guidance with no material impact to our consolidated financial
statements.




In August
2009, an update was made toFair Value Measurements and Disclosures –Measuring Liabilities at Fair
Value.”  This update permits entities to measure the fair
value of liabilities, in circumstances in which a quoted price in an active
market for an identical liability is not available, using a valuation technique
that uses a quoted price of an identical liability when traded as an asset,
quoted prices for similar liabilities or similar liabilities when traded as
assets, or the income or market approach that is consistent with the
principles ofFair Value
Measurements and Disclosures.  Effective upon
issuance, the Company adopted this guidance with no material impact to our
consolidated financial statements.




In
October 2009, the FASB ratified FASB ASC 605-25 (the EITF’s final consensus on
Issue 00-21,“Revenue
Arrangements with Multiple Deliverables”). FASB ASC 605-25 is effective
for fiscal years beginning on or after June 15, 2010. Earlier adoption is
permitted on a prospective or retrospective basis. The Company is currently
evaluating the impact of this pronouncement on its consolidated financial
statements.





3.
            EARNINGS
      PER SHARE




Earnings
per share is computed in accordance with the provisions of FASB ASC Topic 260
(SFAS No. 128, “Earnings Per
Share”). Basic net income (loss) per share is computed using the
weighted-average number of common shares outstanding during the period.
 Diluted earnings per share is computed using the weighted-average number
of common shares outstanding during the period, as adjusted for the dilutive
effect of the Company’s outstanding convertible preferred shares using the “if
converted” method and dilutive potential common shares. Potentially dilutive
securities include convertible preferred stock, employee stock options,
restricted shares, and contingently issuable shares for the purchase of
Rupinvest.  Potentially dilutive common shares from employee incentive
plans are determined by applying the treasury stock method to the assumed
exercise of outstanding stock options and the assumed vesting of outstanding
restricted stock.




ThreeMonthsEnded
                    September30,
                  
                  
                  NineMonthsEnded
                    September30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009(in thousands, except per
                    share data)
                  
                  
                  (in thousands, except per
                    share data)Net lossattributable to Premier Power
      RenewableEnergy,
      Inc.
                  
                  $
                  (1,188
                  )
                  
                  $
                  (986
                  )
                  
                  $
                  (1,267
                  )
                  
                  $
                  (525
                  )Earnings
      (loss) per share:Basic
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.05
                  )
                  
                  $
                  (0.02
                  )Diluted
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.05
                  )
                  
                  $
                  (0.02
                  )Weighted
      average shares outstanding:Basic
                  
                  
                  26,602
                  
                  
                  
                  26,049
                  
                  
                  
                  26,588
                  
                  
                  
                  26,049Diluted
                  
                  
                  26,602
                  
                  
                  
                  26,049
                  
                  
                  
                  26,588
                  
                  
                  
                  26,049


F-12




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)




For the
three and nine month periods ended September 30, 2010, there were issued
and outstanding stock options exercisable for an aggregate 2,333,600 and
1,972,705 shares of common stock, respectively, that were anti-dilutive as their
weighted average exercise price exceeded the average market price of the
Company’s common stock.  For the three and nine months ended September
30, 2010, an additional 6,300,000 of shares of common stock from the potential
conversion of preferred shares were excluded from the computation of diluted
earnings per share as their effect was anti-dilutive.  For the three
and nine months ended September 30, 2009, 5,550,753 and 6,312,466, respectively,
of potentially dilutive securities, including options, warrants, and convertible
preferred shares, were excluded from the computation of diluted earnings per
share as their effect was anti-dilutive.





4.
            INTANGIBLE
      ASSETS




Intangibles
consist of amortizing intangibles and goodwill.  At September 30, 2010
and December 31, 2009, such amounts were as follows:




September30,
                  2010
                
                
                December31,
                  2009(in
      thousands)Trademark
                
                $
                775
                
                
                $
                814Customer
      List
                
                
                63
                
                
                
                89Employee
      contract
                
                
                -
                
                
                
                67838
                
                
                
                970Goodwill
                
                
                11,663
                
                
                
                12,254$
                12,501
                
                
                $
                13,224




Amortization
periods for the intangibles are as follows: trademark – 17 years, customer list
– 3 years, and employee contract – 2 years. Amortization for the three and nine
months ended September 30, 2010 was $43 thousand and $132 thousand,
respectively.  Amortization for the three and nine months ended
September 30, 2009 was $67 thousand and $191 thousand,
respectively.   Accumulated amortization was $376 thousand and
$244 thousand at September 30, 2010 and December 31, 2009, respectively. The
change of $591 thousand in goodwill as of September 30, 2010 compared to
December 31, 2009 was the result of changes in foreign currency translation
rates.





The
Company expects amortization expense for the next five years to be as follows
(in thousands):




Year
                    
                    Amount2010
                    
                    $
                    212011
                    
                    $
                    842012
                    
                    $
                    712013
                    
                    $
                    522014
                    
                    $
                    52




F-13




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)




5.
            PROPERTY
      AND EQUIPMENT




Property
and equipment consisted of the following:




September30,
                    2010
                  
                  
                  December31,
                    2009(in
      thousands)Equipment
                  
                  $
                  249
                  
                  
                  $
                  217Furniture
      and computers
                  
                  
                  225
                  
                  
                  
                  204Vehicles
                  
                  
                  624
                  
                  
                  
                  6511,098
                  
                  
                  
                  1,072Less:
      accumulated depreciation
                  
                  
                  (564
                  )
                  
                  
                  (457
                  )$
                  534
                  
                  
                  $
                  615




Depreciation
expense was $48 thousand and $140 thousand for the three and nine months ended
September 30, 2010, respectively.  Depreciation expense was $40
thousand and $118 thousand for three and nine months ended September 30,
2009.




6.
            ACCRUED
      LIABILITIES




Accrued
liabilities consisted of the following:




September30,
                    2010
                  
                  
                  December31,
                    2009(in
      thousands)Sales
      and local taxes
                  
                  $
                  143
                  
                  
                  $
                  176Payroll
                  
                  
                  436
                  
                  
                  
                  363Accrued
      subcontractors
                  
                  
                  1,015
                  
                  
                  
                  998Warranty
      reserve
                  
                  
                  396
                  
                  
                  
                  359Other
      operational accruals
                  
                  
                  413
                  
                  
                  
                  147$
                  2,403
                  
                  
                  $
                  2,043




7.
            INCOME
      TAXES




The
effective tax rate for the periods presented is the result of the mix of income
earned in various tax jurisdictions that apply a broad range of income tax
rates.  Our provision for income taxes differs from the tax computed
at the U.S. federal statutory income tax rate due primarily to state taxes,
earnings considered as indefinitely reinvested in foreign operations, and
changes in the valuation allowance and fair values of the contingent
consideration liability and financial instruments.


F-14




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)




Our net
deferred tax assets decreased from $1.8 million as of December 31, 2009 to $0.7
million as of September 30, 2010 primarily as a result of the Company
recognizing a valuation allowance of $1.4 million during the quarter ended
June 30, 2010 mainly related to net operating loss carry forwards in the U.S.
offset by an increase in deferred tax assets in Spain.   The
valuation allowance was recorded as a result of delays in the execution and
signing of certain construction contracts, and we believe based on current U.S.
operations that it has become more likely than not that we will be unable to
realize our U.S. net operating loss carry forwards.





The
Company files income tax returns in the U.S. federal jurisdiction and various
state and foreign jurisdictions.  The Company adopted the provisions
of accounting for uncertain tax positions in accordance with theIncome Taxes (ASC 740) topic
on September 8, 2008, and, accordingly, performed a comprehensive review of the
Company’s uncertain tax positions as of that date.  In this regard, an
uncertain tax position represents its expected treatment of a tax position taken
in a filed tax return, or planned to be taken in a future tax return, that has
not been reflected in measuring income tax expense for financial reporting
purposes.




The
Company does not expect there to be any material changes to the assessment of
uncertain tax positions over the next twelve months.  The Company is
subject to routine corporate income tax audits in the United States and foreign
jurisdictions.  The statute of limitations for the Company’s 2008 tax
years remains open for U.S. purposes.  Most foreign jurisdictions have
statute of limitations that range from three to six years.




The
liability for uncertain tax positions is recorded in accrued expenses in the
Company’s consolidated balance sheet.  The Company recognizes interest
and penalties related to uncertain tax positions in the income tax
provision.  Interest and penalties are computed based upon the
difference between its uncertain tax positions under ASC 740 and the amount
deducted or expected to be deducted in its tax returns.  The Company
has not accrued or paid for any interest and penalties.





8.
            BORROWINGS




Notes
Payable




Notes
payable were $0.8 million at September 30, 2010 and December 31,
2009.  Notes payable of $50 thousand are secured by vehicles and have
maturities through 2014.  Additionally, we have $33 thousand in short
term unsecured notes associated with various insurance policies. 
Premier Power Spain has two unsecured loans totaling $0.5 million with
Instituto de Crédito Oficial as of September 30, 2010.  Payments on
the two loans begin in December 2010 and June 2011, respectively.  The
loans provide for six additional monthly payments of $63 thousand and $38
thousand, respectively, to their maturity dates of June 2012 and December 2012,
respectively.  The annual interest rates on the notes range from 2.9%
to 6.4%.





Lines
of Credit




On July
13, 2009, the Company entered into a loan agreement with Umpqua Bank, an Oregon
corporation, for a line of credit of up to $12 million, maturing on July 13,
2011.  The loan agreement provided for an initial line of credit of $7
million, provided, however, that the Company may request no more than twice
prior to the maturity date that the line of credit be increased to an amount not
to exceed $12 million in the event the Company acquires another subsidiary and
require additional working capital for such subsidiary.  The balance
of the line of credit was paid off and terminated on September 15,
2010.  There is no outstanding balance, and the Company has no further
borrowing capabilities under this line of credit.


F-15





PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)




At
September 30, 2010, Premier Power Spain had an unsecured line of credit for $0.1
million, which has interest terms of Euribor+3.25 and is due in full on August
1, 2011.  As of September 30, 2010, there was approximately $100
thousand outstanding on the line.




The
future principle payments on these balances as of September 30, 2010 are as
follows:




(inthousands)2010
                  
                  $
                  2452011
                  
                  
                  3162012
                  
                  
                  2102013
                  
                  
                  102014
                  
                  
                  5$
                  786





9.
            EQUITY




Preferred
Stock





The
Company has authorized 20,000,000 shares of preferred stock, par value $ 0.0001
per share (“Preferred Stock”). The Preferred Stock may be issued from time to
time in series having such designated preferences and rights and qualifications
and to such limitations as the Board of Directors may determine.




The
Company has designated 5,000,000 shares of Preferred Stock as Series A
Convertible Preferred Stock (“Series A Stock”).  The holders of Series
A Stock have no voting rights except with regards to certain corporate events,
enjoys a $2.40 liquidation preference per share, subject to adjustment, over
holders of common stock, and may convert each share of Series A Stock into one
share of common stock at any time.  Series A stock converts
automatically upon the occurrence of an offering meeting certain
criteria.  Holders of the Series A Stock have certain redemption
rights.  The Company has determined that the events triggering such
rights are either in control of the Company or in the case of such events where
the Company is not deemed to exercise control; the redemption right is limited
to the ability to convert into shares of the Company’s common
stock.  As of September 30, 2010 and 2009, there were 3,500,000 shares
of Series A Stock outstanding.





The
Company has designated 2,800,000 shares of Preferred Stock as Series B
Convertible Preferred Stock (“Series B Stock”).  The holders of
Series B Stock have no voting rights except with regards to certain corporate
events and may convert each share of Series B Stock into one share of common
stock at any time. Series B stock converts automatically upon the occurrence of
an offering meeting certain criteria.  Holders of the Series B Stock
have certain redemption rights.  The Company has determined that the
events triggering such rights are either in control of the Company or in the
case of such events where the Company is not deemed to exercise control; the
redemption right is limited to the ability to convert into shares of the
Company’s common stock.  As of September 30, 2010 and 2009, there were
2,800,000 shares of Series B Stock outstanding.


F-16




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)





Warrants





In
September 2008, the Company issued 3,500,000 units, consisting each of 1 share
of Series A Stock, 1⁄2 of a Series A Warrant, and 1⁄2 of a Series B Warrant, in
exchange for $7,000,000 in gross proceeds.  Both the Series A and B
Warrants had four year lives. The Company had the right to call for cancellation
of each outstanding Series A Warrant or Series B Warrant under certain
circumstances. The Series A Warrants had an exercise price of $2.50 and a fair
value of $.15 per warrant. The Series B Warrants had an exercise price of $3.00
and a fair value of $.13 per warrant. All of the issued and outstanding Series A
Warrants and Series B Warrants were cancelled on June 16, 2009 in connection
with a sale of our Series B Stock.




The
significant assumptions used to determine the fair values of the warrants are as
follows:





Risk-free
      interest rate at grant date
                  
                  
                  4.5
                  %Expected
      stock price volatility
                  
                  
                  95
                  %Expected
      dividend payout
                  
                  
                  -Expected
      option life
                  
                  4
      yrs





The fair
value of the Series A Stock was calculated based on the estimated fair value and
underlying number of common shares it would convert into at the time of the
transaction. The estimated fair value of our common stock on the transaction
date was $.42 per share, and the Series A Stock would have converted into
3,500,000 shares of common stock, thus deriving a fair value of $1,475,000 for
the underlying common stock.





10.
            RELATED
      PARTY TRANSACTIONS




Certain
stockholders have guaranteed certain obligations under the Company’s borrowings
and operating leases.  Premier Power Italy purchased $0.06 million of
furniture and office equipment from a company related to an executive officer of
Premier Power Italy.  Premier Power Italy also retained a relative of
an executive officer on a contract basis to perform design services and has been
paid an insignificant amount for the nine months ended September 30,
2010.  In addition, an executive officer has contracted with the
Company for a residential solar system.  For the nine months
ended September 30, 2010, the Company has recognized minimal revenue and cost
from this contract.  The total contract value is for $50
thousand.





11.
            COMMITMENTS
      AND CONTINGENCIES





Premier
Power Spain is party to non-cancelable leases for operating facilities in
Barcelona and Madrid, Spain which expire in 2012 and 2014,
respectively.  Premier Power Italy is party to a non-cancelable lease for
operating facilities in Ripolimosani and Campobasso, Italy, which expires in
2015.  Premier Power California is party to a non-cancelable lease for
operating facilities in Redlands, California, which expires in
2010.  These leases provide for annual rent increases tied to the
Consumer Price Index. The leases require the following payments as of September
30, 2010, subject to annual adjustment, if any:


F-17





PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)





(in thousands)2010
                    
                    $
                    402011
                    
                    
                    1482012
                    
                    
                    1302013
                    
                    
                    1202014
                    
                    
                    30Thereafter
                    
                    
                    17$
                    484




In May
2010, the Company entered into an agreement with a reseller.  Under the
agreement, the Company pays $1,000 per month, with the first 6 months of fees
waived.  Additionally, the Company provides the reseller a margin of 5%-6%
on sales of its products by the reseller.  The agreement expires in May
2011, unless renewed.





At times
we enter into take or pay agreements with our suppliers.  This
provides pricing advantages to the Company in return for supply
certainty.  At September 30, 2010, the Company, as part of the
purchase of solar modules from a vendor for distribution in the Czech Republic,
entered into a take or pay agreement of which 500 kilowatts of solar modules
with a value of approximately $1.0 million remain to be
delivered.  This agreement is supported by a Letter of
Credit.  We currently have no other take or pay commitments
outstanding and have incurred no losses as a result of these
agreements.




Legal
Matters
  The
Company is subject to legal proceedings, claims, and litigation arising in the
ordinary course of business.  The Company is not currently involved in
any litigation, the outcome of which would, based on information currently
available, have a material adverse effect on the Company’s financial position,
results of operations, or cash flows. We are also not aware of any material
legal proceedings involving any of our directors, officers, or affiliates or any
owner of record or beneficially of more than 5% of any class of our voting
securities.
  Indemnifications
  The
Company indemnifies its directors and executive officers for costs associated
with any fees, expenses, judgments, fines and settlement amounts incurred by
them in any action or proceeding to which any of them is, or is threatened to
be, made a party by reason of his or her services in their role as a director or
officer.


12.
            CONTINGENT
      CONSIDERATION LIABILITY




In
connection with the acquisition of Rupinvest, contingent consideration liability
of approximately $12.0 million was recorded at the time of the purchase to
reflect the estimated fair value of 3 million contingently issuable shares of
the Company’s common stock.





The
conditions that must be met and the amount of the 3 million shares, if any,
to be issued are described below:




(i)
            375,000
      shares for each ten million Euros (€10 million, or approximately $14.2
      million) worth of net sales (as defined) achieved by Premier Power
      Italy from July 9, 2009, the escrow opening date, to December 31, 2009
      (the “First Issuance”), with the maximum number of shares released as part
      of the First Issuance to be 1,500,000 shares (any number of shares not
      issuable as part of the First Issuance solely due to the fact that the
      1,500,000 shares threshold was exceeded is hereinafter referred to as the
      “Excess Issuable Amount”);





(ii)
            50%
      of the Excess Issuable Amount, if any, plus 200,000 shares for each ten
      million Euros (€10 million, or approximately $14.2 million) worth of net
      sales achieved by Premier Power Italy from January 1, 2010 to December 31,
      2010 (the “Second Issuance”). The maximum combined number of shares to be
      released as part of the First Issuance and the Second Issuance, in the
      aggregate, shall not exceed 3,000,000 shares;
  and





(iii)
            100,000
      shares for each ten million Euros (€10 million, or approximately
      $14.2 million) worth of net sales achieved by Premier Power Italy
      from January 1, 2011 to December 31, 2011 (the “Third Issuance”). The
      maximum combined number of shares to be released as part of the First
      Issuance, the Second Issuance, and the Third issuance, in the aggregate,
      shall not exceed 3,000,000
shares.


F-18




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)





At
September 30, 2010 and December 31, 2009, the Company estimated the fair value
of the contingent consideration liability at $1.9 million and $7.7 million,
respectively, assuming 1,422,100 and 2,801,875 shares of its common stock,
respectively, would be issued, a share price of $1.37 and $2.75, respectively,
and an adjustment for counterparty performance risk.  As of
September 30, 2010, the Company estimated the amount of shares earned by
the seller was approximately 502,100 for period ended December 31, 2009, but no
such shares have yet been distributed as the Company and seller are finalizing
the application of the conditions to the 2009 results. The Company does not
expect the final number of shares to be issued for 2009 to materially differ
from its current estimate.




13.
            DERIVATIVE
      INSTRUMENT




On
January 1, 2009, the Company adopted FASB ASC 815 (EITF 07-5,“Determining Whether an Instrument
(or embedded Feature) is Indexed to an Entity’s Own Stock”). As part of the adoption of
FASB ASC 815, the Company determined that its warrants are not indexed to its
stock as a result of the basis of an exercise price reset that occurs when the
Company sells its common stock at a lower price, even if such price is at fair
value. Thus, the value of the warrants were recorded as a
liability.




The
Company recorded a warrant liability in the amount of $11.1 million upon
adoption of FASB ASC 815.  The liability was then adjusted to fair
value, $9.6 million as of March 31, 2009 and $8.9 million as of June 30,
2009.  As a result of the changes in fair value, the Company recorded
income of $0 million and $2.2 million for the three and nine months ended
September 30, 2009, respectively.





The
Company recorded the following cumulative effect of change in accounting
principle pursuant to its adoption of EITF 07-05 as of January 1,
2009:




Other
                  
                  
                  OtherPaid-In-
                  
                  
                  Current
                  
                  
                  RetainedCapital
                  
                  
                  Liability
                  
                  
                  Earnings(in
      thousands)Record
      January 1, 2009, derivative instrument liability related to
      warrants
                  
                  $
                  -
                  
                  
                  $
                  11,119
                  
                  
                  $
                  -Record
      January 1, 2009, the reversal of prior accounting related
      warrants
                  
                  
                  (1,794
                  )
                  
                  
                  -
                  
                  
                  
                  (9,325
                  )$
                  (1,794
                  )
                  
                  $
                  11,119
                  
                  
                  $
                  (9,325
                  )





The
Company used the Black-Scholes pricing model to calculate fair value of its
warrant liability.  Key assumptions used are as follows:




Number of Shares
                    included in
                    Warrant
                  
                  Dividend Yield
                  
                  Volatility
                  
                  Risk-Free
                    Rate
                  
                  Expected Life
                    (in years)
                  
                  Stock Price1,750,000
                  
                  0.0
                  %
                  95.0
                  %
                  4.5
                  %
                  4.0
                  
                  $
                  2.501,750,000
                  
                  0.0
                  %
                  95.0
                  %
                  4.5
                  %
                  4.0
                  
                  $
                  3.00


F-19




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)




14.
              SHARE-BASED
      COMPENSATION EXPENSE AND VALUATION OF STOCK OPTIONS AND RESTRICTED
      STOCK-BASED AWARDS




The
Company’s 2008 Equity Incentive Plan (the “Incentive Plan”) provides for the
issuance of incentive stock options and non-statutory stock options. The board
of directors determines to whom grants are made and the vesting, timing,
amounts, and other terms of such grants, subject to the terms of the Incentive
Plan. 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, certain consultants, and certain advisors. Options under
the Incentive Plan vest as determined by the Board.  The term of the
options granted under the Incentive Plan may not exceed 10 years, and the
maximum number of shares of common stock that may be issued pursuant to
stock options and stock awards granted under the Incentive
Plan is 2,951,875 shares in the aggregate. The Company granted 545,000
and 1,273,500 options in the three and nine months ended September 30, 2010,
respectively.  An aggregate of 2,764,229 stock options and awards (net
of forfeitures) were committed and 187,646 were available for grant under the
Incentive Plan as of September 30, 2010.




Restricted
stock awards granted under the Incentive Plan are independent of option grants
and are subject to restrictions.  Awards, which have been issued since
2009, are subject to forfeiture if employment or services are terminated prior
to the release of restrictions, which generally occurs on a ratable basis over
three to four years from the date of grant.  The cost of the awards,
determined to be the fair market value of the shares at the date of grant, is
expensed ratably over the period the restriction lapse.  At September
30, 2010 and 2009, there were an aggregate of 183,000 and 150,000, respectively,
restricted stock awards unissued and unvested.




Share-based
compensation is included in the following operating expense line items in our
consolidated statement of operations:




ThreeMonthsEnded
                  September30,
                
                
                NineMonthsEnded
                  September30,2010
                
                
                2009
                
                
                2010
                
                
                2009(in
      thousands)Cost
      of revenues
                
                $
                40
                
                
                $
                28
                
                
                $
                163
                
                
                $
                121Selling
      and marketing
                
                
                76
                
                
                
                18
                
                
                
                277
                
                
                
                79General
      and administrative
                
                
                113
                
                
                
                41
                
                
                
                273
                
                
                
                177$
                229
                
                
                $
                87
                
                
                $
                713
                
                
                $
                377





We
estimate the fair value of our stock option grants using the
Black-Scholes-Merton option-pricing model, which was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable.  Option valuation models, including the
Black-Scholes-Merton option-pricing model, require the input of assumptions,
including stock price volatility.  Changes in the input assumptions
can materially affect the fair value estimates and ultimately how much we
recognize as share-based compensation expense.  The fair values of our
stock options were estimated at the date of grant.  The weighted
average input assumptions used and resulting fair values were as follows for the
nine months ended September 30, 2010 and 2009:


F-20




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)





NineMonthsEnded
                      September30,2010
                    
                    
                    2009Expected
      volatility
                    
                    
                    82.95
                    %
                    
                    
                    93.60
                    %Expected
      dividend
                    
                    
                    0
                    %
                    
                    
                    0
                    %Expected
      term
                    
                    6.2
      years
                    
                    
                    6.5
      yearsRisk-free
      interest rate
                    
                    
                    2.38
                    %
                    
                    
                    1.88
                    %Weighted-average
      fair value per share
                    
                    $
                    1.25
                    
                    
                    $
                    3.32




Valuation and Amortization Method
— The estimated fair value of stock options is amortized over the
requisite service periods of the awards, which is generally the vesting period.
Stock options typically have a ten-year life from date of grant and vesting
periods of three to five years. The fair value of the Company’s restricted stock
award is based on its value as determined by market prices of the Company’s
stock on the date of grant. Compensation expense is recognized on a
straight-line basis over the respective vesting period.





Expected Volatility — Because
there is minimal history of stock price returns, the Company does not have
sufficient historical volatility data for its stock option grants. Accordingly,
the Company has chosen to use rates for similar publicly traded U.S.-based
competitors to calculate the volatility for its granted options.





Expected Dividend — The
Company has never paid dividends on its common shares and currently does not
intend to do so.  Accordingly, the dividend yield percentage is zero
for all periods.





Expected Term — The Company’s
expected term represents the period that the Company’s stock options are
expected to be outstanding. For awards granted subject only to service vesting
requirements, the Company utilizes the simplified method under the provisions of
FASB ASC 718-10-S99-1 (Staff Accounting Bulletin No. 107) for estimating
the expected term of the stock options.




Risk-Free Interest Rate — The
Company bases the risk-free interest rate used in the Black-Scholes-Merton
valuation method upon the implied yield curve currently available on U.S.
Treasury zero-coupon issues with a remaining term equal to the expected term
used as the assumption in the model.




15.
            EMPLOYEE
      BENEFITS





The
Company has a 401(k) Plan for its United States employees. Employees are
eligible to make contributions when they attain an age of twenty-one and have
completed at least one year of service. The Company makes discretionary matching
contributions to employees who qualify for the Plan and were employed on the
last day of the Plan year. Such contributions totaled $0 for each of the three
and nine month periods ended September 30, 2010 and 2009.  Employees
are vested 100% after 3 years of service.  None of the Company’s
subsidiaries offer defined contribution or defined benefit plans to
employees.


F-21




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)





16.
            FAIR
      VALUE OF FINANCIAL INSTRUMENTS





The fair
value of a financial instrument is the amount at which the instrument could be
exchanged in an orderly transaction between market participants to sell the
asset or transfer the liability.  In accordance with  FASB
ASC 820 (SAS No. 157,“Fair Value Measurements”), the Company uses fair
value measurements based on quoted prices in active markets for identical assets
or liabilities (Level 1), significant other observable inputs (Level 2), or
unobservable inputs for assets or liabilities (Level 3), depending on the nature
of the item being valued.





The
following disclosure is made in accordance with FASB ASC 820 (FASB Staff
Position (FSP) FAS 107-1,“Interim Disclosures about Fair Value
of Financial Instruments”): The carrying amounts of
cash and cash equivalents and accounts receivable, prepaid expenses, costs and
estimated earnings in excess of billings, accounts payable, billings in excess
of costs and estimated earnings on uncompleted contracts, and accrued
liabilities approximate their fair values at each balance sheet date due to the
short-term maturity of these financial instruments. The fair value of the
Company’s borrowings approximates their carrying values, either as a result of
their short term nature or their terms.





FASB ASC
820 (SFAS No. 157) defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.  FASB ASC 820 establishes
a fair value hierarchy that prioritizes the inputs to valuation techniques used
to measure fair value.  The hierarchy, as defined below, gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities and the lowest priority to unobservable
inputs.




●
            Level
      1, defined as observable inputs such as quoted prices in active markets
      for identical assets.





●
            Level
      2, defined as observable inputs other than Level 1 prices.  They
      include quoted prices for similar assets or liabilities in an active
      market, quoted prices for identical assets and liabilities in a market
      that is not active, or other inputs that are observable or can be
      corroborated by observable market data for substantially the full term of
      the assets or liabilities.





●
            Level
      3, defined as unobservable inputs in which little or no market data
      exists, therefore requiring an entity to develop its own
      assumptions.





The table
below sets forth the Company’s Level 3 financial assets and liabilities that are
accounted for at fair value:





September 30, 2010
                  
                  
                  December 31, 2009(inthousands)
                  
                  
                  (inthousands)Level
      1
                  
                  
                  Level
      2
                  
                  
                  Level
      3
                  
                  
                  Level
      1
                  
                  
                  Level
      2
                  
                  
                  Level
      3Liabilities:
      Contingent consideration
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  1,901
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  7,725





ContingentConsiderationLiability(in thousands)Beginning
      balance
                  
                  $
                  7,725Total
      gain recognized
                  
                  
                  5,824Ending
      balance
                  
                  $
                  1,901


F-22





PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)






17.
            SEGMENT
      INFORMATION




The
Company has adoptedSegment
Reporting (ASC 280) requiring segmentation based on the Company’s
internal organization, reporting of revenue and other performance
measures.  Operating segments are defined as components of an
enterprise about which discrete financial information is available that is
evaluated regularly by the chief operating decision maker, or decision making
group, in deciding how to allocate resources and in assessing
performance.  The Company’s chief operating decision maker is the
Chief Executive Officer.  The Company’s segments are designed to
allocate resources internally and provide a framework to determine management
responsibility.  There are three operating segments, as summarized
below:




●
            North
      America – consists of (i) commercial ground mount or rooftop solar energy
      projects generally ranging from 100kWh to 20MW provided to corporate,
      municipal, agricultural, and utility customers and (ii) residential that
      consists mainly of rooftop solar installations generally ranging from 5kWh
      to 40KWh provided to residential customers primarily in
      California.




●
            Italian
      – consists of distribution, ground mount, roof mount, and solar power
      plant installations.




●
            Other
      European – consists of rooftop solar installations generally ranging 5kWh
      to 1MW provided primarily to businesses that own commercial buildings or
      warehouse and distribution and engineering, procurement, and
      construction of ground mount, and solar power plant
      systems.




Prior to
its acquisition of Premier Power Italy, the Company determined that it operated
as a single segment. In conjunction with the acquisition and changes in its
management structure, the Company determined that the three operating segments
noted above are more reflective of its operations. During
the three months ended September 30, 2010 the Company renamed the segment
previously known as Spain to Other European to reflect an increased level
of sales outside of Spain for the three and nine month periods ended September
30, 2010. For the three and nine months ended September 30, 2009 this
segment’s
activities were almost exclusively conducted within Spain.


The
Company refers to the Revenue as the revenue earned from the installation
projects and distribution sales.  Currently, the Company does not
separately allocate operating expenses to these segments, nor does it allocate
specific assets to these segments.  Therefore, segment information
reported includes only revenues, cost of revenues, and gross
profit.  The following tables present the operations by each operating
segment:


F-23





PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)




ThreeMonthsEndedSeptember30,2010North
                    America
                  
                  
                  Italian
                  
                  
                  Other
                    European
                  
                  
                  Total(in thousands)Revenues
                  
                  $
                  4,223
                  
                  
                  $
                  3,061
                  
                  
                  $
                  21,005
                  
                  
                  $
                  28,289Cost
      of revenues
                  
                  
                  (3,944
                  )
                  
                  
                  (2,394
                  )
                  
                  
                  (20,432
                  )
                  
                  
                  (26,770
                  )Gross
      margin
                  
                  $
                  279
                  
                  
                  $
                  667
                  
                  
                  $
                  573
                  
                  
                  
                  1,519Total
      operating expenses
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  3,102Operating
      loss
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  (1,583
                  )





ThreeMonthsEndedSeptember30,2009North
                  America
                
                
                Italian
                
                
                Other
                  European
                
                
                Total(in thousands)Revenues
                
                $
                4,479
                
                
                $
                337
                
                
                $
                1,469
                
                
                $
                6,285Cost
      of reveneus
                
                
                (3,969
                )
                
                
                (11
                )
                
                
                (921
                )
                
                
                (4,901
                )Gross
      margin
                
                $
                510
                
                
                $
                326
                
                
                $
                548
                
                
                
                1,384Total
      operating expenses
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                2,443Operating
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                (1,059
                )





NineMonthsEndedSeptember30,2010North
                  America
                
                
                Italian
                
                
                Other
                  European
                
                
                Total(in thousands)Revenues
                
                $
                6,206
                
                
                $
                7,368
                
                
                $
                27,140
                
                
                $
                40,714Cost
      of reveneus
                
                
                (6,291
                )
                
                
                (6,366
                )
                
                
                (26,058
                )
                
                
                (38,715
                )Gross
      margin
                
                $
                (85
                )
                
                $
                1,002
                
                
                $
                1,082
                
                
                
                1,999Total
      operating expenses
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                7,795Operating
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                (5,796
                )





NineMonthsEndedSeptember30,2009North
                  America
                
                
                Italian
                
                
                Other
                  European
                
                
                Total(in thousands)Revenues
                
                $
                9,947
                
                
                $
                337
                
                
                $
                4,908
                
                
                $
                15,192Cost
      of reveneus
                
                
                (9,290
                )
                
                
                (11
                )
                
                
                (3,601
                )
                
                
                (12,902
                )Gross
      margin
                
                $
                657
                
                
                $
                326
                
                
                $
                1,307
                
                
                
                2,290Total
      operating expenses
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                6,218Operating
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                (3,928
                )




F-24





PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements


(unaudited)





At
September 30, 2010 and December 31, 2009, property and equipment located in the
United States, net of accumulated depreciation and amortization, was
approximately $0.3 million and $0.3 million, respectively.  At
September 30, 2010 and December 31, 2009, property and equipment located in
foreign countries, net of accumulated depreciation and amortization, was
approximately $0.3 million and $0.3 million, respectively.





18.
            SUBSEQUENT
      EVENT





On
November 4, 2010, as part of the annual meeting of stockholders, the holders of
at least a majority of the Company’s capital stock approved an amendment to its
Certificate of Incorporation to effect a reverse stock split of the issued and
outstanding shares of common stock of not more than one-for-five, with the final
ratio to be decided upon at the sole discretion of management and to be approved
by the Board.   No reverse split has yet been
affected.  In addition, the holders of at least a majority of the
Company’s capital stock approved an increase in the number of shares of common
stock reserved for issuance under its 2008 Equity Incentive Plan by 2,000,000
shares.


F-25




Item
2.   Management’s Discussion and Analysis of Financial Condition and
Results of Operations.




Forward-Looking
Statements





The
following discussion and analysis of the results of operations and financial
condition of Premier Power Renewable Energy, Inc. should be read in conjunction
with the financial statements included in this report and the notes to those
financial statements. References to “we,” “our,” or “us” in this section refers
to the Company and its subsidiaries. Our discussion includes forward-looking
statements based upon current expectations that involve risks and uncertainties,
such as our plans, objectives, expectations, and intentions. Actual results and
the timing of events could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including those
included in the “Risk Factors” section of our most recent Annual Report on Form
10-K filed with the Securities and Exchange Commission. We use words such as
“anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,”
“believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions
to identify forward-looking statements.





Overview





We are a
developer, designer, and integrator of solar energy solutions. We develop,
market, sell, and maintain solar energy systems for residential, agricultural,
commercial, industrial customers in North America and Europe. In addition, we
distribute solar modules and invertors to smaller solar developers and
integrators.





Our
business is conducted by our wholly owned subsidiary, Premier Power Renewable
Energy, Inc., a California corporation (“Premier Power California”), through its
wholly owned subsidiaries, Bright Future Technologies, LLC, a Nevada limited
liability company (“Bright Future”), and Premier Power Sociedad
Limitada, a limited liability company formed in Spain (“Premier Power
Spain”).Our business is also conducted by
Rupinvest SARL, a corporation duly organized and existing under the law of
Luxembourg (“Rupinvest”), through its wholly owned subsidiaries Premier Power
Italy S.p.A. (“Premier Power Italy”) and Premier Power Development Srl (“Premier
Power Development”), each of which are a private limited company duly organized
and existing under the laws of Italy.





We
procure solar components from the solar industry’s leading suppliers and
manufacturers that includes GE, Sharp, various Chinese module manufacturers,
Power One, Fronius, and SunPower Corporation.  We procure solar components
that best fit the respective project and do not have any exclusive supplier
relationships.





Critical
Accounting Policies and Estimates





Our
management’s discussion and analysis of our financial condition and results of
operations are based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported net revenues and expenses
during the reporting periods. On an ongoing basis, we evaluate our estimates and
assumptions. We base our estimates on historical experience and on various other
factors that we believe are reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or
conditions.


While our
significant accounting policies are more fully described in Note 2 to our
consolidated financial statements, we believe that the following accounting
policies are the most critical to aid the reader in fully understanding and
evaluating this discussion and analysis:





Basis of Presentation – The
accompanying consolidated financial statements have been prepared in accordance
with generally accepted accounting principles accepted in the United States
(“GAAP”), and include the accounts of Premier Power Renewable Energy, Inc. and
its subsidiaries.  All intercompany accounts and transactions are
eliminated.





Inventories – Inventories,
consisting of raw materials and finished goods, are recorded using the average
cost method, and are carried at the lower of cost or market.


4


Share-Based Compensation – The Company accounts for stock-based compensation under the
provisions of  Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) 718 (Statement of Financial Accounting Standards
No. 123 (revised 2004),“Share-Based Payment”), which
requires the Company to measure the stock-based compensation costs of
share-based compensation arrangements based on the grant date fair value and
generally recognizes the costs in the financial statements over the employee’s
requisite service period.  Stock-based compensation expense for all
stock-based compensation awards granted was based on the grant date fair value
estimated in accordance with the provisions of FASB ASC 718.




Goodwill and Other Intangible Assets
– The Company does not amortize goodwill, but rather tests goodwill for
impairment at least annually. We determine the fair value of our reporting units
using a weighted market and income approach. Under the income approach, we
calculate the fair value of a reporting unit based on the present value of
estimated future cash flows. Under the market approach, we calculate the fair
value of the reporting unit using selected comparable companies’ revenue
multiples and applying an average of such companies’ multiples to the Company’s
revenue. If the fair value of the reporting unit exceeds the carrying value of
the net assets including goodwill assigned to that unit, goodwill is not
impaired. If the carrying value of a reporting unit’s goodwill exceeds its
implied fair value, then an impairment of goodwill has occurred, and we
recognize an impairment of loss for the difference between the carrying amount
and the implied fair value of goodwill as a component of operating income. In
the second quarter of 2010, due to the reduction in forecasted revenue since the
purchase of our Italian operations, the Company performed an impairment test of
the goodwill recorded from the acquisition of Rupinvest, which totaled $11.2
million at September 30, 2010. The Company's testing approach utilized a
discounted cash flow analysis and comparative market multiples to determine the
entity's (single reporting unit) fair value for comparison to its carrying
value.  We did not recognize any goodwill impairment charges for the
nine months ended September 30, 2010 and 2009.  Intangible assets,
consisting of a customer list, trademarks, and an employee contract, are
amortized over their estimated useful lives ranging from 2-17
years.





Fair Value of Financial Instruments
– The carrying value reported for cash equivalents, accounts receivable,
prepaid expenses, other receivables, 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. The fair value of the
contingent consideration liability and our borrowings have been determined in
accordance with the methodology as disclosed in the notes to our
annual and interim consolidated financial statements.





Revenue Recognition – Revenue
on solar power projects installed by the Company for customers under
installation contracts is recognized using the percentage of completion method
of accounting. At the end of each period, the Company measures the cost incurred
on each project and compares the result against its estimated total costs at
completion. The percent of cost incurred determines the amount of revenue to be
recognized. Payment terms are generally defined by the installation contract and
as a result may not match the timing of the costs incurred by the Company and
the related recognition of revenue. Such differences are recorded as either
costs or estimated earnings in excess of billings on uncompleted contracts or
billings in excess of costs and estimated earnings on uncompleted contracts. The
Company determines a customer’s credit worthiness at the time an order is
accepted. Sudden and unexpected changes in a customer’s financial condition
could put recoverability at risk.





Contract
costs include all direct material and labor costs attributable to a project as
well as certain indirect costs related to contract performance, such as indirect
labor, supplies, tools, repairs, and depreciation costs. Selling, general, and
administrative costs are charged to expense, as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in job performance, job conditions, and estimated
profitability, including those arising from contract penalty provisions and
final contract settlements, may result in revisions to costs and income and are
recognized in the period in which the revisions are determined. Profit
incentives are included in revenues when their realization is reasonably
assured.





The
percentage of completion method requires the ability to estimate several
factors, including the ability of the customer to meet its obligations under the
contract, including the payment of amounts when due. If we determine that
collectability is not assured, we will defer revenue recognition and use methods
of accounting for the contract such as completed contract method until such time
we determine that collectability is reasonably assured or through the completion
of the project.




The
Company recognized revenue on a percentage of completion basis on a 1 megawatt
solar project in Italy in 2009 and in 2010 as the project was being
completed.  The Company completed the project in May 2010 and invoiced
the customer in accordance with the related contract.  Subsequently,
the customer informed the Company that it intended to resell the project, but
the buyer requested that the Company enter into an operating and maintenance
(O&M) contract for the solar facility and wanted to purchase the project
from the Company in its role as the builder.  The Company agreed to
retake title to the project and transfer it to the buyer.  The Company
did not receive any additional compensation for the transaction, took on a
minimal increase in its warranty exposure that was limited to the de minimis
amount of fees of the O&M contract, and did not assume other obligations
with its assumption and passage of title to the buyer contemporaneously in June
2010.  Prior to June 2010, there was no agreement to enter into this
transaction and payment of the original contract amount was not contingent on
the sale to the buyer.  In July 2010, the Company received full
payment for the total outstanding accounts receivable, which equals the original
contract amount.  The Company determined the assumption of title and
sale did not cause a change in the previous accounting recognition, and
accordingly there was no effect on the accompanying financial
statements.


5


Revenue
related to distribution sales is recognized when we have received either a
purchase order or contract, product is delivered to the customer or a third
party shipper takes possession, the title and risk of ownership have passed to
the buyer, and we determine that collection is probable.  The Company
considers the risk of ownership to have passed when the customer has assumed the
risk of loss.




Product Warranties – The
Company warrants its projects for labor and materials associated with its
installations.  The Company’s warranty is ten years in California and
generally five to ten years elsewhere in the U.S., depending upon each state’s
specific requirements.  Premier Power Italy provides a ten year
warranty covering the labor and materials associated with its
installations.  Premier Power Spain provides a one year warranty for
all contracts signed after December 31, 2006.  Since the Company does
not have sufficient historical data to estimate its exposure, we have looked to
our historical data and the historical data reported by a peer company solar
system installer. Solar panels and inverters are warranted by the manufacturer
for 25 years and 10 years, respectively.





Income Taxes – The Company
accounts for income taxes under the liability method. Under this method,
deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax reporting bases of assets and liabilities and
are measured using enacted tax rates and laws that are expected to be in effect
when the differences are expected to reverse. Realization of deferred tax assets
is dependent upon the weight of available evidence, including expected future
earnings. A valuation allowance is recognized if it is more likely than not that
some portion or all of a deferred tax asset will not be realized. As of
September 30, 2010 the Company has a full valuation allowance for its net
deferred tax asset associated with its U.S. operations.  Prior to
September 2008, the Company was not subject to federal income tax.





Effective
September 1, 2008, the Company adopted FASB ASC 740-10 (Financial Accounting
Standards Interpretation FIN No. 48, “Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement No. 109” (FIN 48)). FASB ASC
740-10 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of uncertain tax positions taken
or expected to be taken in a company’s income tax return and provides guidance
on derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. As a result of the implementation of FASB
ASC 740-10, the Company recognized no change in the liability for unrecognized
tax benefits related to tax positions taken in prior periods and no
corresponding change in retained earnings. As a result of the implementation of
FASB ASC 740-10, the Company has not recognized an adjustment in the liability
for unrecognized income tax benefits.  Also, the Company had no
amounts of unrecognized tax benefits that, if recognized, would affect its
effective tax rate.





Premier
Power Italy and Premier Power Development are organized under the laws of Italy
and is subject to federal and provincial taxes.  Premier Power Spain is
organized under the laws of Spain and is subject to federal and provincial
taxes.





Contingent Consideration
Liability – In connection with the acquisition of Rupinvest, contingent
consideration liability of approximately $12 million was recorded at the time of
the purchase. The contingent consideration liability relates to the contingent
issuance of 3 million shares to the sellers of Rupinvest.   In accordance
with FASB ASC 820 the Company estimates the fair value of the contingent
consideration liability at each reporting period, with changes in the estimated
fair value recorded in income.





The fair
value measurement assumes that the contingent consideration liability is
transferred to a market participant at the valuation date and that the
nonperformance risk related to the contingent consideration liability remains
constant. The Company estimates the fair value using the market price of its
shares since it believes this represents the present value of its future stock
returns, discounted at the Company’s required rate of return. The Company also
estimates the number of shares to be issued based on a number of financial
scenarios weighted based on their relative probability. The Company considers
the effect of counterparty performance risk in its fair value estimate. The
Company estimates the counterparty performance risk by comparing its borrowing
rate to those of U.S. treasury notes and uses the underlying spread to
discount the estimated fair value.


6


Recently
Issued Accounting Pronouncements





In
January 2010, the FASB issued Accounting Standards Update No. 2010-06,
Improving Disclosures about
Fair Value Measurements (Topic 820)— Fair Value Measurements and
Disclosures(ASU 2010-06) to add additional disclosures about the
different classes of assets and liabilities measured at fair value, the
valuation techniques and inputs used, the activity in Level 3 fair value
measurements, and the transfers between Levels 1, 2, and 3. Levels 1, 2 and 3 of
fair value measurements are defined in Note 16 of our annual consolidated
financial statements. We have adopted the provisions of this guidance, except
for those pertaining to Level 3 fair value measurements, which we will adopt on
January 1, 2011, as required. There was no material impact on our results of
operations, cash flows, or financial position resulting from the adoption of
this guidance. Further, we expect that adoption of the provisions pertaining to
Level 3 fair value measurements on January 1, 2011 will not have a material
impact on our results of operations, cash flows, or financial
position.





In
April 2010, the FASB issued an update to Compensation-Stock Compensation (ASC
718),which
clarifies that an employee share-based payment award with an exercise price
denominated in the currency of a market in which a substantial portion of the
entity’s equity shares trades should not be considered to contain a condition
that is not a market, performance or service condition. Therefore, an entity
would not classify such an award as a liability if the award otherwise qualifies
as equity.  The standard is effective for interim and annual periods ending
after December 15, 2010 and should be applied prospectively.  The
adoption of this standard is not expected to have a material impact to our
consolidated financial statements.





In June
2009, the FASB issued FASB ASC 810 (SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R)”). FASB ASC 810 applies to FASB ASC 105 entities and is
effective for annual financial periods beginning after November 15, 2009 and for
interim periods within those years. Earlier application is prohibited. A
calendar year-end company must adopt this statement as of January 1, 2010. 
The Company adopted this guidance with no material impact to our consolidated
financial statements.





In June
2009, the FASB issued FASB ASC 860 (SFAS No. 166, “Accounting for Transfers of
Financial Assets-an amendment of FASB Statement No. 140”). FASB ASC 860
applies to all entities and is effective for annual financial periods beginning
after November 15, 2009 and for interim periods within those years. Earlier
application is prohibited. A calendar year-end company must adopt this statement
as of January 1, 2010. This statement retains many of the criteria of FASB ASC
860 (FASB 140, “Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities”) to determine whether a transfer of financial assets
qualifies for sale accounting, but there are some significant changes as
discussed in the statement. Its disclosure and measurement requirements apply to
all transfers of financial assets occurring on or after the effective date. Its
disclosure requirements, however, apply to transfers that occurred both before and after the
effective date. In addition, because FASB ASC 860 eliminates the consolidation
exemption for Qualifying Special Purpose Entities, a company will have to
analyze all existing QSPEs to determine whether they must be consolidated under
FASB ASC 810. The Company adopted this guidance with no material impact to our
consolidated financial statements.





In August
2009, the FASB issued ASU 2009-05, “Measuring Liabilities at Fair
Value.” ASU 2009-05 applies to
all entities that measure liabilities at fair value within the scope of FASB ASC
820, “Fair Value Measurements
and Disclosures.” ASU 2009-05 is
effective for the first reporting period (including interim periods) beginning
after issuance, October 1, 2009 for the Company. The Company has adopted this
guidance with no material impact to our consolidated financial
statements.





In August
2009, an update was made to Fair Value Measurements and
Disclosures –Measuring
Liabilities at Fair Value.” This update permits
entities to measure the fair value of liabilities, in circumstances in which a
quoted price in an active market for an identical liability is not available,
using a valuation technique that uses a quoted price of an identical liability
when traded as an asset, quoted prices for similar liabilities or similar
liabilities when traded as assets or the income or market approach that is
consistent with the principles of Fair Value Measurements and
Disclosures.Effective upon issuance, the Company adopted this
guidance with no material impact to our consolidated financial
statements.





In
October 2009, the FASB ratified FASB ASC 605-25 (the EITF’s final consensus on
Issue 00-21, “Revenue
Arrangements with Multiple Deliverables”). FASB ASC 605-25 is effective
for fiscal years beginning on or after June 15, 2010. Earlier adoption is
permitted on a prospective or retrospective basis. The Company is currently
evaluating the impact of this pronouncement on its consolidated financial
statements.


7


Results
of Operations





Comparison of Three Months
Ended September 30, 2010 and 2009





Our
revenues for the three months ended September 30, 2010 were $28.3 million, an
increase of $22.0 million, or 350.1% from the prior year period.  North
America  revenues were $4.2 million for the three months ended
September 30, 2010, a decrease of $0.3 million, or 5.7% from the prior year
period.  Our Italian operations provided $3.1 million of revenues for the
three months ended September 30, 2010, an increase of $2.7 million, or 808.6%
from the prior year period.  Other European revenues were $21.0 million for
the three months ended September 30, 2010, an increase of $19.5 million, or
1,330.0% from the prior year period.





We had
net loss for the three months ended September 30, 2010 of $1.2 million, or $0.04
per share, compared to net loss of $1.0 million, or $0.04 per share, for the
three months ended September 30, 2009.  Cost of revenue increased $21.9
million, or 446.3%, for the three months ended September 30, 2010, compared to
the prior year period.  Operating expenses increased by $0.7 million, or
27.0%, for the three months ended September 30, 2010, as compared to the prior
year period.





Sources
of Revenue





Three Months September 30,(Dollars in thousands)
                  
                  2010
                  
                  
                  2009
                  
                  
                  Change %Revenues:North
      America
                  
                  $
                  4,223
                  
                  
                  $
                  4,479
                  
                  
                  
                  (5.7
                  )%Italian
                  
                  
                  3,061
                  
                  
                  
                  337
                  
                  
                  
                  808.6
                  %Other
      European
                  
                  
                  21,005
                  
                  
                  
                  1,469
                  
                  
                  
                  1,330.0
                  %$
                  28,289
                  
                  
                  $
                  6,285
                  
                  
                  
                  350.1
                  %





Our
revenues include revenue recognized under installation contracts using the
percentage of completion method of accounting.  Additionally, for the three
months ended September 30, 2010, we derived revenues from our Italian business
segment of $2.7 million primarily as result of distribution sales, which
accounted for 89.0% of our total Italian revenue.  The addition of our
Italian revenue is a result of the acquisition of our Italian subsidiary in the
third quarter of 2009.  North American revenues were down slightly for
quarter compared to the comparable quarter in 2009.  This $256
thousand decrease is comprised of a $629 thousand decrease in revenues from
residential customers, partially offset by a $373 thousand increase in revenues
from commercial customers.  The increase in the commercial revenues in
North America was largely the result of the Company signing several megawatt
projects in the second and third quarters as our customers have shown greater
ability to access project finance versus previous quarters.  We have
continued to build a strong project pipeline and backlog in North America, and
we have partnered with several power purchase agreement providers and expect to
have signed projects from these efforts in future quarters.  The
increase in our Other European segment is largely the result of the successful
collaboration with a Czech Republic company for approximately $10 million
in distribution and engineering, procurement, and construction services on
up to 19 megawatts of solar projects and approximately $10 million in
distribution to a large Spanish development company.





Cost
of revenues





Three Months Ended September 30,(Dollars in thousands)
                  
                  2010
                  
                  
                  2009
                  
                  
                  Change %Cost
      of RevenuesNorth
      America
                  
                  $
                  3,944
                  
                  
                  $
                  3,969
                  
                  
                  
                  (0.6
                  )%Italian
                  
                  
                  2,394
                  
                  
                  
                  11
                  
                  
                  
                  21,707.4
                  %Other
      European
                  
                  
                  20,432
                  
                  
                  
                  921
                  
                  
                  
                  2,120.9
                  %$
                  26,770
                  
                  
                  $
                  4,901
                  
                  
                  
                  446.2
                  %Share-based
      compensation included above
                  
                  $
                  40
                  
                  
                  $
                  28
                  
                  
                  
                  44.4
                  %Gross
      Margin PercentageNorth
      America
                  
                  
                  6.6
                  %
                  
                  
                  11.4
                  %Italian
                  
                  
                  21.8
                  %
                  
                  
                  96.7
                  %Other
      European
                  
                  
                  2.7
                  %
                  
                  
                  37.4
                  %5.4
                  %
                  
                  
                  22.0
                  %


8


Cost of
revenues include all direct material and labor costs attributable to a project
as well as certain indirect costs related to contract performance, such as
indirect labor, supplies, tools, repairs, and depreciation costs.  Cost of
revenues for North America decreased $25 thousand, or 0.6%, for the three months
ended September 30, 2010, compared to the prior year period.  The decrease
was primarily the result of a decrease in recognized revenue.  North
America gross margin decreased to 6.6% due to the insufficient volume of net
sales to cover fixed operational costs and the increased competitive nature of
the industry as a result of lower U.S. energy incentives.  The gross margin
for our Italian operations was 21.8%.  The Italian operation was newly
acquired in the third quarter of 2009, and the margins realized for that quarter
are not indicative of expected margins.  Large scale solar projects
have, in prior quarters, contributed to our Italian gross margins, and none were
recognized in the three months ended September 30, 2010.  Cost of revenues
for our Other European operations increased $19.5 million, or 2,120.9%, for the
three months ended September 30, 2010 compared to the prior year period. 
The increase can be attributable to an increase in net revenues of $19.5
million, but the increase was largely due to entry into the Czech Republic
market where initially we are primarily providing procurement, distribution, and
engineering services, which generally have lower margins than those realized on
our construction contracts.  The gross margin for our Other European
operations decreased to 2.7% of revenues.





Operating
Expenses




Three Months September 30,(Dollars in thousands)
                      
                      2010
                      
                      
                      2009
                      
                      
                      Change %Selling
      and marketing
                      
                      $
                      1,436
                      
                      
                      $
                      601
                      
                      
                      
                      138.9
                      %General
      and administrative
                      
                      $
                      1,666
                      
                      
                      $
                      1,842
                      
                      
                      
                      (9.6
                      )%As
      a percent of revenuesSelling
      and marketing
                      
                      
                      5.1
                      %
                      
                      
                      9.6
                      %General
      and administrative
                      
                      
                      5.9
                      %
                      
                      
                      29.3
                      %Share-Based
      Compensation Included Above:Selling
      and marketing
                      
                      $
                      76
                      
                      
                      $
                      18
                      
                      
                      
                      313.5
                      %General
      and administrative
                      
                      $
                      113
                      
                      
                      $
                      41
                      
                      
                      
                      176.4
                      %





Selling
and Marketing Expenses





Selling
and marketing expenses consist primarily of personnel costs and costs related to
our sales force and marketing staff.  They also include expenses relating
to advertising, brand building, marketing promotions and trade show events, lead
generation, investor relations, and travel and related overhead. 
Commissions are due and payable when customer payment is received.  Selling
and marketing expense for the three months ended September 30, 2010 increased
$835 thousand, or 138.9% compared to the prior year period largely as a result
of the 2009 acquisition of our Italian operations.





General
and Administrative Expenses





General
and administrative expenses consist of personnel and related costs for
accounting, legal, information systems, human resources, and other
administrative functions.  They also include professional service fees, bad
debt expense, and other corporate expenses and related overhead.  General
and administrative expenses decreased by $176 thousand, or 9.6%, for the three
months ended September 30, 2010 compared to the prior year period.  During
the third quarter of 2009, we experienced the highest quarter of general and
administrative expenses in the last 3 years, largely due to salary costs related
to restructuring and severance payments made to employees who were laid off
during that period and a one-time cost of commissions associated with our
acquisition of our Italian operations.  The decrease from that higher
level was to be expected but was partially offset by increases in the growth of
our international operations, which combined had general and administrative
expenses of $591 thousand for the quarter compared to $404 thousand for the
comparable period during the prior year.  Additionally, in the current
period, we incurred a one-time expense of $251 thousand related to the write-off
of costs related to the termination of a secondary public offering.




Other
Income and Expenses





Other
income and expense consists of change in fair value of financial instruments,
interest income, interest expense, gains and losses from foreign currency
exchange, and other income (expense).  Change in fair value of financial
instruments consists of gain on the fair value and cancellation of warrant
liability in the 2009 period and changes in the fair value of the
contingent consideration liability in the 2010 period.


9


Income
Taxes





For three
months ended September 30, 2010 and 2009, the effective tax rate is different
from the U.S. federal statutory rate primarily due to changes in the valuation
allowance, the fair value of the contingent consideration liability and
financial instruments, and earnings considered as indefinitely reinvested in
foreign operations.





Comparison of Nine Months
Ended September 30, 2010 and 2009





Our total
revenues for the nine months ended September 30, 2010 were $40.7 million, an
increase of $25.5 million, or168.0%, from the nine months ended September 30,
2009.  North America revenues were $6.2 million for the nine months ended
September 30, 2010, a decrease of $3.7 million, or 37.6%, from the prior year
period.  Our Italian operations provided $7.4 million of revenues for the
nine months ended September 30, 2010, an increase of $7.0 million, or 2,086.7%,
from the prior year.  Other European revenues were $27.1 million for the
nine months ended September 30, 2010, an increase of $22.2 million, or 453.0%,
from the prior year period.





Our net
loss for the nine months ended September 30, 2010, was $1.3 million, or $0.05
per share, compared to net loss of $0.5 million, or $0.02 per share, for the
nine months ended September 30, 2009.  Net loss was impacted by the effects
of a $5.8 million gain associated with the adjustment to fair value of the
contingent consideration liability and a $1.4 million valuation allowance on
deferred tax assets for the nine months ended September 30, 2010.  Net
income for the nine months ended September 30, 2009 was impacted by a $2.2
million gain associated with the cancellation of all of our issued and
outstanding Series A Warrants and Series B Warrants and a $1.2 million income
tax benefit recorded.  Cost of revenues increased by $25.8 million, or
200.1%, for the nine months ended September 30, 2010, compared to the prior year
period.  Operating expenses increased by $1.6 million, or 25.4%, for the
nine months ended September 30, 2010 as compared to the nine months ended
September 30, 2009.





Sources
of Revenue





Nine Months September 30,(Dollars in thousands)
                  
                  2010
                  
                  
                  2009
                  
                  
                  Change %Net
      revenues:North
      America
                  
                  $
                  6,206
                  
                  
                  $
                  9,947
                  
                  
                  
                  (37.6
                  )%Italian
                  
                  
                  7,368
                  
                  
                  
                  337
                  
                  
                  
                  2,086.7
                  %Other
      European
                  
                  
                  27,140
                  
                  
                  
                  4,908
                  
                  
                  
                  453.0
                  %$
                  40,714
                  
                  
                  $
                  15,192
                  
                  
                  
                  168.0
                  %





For the
nine months ended September 30, 2010, in addition to revenues under installation
contracts, we increased revenues from our distribution
business.   In North America revenues were $0.1 million, Italian
revenues were $6.7 million, and Other European revenues were $12.3 million from
our distribution services business, which in the aggregate was 46.9% of our
total revenue.  We did not start our distribution services business in our
Other European segment until early 2010.  The increase in revenue in the
United States was largely the result of the Company signing several mega watt
projects in the second and third quarters as our customers have shown greater
ability to access project finance versus previous quarters.  We have begun
to build a strong product pipeline and backlog in the U.S., and we have
partnered with several power purchase agreement providers and expect to begin to
have signed projects from these efforts in future quarters.  The
growth in Italian revenues is the result of the acquisition of our Italian
subsidiary in the third quarter of 2009.  The increase in our Other
European segment is largely the result of the successful collaboration with
a Czech Republic company for approximately $10 million in distribution
and engineering, procurement, and construction services on up to 19 megawatts of
solar projects which began in the second quarter of 2010 and approximately $10
million in distribution to a large Spanish development company.





Cost
of Revenues





Nine Months Ended September 30,(Dollars in thousands)
                  
                  2010
                  
                  
                  2009
                  
                  
                  Change %Cost
      of RevenuesNorth
      America
                  
                  $
                  6,573
                  
                  
                  $
                  9,290
                  
                  
                  
                  (29.2
                  )%Italian
                  
                  
                  6,366
                  
                  
                  
                  11
                  
                  
                  
                  57,884.8
                  %Other
      European
                  
                  
                  25,776
                  
                  
                  
                  3,601
                  
                  
                  
                  615.8
                  %$
                  38,715
                  
                  
                  $
                  12,902
                  
                  
                  
                  200.1
                  %Share-based
      compensation included above
                  
                  $
                  163
                  
                  
                  $
                  121
                  
                  
                  
                  34.8
                  %Gross
      Margin PercentageNorth
      America
                  
                  
                  (5.9
                  )%
                  
                  
                  6.6
                  %Italian
                  
                  
                  13.6
                  %
                  
                  
                  96.7
                  %Other
      European
                  
                  
                  5.0
                  %
                  
                  
                  26.6
                  %4.9
                  %
                  
                  
                  15.1
                  %




10




Cost of
revenues increased $25.8 million, or 200.1%, for the nine months ended September
30, 2010 compared to the nine months ended September 30, 2009.  The
increase was primarily the result of increased recognized revenues in the Other
European market and the addition of our Italian operation.  North America
gross margin decreased to negative 5.9% due to the recognition of an
insufficient volume of net sales to cover fixed operation costs, the increased
competitive nature of the industry, and the scope and size of projects as larger
projects typically have lower gross margins.  The gross margin for our
Italian operations was 13.6% and is a combination of generating less of our
revenue from solar projects and increased lower margin distribution
sales.  Cost of revenues for our Other European operations increased
$22.1 million, or 615.8%, for the nine months ended September 30, 2010 compared
to the nine months ended September 30, 2009.  The increase was primarily
the result of increased revenues from our Czech Republic collaboration. 
The gross margin for our Other European operations decreased to 5.0% of revenues
due to entry into the Czech Republic market where initially we
are primarily providing procurement, distribution, and engineering
services, which generally have lower margins than those realized on our
construction contracts.





Operating
Expenses





Nine Months Ended September 30,(Dollars in thousands)
                      
                      2010
                      
                      
                      2009
                      
                      
                      Change %Selling
      and marketing
                      
                      $
                      2,948
                      
                      
                      $
                      1,973
                      
                      
                      
                      49.4
                      %General
      and administrative
                      
                      $
                      4,847
                      
                      
                      $
                      4,245
                      
                      
                      
                      14.2
                      %As
      a percent of revenuesSelling
      and marketing
                      
                      
                      7.2
                      %
                      
                      
                      13.0
                      %General
      and administrative
                      
                      
                      11.9
                      %
                      
                      
                      27.9
                      %Share-Based
      Compensation Included Above:Selling
      and marketing
                      
                      $
                      277
                      
                      
                      $
                      79
                      
                      
                      
                      250.2
                      %General
      and administrative
                      
                      $
                      270
                      
                      
                      $
                      177
                      
                      
                      
                      53.2
                      %





Selling
and Marketing Expenses





Selling
and marketing expenses were higher for the nine months ended September 30, 2010
by $1.0 million, or 49.4%, compared to the nine months ended September 30, 2009,
largely as result of the addition of our acquired Italian
operations.  In addition, the generation of increased revenues
required expenditures for increased sales commissions and for the use of third
party sales agents.





General
and Administrative Expenses





General
and administrative expenses increased by $0.6 million, or 14.2%, for the nine
months ended September 30, 2010, compared to the nine months ended September 30,
2009.  The increase was attributable to the growth of our international
operations, which combined for $1.8 million of general and administrative
expenses for the nine months ended September 30, 2010 compared to $0.9 million
for the comparable period in the prior year.  Additionally, in the
current period, we incurred a one-time expense of $251 thousand related to the
write-off of costs related to the termination of a secondary public
offering.


11


Other
Income and Expenses





Other
income and expense consists of change in fair value of financial instruments,
interest income, interest expense, gains and losses from foreign currency
exchange, and other income (expense). Change in fair value of financial
instruments consists of gain on the fair value and cancellation of warrant
liability and changes in the fair value of contingent consideration
liability.  For the nine months ended September 30, 2010, interest expense
increased by $75 thousand compared to the nine months ended September 30, 2009,
due primarily to increased borrowing in our Spanish
subsidiary.





Income
Taxes





For the
nine months ended September 30, 2010 and 2009, the effective tax rate is
different from the U.S. federal statutory rate primarily due to changes in the
valuation allowance, the fair value of the contingent consideration liability
and financial instruments, and earnings considered as indefinitely reinvested in
foreign operations.  The valuation allowance of $1.4 million recorded in
June 2010 related to net deferred tax assets associated with our U.S. operations
was recorded as we believe based on current U.S. operations that it has become
more likely than not that we will be unable to realize our U.S. net operating
loss carryforwards.





Liquidity





Cash
Flows





For
the Nine Months Ended September 30, 2010 and 2009





Nine Months Ended September 30,2010
                              
                              
                              2009(in
      thousands)Net
      cash flow provided by (used in) operating activities
                              
                              $
                              556
                              
                              
                              $
                              (6,855
                              )Net
      cash used in investing activities
                              
                              $
                              (75
                              )
                              
                              $
                              (115
                              )Net
      cash (used in) provided by  financing activities
                              
                              $
                              (1,670
                              )
                              
                              $
                              4,834Cash
      and cash equivalents
                              
                              $
                              2,592
                              
                              
                              $
                              3,666





The
Company generates cash from operations primarily from cash collections related
to its installation and distribution sales.  Net cash provided by operating
activities was $0.6 million for the nine months ended September 30, 2010,
compared with net cash used in operating activities of $6.8 million for the nine
months ended September 30, 2009.  Our largest source of increased operating
cash flows for the nine months ended September 30, 2010, was the combined
increase of $8.5 million resulting from an increase in billings in excess of
cost and estimated earnings and a decrease in cost and estimated earnings in
excess of billings on uncompleted contracts.  Our primary use of cash from
operating activities was net loss of $1.3 million and the add-back of a noncash
gain of $5.8 million from the change in fair value of the contingent
consideration liability, as well as increases in inventories and prepaid
assets.  Accounts receivable and accounts payable both increased
significantly as a result of the growth in the Other European segment, but these
effects essentially offset each other.  As of September 30, 2010, we
had significant projects pending billing upon completion in our Italian business
segment.  Upon billing and receipt, we anticipate an increase in cash and
cash equivalents.





The
change in cash flows from investing activities was minimal for the nine months
ended September 30, 2010 and 2009 with minimal capital asset
purchases.





The
change in cash flows from financing activities primarily relate to borrowings
and payment under debt facilities.  The net cash flows from financing
activities for the nine months ended September 30, 2009 was mainly the result of
the issuance of our Series B Convertible Preferred Stock in exchange for net
proceeds of $3 million during the first half of 2009.





Material
Impact of Known Events on Liquidity





Our
expanding large-scale solar power project development business in Italy is
having increased liquidity requirements. Solar power project development
cycles can take several months to develop. In certain of our markets,
primarily Italy, it is not uncommon to receive payment at the end of a project.
This may require us to make an advancement of costs prior to cash receipts. To
date, we have financed these up-front construction costs using working capital
and cash on hand.  In addition, the solar module market has been in
tight supply and has required us at times to pay for modules in advance of
receipt or customer payment to ensure delivery timelines for our
projects.


12


The
disruption in the credit markets has had a significant adverse impact on a
number of financial institutions.  As of September 30, 2010, however, our
liquidity and capital investments have not been materially adversely impacted,
and we believe that they will not be materially adversely impacted in the near
future.  We will continue to closely monitor our liquidity and the credit
markets.  Nonetheless, we cannot predict with any certainty the impact to
us of any further disruption in the credit environment.





There are
no other known events that are expected to have a material impact on our
short-term or long-term liquidity.





Capital
Resources





As of
September 30, 2010, we had $2.6 million of cash and cash equivalents.  We
also have extended payment terms on certain of our accounts payable from large
solar projects that we believe will provide additional working capital.  We
have financed our operations primarily through operating activities and equity
financings.  In September 2010 we paid off and cancelled our $7.0 million
credit line with Umpqua Bank that was for working capital and capital
expenditures. We renewed a €100,000 credit line for Premier Power
Spain, which expires on August 1, 2011.  Please see the discussion below
under “Lines of Credit.” At September 30, 2010, there were no available
borrowings under Premier Power Spain’s line of credit.





We also
have contracted backlog in the amount of approximately $55.6 million, as of
September 30, 2010, consisting of non-cancellable signed contracts for projects
for approximately 16.5 MW that the Company expects to complete within the next
12 months, including projects for 2 MW representing revenues of approximately
$10.3 million in the Italian business segment, projects for 4.7 MW representing
revenues of approximately $25.3 million in the North America business segment,
and projects for 9.8 MW representing revenues of approximately $20.0 million in
the Other European business segment. In addition to our cash and cash
equivalents and accounts receivable, we expect to invoice approximately $7.6
million against our costs and estimated earnings in excess of billings on
uncompleted contracts in the next 90 days. Thus, we believe that our current
cash and cash equivalents, cash flow from operations, and our line of credit
with banks will be sufficient to meet our anticipated cash needs, including our
cash needs for working capital and capital expenditures for at least the next 12
months.





We may
seek to raise additional cash to fund future project investments or acquisitions
we may decide to pursue. To the extent it becomes necessary to raise additional
cash in the future, we may seek to raise it through the sale of debt or equity
securities, funding from joint-venture or strategic partners, debt financing or
loans, issuance of common stock, or a combination of the foregoing. We cannot
provide any assurances that we will be able to secure the additional cash or
working capital we may require to continue our operations.





Contractual
Obligations and Off-Balance Sheet Arrangements





Line
of Credit





On July
13, 2009, the Company entered into a loan agreement with Umpqua Bank, an Oregon
corporation, for a line of credit of up to $12 million, maturing on July 13,
2011.  The loan agreement provided for an initial line of credit of $7
million, provided, however, that the Company may request no more than twice
prior to the maturity date that the line of credit be increased to an amount not
to exceed $12 million in the event the Company acquires another subsidiary and
require additional working capital for such subsidiary.  The balance
of the line of credit was paid off and terminated on September 15,
2010.  There is no outstanding balance, and the Company has no further
borrowing capabilities under this line of credit.





At
September 30, 2010, Premier Power Spain had an unsecured line of credit for $0.1
million, which has interest terms of Euribor+3.25 and is due in full on August
1, 2011.  As of September 30, 2010, there was $0.1 million outstanding
on the line.





Contractual
Obligations





We have
certain fixed contractual obligations and commitments that include future
estimated payments. Changes in our business needs, cancellation provisions,
changing interest rates, and other factors may result in actual payments
differing from the estimates. We cannot provide certainty regarding the timing
and amounts of payments. We have presented below a summary of the most
significant assumptions used in our determination of amounts presented in the
tables in order to assist in the review of this information within the context
of our consolidated financial position, results of operations, and cash
flows.


13


The
following table summarizes our contractual obligations as of September 30, 2010,
and the effect these obligations are expected to have on our liquidity and cash
flows in future periods.





Less than 1Total
                        
                        
                        year
                        
                        
                        1-3 Years
                        
                        
                        3-5 Years(in
      thousands)Contractual
      Obligations:Bank indebtedness
                        
                        $
                        786
                        
                        
                        $
                        248
                        
                        
                        $
                        533
                        
                        
                        $
                        5Operating leases
                        
                        
                        484
                        
                        
                        
                        40
                        
                        
                        
                        397
                        
                        
                        
                        47$
                        1,270
                        
                        
                        $
                        288
                        
                        
                        $
                        930
                        
                        
                        $
                        52





In May
2010, we entered into an agreement with a reseller.  Under the agreement,
we pay $1,000 per month, with the first 6 months of fees waived. 
Additionally, we provide the reseller a margin of 5%-6% on sales of our products
by the reseller.  The agreement expires in May 2011, unless
renewed.





At times
we enter into take or pay agreements with our suppliers.  This
provides pricing advantages to the Company in return for supply
certainty.  At September 30, 2010, we, as part of the purchase of
solar modules from a vendor for a project in the Czech Republic, entered in to a
take or pay agreement of which 500 kilowatts of solar modules with a value of
approximately $1.0 million remain to be delivered.  This agreement is
supported by a Letter of Credit.  We currently have no other take or
pay commitments outstanding and have incurred no losses as a result of these
agreements.





Off-Balance
Sheet Arrangements





We have
not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as
stockholders’ equity or that are not reflected in our financial statements.
Furthermore, we do not have any retained or contingent interest in assets
transferred to an unconsolidated entity that serves as credit, liquidity, or
market risk support to such entity. We do not have any variable interest in any
unconsolidated entity that provides financing, liquidity, market risk, or credit
support to us or engages in leasing, hedging, or research and development
services with us.




Item
4.  Controls and Procedures.





Disclosure
Controls and Procedures





As of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with the participation of our management, including our
Chief Executive Officer (principal executive officer) and Chief Financial
Officer (principal financial and accounting officer), of the effectiveness of
the design and operation of our disclosure controls and procedures, as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”).  Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of the end of the applicable period to
ensure that the information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act (i) is recorded, processed,
summarized, and reported within the time periods specified in Securities and
Exchange Commission rules and forms and (ii) is accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosures.





Changes
in Internal Control over Financial Reporting





There was
no change in our internal control over financial reporting during our most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.





PART
II - OTHER INFORMATION




Item
1.  Legal Proceedings.





There
have been no material developments during the quarter ended September 30, 2010
in any material pending legal proceedings to which the Company is a party or of
which any of our property is the subject.


14


Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds.





There
were no unregistered sales of equity securities during the quarter ended
September 30, 2010 to report.





Item
3.  Defaults Upon Senior Securities.





None.





Item
5.  Other Information.




(a)  None.


(b)  There
were no changes to the procedures by which security holders may recommend
nominees to our board of directors.





Item
6.  Exhibits.





Exhibit
                    Number
                  
                  Description3.1
                  
                  Certificate
      of Incorporation (1)3.2
                  
                  Bylaws
      (1)3.3
                  
                  Certificate
      of Amendment of the Certificate of Incorporation, filed August 19, 2008
      with the Secretary of State of the State of Delaware
(2)3.4
                  
                  Certificate
      of Amendment of the Certificate of Incorporation, filed August 29, 2008
      and effective September 5, 2008 with the Secretary of State of the State
      of Delaware (3)3.5
                  
                  Certificate
      of Designation of Preferences, Rights and Limitations of Series A
      Convertible Preferred Stock, filed September 10, 2008 with the Secretary
      of State of the State of Delaware (3)3.6
                  
                  Amendment
      to Certificate of Incorporation, filed November 24, 2008 with the
      Secretary of State of Delaware (4)3.7
                  
                  Amendment
      to Bylaws (5)3.8
                  
                  Certificate
      of Designation of Preferences, Rights and Limitations of Series B
      Convertible Preferred Stock, filed with the Delaware Secretary of State on
      June 12, 2009 (6)10.1
                  
                  Securities
      Purchase Agreement Amendment No. 1 between the Registrant  and
      Vision Opportunity Master Fund, Ltd., dated September 30, 2010
      (7)31.1
                  
                  Section 302
      Certification by the Corporation’s Principal Executive Officer
      *31.2
                  
                  Section 302
      Certification by the Corporation’s Principal Financial and Accounting
      Officer *32.1
                  
                  Section 906
      Certification by the Corporation’s Principal Executive Officer
      *32.2
                  
                  Section 906
      Certification by the Corporation’s Principal Financial and Accounting
      Officer *




*
                Filed
      herewith.(1)
                Filed
      on February 13, 2007 as an exhibit to our Registration Statement on Form
      SB-2/A, and incorporated herein by reference.(2)
                Filed
      on August 29, 2008 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.(3)
                Filed
      on September 11, 2008 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.(4)
                Filed
      on November 26, 2008 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.(5)
                Filed
      on January 16, 2009 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.(6)
                Filed
      on June 18, 2009 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.(7)
                Filed
      on October 4, 2010 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by
reference.


15




SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.




PREMIER
      POWER RENEWABLE ENERGY, INC.(Registrant)Date:
      November 15, 2010
              By:
              /s/ Dean R. MarksDean
      R. MarksChief
      Executive Officer and President (Principal Executive
    Officer)Date:
      November 15, 2010
              By:
              /s/ Frank J. SansoneFrank
      J. SansoneChief
      Financial Officer (Principal Financial & Accounting
      Officer)


16