UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q/A




(Mark
One)





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


For the
quarterly period ended March
31, 2009





 ̈
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)





(916) 939-0400





(Registrant's
telephone number, including area code)





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





Indicate
by check mark whether the registrant 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 
o No  o





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  ̈
            
            Non-Accelerated
      Filer  ̈Accelerated
      Filer  ̈
            
            Smaller
      Reporting Company x





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




APPLICABLE
ONLY TO CORPORATE ISSUERS:





Indicate
the number of shares outstanding of each issuer's classes of common stock, as of
the latest practicable date:  26,048,750 issued and outstanding as of May
18, 2009.





EXPLANATORY
NOTE





This
Amendment No. 2 to our quarterly report on Form 10-Q (“Form 10-Q/A”) for the
quarter ended March 31, 2009 is filed to (i) restate the financial statements
included with the Form 10-Q for the quarter ended March 31, 2009 originally
filed on May 19, 2009 and amended on May 21, 2009 (the “Form 10-Q”) to
reflect certain non-cash adjustments and a re-valuation of warrants and stock
option expense, (ii) amend the footnotes to our financial statements included
with the Form 10-Q, and (iii) amend certain disclosures in the Results of
Operations and Liquidity sub-sections of Item 2 under “Management's Discussion
and Analysis of Financial Condition and Results of
Operations.”   The following financial statements have been
amended: (i) the Condensed Consolidated Balance Sheets as of March 31, 2009
(ii) the Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2009, (iii) the Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2009, and (iv) the Condensed Consolidated
Statements of Shareholders’ Equity for the Three Months Ended March 31, 2009.
Please see footnote 13 to our financial statements filed with this Form
10-Q/A.





These
changes were made, and this Form 10-Q/A is filed in connection with a letter
from the Commission dated July 20, 2009 regarding our Amendment No. 6 to the
Registration Statement on Form S-1 (333-155241).  Except as required
to reflect the changes noted above, this Form 10-Q/A does not attempt to modify
or update any other disclosures set forth in our quarterly report on Form 10-Q.
Additionally, this Form 10-Q/A does not purport to provide a general update or
discussion of any other developments of the Company subsequent to the original
filing.  The filing of this Form 10-Q/A shall not be deemed an
admission that the original filing, when made, included any untrue statement of
material fact or omitted to state a material fact necessary to make a statement
not misleading.





PREMIER
POWER RENEWABLE ENERGY, INC.


TABLE OF
CONTENTS


TO
QUARTERLY REPORT ON FORM 10-Q/A


FOR
QUARTER ENDED MARCH 31, 2009




PagePART I
                FINANCIAL INFORMATIONItem
      1.
                Financial
      Statements
                3Item
      2.
                Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                4Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                9Item
      4.
                Controls
      and Procedures
                9PART
      II
                OTHER
      INFORMATION
                10Item
      1.
                Legal
      Proceedings
                10Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                10Item
      3.
                Defaults
      Upon Senior Securities
                10Item
      4.
                Submission
      of Matters to a Vote of Security Holders
                10Item
      5.
                Other
      Information
                10Item
      6.
                Exhibits
                11Signatures
                13


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.
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 AS
OF MARCH 31, 2009 AND DECEMBER 31, 2008
 
 2009
                              
                              
                              2008(unaudited)
                              
                              
                              (audited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                              
                              
                              
                              $
                              2,899,388
                              
                              
                              $
                              5,770,536Accounts
      receivable, net of allowance for doubtful accounts of$18,000
      at March 31, 2009 and December 31, 2008
                              
                              
                              
                              
                              4,025,281
                              
                              
                              
                              4,767,653Inventory
                              
                              
                              
                              
                              1,458,843
                              
                              
                              
                              1,424,910Prepaid
      expenses and other current assets
                              
                              
                              
                              
                              181,590
                              
                              
                              
                              259,328Costs
      and estimated earnings in excess of billings on uncompleted
      contracts
                              
                              
                              
                              
                              830,140
                              
                              
                              
                              235,929Sales
      tax receivable
                              
                              
                              
                              
                              250,517
                              
                              
                              
                              93,775Deferred
      tax assets
                              
                              
                              
                              
                              262,709
                              
                              
                              
                              228,835Total
      current assets
                              
                              
                              
                              
                              9,908,468
                              
                              
                              
                              12,780,966Property
      and equipment, net
                              
                              
                              
                              
                              501,537
                              
                              
                              
                              474,905Intangible
      assets
                              
                              
                              
                              
                              986,839
                              
                              
                              
                              1,048,420Goodwill
                              
                              
                              
                              
                              483,496
                              
                              
                              
                              483,496Deferred
      tax assets, long-term
                              
                              
                              
                              
                              668,350
                              
                              
                              
                              24,867Total
      assets
                              
                              
                              
                              $
                              12,548,690
                              
                              
                              $
                              14,812,654LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
                              
                              
                              
                              $
                              3,020,664
                              
                              
                              $
                              3,707,141Accrued
      liablilities
                              
                              
                              
                              
                              915,242
                              
                              
                              
                              1,368,018Warrant
      liability
                              
                              (1)
                              
                              
                              9,643,347
                              
                              
                              
                              -Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
                              
                              
                              
                              
                              726,063
                              
                              
                              
                              1,206,403Taxes
      payable
                              
                              
                              
                              
                              280,598
                              
                              
                              
                              184,470Borrowings,
      current
                              
                              
                              
                              
                              26,933
                              
                              
                              
                              38,311Total
      current liabilities
                              
                              (1)
                              
                              
                              14,612,847
                              
                              
                              
                              6,504,343Borrowings,
      non-current
                              
                              
                              
                              
                              85,591
                              
                              
                              
                              92,407Defered
      tax liabilities, long-term
                              
                              
                              
                              
                              343,279
                              
                              
                              
                              343,279Total
      liabilities
                              
                              (1)
                              
                              
                              15,041,717
                              
                              
                              
                              6,940,029Shareholders'
      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 March 31, 2009 and December 31,
      2008, respectively
                              
                              
                              
                              
                              350
                              
                              
                              
                              350Common
      stock, par value $.0001 per share; 500,000,000 shares authorized;
      26,048,750 and 21,159,451 shares issued and outstanding at March 31, 2009
      and December 31, 2008, respectively
                              
                              
                              
                              
                              2,605
                              
                              
                              
                              2,605Additional
      paid-in-capital
                              
                              (1)
                              
                              
                              5,823,201
                              
                              
                              
                              7,542,064Retained
      earnings (acumulated deficit)
                              
                              (1)
                              
                              
                              (8,233,728
                              )
                              
                              
                              369,296Accumulated
      other comprehensive loss
                              
                              
                              
                              
                              (85,455
                              )
                              
                              
                              (41,690
                              )Total
      shareholders' equity
                              
                              
                              
                              
                              (2,493,027
                              )
                              
                              
                              7,872,625Total
      liabilities and shareholders' equity
                              
                              (1)
                              
                              $
                              12,548,690
                              
                              
                              $
                              14,812,654
 
 (1) As
restated. See notes 8, 9, 12, and 13.
 
 The
accompanying notes are an integral part of these financial
statements.
  F-1
  PREMIER
POWER RENEWABLE ENERGY, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND MARCH 31, 2008
 
 2009
                        
                        
                        2008(unaudited)
                        
                        
                        (unaudited)Net
      sales
                        
                        
                        
                        $
                        4,793,352
                        
                        
                        $
                        4,864,946Cost
      of sales
                        
                        
                        
                        
                        (4,425,473
                        )
                        
                        
                        (4,047,800
                        )Gross
      profit
                        
                        
                        
                        
                        367,879
                        
                        
                        
                        817,146Operating
      expenses:Sales
      and marketing
                        
                        
                        
                        
                        654,757
                        
                        
                        
                        408,504General
      and administrative
                        
                        
                        
                        
                        1,128,006
                        
                        
                        
                        608,059Total
      operating expenses
                        
                        
                        
                        
                        1,782,763
                        
                        
                        
                        1,016,563Operating
      loss
                        
                        
                        
                        
                        (1,414,884
                        )
                        
                        
                        (199,417
                        )Other
      income (expense):Change
      in fair value of financial instruments
                        
                        (1)
                        
                        
                        1,475,226
                        
                        
                        
                        -Interest
      expense
                        
                        
                        
                        
                        (1,771
                        )
                        
                        
                        (6,622
                        )Interest
      income
                        
                        
                        
                        
                        17,938
                        
                        
                        
                        9,129Total
      other income (expense), net
                        
                        (1)
                        
                        
                        1,491,393
                        
                        
                        
                        2,507Income
      (loss) before income taxes
                        
                        (1)
                        
                        
                        76,509
                        
                        
                        
                        (196,910
                        )Income
      tax (benefit) expense
                        
                        
                        
                        
                        (645,053
                        )
                        
                        
                        2,800Net
      income (loss) before minority interest
                        
                        (1)
                        
                        
                        721,562
                        
                        
                        
                        (199,710
                        )Minority
      interest
                        
                        
                        
                        
                        -
                        
                        
                        
                        6,151Net
      income (loss)
                        
                        
                        
                        $
                        721,562
                        
                        
                        $
                        (193,559
                        )Earnings
      Per Share:Basic
                        
                        (1)
                        
                        $
                        0.03
                        
                        
                        $
                        (0.01
                        )Diluted
                        
                        (1)
                        
                        $
                        0.02
                        
                        
                        $
                        (0.01
                        )Weighted
      Average Shares Outstanding:Basic
                        
                        
                        
                        
                        26,048,750
                        
                        
                        
                        21,159,451Diluted
                        
                        (1)
                        
                        
                        30,529,116
                        
                        
                        
                        21,159,451
 
 (1) As
restated. See notes 8, 9, 12, and 13.
 
 The
accompanying notes are an integral part of these financial
statements.
  F-2
 
 PREMIER
POWER RENEWABLE ENERGY, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND MARCH 31, 2008
 
 March 31, 2009
                        
                        
                        March 31, 2008(unaudited)
                        
                        
                        (unaudited)Cash
      flows from operating activities:Net
      gain (loss)
                        
                        
                        
                        $
                        721,562
                        
                        
                        $
                        (193,559
                        )Minority
      interest
                        
                        
                        
                        
                        -
                        
                        
                        
                        (6,151
                        )Net
      income before minority interest
                        
                        (1)
                        
                        
                        721,562
                        
                        
                        
                        (199,710
                        )Adjustments
      to reconcile net income provided by (used in) operating
      activities:Employees
      stock compensation
                        
                        
                        
                        
                        144,770
                        
                        
                        
                        -Depreciation
      and amortization
                        
                        
                        
                        
                        101,028
                        
                        
                        
                        24,270Change
      in fair value of finacial instruments
                        
                        (1)
                        
                        
                        (1,475,226
                        )
                        
                        
                        -Changes
      in operating assets and liabilities:Accounts
      receivable
                        
                        
                        
                        
                        522,198
                        
                        
                        
                        1,363,921Sales
      tax receivable
                        
                        
                        
                        
                        (155,450
                        )Inventory
                        
                        
                        
                        
                        (40,946
                        )
                        
                        
                        167,065Prepaid
      expenses and other assets
                        
                        
                        
                        
                        77,356
                        
                        
                        
                        10,597Costs
      and estimated earnings in excess of billings
                        
                        
                        
                        
                        
                        
                        
                        
                        -on
      uncompleted contracts
                        
                        
                        
                        
                        (592,967
                        )
                        
                        
                        (614,521
                        )Accounts
      payable
                        
                        
                        
                        
                        (438,754
                        )
                        
                        
                        (828,740
                        )Accrued
      liablities
                        
                        
                        
                        
                        (437,074
                        )
                        
                        
                        203,632Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
                        
                        
                        
                        
                        (454,421
                        )
                        
                        
                        329,511Income
      tax payable
                        
                        
                        
                        
                        104,882
                        
                        
                        
                        -Deferred
      taxes
                        
                        
                        
                        
                        (679,309
                        )
                        
                        
                        (11,000
                        )Net
      cash (used in) provided by operating activities
                        
                        
                        
                        
                        (2,602,351
                        )
                        
                        
                        445,025Cash
      flows from investing activities:Acquisition
      of property and equipment
                        
                        
                        
                        
                        (35,057
                        )
                        
                        
                        (13,771
                        )Cash
      flows from financing activities:Net
      principal payments on borrowings
                        
                        
                        
                        
                        (54,891
                        )
                        
                        
                        (14,161
                        )Proceeds
      from line of credit
                        
                        
                        
                        
                        -
                        
                        
                        
                        500,000Cost
      related to share registration
                        
                        
                        
                        
                        (69,646
                        )
                        
                        
                        -Net
      cash (used in) provided by financing activities
                        
                        
                        
                        
                        (124,537
                        )
                        
                        
                        485,839Effect
      of foreign currency
                        
                        
                        
                        
                        (109,203
                        )
                        
                        
                        (31,382
                        )(Decrease)
      increase in cash and cash equivalents
                        
                        
                        
                        
                        (2,871,148
                        )
                        
                        
                        885,711Cash
      and cash equivalents at begining of period
                        
                        
                        
                        
                        5,770,536
                        
                        
                        
                        1,277,043Cash
      and cash equivalents at end of period
                        
                        
                        
                        $
                        2,899,388
                        
                        
                        $
                        2,162,754Supplemental
      cash flow information:Non-cash
      investing and financing activities:Issuance
      of notes to acquire equipment
                        
                        
                        
                        $
                        38,768
                        
                        
                        $
                        -Initial
      valuation of derivative liability
                        
                        (1)
                        
                        $
                        11,118,573
                        
                        
                        $
                        -Interest
      paid
                        
                        
                        
                        $
                        1,864
                        
                        
                        $
                        6,622Taxes
      paid
                        
                        
                        
                        $
                        9,450
                        
                        
                        $
                        2,800
 
 (1) As
restated. See notes 8, 9, 12, and 13.
 
 The
accompanying notes are an integral part of these financial
statements.
  F-3
 
 PREMIER
POWER RENEWABLE ENERGY, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR
THE THREE MONTHS ENDED MARCH 31, 2009
 
 Common
      Stock
                          
                          
                          Preferred
      Stock
                          
                          
                          Additional
      Paid
                          
                          
                          Retained
      Earnings
                          
                          
                          Accumulated
                            Other
                            Comprehensive
                          
                          
                          UnauditedShares
                          
                          
                          Amount
                          
                          
                          Shares
                          
                          
                          Amount
                          
                          
                          In
      Capital
                          
                          
                          Accumulated
      Deficit
                          
                          
                          Income
      (Loss)
                          
                          
                          TotalBalance
      December 31, 2008
                          
                          
                          26,048,750
                          
                          
                          $
                          2,605
                          
                          
                          
                          3,500,000
                          
                          
                          $
                          350
                          
                          
                          $
                          7,542,064
                          
                          
                          $
                          369,296
                          
                          
                          $
                          (41,690
                          )
                          
                          $
                          7,872,625Cumulative
      effect of adjustment upon adoption of EITF 07-5
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (1,793,987
                          )
                          
                          
                          (9,324,586
                          ) (1)
                          
                          
                          
                          
                          
                          
                          (11,118,573
                          ) (1)Balance
      January 1, 2009
                          
                          
                          26,048,750
                          
                          
                          
                          2,605
                          
                          
                          
                          3,500,000
                          
                          
                          
                          350
                          
                          
                          
                          5,748,077
                          
                          
                          
                          (8,955,290
                          ) (1)
                          
                          
                          (41,690
                          )
                          
                          
                          (3,245,948
                          ) (1)Net
      income
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          721,562
                          (1)
                          
                          
                          
                          
                          
                          
                          721,562
                          (1)Foreign
      currency translation adjustment
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (43,765
                          )
                          
                          
                          (43,765
                          )Comprehensive
      income
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          677,797
                          (1)Employee
      stock compensation
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          144,770
                          (1)
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          144,770
                          (1)Cost
      related to share registration
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (69,646
                          )
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (69,646
                          )Balance
      March 31, 2008 (unaudited)
                          
                          
                          26,048,750
                          
                          
                          $
                          2,605
                          
                          
                          
                          3,500,000
                          
                          
                          $
                          350
                          
                          
                          $
                          5,823,201
                          
                          
                          $
                          (8,233,728
                          ) (1)
                          
                          $
                          (85,455
                          )(1)
                          
                          $
                          (2,493,027
                          ) (1)
 
 (1) As
restated. See notes 8, 9, 12, and 13.
  The
accompanying notes are an integral part of these financial
statements.


F-4


PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Condensed Consolidated Financial Statements


(unaudited)




1.
            
ORGANIZATION AND NATURE OF BUSINESS




Premier
Power Renewable Energy, Inc., a Delaware corporation (the “Parent”), and its
subsidiaries, Premier Power Renewable Energy, Inc., a California corporation
(“Premier Power California”), Bright Future Technologies, LLC (“Bright Future”),
and Premier Power Sociedad Limitada (“Premier Power Spain”) (collectively the
“Company”) designs, engineers, and installs photovoltaic systems in the United
States and Spain.





Prior to
September 9, 2008, Premier Power California and Bright Future were wholly owned
by a common shareholder group. That same shareholder group was deemed to
exercise control over Premier Power Spain through a 51% ownership interest,
management control, and the absence of disproportionate voting rights. On
September 1, 2008, that shareholder group exchanged their interests in Premier
Power Spain for shares of common stock of Premier Power California. On August
27, 2008, the holders of the 49% minority interest in Premier Power Spain
exchanged their interests in Premier Power Spain for shares of common stock of
Premier Power California. A summary of the fair value of the acquired tangible
and intangible assets and liabilities held by the 49% minority interest is as
follows:




Fair
      value of shares exchanged
                  
                  $
                  1,489,234Tangible
      assets acquired
                  
                  $
                  (1,033,603
                  )Amortizing
      intangible assets acquired
                  
                  $
                  (1,110,001
                  )Liabilities
      assumed
                  
                  $
                  1,137,866Goodwill
                  
                  $
                  483,496





As of
December 31, 2008, the Company has completed the process of valuing the acquired
assets and liabilities.  There were no material adjustments to the
initial allocation of the acquisition price as a result of the completion of
this process.





The
historical financial statements of the Company prior to September 9, 2008
present its financial position, results of operations, and cash flows on a
combined basis.





Pursuant
to a reverse acquisition between the Parent (formerly “Harry’s Trucking, Inc.”)
and Premier Power California that closed on September 9, 2008, the shareholders
of Premier Power California exchanged 100% of their interests in Premier Power
California for an aggregate 24,218,750 shares of the Parent’s common
stock.





Subsequent
to the merger, the former shareholders of Premier Power California held
approximately 87% of the outstanding common stock of the Company. The merger was
considered to be a reverse acquisition accounted for as a recapitalization.
Premier Power California was considered to be the accounting acquirer, and the
historical financial statements of the Company are those of Premier Power
California. The outstanding shares, members’ equity, and earnings per share in
the historical financial statements have been restated to give effect to the
shares of common stock issued to the controlling shareholders.




In
connection with the reverse acquisition, the Company issued 3,500,000
units, each unit consisting of 1 share of Series A Convertible Preferred Stock,
1⁄2 of a Series A Warrant, and 1⁄2 of a Series B Warrant in exchange for $5,511,845
in net proceeds. Each 1 share of Series A Convertible Preferred Stock converts
into 1 share of common stock. Each 1 Series A Warrant and 1 Series B Warrant
entitles the holder thereof to purchase one share of common stock at $2.50 and
$3.00 per share, respectively.


F-5


PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Condensed Consolidated Financial Statements


(unaudited)




2.
            
SIGNIFICANT ACCOUNTING POLICIES




Basis of Presentation - The
accompanying condensed 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
financial statements and related notes to the financial statements of Premier
Power Renewable Energy, Inc.  (the “Company”) for the years ended
December 31, 2008 and 2007 appearing in the Company’s Form 10-K filed with the
Securities and Exchange Commission (the “SEC”). The March 31, 2009 unaudited
interim condensed consolidated financial statements on Form 10-Q have been
prepared pursuant to the rules and regulations of the SEC for smaller reporting
companies. Certain information and note disclosures normally included in the
annual financial statements on Form 10-K 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 operation 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 Premier Power
Renewable Energy, Inc. and its subsidiaries. Intercompany balances, transactions
and cash flows are eliminated on consolidation.




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 the allowance for doubtful accounts, warranty
reserves, revenue recognition, the estimated useful life of property and
equipment, derivative values, and income taxes. Accordingly, actual results
could differ from those estimates.





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
federally insured limits. The Company has not experienced any losses in such
accounts. The Company had $2,672,010 and $5,129,335 in cash in bank accounts at
March 31, 2009 and December 31, 2008, respectively, in excess of deposit
insurance limits.




Concentrations and Credit Risk
- One customer accounted for 24% of the Company’s sales for the three
months ended March 31, 2009. One customer accounted for 27% of the Company’s
revenues, another 10% of revenue and a third customer accounted for 9% of
revenue for the three months ended March 31, 2008.   Accounts
receivable primarily consist of trade receivables and amounts due from state
agencies and utilities for rebates on solar systems installed.  At
March 31, 2009, the Company had two customers that accounted for 34% and 18%,
respectively, of the Company’s accounts receivable.   At March
31, 2008, four customers accounted for 20%, 18%, 17%, and 14% ,
respectively, of the Company’s accounts receivable. 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. To date, the Company’s losses on
uncollectible accounts receivable have been immaterial. 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 $18,000 and $18,000 as of March 31, 2009 and December 31, 2008,
respectively.




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





Inventory - Inventory,
consisting primarily of raw materials, is recorded using the average cost
method and is carried at the lower of cost or market.




Property and Equipment -
Property and equipment with a value greater than $2,000 are recorded 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.





Stock-Based Compensation – The
Company accounts for stock-based compensation under the provisions of Statement
of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (SFAS
No. 123(R)), 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 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 SFAS No.
123(R).


F-6


PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Condensed Consolidated Financial Statements


(unaudited)





Revenue Recognition - Revenue
on photovoltaic system 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
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
costs and estimated earnings in excess of billings on uncompleted contracts or
billings in excess of costs and estimated earnings on uncompleted contracts. The
Company determines its customer’s credit worthiness at the time the 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 and those indirect costs
related to contract performance, such as indirect labor, supplies, tools,
repairs, and depreciation costs. Selling and 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.





Advertising - The Company
expenses advertising costs as they are incurred. Advertising costs were
$171,061and $149,174 for the three months ended March 31, 2009 and 2008,
respectively.





Product Warranties - Prior to
January 1, 2007, the Company provided a five year warranty covering the labor
and materials associated with its installations. Effective January 1, 2007, the
Company changed the coverage to generally be ten years in the U.S. and to one
year in Spain for all contracts signed after December 31, 2006. Solar panels and
inverters are warranted by the manufacturer for 25 years and 10 years,
respectively. The Company recorded warranty expense of $83,882 and warranty
claims of $42,624 for the three months ended March 31, 2008.  Activity
in the Company’s warranty reserve for the three months ended March 31, 2009 was
as follows:




Three
                    Months
                    Ended
                    March 31,
                    2009Balance
      at beginning of period
                  
                  $
                  367,250Warranty
      expense
                  
                  
                  113,301Less:
      Warranty claims
                  
                  
                  (148,304
                  )Balance
      at end of period
                  
                  $
                  332,247





Foreign Currency -Premier
Power Spain’s functional currency is the Euro. Its assets and liabilities are
translated at year-end exchange rates, except for certain non-monetary balances,
which are translated at historical rates. All income and expense amounts of
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 shareholders’ 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 months ended
March 31, 2009 and 2008, the foreign currency transaction loss was
$41,093 and $69,244, respectively.





Minority Interest – The
minority interest reflected in the statement of operations represents the
49% shareholdings of the non-controlling shareholders in the Company’s Spanish
operations, Premier Power Spain. Concurrent with the reverse merger, these
shareholdings were converted into shares of the Company’s stock and no longer
reported as a minority interest effective September 9, 2008.


F-7


PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Condensed Consolidated Financial Statements


(unaudited)





Earnings per Share – Earnings
per share is computed in accordance with the provisions of 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 other dilutive
potential common shares. For the three months ended March 31, 2009, the Company
had dilutive potential common shares outstanding related to convertible
preferred shares and warrants.





Three Months
                  Ended
                
                
                Three Months
                  EndedMarch 31,
                  2009
                
                
                March 31,
                  2008Net
      Income (Loss) (restated)
                
                $
                721,562
                
                
                $
                (193,559
                )Earnings
      Per Share:Basic
      (restated)
                
                $
                0.03
                
                
                $
                (0.01
                )Diluted
      (restated)
                
                $
                0.02
                
                
                $
                (0.01
                )Weighted
      Average Shares Outstanding:Basic
                
                
                26,048,750
                
                
                
                21,159,451Diluted
      effect of convertible preferred stock (restated)
                
                
                3,500,000
                
                
                
                ―Diluted
      effect of  warrants (restated)
                
                
                980,366
                
                
                
                ―Diluted
      (restated)
                
                
                30,529,116
                
                
                
                21,159,451





On
December 19, 2008, the board of directors approved the Premier Power Renewable
Energy, Inc. 2008 Equity Incentive Plan (the “Incentive Plan”).  All
of the Company’s employees, officers, and directors, and those consultants who
(i) are natural persons and (ii) provide bona fide services to the Company not
connected to a capital raising transaction or the promotion or creation of a
market for our securities are eligible to be granted options or restricted stock
awards under the Incentive Plan.  In January 2009, the Company granted
stock options for 1,142,479 shares of its common stock to eligible
persons.




Comprehensive Income (Loss)
- 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 (loss), 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.





For the
three months ended March 31, 2009, the Company recorded approximately
$(612,000), $(34,000) and $1,000 in federal, state, and foreign income tax
(benefit) expense, respectively. For the three months ended March 31,
2008, the Company recorded $0, $3,000, and $0 in federal, state, and
foreign income tax expense, respectively. Prior to September 2008, the Company
was not subject to federal income tax.  For the three months ended
March 31, 2008, the Company’s pro forma tax and earnings per share data, had it
been subject to federal income tax, would not have been materially different
from that presented, and, thus, such pro forma data is not presented. At March
31, 2009, the Company recorded a deferred tax asset of approximately $645,000
related to its net operating loss. At March 31, 2009 and December 31, 2008,
the Company had income tax payable of approximately $170,000 and $184,000,
respectively.


F-8


PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Condensed Consolidated Financial Statements


(unaudited)





Effective
September 1, 2008, the Company adopted Financial Accounting Standards
Interpretation No. 48, or FIN No. 48, “Accounting for Uncertainty in
Income Taxes – an interpretation of FASB Statement No. 109” (FIN 48). FIN
48 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 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition.  As a result of the
implementation of FIN 48, 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 FIN 48, the Company recognized no material adjustment in
the liability for unrecognized income tax benefits as of the September 2008
adoption date and at March 31, 2008. Also, the Company had no amounts of
unrecognized tax benefits that, if recognized, would affect its effective tax
rate.





The
Company’s policy for deducting interest and penalties is to treat interest as
interest expense and penalties as taxes. As of March 31, 2009, the Company had
no amount accrued for the payment of interest and penalties related to
unrecognized tax benefits and no amounts as of the adoption date of FIN
48.





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





Recently
Issued Accounting Pronouncements





In
December 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“FAS”)  No. 157, "
Fair Value Measurement
" ("FAS 157"), which defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles (GAAP) and
expands disclosures about fair value measurements. This statement applies under
other accounting pronouncements that require or permit fair value
measurements, FASB having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value
measurements.  This statement is effective for fiscal years beginning
after November 15, 2007, except for non-financial assets and liabilities
measured at fair value on a non-recurring basis for which the
effective date will be for fiscal years beginning after November 15,
2008.  The adoption of FAS 157 for financial assets and liabilities
did not have a material impact on the Company's consolidated financial
statements.  The adoption of FAS 157 for non-financial assets did not
have a material impact on the Company’s financial position, results of
operations or cash flows.





In
February 2007, the FASB issued FAS No. 159, “ The Fair Value Option for
Financial Assets and Financial
Liabilities — Including an amendment of FASB Statement No. 115 ” (“FAS
159”), which permits entities to choose to measure many financial instruments
and certain other items at fair value at specified election dates. A business
entity is required to report unrealized gains and losses on items for which the
fair value option has been elected in earnings at each subsequent reporting
date. This statement is expected to expand the use of fair value measurement.
FAS 159 is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years, and is
applicable beginning in the first quarter of 2008. The adoption of FAS 159 did
not have a material effect on our results of operations, cash flows or financial
position.





In
December 2007, the FASB issued FAS No. 141(R), “Business Combinations” (“FAS
141(R)”), which requires the acquiring entity in a business combination to
recognize all (and only) the assets acquired and liabilities assumed in the
transaction; establishes the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities assumed; and requires the
acquirer to disclose to investors and other users all of the information they
need to evaluate and understand the nature and financial effect of the business
combination. FAS 141(R) is prospectively effective to business combinations for
which the acquisition is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The impact of FAS 141(R) on the
Company's consolidated financial statements will be determined in part by the
nature and timing of any future acquisitions completed.





In
December 2007, the FASB issued FAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements (as amended)” (“FAS 160”), which
improves the relevance, comparability, and transparency of financial information
provided to investors by requiring all entities to report noncontrolling
(minority) interests in subsidiaries in the same way as equity consolidated
financial statements. Moreover, FAS 160 eliminates the diversity that currently
exists in accounting from transactions between an entity and non-controlling
interests by requiring they be treated as equity transactions. FAS 160 is
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008; earlier adoption is prohibited. The
adoption of FAS 160 did not have a material effect on our results of operations,
cash flows, or financial position.


F-9




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Condensed Consolidated Financial Statements


(unaudited)





In March
2008, the FASB issued FAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No.
133” (“FAS 161”), which requires additional disclosures about the
objectives of the derivative instruments and hedging activities, the method of
accounting for such instruments under SFAS No. 133 and its related
interpretations, and a tabular disclosure of the effects of such instruments and
related hedged items on our financial position, financial performance, and cash
flows. The Company adopted FAS 161 effective beginning January 1, 2009. The
adoption of FAS 161 did not have a material effect on the Company’s financial
position, results of operations or cash flows.





In April
2008, the FASB issued FASB Staff Position (FSP) FAS No. 142-3, “Determination of the Useful Life of
Intangible Assets.” The FSP amends the factors an entity should consider
in developing renewal or extension assumptions used in determining the useful
life of recognized intangible assets under FAS No. 142, “ Goodwill and Other Intangible Assets.” The
FSP must be applied prospectively to intangible assets acquired after the
effective date. The adoption of FSP FAS 142-3 did not have a material
effect on the Company’s consolidated financial statements.





In May
2008, the FASB issued FAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“FAS 162”), which identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States (the GAAP hierarchy). This statement became effective on November
15, 2008 which is 60 days following the SEC’s approval of the Public Company
Accounting Oversight Board amendments of AU Section 411, “ The Meaning of Presents Fairly in
Conformity with Generally Accepted Accounting Principles.
”  The adoption of FAS 162 did not have a material effect on our
consolidated financial statements.





In June
2008, the FASB ratified EITF Issue No. 07-5, "Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity's Own
Stock.”  EITF 07-5 provides that an entity should use a two
step approach to evaluate whether an equity-linked financial instrument (or
embedded feature) is indexed to its own stock, including evaluating the
instrument's contingent exercise and settlement provisions.  It also
clarifies on the impact of foreign currency denominated strike prices and
market-based employee stock option valuation instruments on the
evaluation.  EITF 07-5 is effective for fiscal years beginning after
December 15, 2008 and interim periods within those fiscal years. See Note 8
for additional information.





In May
2009, the FASB issued FASB Staff Position No. APB 14-1 “Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) ” FASB Staff Position No. APB 14-1 clarifies that convertible
debt instruments that may be settled in cash upon conversion (including partial
cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants. Additionally, this FSP
specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entity’s
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. This FSP is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years.  The adoption of FSP APB 14-1 did not have a material
effect on our consolidated financial statements.





3.
            INTANGIBLE
      ASSETS





Intangibles
consist of amortizing intangibles and goodwill. At March 31, 2009 and December
31, 2008, such amounts were as follows:





March
      31,2009
                                
                                
                                December
                                  31,2008Trademark
                                
                                $
                                852,194
                                
                                
                                $
                                865,106Employee
      contract
                                
                                
                                134,645
                                
                                
                                
                                157,086Backlog
                                
                                
                                —
                                
                                
                                
                                26,228Subtotal
      – amortizing intangibles
                                
                                
                                986,839
                                
                                
                                
                                1,048,420Goodwill
                                
                                
                                483,496
                                
                                
                                
                                483,496Total
                                
                                $
                                1,470,335
                                
                                
                                $
                                1,531,916





There
were no intangible assets at March 31, 2008.   Amortization periods
for the intangibles are as follows: trademark – 17 years, employee contract – 2
years, and backlog – 6 months. Amortization for the three months ended March 31,
2009 was $61,581.  Accumulated amortization was $123,161. The Company
expenses the costs, if any, to renew its recognized intangible
assets.


F-10


PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Condensed Consolidated Financial Statements


(unaudited)





4.
            PROPERTY AND
      EQUIPMENT





Property
and equipment consists of the following:





March
      31,
                            2009
                          
                          
                          December
                            31,
      2008Equipment
                          
                          $
                          139,777
                          
                          
                          $
                          203,628Furniture
      and computers
                          
                          
                          156,115
                          
                          
                          
                          59,194Vehicles
                          
                          
                          536,299
                          
                          
                          
                          504,546832,191
                          
                          
                          
                          767,368Less:
      accumulated depreciation
                          
                          
                          (330,654
                          )
                          
                          
                          (292,463
                          )$
                          501,537
                          
                          
                          $
                          474,905





Depreciation
expense was $39,447 and $24,270 for the three months ended March 31, 2009
and 2008, respectively.




5.
            ACCRUED
      LIABILITIES





Accrued
liabilities consisted of the following:





March
      31,
                        2009
                      
                      
                      December
      31,
                        2008Payroll
                      
                      $
                      239,490
                      
                      
                      $
                      477,163Warranty
      reserve
                      
                      
                      332,247
                      
                      
                      
                      367,250401K
      plan
                      
                      
                      36,760
                      
                      
                      
                      20,000Sales
      and local taxes
                      
                      
                      137,155
                      
                      
                      
                      301,938Workers
      compensation insurance
                      
                      
                      23,735
                      
                      
                      
                      20,000Accrued
      subcontractors
                      
                      —
                      
                      
                      
                      79,002Other
      operational accruals
                      
                      
                      145,855
                      
                      
                      
                      102,665Total
                      
                      $
                      915,242
                      
                      
                      $
                      1,368,018


F-11


PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Condensed Consolidated Financial Statements


(unaudited)




6.
            BORROWINGS





Borrowings
consist of notes payable and lines of credit.





Notes
Payable





Notes
payable were $112,524 and $130,718 at March 31, 2009 and December 31, 3008,
respectively.  The notes are secured by vehicles and have maturities
through 2014.   The annual interest rates on the notes range from
1.9% to 6.6%.  The future principal payments on these notes as of
March 31, 2009 are as follows:





2009
                    
                    $
                    26,9332010
                    
                    
                    27,7832011
                    
                    
                    23,7512012
                    
                    
                    19,9992013
                    
                    
                    9,9842014
                    
                    
                    4,074$
                    112,524





Line of
Credit





In
February 2008, Premier Power California entered into a $3,000,000 line of credit
agreement (LOC) with Guaranty Bank, which expires on May 27,
2009.  The line of credit is secured by the assets of Premier Power
California and personal guaranties issued by our Chairman and Chief Executive
Officer, Dean Marks; Sarilee Marks, the wife of Dean Marks; and Bright
Future.  The line of credit bears interest at the prime rate plus
1%.  At March 31, 2009, the interest rate was 6%.  At March
31, 2009 and December 31, 2008, the Company had no amounts outstanding
under the LOC.




7.
            COMMITMENTS AND
      CONTINGENCIES





Premier
Power Spain is party to a non-cancelable lease for operating facilities in
Madrid, Spain, which expires in 2013, and a non-cancelable lease for operating
facilities in Navarra, Spain, which expires in 2012.  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 March 31, 2009, subject to annual adjustment, if
any:





2009
                      
                      $
                      54,4372010
                      
                      
                      38,0382011
                      
                      
                      38,0382012
                      
                      
                      30,6422013
                      
                      
                      20,208Total
                      
                      $
                      181,363





8.
            DERIVATIVE INSTRUMENTS
      (RESTATED)





Adoption of EITF
07-5





On
January 1, 2009, the Company adopted EITF 07-5, Determining Whether an Instrument
(or embedded Feature) is Indexed to an Entity’s Own Stock. As part of the
adoption of EITF 07-5, 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 has been recorded as a
liability.  The Company recorded a warrant liability in the amount of
$11,118,573 (restated) in adoption of EITF07-5.  The liability was
then adjusted to fair value, $9,643,347 (restated), as of March 31, 2009,
resulting in a decrease in the liability and other income of $1,475,226
(restated) for the three months ended March 31, 2009.





The
Company recorded the following cumulative effect of change in accounting
principle pursuant to its adoption of EITF 07-5 as of January 1,
2009:





Other
                                          Paid-In-Capital
                                        
                                        
                                        Other
                                          Current
                                          Liability
                                          (restated)
                                        
                                        
                                        Retained
                                          Earnings
                                          (restated)Record
      January 1, 2009, derivative instrument liability related to
      warrants
                                        
                                        $
                                        —
                                        
                                        
                                        $
                                        11,118,573
                                        
                                        
                                        $
                                        —Record
      January 1, 2009, the reversal of prior accounting related
      warrants
                                        
                                        
                                        (1,793,987)
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        (9,324,586)$
                                        (1,793,987)
                                        
                                        
                                        $
                                        11,118,573
                                        
                                        
                                        $
                                        (9,324,586)





A
Black-Scholes option-pricing model was used to obtain the fair value of the
Company’s warrants using the assumptions below at March 31,
2009.  Based on the market price of the common stock, the Company
determined that the value of its common stock was $4.50 (restated) and $4.40
(restated) on January 1, 2009 and March 31, 2009, respectively.





Number
      of Shares
                        included
      in
                        Warrants
                      
                      Dividend
                        Yield
                      
                      
                      Volatility
                      
                      
                      Risk-Free
      Rate
                      
                      
                      Expected
      Life
                        (in
      years)
                      
                      
                      Exercise
      Price1,750,000
                      
                      
                      0.0
                      %
                      
                      
                      95.0
                      %
                      
                      
                      4.5
                      %
                      
                      
                      3.5
                      
                      
                      $
                      2.501,750,000
                      
                      
                      0.0
                      %
                      
                      
                      95.0
                      %
                      
                      
                      4.5
                      %
                      
                      
                      3.5
                      
                      
                      $
                      3.00


F-12





9.
            STOCK-BASED COMPENSATION
      (RESTATED)





The
Company’s 2008 Equity Incentive Plan (the “2008 Plan”) provides for the issuance
of incentive stock options, non-statutory stock options, and restricted stock.
The Company’s 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 2008 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, consultants and advisors. Options under the 2008
Plan vest as determined by the Board of Directors.  The term of the
options granted under the 2008 Plan may not exceed 10 years, and the maximum
aggregate shares subject to awards under the 2008 Plan that may be granted
during any one (1) calendar year to any covered employee is 1,500,000
shares of common stock. Options for 1,142,479 shares of common stock were
outstanding as of March 31, 2009.  The Company did not grant
stock options prior to January 2009, and there was no stock compensation expense
for the three months ended March 31, 2008.





The
Company recognized stock-based compensation expense of approximately $144,770
(restated) during the three months ended March 31, 2009.





The
following table sets forth a summary stock option activity for the three
months ended March 31, 2009:





Weighted-AverageNumber of
                          
                          Grant DateShares
                          
                          Fair Value
                            (restated)Outstanding
      and not vested beginning balance
                          -
                          
                          $
                          -Granted
      during the period
                          1,142,479
                          
                          
                          3.32Forfeited/cancelled
      during the period
                          -
                          
                          
                          -Released/vested
      during the period
                          -
                          
                          
                          -Outstanding
      and not vested at March 31, 2009
                          1,142,479
                          
                          $
                          3.32


F-13


PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Condensed Consolidated Financial Statements


(unaudited)





At March
31, 2009 and December 31, 2008, there was approximately $335,112 (restated)
and $0, respectively, of unrecognized stock-based compensation expense
associated with the non-vested stock options granted. Stock-based
compensation expense relating to these stock options is being
recognized over a weighted-average period of 4.7 years. Stock compensation
expense of $144,770 (restated) and $0 was recognized during the three
months ended March 31, 2009 and 2008, respectively.  SFAS 123R
requires the cash flows as a result of the tax benefits resulting from tax
deductions in excess of the compensation cost recognized (excess tax benefits)
to be classified as financing cash flows. There are no excess tax benefits
relating to stock options for the three months ended March 31, 2009 and 2008,
respectively, and therefore, there is no impact on the accompanying consolidated
statements of cash flows.





The
following table summarizes the consolidated stock-based compensation by line
item for the three months ended March 31, 2009:





Three Months EndedMarch 31, 2009
                              (restated)Administration
                            
                            $
                            67,744Sales and
      marketing
                            
                            
                            30,443Cost
      of goods sold
                            
                            
                            46,583Total
      stock-based compensation expense
                            
                            
                            144,770Tax
      effect on stock-based compensation expense
                            
                            
                            -Total
      stock-based compensation expense after taxes
                            
                            $
                            144,770Effect
      on net income per share: basic
                            
                            $
                            0.00Effect
      on net income per share: diluted
                            
                            $
                            0.01





The
following table sets forth a summary of stock option activity for the three
months ended March 31, 2009:





Number of
                            Shares
                            Subject To
                          
                          
                          Weighted-
                            AverageOption
                          
                          
                          Exercise PriceOutstanding
      at January 1, 2009
                          
                          -
                          
                          
                          $
                          -Granted
      during three months ended March 31, 2009
                          
                          
                          1,142,479
                          
                          
                          
                          4.25Forfeited/cancelled/expired
      during 2009
                          
                          
                          -
                          
                          
                          
                          -Exercised
      during the year
                          
                          
                          -
                          
                          
                          
                          -Outstanding
      at March 31, 2009
                          
                          
                          1,142,479
                          
                          
                          $
                          4.25Exercisable
      at March 31, 2009
                          
                          
                          -
                          
                          
                          $
                          -





The fair
value of stock option grants during the three months ended March 31, 2009 was
estimated on the date of grant using the Black-Scholes option-pricing model with
the following assumptions:





Valuation
Assumptions





Valuation and Amortization
Method — The Company estimates the fair value of stock options
granted using the Black-Scholes-Merton option-pricing formula. The fair value is
then 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 four to five years. For the three
months ended March 31, 2009, the fair value of the Company’s common stock is
based on its value as determined by market prices on the date of
grant. Compensation expense is recognized on a straight-line basis over the
respective vesting period.





Expected Term — The
Company’s expected term represents the period that the Company’s stock-based
awards are expected to be outstanding. For awards granted subject only to
service vesting requirements, the Company utilizes the simplified method under
the provisions of Staff Accounting Bulletin No. 107 (“SAB 107”) for
estimating the expected term of the stock-based award.





Expected
Volatility — Because there is minimal history of stock price returns, the
Company does not have sufficient historical volatility data for its equity
awards. 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, and accordingly, the dividend yield percentage is zero for all
periods.





Risk-Free Interest Rate
— The Company bases the risk-free interest rate used in the Black-Scholes
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.





Expected
      volatility
                  
                  
                  93.60
                  %Expected
      dividends
                  
                  
                  0.0
                  %Expected
      life
                  6.5 yearsRisk-free
      interest rate
                  
                  
                  1.88
                  %Weighted-average
      fair value per share (restated)
                  
                  $
                  3.32





The
weighted-average fair value per share of the stock options as determined on the
date of grant was $3.32 (restated) for the 1,142,479 stock options granted
during the three months ended March 31, 2009. The total fair value of stock
options vested during the three months ended March 31, 2009 was
$0.


F-14


PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Condensed Consolidated Financial Statements


(unaudited)





10.
            EMPLOYEE
      BENEFITS





Premier
Power Renewable Energy, Inc. has a 401(k) plan (the Plan) for its employees.
Employees are eligible to make contributions when they attain an age of
twenty-one and have completed at least one year of service. Premier Power 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
$12,000 and $18,000 for the three months ended March 31, 2009 and 2008,
respectively. Employees are vested 100% after 3 years of service. Neither Bright
Future nor Premier Power Spain offer defined contribution or defined
benefit plans to their employees.





11.
            RELATED PARTIES
      TRANSACTION





The
Company’s CEO, who is also a significant shareholder of the Company, is a
guarantor of the Company’s line of credit with Guaranty Bank. Prior to the
reverse merger, Premier Power California made distributions to its members to
cover their estimated tax liabilities on their deemed portion of its income.
These distributions are based on the Company's best estimates and available
information, and may be revised at a later date. Such revisions may result in a
portion of previously made distributions being refunded to the Company. The
balance of $23,458 was recorded as due from shareholders at March 31, 2008 and
represents payments made to a member of Premier Power California in excess of
the member’s actual tax liability. Such amounts were repaid on June 30, 2008.
Due to the nature of the receivable and its short duration, it was not interest
bearing or collateralized.




12.
            FAIR
      VALUE MEASUREMENTS





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.  Statement No. 157 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, by level, the Company’s financial assets and liabilities that
are accounted for at fair value.





Level
      1
                    
                    
                    Level
      2
                    
                    
                    Level
      3Liabilities:  Warrants
      (restated)
                    
                    $
                    –
                    
                    
                    $
                    –
                    
                    
                    $
                    9,643,347





The
following table summarizes the change in the fair values of the derivative
instrument liabilities categorized as Level 3:





Three Months Ended
                      March 31, 2009
                      (restated)Beginning
      balance
                    
                    $
                    –January
      1, 2009, beginning balance adjustment pursuant to adoption of EITF
      07-5
                    
                    
                    11,118,573Change
      in fair value
                    
                    
                    1,475,226Ending
      balance
                    
                    $
                    ($9,643,347)


F-15


PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Condensed Consolidated Financial Statements


(unaudited)





13.           RESTATEMENT





The
Company’s common stock has a limited trading volume, and approximately 93% of
the issued and outstanding shares of its common stock are unregistered and
restricted from trading.  As a result, the Company previously
determined that it was more appropriate to use an independent valuation analysis
to determine the fair value of its common stock for use in determining stock
compensation expense and the fair value of the Company’s warrant
liability.  Subsequent to the filing of this Form 10-Q for the three
months ended March 31, 2009 originally filed with the Securities and Exchange
Commission on May 19, 2009 and amended on May 21, 2009, the Company determined
that it was more appropriate to use the market price of its common stock in
accordance with SFAS 157 in conjunction with the determination of stock
compensation expense and warrant liability.





As a
result of the change described above, the amount of stock compensation expense
recorded by the Company increased to $144,770 from $9,556, the estimated fair
value of the Company’s warrant liability increased at both January 1 and March
31, 2009, and the Company recorded a significant change in the fair value of its
warrant liability resulting in the Company restating net income for the three
months ended March 31, 2009.  A summary of the impact of these changes
is as follows:


Balance Sheet
 
 ThreeMonthsEndedMarch31,2009As Reported
                              
                              
                              As RestatedWarrant
      liability January 1, 2009
                              
                              $
                              506,560
                              
                              
                              $
                              11,118,573Warrant
      liability March 31, 2009
                              
                              $
                              506,560
                              
                              
                              $
                              9,643,347
 
 Income Statement
 
 Three Months EndedMarch31,2009AsReported
                                  
                                  
                                  AsRestatedGeneral
      and Administrative
                                  
                                  $
                                  1,069,819
                                  
                                  
                                  $
                                  1,128,006Sales
      and marketing
                                  
                                  $
                                  624,313
                                  
                                  
                                  $
                                  654,757Cost
      of goods sold
                                  
                                  $
                                  4,378,890
                                  
                                  
                                  $
                                  4,425,473
  Three Months EndedMarch 31, 2009As
      Reported
                                                                  
                                                                  
                                                                  As
      RestatedNet
      income (loss)
                                                                  
                                                                  $
                                                                  (618,450
                                                                  )
                                                                  
                                                                  $
                                                                  721,562Weighted
      average shares outstanding:Basic
                                                                  
                                                                  
                                                                  26,048,750
                                                                  
                                                                  
                                                                  
                                                                  26,048,750Diluted
                                                                  
                                                                  26,048,750
                                                                  
                                                                  
                                                                  
                                                                  30,529,116Earnings
      per share:Basic
                                                                  
                                                                  $
                                                                  (0.02
                                                                  )
                                                                  
                                                                  $
                                                                  0.03Diluted
                                                                  
                                                                  $
                                                                  (0.02
                                                                  )
                                                                  
                                                                  $
                                                                  0.02
 F-16





ITEM 2.
            MANAGEMENT’S DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS.





Forward
Looking Statements





Certain
statements in the Management’s Discussion and Analysis (“MD&A”), other than
purely historical information, including estimates, projections, statements
relating to our business plans, objectives and expected operating results, and
the assumptions upon which those statements are based, are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. These forward-looking statements generally
are identified by the words “believe,” “project,” “expect,” “anticipate,”
“estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,”
“will be,” “will continue,” “will likely result,” and similar expressions.
Forward-looking statements are based on current expectations and assumptions
that are subject to risks and uncertainties which may cause actual results to
differ materially from the forward-looking statements. A detailed discussion of
risks and uncertainties that could cause actual results and events to differ
materially from such forward-looking statements is included in the section under
“Risk Factors”. We undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events, or otherwise.




As
used in this report, unless the context requires otherwise, “we” or “us” or the
“Company” or “Premier Power” means Premier Power Renewable Energy, Inc. and its
subsidiaries.




Overview





We are a
developer, designer, and integrator of solar energy solutions. Our financial
statements give effect to the financial position and results of operations of
Premier Power Renewable Energy, Inc., a California corporation (“Premier Power
California”), and its two wholly owned subsidiaries (i) Bright Future
Technologies LLC (“Bright Future”) and (ii) and Premier Power Sociedad Limitada
(“Premier Power Spain”), (collectively the “Premier Power Group”). We develop,
market, sell, and maintain solar energy systems for residential, agricultural,
commercial, industrial customers in North America and Spain. We use solar
components from the solar industry’s leading suppliers and manufacturers such as
General Electric, Sharp, Kyocera, Fronius, Watsun, and SunPower
Corporation.





On
September 9, 2008, we acquired all of the outstanding shares of Premier Power
California in exchange for the issuance by the Company of 24,218,750 restricted
shares of our common stock (the “Share Exchange”)., which represented
approximately 93.1% of the then-issued and outstanding common stock of the
Company.  As a result of the Share Exchange, Premier Power California
became the Company’s wholly owned subsidiary, and the Company acquired the
business and operations of the Premier Power Group. Prior to the Share Exchange,
the operations of the Premier Power Group were deemed to have common ownership
and control





Concurrently
with the closing of the Share Exchange on September 9, 2008, we raised
$7,000,000 in a private placement financing (the “Financing”) by issuing a total
of 3,500,000 units (the “Units”), with each Unit consisting of one share of our
Series A Convertible Preferred Stock (“Series A Preferred Stock”), one-half of
one Series A Warrant (the “Series A Warrants”), and one-half of one Series B
Warrant (the “Series B Warrants”) to investors at $2.00 per Unit.





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 sales 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 1 to our
condensed 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 condensed 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 financial statements and related notes to the
financial statements of Premier Power Renewable Energy, Inc.  (the
“Company”) for the years ended December 31, 2008 and 2007 appearing in the
Company’s Form 10-K filed with the Securities and Exchange Commission (the
“SEC”). The March 31, 2009 unaudited interim condensed consolidated financial
statements on Form 10-Q have been prepared pursuant to the rules and regulations
of the SEC for smaller reporting companies. Certain information and note
disclosures normally included in the annual financial statements on Form 10-K
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 operation 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
Premier Power Renewable Energy, Inc. and its subsidiaries. Intercompany
balances, transactions and cash flows are eliminated on
consolidation.


4





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





Revenue
Recognition – Revenue on photovoltaic system 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 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 costs and estimated earnings in excess
of billings on uncompleted contracts or billings in excess of costs and
estimated earnings on uncompleted contracts. The Company determines its
customer’s credit worthiness at the time the 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 and those indirect costs
related to contract performance, such as indirect labor, supplies, tools,
repairs, and depreciation costs. Selling and 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.





Earnings per
Share  –
Earnings per share is computed in accordance with the provisions of 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. For the three months ended March
31, 2009, dilutive potential common shares related to convertible preferred
stock and warrants.  There were no dilutive potential common shares
for the three months ended March 31, 2008.




Stock-Based
Compensation –
The Company accounts for stock-based compensation under the provision of
Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (SFAS
No. 123(R)), 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 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 SFAS No.
123(R).




Product
Warranties 
–  Prior to
January 1, 2007, the Company provided a five year warranty covering the labor
and materials associated with its installations. Effective January 1, 2007, the
Company changed the coverage to generally be ten years in the U.S. and to one
year in Spain for all contracts signed after December 31, 2006. Solar panels and
inverters are warranted by the manufacturer for 25 years and 10 years,
respectively. The Company recorded warranty expense of $83,882 and warranty
claims of $42,624 for the three months ended March 31, 2008. Activity
in the Company’s warranty reserve for the three months ended March 31, 2009 was
as follows:




Three
                    Months
                    Ended
                    March 31,
                    2009Balance
      at beginning of period
                  
                  $
                  367,250Warranty
      expense
                  
                  
                  113,301Less:
      Warranty claims
                  
                  
                  (148,304
                  )Balance
      at end of period
                  
                  $
                  332,247





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


5


Recently
Issued Accounting Pronouncements





In
December 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“FAS”)  No. 157,
"Fair Value
Measurement" ("FAS 157"), which defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP) and expands disclosures about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair value
measurements, FASB having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value
measurements.  This statement is effective for fiscal years beginning
after November 15, 2007, except for non-financial assets and liabilities
measured at fair value on a non-recurring basis for which the
effective date will be for fiscal years beginning after November 15,
2008.  The adoption of FAS 157 for financial assets and liabilities
did not have a material impact on the Company's consolidated financial
statements.  The adoption of FAS 157 for non-financial assets did not
have a material impact on the Company’s financial position, results of
operations, and cash flows.





In
February 2007, the FASB issued FAS No. 159, “The Fair Value Option for
Financial Assets and Financial
Liabilities — Including an amendment of FASB Statement No. 115” (“FAS
159”), which permits entities to choose to measure many financial instruments
and certain other items at fair value at specified election dates. A business
entity is required to report unrealized gains and losses on items for which the
fair value option has been elected in earnings at each subsequent reporting
date. This statement is expected to expand the use of fair value measurement.
FAS 159 is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years, and is
applicable beginning in the first quarter of 2008. The adoption of FAS 159 did
not have a material effect on our results of operations, cash flows or financial
position.





In
December 2007, the FASB issued FAS No. 141(R), “Business Combinations” (“FAS
141(R)”), which requires the acquiring entity in a business combination to
recognize all (and only) the assets acquired and liabilities assumed in the
transaction; establishes the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities assumed; and requires the
acquirer to disclose to investors and other users all of the information they
need to evaluate and understand the nature and financial effect of the business
combination. FAS 141(R) is prospectively effective to business combinations for
which the acquisition is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The impact of FAS 141(R) on the
Company's consolidated financial statements will be determined in part by the
nature and timing of any future acquisitions completed.





In
December 2007, the FASB issued FAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements (as amended)” (“FAS 160”), which
improves the relevance, comparability, and transparency of financial information
provided to investors by requiring all entities to report noncontrolling
(minority) interests in subsidiaries in the same way as equity consolidated
financial statements. Moreover, FAS 160 eliminates the diversity that currently
exists in accounting from transactions between an entity and non-controlling
interests by requiring they be treated as equity transactions. FAS 160 is
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008; earlier adoption is prohibited. The
adoption of FAS 160 did not have a material effect on our results of operations,
cash flows, or financial position.





In March
2008, the FASB issued FAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No.
133” (“FAS 161”), which requires additional disclosures about the
objectives of the derivative instruments and hedging activities, the method of
accounting for such instruments under SFAS No. 133 and its related
interpretations, and a tabular disclosure of the effects of such instruments and
related hedged items on our financial position, financial performance, and cash
flows. The Company adopted FAS 161 effective beginning January 1, 2009. The
adoption of FAS 161 did not have a material effect on the Company’s financial
position, results of operations, and cash flows.




In April
2008, the FASB issued FASB Staff Position (FSP) FAS No. 142-3, “Determination of the Useful Life of
Intangible Assets.” The FSP amends the factors an entity should consider
in developing renewal or extension assumptions used in determining the useful
life of recognized intangible assets under FAS No. 142, “ Goodwill and Other Intangible Assets.” The
FSP must be applied prospectively to intangible assets acquired after the
effective date. The adoption of FSP FAS 142-3 did not have a material
effect on the Company’s consolidated financial statements.




In May
2008, the FASB issued FAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“FAS 162”), which identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States (the GAAP hierarchy). This statement is effective November 15,
2008, which is 60 days following the SEC’s approval of the Public Company
Accounting Oversight Board amendments of AU Section 411, “The Meaning of Presents Fairly in
Conformity with Generally Accepted Accounting Principles.”  The
adoption of FAS 162 did not have a material effect on our financial
statements.




In June
2008, the FASB ratified EITF Issue No. 07-5, “Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity's Own
Stock.”  EITF 07-5 provides that an entity should use a two
step approach to evaluate whether an equity-linked financial instrument (or
embedded feature) is indexed to its own stock, including evaluating the
instrument's contingent exercise and settlement provisions.  It also
clarifies on the impact of foreign currency denominated strike prices and
market-based employee stock option valuation instruments on the
evaluation.  EITF 07-5 is effective for fiscal years beginning after
December 15, 2008 and for interim periods within those fiscal years. See Note 8
to our condensed consolidated financial statements included
herein for additional information.


6


In
May 2009, the FASB issued FASB Staff Position No. APB 14-1 “Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement).” FASB Staff Position No. APB 14-1 clarifies that convertible
debt instruments that may be settled in cash upon conversion (including partial
cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants. Additionally, this FSP
specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entity’s
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. This FSP is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years.  The adoption of FSP APB 14-1 did not have a
material effect on our consolidated financial statements.





Results
of Operations





Net sales.
  For the
three months ended March 31, 2009, net sales decreased 1% relative to the three
months ended March 31, 2008, from $4,864,946 to $4,793,352.  The
slight decrease from the first quarter of 2008 to the first quarter of 2009 is
primarily attributable to continued expansion of our Spanish operations in the
rooftop market offset by a slowdown in our U.S. in residential and commercial
sales.





Cost of
sales. 
  Cost of sales for the three months ended March 31, 2009 was
$4,425,473 compared to $4,047,800 for the three months ended March 31, 2008, an
increase of approximately 9%.   The increase in our cost of sales
is attributable to a higher percentage of our net sales being comprised of
commercial sales rather than residential sales as commercial projects carry a
higher cost of sales than residential projects.





Gross
profit.   Gross profit for the three months ended March 31,
2009 was $367,879 compared to a gross profit of $817,146 for the three months
ended March 31, 2008, representing gross margins of approximately 8% and 17%,
respectively.  The decrease in gross profit percent is attributed to
our higher fixed operations cost and some increased costs on our large scale
commercial projects.





Operating
expenses.
  Our operating expenses consist of sales and marketing expenses and
administrative expenses.  For the three months ended March 31, 2009,
total operating expenses were $1,782,763 consisting of sales and marketing costs
of $654,757 and administrative costs of $1,128,006, while total operating
expenses for the three months ended March 31, 2008 were $1,016,563, consisting
of sales and marketing costs of $408,504 and administrative costs of $608,059,
representing an increase of approximately 75%.  As a percentage of
sales, operating expenses were 37% and 21% for the three months ended March 31,
2009 and 2008, respectively.  The increase in operating expenses is
due to hiring of additional sales people in our commercial sales department, an
increase in professional costs related to becoming a public company through our
share exchange transaction that closed in September 2008, stock compensation
expense related to our January 2009 stock option grants, and amortization of the
intangible assets associated with the acquisition of our Spanish subsidiary,
Premier Power Spain.




Income
taxes.  For the three months ended March 31, 2009, we recorded
a tax benefit of $645,053, primarily due to federal and state net operating
losses.   For the three months ended March 31, 2008, we were not
subject to federal income taxes.  The change in income taxes primarily
related to a change in our tax status for federal income taxes.




Net
income/loss.  We had net income of $721,562 (restated) for the three
months ended March 31, 2009 as compared to net loss of $193,559 for the
three months ended March 31, 2008.





LIQUIDITY





Cash
Flows




(in thousands)
                  
                  Three Months
                    Ended
                    March 31,
                    2009
                  
                  
                  Three
                    Months
                    Ended
                    March 31,
                    2008Net
      cash (used in) provided by operating activities
                  
                  $
                  (2,602,351
                  )
                  
                  $
                  445,025Net
      cash used in investing activities
                  
                  $
                  (35,057
                  )
                  
                  $
                  (13,771
                  )Net
      cash (used in) provided by financing activities
                  
                  $
                  (124,537
                  )
                  
                  $
                  485,839Net
      (decrease) increase in cash and cash equivalents
                  
                  $
                  (2,871,148
                  )
                  
                  $
                  885,711





Net cash
flow used in operating activities was $2,602,351 for the three months ended
March 31, 2009, while net cash flow provided by operating activities
was $445,025 for the three months ended March 31, 2008.  The decrease
in net cash flow from operating activities between the two quarters was mainly
due to a greater accounts payable, change in fair value of financial
instruments, accrued liabilities, and taxes.





Net cash
flow used in investing activities was $35,057 for the three months ended
March 31, 2009, while and net cash flow used in investing activities was $13,771
for the three months ended March 31, 2008.  We consider the change
between these two periods to be immaterial.





Net cash
flow used in financing activities was $124,537 for the three months ended
March 31, 2009, while net cash flow provided by financing activities was
$485,839 for the three months ended March 31, 2008.  The decrease in
net cash flow from financing activities was mainly due to the Company
utilizing its line of credit during the three months ended March 31, 2008 as
well as increased costs we incurred during the three months ended March 31, 2009
associated with the registration of certain securities pursuant to the
Registration Rights Agreement we entered into in connection with our financing
transaction that closed in September 2008.


7


Material
Impact of Known Events on Liquidity





Our
business is exposed to risks associated with the ongoing financial crisis and
weakening global economy, which may have a material impact on our short-term and
long-term liquidity as a result of the uncertainty of project financing for
commercial solar installations and the risk of non-payment from both commercial
and residential customers.  The recent severe tightening of the credit
markets, turmoil in the financial markets, and weakening global economy are
contributing to slowdowns in the solar industry, which slowdowns may worsen if
these economic conditions are prolonged or deteriorate further.  The
market for installation of solar power systems depends largely on commercial and
consumer capital spending.  Economic uncertainty exacerbates negative
trends in these areas of spending, and may cause our customers to push out,
cancel, or refrain from placing orders, which may reduce our net
sales.  Difficulties in obtaining capital and deteriorating market
conditions may also lead to the inability of some customers to obtain affordable
financing, including traditional project financing and tax-incentive based
financing and home equity-based financing, resulting in lower sales to potential
customers with liquidity issues, and may lead to an increase of incidents where
our customers are unwilling or unable to pay for systems they purchase, and
additional bad debt expense for the Company.  Further, these
conditions and uncertainty about future economic conditions may make it
challenging for us to obtain equity and debt financing to meet our working
capital requirements to support our business.




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




Capital
Resources





We have
financed our operations primarily through cash flows from operations and
borrowings. On September 9, 2008, we received gross proceeds of $7,000,000 from
a private placement financing transaction. We also have a credit line that is
utilized solely for working capital and capital expenditures, which expires on
May 27, 2009.  We plan to renew it with the lender or replace it with
a credit line with a new lender. Additionally, as the credit markets tighten, we
continue to strengthen our balance sheet, allowing us to continue to receive
favorable credit terms as needed.  Thus, we believe that our current
cash and cash equivalents, anticipated cash flow from operations, net proceeds
from the private placement financing, and line of credit 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. The proceeds from the
private placement financing will be used for general working capital purposes
(including funding the purchase of additional inventory and advertising and
marketing expenses) and for acquisitions we may decide to pursue.





We may,
however, require additional cash due to changes in business conditions or other
future developments, including any 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. Other than our lines
of credit with banks, we currently do not have any binding commitments for, or
readily available sources of, additional financing. 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 March
9, 2009, Premier Power California entered into an agreement with Guaranty Bank
for a $3,000,000 line of credit that became effective on February 27, 2009 and
matures on May 27, 2009.  This line of credit renewed a $3,000,000
line of credit that Premier Power California had with Guaranty Bank that matured
on February 26, 2009.  The line of credit is secured by the assets of
Premier Power California and personal guaranties issued by our Chairman and
Chief Executive Officer, Dean Marks; Sarilee Marks, the wife of Dean Marks; and
Bright Future.  The line of credit bears interest at the prime rate
plus 1%.  At March 31, 2009, the interest rate was 6%.  As
of March 31, 2009, there were no amounts outstanding under our agreement with
Guaranty Bank.




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.




The
following table summarizes our contractual obligations as of March 31, 2009, and
the effect these obligations are expected to have on our liquidity and cash
flows in future periods.





Payments Due by PeriodTotal
                
                Less than
                  1 year
                
                1-3 Years
                
                3-5 Years
                
                5 years +Contractual Obligations:Bank
      Indebtedness
                
                $
                107,372
                
                
                $
                21,781
                
                
                $
                51,534
                
                
                $
                29,983
                
                
                $
                4,074Other
      Indebtedness
                
                
                5,152
                
                
                
                5,152
                
                
                
                -
                
                
                
                -
                
                
                
                -Operating
      Leases
                
                
                181,362
                
                
                
                54,437
                
                
                
                76,076
                
                
                
                50,849
                
                
                
                -Totals:
                
                $
                293,886
                
                
                $
                81,370
                
                
                $
                127,610
                
                
                $
                80,832
                
                
                $
                4,074


8


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
3.           QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





Not
applicable.





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 and Chief Financial 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.


9


PART
II - OTHER INFORMATION





ITEM
1.           LEGAL PROCEEDINGS





There
have been no material developments during the quarter ended March 31, 2009 in
any material pending legal proceedings to which the Company is a party or of
which any of our property is the subject.




ITEM
2.           UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS





None.




ITEM
3.           DEFAULTS UPON SENIOR
SECURITIES





None.





ITEM
4.           SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS





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.


10





ITEM
6.      EXHIBITS





Exhibit
                Number
              
              Description2.1
              
              Share Exchange Agreement by and
      among the Company, its majority stockholder, Premier Power Renewable
      Energy, Inc., and its stockholders, dated September 9, 2008 (3)3.1
              
              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)10.1
              
              Voting
      Agreement between Dean Marks and Miguel de Anquin, dated January 21, 2009
      (6)10.2
              
              Voting
      Agreement between Dean Marks, Sarilee Marks, and Miguel de Anquin, dated
      January 21, 2009 (6)10.3
              
              Business
      Loan Agreement (Asset Based) between Premier Power Renewable Energy, Inc.
      and Guaranty Bank, entered into on March 9, 2009 and effective February
      27, 2009 (7)10.4
              
              Promissory
      Note issued to Guaranty Bank by Premier Power Renewable Energy, Inc.,
      entered into on March 9, 2009 and effective February 27, 2009
      (7)10.5
              
              Commercial
      Guaranty between Premier Power Renewable Energy, Inc., Dean Marks, and
      Guaranty Bank, entered into on March 9, 2009 and effective February 27,
      2009 (7)10.6
              
              Commercial
      Guaranty between Premier Power Renewable Energy, Inc., Sarilee Marks, and
      Guaranty Bank, entered into on March 9, 2009 and effective February 27,
      2009 (7)10.7
              
              Commercial
      Guaranty between Premier Power Renewable Energy, Inc., Bright Future
      Technologies, LLC, and Guaranty Bank, entered into on March 9, 2009 and
      effective February 27, 2009 (7)10.8
              
              Director
      Agreement between Premier Power Renewable Energy, Inc. and Tommy Ross,
      dated March 23, 2009 (8)31.1
              
              Section 302 Certification by
      the Corporation’s Chief Executive Officer *31.2
              
              Section 302 Certification by
      the Corporation’s Chief Financial Officer *32.1
              
              Section 906 Certification by
      the Corporation’s Chief Executive Officer *32.2
              
              Section 906 Certification by
      the Corporation’s Chief Financial 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.




11




(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 February 5, 2009 as an
      exhibit to our Amendment No. 1 to Registration Statement on Form S-1/A,
      and incorporated herein by
reference.





(7)
            Filed on March 12, 2009 as an
      exhibit to our Current Report on Form 8-K, and incorporated herein by
      reference.





(8)
            Filed on March 24, 2009 as an
      exhibit to our Current Report on Form 8-K, and incorporated herein by
      reference.


12


SIGNATURES





In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.




PREMIER
      POWER RENEWABLE ENERGY, INC.(Registrant)Date:
      August 14, 2009
              By:
              /s/ Dean MarksDean
      MarksChief
      Executive Officer and PresidentDate:
      August 14, 2009
              By:
              /s/ Teresa KelleyTeresa
      KelleyChief
      Financial Officer




13