UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-K/A


(Mark
One)





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





For the
fiscal year ended: December 31,
2009




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





For the
transition period from __________ to __________





Commission
file number: 333-140637





PREMIER POWER RENEWABLE
ENERGY, INC.


(Exact
name of registrant as specified in its charter)





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





4961
      Windplay Drive, Suite 100, El Dorado Hills, CA
                
                95762(Address
      of principle executive offices)
                
                (Zip
      Code)





Registrant’s
telephone number, including area code: (916)
939-0400





Securities
registered pursuant to Section 12(b) of the Act: None


Securities
registered under Section 12(g) of the Act: None





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  ̈ Yes  x No





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  ̈ Yes  x No





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 requirement for
the past 90 days. x
Yes   ̈
No





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





Indicate
by check mark if disclosure of delinquent filers in response to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.  ̈





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





Large
      accelerated filer    ̈
            Accelerated
      filer    ̈Non-accelerated
      filer   ̈
            Smaller
      reporting company x





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





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter: $35,104,051 as of June 30, 2009, based upon 8,069,897 shares at
$4.35 per share as reported on the OTC Bulletin Board.





APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:




Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.    ̈ Yes   ̈ No





(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)





Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the last practicable date:  29,083,250 shares of common
stock as of March 10, 2010.





DOCUMENTS
INCORPORATED BY REFERENCE





None.











TABLE
OF CONTENTS





Page
      No.EXPLANATORY
      NOTE
                        
                        3CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING INFORMATION
                        
                        3PART
      I
                        
                        4Item
      1. Business
                        
                        4Item
      1A. Risk Factors
                        
                        11Item
      2. Properties
                        
                        23Item
      3. Legal Proceedings
                        
                        24Item
      4. Submission of Matters to a Vote of Security Holders
                        
                        24PART
      II
                        
                        26Item
      5. Market for the Registrant’s Common Equity, Related Stockholder Matters
      and Issuer Purchases of Equity Securities
                        
                        26Item
      6. Selected Financial Data
                        
                        27Item
      7. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                        
                        29Item
      7A. Quantitative and Qualitative Disclosures About Market
    Risk
                        
                        36Item
      8. Financial Statements and Supplementary Data
                        
                        36Item
      9. Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure
                        
                        37Item
      9A. Controls and Procedures
                        
                        37Item
      9B. Other Information
                        
                        38PART
      III
                        
                        39Item
      10. Directors, Executive Officers and Corporate Governance
                        
                        39Item
      11. Executive Compensation
                        
                        41Item
      12. Security Ownership of Certain Beneficial Owners and Management and
      Related Stockholder Matters
                        
                        45Item
      13. Certain Relationships and Related Transactions, and Director
      Independence
                        
                        47Item
      14. Principal Accounting Fees and Services
                        
                        47PART
      IV
                        
                        49Item
      15. Exhibits, Financial Statement Schedules
                        
                        49SIGNATURES
                        
                        53







2




EXPLANATORY
NOTE
 
 This
Amendment No. 1 to our annual report on Form 10-K (“Form 10-K/A”) for the fiscal
year ended December 31, 2009 is filed to (i) update the section titled “Business
Segments” under “Item 1. Business” to describe our operations in three business
segments rather than four business segments as previously disclosed, (ii) revise
the Other Income line previously classified as “Change in fair value of
contingent liability” to “Change in fair value of contingent consideration
liability” in the table on page 28 under “Item 6. Selected Financial Data,”
(iii) revise the Balance Sheet Data line previously classified as “Total
shareholder equity” to “Total shareholders’ equity” in the table on page 29
under “Item 6. Selected Financial Data,” (iv) revise the reference to a footnote
from “note 12” to “note 13” under “Line of Credit” on page 34, (v) add the
signature of the Company’s auditor in its independent auditor report on page F-1
and add a title to such report, (vi) revise the reference to “Contingent
Liability” to “Contingent Consideration Liability” and the reference to “Note
12” to “Note 13” under “Lines of Credit” on page F-19, and (vii) clarify that
there was only one significant deficiency in the Company’s internal control over
financing reporting as of December 31, 2009 and disclose how the Company
determined this to be a deficiency under “Item 9A. Controls and
Procedures.”
 
 Except
as required to reflect the changes noted above, this Form 10-K/A does not
attempt to modify or update any other disclosures set forth in our annual report
on Form 10-K. Additionally, this Form 10-K/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-K/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.





CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION





This
annual report on Form 10-K contains forward-looking statements.  Such
forward-looking statements include statements regarding, among other things, (a)
our projected sales and profitability, (b) our growth strategies, (c)
anticipated trends in our industry, (d) our future financing plans, and (e) our
anticipated needs for working capital.  Forward-looking statements
that involve assumptions and describe our future plans, strategies, and
expectations are generally identifiable by use of the words “may,” “will,”
“should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project”
or the negative of these words or other variations on these words or comparable
terminology.  This information may involve known and unknown risks,
uncertainties, and other factors that may cause our actual results, performance,
or achievements to be materially different from the future results, performance,
or achievements expressed or implied by any forward-looking
statements.  These statements may be found under “Management's
Discussion and Analysis of Financial Condition and Results of Operations” and
“Business,” as well as in this annual report generally.  Actual events
or results may differ materially from those discussed in forward-looking
statements as a result of various factors, including, without limitation, the
risks outlined under “Risk Factors” and matters described in this annual report
generally.  This annual report may contain market data related to our
business that may have been included in articles published by independent
industry sources.  Although we believe these sources are reliable, we
have not independently verified this market data.  This market data
includes projections that are based on a number of assumptions.  If
any one or more of these assumptions turns out to be incorrect, actual results
may differ materially from the projections based on these
assumptions.  In light of these risks and uncertainties, there can be
no assurance that the forward-looking statements contained in this annual report
will in fact occur.  In addition to the information expressly required
to be included in this annual report, we will provide such further material
information, if any, as may be necessary to make the required statements, in
light of the circumstances under which they are made, not
misleading.




Each
forward-looking statement should be read in context with, and with an
understanding of, the various other disclosures concerning our company and our
business made elsewhere in this annual report as well as other public reports
that may be filed with the United States Securities and Exchange
Commission.  You should not place undue reliance on any
forward-looking statement as a prediction of actual results or
developments.  We are not obligated to update or revise any
forward-looking statement contained in this annual report to reflect new events
or circumstances, unless and to the extent required by applicable
law.  Neither the Private Securities Litigation Reform Act of 1995 nor
Section 27A of the Securities Act of 1933, as amended (the “Act”), provides any
protection for statements made in this annual report.





When used
in this annual report, the terms the “Company,” “Premier Power,” “we,” “us,”
“our,” and similar terms refer to Premier Power Renewable Energy, Inc., a
Delaware corporation, and our subsidiaries.




3





PART I





Item
1.  Business.





Overview





We are a
developer, designer, and integrator of ground mount and rooftop solar energy
solutions for residential, commercial, industrial, and equity fund customers in
North America, Spain, and Italy.  We provide a full range of
installation services to our solar energy customers including design,
engineering, procurement, permitting, construction, grid connection, warranty,
system monitoring, and maintenance services.  We use solar components
from the industry’s leading suppliers and manufacturers including solar panels
from General Electric (“GE”), Canadian Solar, Sharp, Solyndra, and Sun Power,
inverters from Fronius, Wattsun, SMA, Satcon, and Xantrex, solar trackers from
Wattsun, and residential solar thermal systems from Schuco.  We have
installed over 1,400 solar power systems since the commencement of our current
business operations in 2003, with the scale of these projects ranging from 5
kilowatts to multi megawatts of installed capacity.  We believe our
experience in developing, designing, and installing large and complex solar
projects differentiates us from many of our competitors.





On July
31, 2009, we acquired Premier Power Italy S.p.A. (formerly known as ARCO Energy,
SRL, hereinafter “Premier Power Italy”), a distributor of solar modules and
developer and integrator of ground mount and rooftop solar power systems in
Italy.





Our
History





We were
originally incorporated as “Harry’s Trucking, Inc.” in Delaware on August 31,
2006.  Effective September 5, 2008, we changed our name to “Premier
Power Renewable Energy, Inc.”  On September 9, 2008, we consummated a
share exchange transaction whereby we acquired Premier Power Renewable Energy,
Inc., a California corporation (“Premier Power California”) and Premier Power
California’s wholly owned subsidiaries, Premier Power Sociedad Limitada
(“Premier Power Spain”) and Bright Future Technologies, LLC (“Bright
Future”).





Premier
Power California’s history dates back to 2001 when Premier Homes Properties,
Inc. (“Premier Homes”), a privately held homebuilder based in Roseville, formed
a solar power systems design and integration division (the “Solar Division”) in
order to meet its internal mandate to make one out of every three homes Premier
Homes developed into a solar home.  On April 22, 2003, in order to
meet the growing demand for commercial and residential retrofit solar power
system installations, the Solar Division was spun-off from Premier Homes by the
formation of Premier Power California.





Bright
Future, a wholly owned subsidiary of Premier Power California, was formed on
December 13, 2006 as a Nevada limited liability company.  Bright
Future operates as a trading company that allows Premier Power California and
Premier Power Spain to consolidate its purchases from suppliers of solar energy
products in order to achieve advantageous trade terms.





Premier
Power Spain, a wholly owned subsidiary of Premier Power California, was formed
on July 7, 2006 as a Spanish limited liability company by the principals of
Premier Power California in order to conduct design, sales, and installation
operations in Spain and other parts of Europe.  Premier Power Spain
was our initial entry into the European market.





On July 31, 2009, we acquired all of the capital stock of Rupinvest
SARL, a corporation duly organized and existing under the law of Luxembourg
(“Rupinvest”).  Rupinvest initially owned 90% of Premier Power Italy,
a private limited company duly organized and existing under the laws of
Italy.  On December 31, 2009, Rupinvest purchased the remaining 10%
interest in Premier Power Italy making it a wholly owned
subsidiary.  Premier Power Italy is a distributor, developer, and
integrator of ground mount and rooftop solar power systems in
Italy.





Recent
Developments





Share Exchange Transaction with Rupinvest SARL and Esdras
Ltd.





On July 31, 2009, we closed the acquisition of 100% of the issued
and outstanding equity ownership of Rupinvest from Esdras Ltd., a corporation
duly organized and existing under the laws of Cyprus
(“Esdras”).  Rupinvest distributes, develops, and integrates ground
mount and rooftop solar power systems in Italy through its subsidiary, Premier
Power Italy, which was a majority-owned subsidiary at the closing but which
became a wholly owned subsidiary on December 31, 2009 as described
below.  The terms of the transaction are set forth in a Share Exchange
Agreement entered into on June 3, 2009 between the Company, Rupinvest, and
Esdras.  Prior to the closing of this share exchange, Rupinvest was
the wholly owned subsidiary of Esdras.  We acquired Rupinvest from
Esdras in exchange for (i) a cash payment by us to Esdras in the amount of
twelve thousand five hundred Euros (€12,500, or approximately $18,292) and (ii)
the potential transfer to Esdras of up to 3 million shares of our common
stock, with the number of shares to be transferred, if any, to be calculated
based on achieving certain sales and gross margin goals by Premier Power Italy
over a three-year period.  Pursuant to the terms of the transaction,
we also made a capital contribution in the amount of one million, one hundred
and twenty five thousand Euros (€1,125,000, or approximately $1,580,063) into
Premier Power Italy representing a 90% interest.  Following the
closing of this share exchange, we conduct operations in Italy through Premier
Power Italy.




4




On
December 31, 2009, Rupinvest purchased the remaining 10% interest of Premier
Power Italy from Esdras pursuant to the Share Exchange Agreement whereby Premier
Power Italy became the wholly owned subsidiary of
Rupinvest.   The agreement allowed for the reimbursement of the
initial capitalization of one hundred and twenty five thousand Euros (€125,000,
or approximately $175,600) made by Esdras if the remaining 10% was purchased by
December 31, 2009.





Financing
Transaction with Vision Opportunity Master Fund – June 16, 2009





On June 16, 2009, we entered into a Securities Purchase Agreement
with Vision Opportunity Master Fund (“Vision”) pursuant to which we sold to
Vision 2.8 million shares of our Series B Convertible Preferred Stock (bearing
no liquidation preference, no coupon payments, and no redemption rights) in
exchange for the cancellation of 4-year Series A Warrants exercisable for an
aggregate 1.75 million shares of our common stock and 4-year Series B
Warrants exercisable for an aggregate 1,750,000 shares of our common stock, and
a $3 million cash payment.





In connection with the purchase agreement, Vision, a holder of our
Series A Convertible Preferred Stock, agreed in writing that no adjustment
will be made to the conversion price of its Series A Convertible Preferred
Stock shares, which right is set forth in Section 7(b) of the Certificate of
Designation of Preferences, Rights and Limitations of Series A Convertible
Preferred Stock, filed on September 10, 2008 with the Delaware Secretary of
State.





Industry
Overview





Challenges
Facing the Electric Power Industry





According
to the Energy Information Administration (“EIA”), a section of the United States
Department of Energy, energy outlook projects moderate growth in U.S. energy
consumption with greater use of renewables.  In fact the EIA’s outlook
in 2010 was that global energy consumption would increase by 14% from 2008 to
2035.  Electric power used to operate businesses and industries
provides the power needed for homes and offices and provides the power for our
communications, entertainment, transportation, and medical needs.  On
the residential side, growth in population and homeowners’ desires to utilize
solar as an alternative source of energy have increased demand over
time.  Population shifts to warmer regions have also increased the
need for cooling.  Electricity is now more commonly used for local
transportation (electric vehicles) and space/water heating needs.





Due to
continuously increasing energy demands, we believe the electric power industry
faces the following challenges:




·
            Limited
      Fossil Fuel Supplies and Cost Pressures.Supplies of fossil
      fuels that are used to generate electricity such as oil, coal and natural
      gas are limited, and yet worldwide demand for electricity continues to
      increase.  The increasing demand for electricity and a finite
      supply of fossil fuels may result in increased fossil fuel prices, which,
      in turn, will likely result in a continuation of increases in long-term
      average costs for
electricity.





·
            Stability of
      Suppliers.Many of the world’s
      leading suppliers of fossil fuels are located in unstable regions of the
      world where political instability, labor unrest, war, and terrorist
      threats may disrupt oil and natural gas production.  Purchasing
      oil and natural gas from these countries may increase the risk of supply
      shortages and may increase costs of fossil
  fuels.





·
            Generation,
      Transmission, and Distribution Infrastructure Costs.Historically,
      electricity has been generated in centralized power plants transmitted
      over high voltage lines and distributed locally through lower voltage
      transmission lines and transformer equipment.  Despite the
      increasing demand for electricity, investment in electricity generation,
      transmission, and distribution infrastructure have not kept pace,
      resulting in service disruptions in the U.S.  As electricity
      demands increase, these systems will need to be expanded, and such
      expansion will be capital intensive and time consuming, and may be
      restricted by environmental concerns.  Without further
      investments in this infrastructure, the likelihood of power shortages may
      increase.





·
            Environmental
      Concerns and Climate Change.  Concerns about
      climate change and greenhouse gas emissions have resulted in the Kyoto
      Protocol, an international agreement establishing a legally binding
      commitment for the reduction of greenhouse gases.  As of
      February 2010 189 countries had voluntarily ratified the Kyoto Protocol
      and are required to reduce greenhouse gas emissions to target levels which
      vary by country.  In the United States, 29 states have
      implemented the Renewable Portfolio Standard, which require electric
      companies to purchase a specific amount of power from renewable
      sources.




5




Drivers
of Solar Market Adoption





The challenges facing the traditional
electric power industry are driving the adoption of renewable energy
sources.  Solar power systems have been used to produce electricity
for several decades, although at generally higher costs as compared with
traditional energy sources.  Technological advances during the past
decade that have significantly reduced system costs, combined with the
advantages of solar power as a renewable energy source and government subsidies
and incentives for solar power, have led to solar power becoming one of the
fastest growing renewable energy technologies.





Advantages
that solar power offers over other sources of power include:





·
            Clean Energy
      Production.Unlike traditional fossil fuel energy sources and many other
      renewable energy sources, solar power systems generate electricity with no
      emissions or noise impact.





·
            Location-Based
      Energy Production.Solar power is a distributed energy source, meaning the electricity
      can be generated at the site of consumption.  This provides a
      significant advantage to the end user who is therefore not reliant upon
      the traditional electricity infrastructure for delivery of electricity to
      the site of use.





·
            Energy
      Generated to Match Peak Usage Times.Peak energy usage and high
      electricity costs typically occur mid-day, which also generally
      corresponds to peak sunlight hours and solar power electricity
      generation.





·
            Reliable
      Source of Electricity.Solar power systems
      generally do not contain moving parts, nor do they require significant
      ongoing maintenance.  As a result, we believe solar power
      systems are one of the most reliable forms of electricity
      generation.





·
            Modular.Solar power systems
      are made from interconnecting and laminating solar cells into solar
      modules. Given this method of construction, solar power products can be
      deployed in many different sizes and configurations to meet specific
      customer needs.





According to Solarbuzz, an independent
solar energy research firm, total worldwide solar cell production increased from
682 megawatts (MW) in 2003 to 6,854 MW in 2008, which represented a compound
annual growth rate, or CAGR, of approximately 58.7%.  Solarbuzz
projects worldwide solar cell production will reach approximately 17,200 MW by
2013 in its “Green World Scenario,” which we believe represents the most
appropriate of three forecast scenarios published by Solarbuzz because it
balances further growth resulting from increased development of government
incentive programs with measured growth in industry production
capacity.  This represents a CAGR of 20.2% from 2008 actual solar cell
production of 6,854 MW as reported by Solarbuzz.





Government
Incentives for Solar Energy





Despite the significant advantages of
solar energy that have resulted in recent rapid market growth, solar energy
continues to represent only a small fraction of the world’s energy output as a
result of costs that remain higher than those of traditional energy
sources.  According to Solarbuzz, the cost of generating a kWh of
solar electricity has declined from 40 cent per kWh to 20 cent per kWh, but
still remains significantly higher than the cost of traditional energy, which
ranges from an average price of 10.3 cents per kWh in the United States to 27.2
cents per kWh in Italy.  While the solar industry continues to drive
down costs by 20% to 40%, various government incentives have been put in place
to make solar energy economically competitive.  These incentives
include:





·
            Feed-in
      Tariffs.  Feed-in tariffs, used primarily in Europe,
      require utility companies to purchase electricity from renewable energy
      sources at a guaranteed rate, generally above the standard rate for
      electricity.





·
            Renewable Portfolio
      Standards.  Renewable portfolio standards, adopted by 29
      states in the United States, require utilities to deliver a certain
      percentage of power from renewable energy sources by a specific
      date.  For example, California requires electric companies to
      increase procurement from eligible renewable energy sources by at least 1%
      of their retail sales annually, until they reach 20% by
    2010.





·
            Tax credits or
      grants.  Tax credits or grants provide an offset to the
      cost of installing a solar system.  In the United States, there
      is currently a 30% federal tax credit for commercial and residential solar
      power systems, which takes the form of a cash grant in 2009 and
      2010.





·
            Loan
      Guarantees.  Government-backed loan guarantees enable
      companies to finance solar projects at a lower cost of capital than would
      otherwise be available in the capital
markets.





U.S.
Solar Market Dynamics





According to Solarbuzz, the market for
solar energy in the United States is expected to grow from 342 MW in 2008 to
3.200 MW in 2012, representing a CAGR of 75%.  Drivers for solar
market growth include rapidly declining costs of solar systems as much as 20% to
40% over the next three years as well as government incentives including an
investment tax credit (providing a 30% federal rebate for solar energy systems),
renewable portfolio standards in 29 states, and selected state and local tax
credits.




6




Spanish
Solar Market Dynamics





Spain led the global market for solar
in 2008, with 2.51 gigawatts installed that year alone, according to a report
from the European Photovoltaic Industry Association (EPIA).  Spain
imposed a 500 MW cap on the feed-in tariff in 2009, causing Solarbuzz to
forecast the market to decline to 550 MW in 2009, and to then resume growth to
1,050 MW by 2012.  With a majority of Spain’s rooftop solar energy
targets unmet, and government support of rooftop solar systems through a revised
feed-in-tariff, the commercial rooftop market has become the leading solar
market segment in Spain.





Italian
Solar Market Dynamics





According to Solarbuzz, the market for
solar energy in Italy is expected to grow from 258 MW in 2008 to 1,600 MW in
2012.  We believe that Italy represents an attractive solar market as
a result of favorable sunlight patterns, high traditional power prices, and an
attractive feed-in tariff of €0.346 per kWh (approximately
$0.50).  According to Solar Plaza, a solar analyst firm, Italy is the
second largest solar PV energy market after Germany in the European
market.  The Italian government has set ambitious goals for solar PV,
with an initial target of 3,000 MW of installed PV power by 2016 and 8,500 MW of
PV expected to be installed by 2020.  We believe that grid-parity will
become a fact of life in Italy during this timeframe, meaning that solar
electricity will be able to compete with electricity from the grid without
subsidies.





Our
Products and Services





We
provide a full range of installation services to our solar energy customers
including design, engineering, procurement, permitting, construction, grid
connection, warranty, system monitoring, and maintenance services.  In
addition, we are a reseller of solar energy system components including, but not
limited to, racking, wiring, inverters, solar modules, and other related
components sourced from the industry’s leading manufacturers and
suppliers.  Through our partners, we assist in arranging power
purchase agreement programs for our customers. In 2010, we intend to offer
direct power purchase agreements.





Business
Segments




We
operate in three business segments:  U.S., Italy, and
Spain.
 
 U.S.
  U.S.
Commercial
  Our
U.S. commercial business consists of ground mount or rooftop solar energy
projects generally ranging from 100 kilowatt (kWh) to 1.1 MW provided to
corporate, municipal, agricultural, and utility customers.  In this
market, we design and build our solar energy systems to meet each customer’s
individual needs and circumstances.  We assess the customer’s annual
power requirements and average daily consumption rates in different seasons of
the year to size and engineer the solar energy system.  We assess the
customer’s site and if relevant roof size, configuration, and composition to
determine the optimum location for the solar modules.  We factor in
information about the customer’s electrical service territory and its rate
structures, and we identify the customer’s budget and preferred financing
method, as well as the customer’s aesthetic preferences.  We also
identify the relevant federal, state, and local regulations, including building
codes that are important to the cost, operation, and return on investment of the
customer’s solar energy system, as well as relevant tax rates and various other
factors.  We assess this data using solar monitoring tools that enable
us to design a solar energy system to a size and configuration that maximizes
energy efficiency for each customer’s circumstances.  We provide
customers with a return on investment analysis and determine the rebates and
performance-based incentives that are available to each customer.  We
prepare final construction plans to obtain a building permit and, as soon as the
permit is approved, our installation professionals begin the installation by
placing metal racking on the customer’s roof (or by building a ground mount),
followed by installation of the solar modules, inverters, and the balance of
systems components and safety equipment.
 
 After
the solar photovoltaic (PV) modules and inverters are procured and installed, we
obtain a final inspection of the installation by the local building department,
prepare and submit all rebate applications to the appropriate rebating
jurisdiction, and apply for the local utility company to interconnect the
customer’s solar energy system to the utility grid.  The entire
process from signing of the contract through final inspection by the local
building department typically takes between 3 and 6 months, with the actual
installation work usually requiring two weeks to two months.
 
 U.S.
Residential
  Our
U.S. residential business consists mainly of rooftop solar installations
generally ranging from 5 kWh to 40 kWh provided to customers primarily in
California and New Jersey as a result of the attractive government incentives in
those states.  We do provide installations in other states when
financially attractive.  The services we provide to our residential
customers are largely similar to our U.S. commercial customers.  Key
differences include that the entire process typically takes between 60 to 90
days for residential customers versus 3 to 6 months for commercial customers,
and the actual installation work usually requires two to five days for
residential customers versus two weeks to two months for commercial
customers.
  U.S.
Distribution
  We
also distribute solar modules and inverters in the U.S.  In 2009,
distribution revenue in the U.S. was minimal.




7




Italy
  Our
Italian business consists of distribution, ground mount, roof mount, and solar
power plant installations.  In Italy, a portion of our business
consists of ground mount or rooftop solar energy projects generally ranging from
50 kWh to 500 kWh provided to corporate, municipal, agricultural, and utility
customers.  In Italy, our customers commission us to install solar
energy systems based on customer-defined specifications, but we have the ability
to define our own projects and select sites based on attractive solar
characteristics.  These projects are typically 1 MW in
size.  We enter into these projects generally with a
reseller of solar power plants or a financial investor who contracts us to
construct the project.   Upon completion of a project, the acquirer of
the project has the rights to the sell electricity to the Italian power
authority at specified rates over 20 years based on Italy’s feed-in tariff. We
are currently contracted to deliver 5 MW’s under an agreement with Global Green
Advisors.
 
 Our
Italian business also consists of distribution of solar modules and
inverters.  In 2009, distribution revenue in Italy amounted to $4.8
million.
 
 Spain
 
 Our
Spanish business consists of rooftop solar installations generally ranging 5 kWh
to 1 MW provided primarily to businesses that own commercial buildings or
warehouses.  Our Spanish business also serves other European countries
other than Italy.  The services we provide to our Spanish customers
are largely similar to our U.S. commercial customers.  Our global
experience and unmatched engineering and design expertise strongly position us
to capitalize on the commercial rooftop opportunities and further build our
leadership role in this growing market.  Starting in 2010, we perform
distribution services whereby we procure solar modules and invertors and sell
these to other solar integrators or commercial buyers.




Strategy





Our goal
is to be the leading integrator of commercial solar energy
systems.  We intend to pursue the following strategies to achieve this
goal:





·
            Target multiple
      markets.  We intend to continue to target numerous market
      segments and opportunities ranging from commercial and industrial to
      agricultural and residential, both domestically and
      internationally.  Through geographic, market segment, and
      product diversification, we have reduced, and will continue to be able to
      reduce, the impact of economic and other fluctuations that any one
      individual market, segment, or region may have on our
      business.





·
            Establish best practices
      across market segments.  We intend to continue to focus
      on establishing and refining best practices for design, sales, and
      marketing that can be replicated throughout our different locations while
      identifying and centralizing operations that are best centralized in order
      to reduce the cost of operations and increase awareness of our services so
      that our best practices are applied in a uniform manner and delivered
      consistently across markets.





·
            Develop proprietary know
      how.  We believe our experience in developing, designing,
      and installing large and complex solar projects differentiates us from
      many of our competitors.  We intend to continue to develop
      proprietary turn-key solar power systems and continued improvements upon
      our prefabrication abilities for application in commercial, rooftop, and
      ground mount applications that will reduce design, permitting, and
      installation time and cost.





·
            Balance in-house engineering
      with outsourced labor.  We intend to balance the use of
      our in-house engineering, design, and installation staffs with the use of
      outsourcing when appropriate in order to improve the customer experience,
      maintain quality control, reduce costs, and protect our
    brand.





·
            Expand our participation in
      “value added” businesses.  We intend to continue to
      expand our offerings to include services such as providing after-market
      systems management programs and customized project finance solutions to
      customers and prospective customers.  This will allow us to have
      greater participation in the ancillary revenue that our projects create,
      which currently is not a significant portion of our
    business.





·
            Develop financial tools such
      as leases or Power Purchase Agreements (PPAs) to help consumers and
      businesses decide in favor of solar power.  A PPA is a
      long-term contract under which a customer has no up-front cost and instead
      agrees to purchase the energy produced by the solar system at a fixed
      rate, typically adjusted annually at an agreed rate, for 15, 20, or 25
      years.  The customer does not own the system and the elimination
      of a capital outlay simplifies the “going solar”
  decision.





·
            Expand through both
      acquisitions and organic growth.  As a growing number of
      states and countries adopt solar programs, we expect solar demand to
      continue to grow.  We intend to continue to evaluate potential
      acquisitions to expand our presence worldwide.  We view
      acquiring a local presence in a new market as a critical step in gaining a
      strong brand and presence in a
market.




8




Customers





Our
business consists of the installation of solar energy systems and all related
components for use by commercial and industrial enterprises, municipalities,
residential homeowners, and other solar energy providers.  The
following table highlights the breakdown of our revenue by market in 2009 and
2008:





United
      States
                    
                    
                    Spain
                    
                    
                    Italy2009
                    
                    
                    45.5
                    %
                    
                    
                    19.2
                    %
                    
                    
                    35.3
                    %2008
                    
                    
                    70.2
                    %
                    
                    
                    29.8
                    %
                    
                    
                    -





In 2009,
our largest customers were an Italian reseller, which represented 17% of our
total revenue, a distribution customer, which represented 5% of our total
revenue, and a U.S. commercial customer, which represented 6% of our total
revenue.  For the fiscal year ended December 31, 2009, 81% of our
revenue was derived from commercial and industrial customers, and 19% of our
revenue was derived from residential customers.  In 2008, our two
largest customers represented 18% and 12% of our total revenue,
respectively.  For the fiscal year ended December 31, 2008, 84% of our
revenue was derived from commercial and industrial customers, and 16% of our
revenue was derived from residential customers.





Our
clients in the United States have included utility companies such as Pacific Gas
and Electric and Sierra Pacific Power Company, home builders such as KB Homes,
and numerous agricultural clients such as leading wineries in Napa Valley,
California.  Our clients in Spain have included BTV, CasaVilla, and
Salvi Cazados.  Our clients in Italy have included Global Green
Advisors, Nacastri, and Camardo.




We
believe that the solar energy market is dynamic and constantly changing as
certain government standards and directives that affect the marketplace have
allowed, and will continue to allow, for new customers in new geographic
areas.  We believe that Renewable Portfolio Standards (“RPS”) in the
United States have resulted in increased demand for solar energy in the American
marketplace. RPS is a state policy that requires electricity providers to
obtain a minimum amount of their power from renewable energy by a certain
date.  According to a May 2009 report by the U.S. Department of
Energy, there were 24 states that adopted a RPS-type
mechanism.  According to the Pew Center on Global Climate Change, that
number increased to 29 states.  We believe that this number will
continue to increase.  With each new state that adopts a RPS, bases of
new customers of solar energy will develop.  In June 2009, Congress
passed a cap-and-trade energy bill that would require electric utilities to meet
20% of their electricity demand through renewable sources by 2020.  We
believe this will generate additional demand for solar energy, which would
create new customers.  We also believe that the renewable energy
directive of the European Union also plays a role in growth of our
marketplace.  According to the European Renewable Energies Foundation
and the European Future Energy Forum, the EU’s member-nations are required to
provide at least 20% of gross final energy consumption from renewable energy
sources by 2020.  This target is mandatory of the 27
member-nations.  Each member-nation must draft a Renewable Energy
Action Plan, which must include clear development targets for electricity,
heating, cooling, and fuel.  Consequently, to avoid penalties, the
member-nations provide incentives in the form of feed-in tariffs for the
generation of solar electricity.  This EU renewable energy directive,
thus, also provides for an increase in customers within the EU.  We
believe that our customer base will grow as a result of such standards and
directives.





Quality
Control





We have a
“zero defect” quality assurance program for installation of solar energy
systems.  Instituted in 2006, the zero defect policy was created to
set the highest quality and customer satisfaction standards in the industry
today.  The program sets standards for ten areas of installation: (1)
installed equipment, (2) solar array, (3) array mounting structure, (4) wire
runs, (5) system component location, (6) system component mounting, (7)
electrical, (8) system performance, (9) building requirements, and (10)
surrounding property.  Each of our installations is independently
verified by a quality control officer and must meet a rigid standard for
excellence.  One point is awarded for each standard that is met, and
our installation crews must have a score of at least 9 points for each
installation.  If an installation crew scores less than 9 points for a
particular installation, we follow up with the customer to allow management to
understand the core problem with that particular installation and to design and
implement measures to further improve the customer experience.





Our
review standards go beyond the quality of the installation to include measures
of the customer experience.  We use the “Net Promoter Score” developed
by the Massachusetts Institute of Technology and implemented by companies such
as GE and Toyota to measure quality and customer satisfaction.  We
regularly review customer surveys and scores and design and implement measures
to further improve the customer experience.




9




Competition





We are active in the U.S. and European
markets and have a few direct competitors that are concurrently active in both
of those markets.  The following provides more specific competitive
information for each of our target markets.





U.S.
Competitors





In
the United States, the solar design and integration market is highly fragmented,
and we face direct competition in this market from a number of smaller local
installers within many U.S. cities, particularly for residential
customers.   For residential opportunities in American cities and
regions such as Los Angeles, the San Francisco Bay Area, and California’s
Central Valley, we experience competition from regional installers such as
Akeena Solar, Solar Universe, Solar City, and SPG.  Based on our
geographic diversification, buying power, and unique installation methods, the
effect of any one installer on our business is limited but
growing.  In particular, among the commercial grade opportunities,
there are few companies with the level of experience to perform, and therefore
only a few competitors qualify under larger scale “Request for Proposal” (“RFP”)
projects.  These competitors include SunPower and BP
Solar.  We seek to distinguish ourselves from the competition by
marketing our depth of experience, complex engineering and design capabilities,
customer satisfaction, and our track record for delivering “on-time” and
“on-budget” installations and when project finance is required providing the
customer with an attractive financing model.





Spanish
Competitors





In the
Spanish market, we face competition from Acciona and Tudela Solar, among other
companies.  These companies, along with most of the competition in
Spain, are focused on building large-scale solar farms, which have proliferated
in 2008 as a result of national feed-in tariffs.  Large-scale farm
developers are experienced at engineering ground mount systems in abundant and
open space and replicating redundant tasks related to a large-scale
installation.  Our Spanish business is differentiated because it is
not dependent on large-scale solar farm subsidies or feed-in tariffs, and
instead is focused on the smaller commercial roof top installation, which has
greater design and installation challenges.  These projects have not
been affected by the caps placed on solar farms by the Spanish
government.  In addition, we have developed and secured exclusivity on
various components of our ballast mount roof system that reduces the cost and
time to complete installations and provides a competitive
advantage.





Italian
Competitors





In the
Italian market, we face competition from Enerqos and SAEM Energy Alternative,
among other companies.  Premier Power Italy intends to operate
as a solar developer and solar integrator. In 2009, we largely
operated as a constructor of solar power plants. In 2010, it is our intent
to market large scale solar power plants as turnkey systems to mostly
financial buyers that acquire systems for purposes of investment because once
these systems are connected to the power grid they produce a constant stream of
cash flow for 20 years for the electricity they produce pursuant to the Italian
feed-in tariff program.  Dealing in the development, construction, and sale
of large scale, capital intensive solar power plants to sophisticated financial
buyers that purchase and manage a portfolio of income producing solar power
plants as a core business requires significant resources, capabilities,
relationships, and a proven track record.  These factors, in addition to
long development cycles that must be funded in advance, a localized culture that
can impede outsiders, and the complex nature of the relatively new solar feed-in
tariff program and varied regional permitting processes, create barriers to
competitor entry and hinder both small and large companies alike from entering
the market.





Sales
and Marketing Activities





We spent
approximately $.8 million and $.4 million on domestic and international sales
and marketing activities in 2009 and 2008, respectively.  We
participate in the solar industry’s leading trade shows, use radio and print
advertising and marketing tools, and have hosted consumer-focused seminars in
targeted markets, as well as customer appreciation events to raise awareness of
solar power options and our brand, services and products.  We also
employ a national public relations firm in the United States, and have used
web-based promotion tools on our websites to educate customers, to showcase our
latest installations, and to provide general and specific sales
information.





Principal
Suppliers





The
components used in our solar energy systems consist of solar modules, inverters,
racking, wire, hardware, monitoring equipment, and electrical
equipment.  We have no exclusive supplier
relationships.  We purchase the components from leading solar
energy product suppliers including solar modules from GE, Sharp, and SunPower
Corporation; inverters from Fronius, Satcon, SMS, and Zantrex; solar trackers
from Watsun; and residential solar thermal systems from Schuco.  In
particular, Canadian Solar, GE, Sharp, SunPower Corporation, and Solyndra
together accounted for over 95% and 80% of our purchases of solar modules during
the fiscal years ended December 31, 2009 and 2008, respectively.





Solar
modules and inverters comprise a substantial portion of the total cost
of our installations.  We constantly evaluate the outlook for supply
of solar panels and other components.  However, we currently do not
maintain any long-term supply agreements for the purchase of these components,
and thus we may be subject to the availability of and/or market price
fluctuations for the components used in our solar energy systems.




10




Intellectual
Properties and Licenses





We
applied with the U.S. Patent and Trademark Office (“USPTO”) for trademark
protection for the brand name “Premier Power,” for which we received approval on
July 21, 2009, and for the brand name “Bright Futures,” for which we received
approval on December 15, 2009.  We also applied with the USPTO for
trademark protection of our sales slogan, “Your Solar Electricity
Specialist.”  This application is currently pending.





Research
and Development





We are
focused on leveraging our years of experience in designing and installing solar
systems to develop best practices and differentiating know how.  For
example, we help GE develop its popular solar tile.  Any technology
and/or procedures that are developed are based on the decades of experience in
solar installations held by the persons behind the development and in-house
expertise in electrical and structural engineering.  Our experienced
engineering team constantly looks for new and innovative ways to address space
constraints, time, and cost saving designs that will increase efficiencies and
drive added revenue.





Our
research and development efforts are often aimed at technology integrations and
system productivity and performance features.  Our engineering team
has evaluated Thin Film module technology, new racking system, next generation
inverter, and connector applications on various installation projects throughout
the year.  Under our installation contracts, we typically obtain the
rights to use any improvements to our technology developed or discovered on a
particular installation on other customer installations.





Government
Approval and Regulation





All
products that we resell are guaranteed by the manufacturer to have passed all
required government approval and regulation requirements. Some of the electrical
services we provide are regulated and require licensing. For example, the
installations of electrical components that are connected to the electric meter
require a C10 license in California and C2 license in Nevada, and the
installation of solar systems in California requires a C46
license.  As we expand our installations operation into other states,
we may need to obtain additional licenses required by the local building
authorities. Some states accept a C10 license from California. We possess and
maintain all the necessary licenses required for the services we provide. Our
employees hold some of the highest levels of licensing and certifications
available in the industry, and some employees are certified by the North America
Board of Certified Energy Practitioners (NABCEP).





Compliance
with Environmental Laws





We are
not required to comply with any environmental laws that are particular to the
solar industry.  However, it is our policy to be as environmentally
conscientious in every aspect of our operations.





Employees





As of
March 24, 2010, we had approximately 80 employees, all of which are
full-time employees.





Offices
and Websites





Our
principal executive offices are located at 4961Windplay Drive, Suite 100, El
Dorado Hills, CA 95762.  Our main telephone number is (916) 939-0400,
and our fax number is (916) 939-0490.  We also have offices in
Southern California, Nevada, New Jersey, Spain (in Barcelona, Pamplona, and
Madrid), and Italy (in Rome and Campobasso).  We also have websites
located at www.premierpower.com and www.mysolarexperience.com.  The
information on these websites is not incorporated herein by
reference.




Item
1A.  Risk Factors.




The
statements contained in or incorporated into this report that are not historic
facts are forward-looking statements that are subject to risks and uncertainties
that could cause actual results to differ materially from those set forth in or
implied by forward-looking statements.  If any of the following risks
actually occurs, our business, financial condition, or results of operations
could be harmed.




11




Risks
Relating to Our Business





We
have a short operating history as a public company, and the limited operating
history of some of our subsidiaries makes it difficult to evaluate our future
prospects and results of operations.





We may
need to hire additional management personnel and outside assistance from legal,
accounting, and other professionals to assist us with complying with additional
SEC reporting requirements and compliance under the Sarbanes-Oxley Act of 2002
not previously required of us as a private company prior to the September 2008
share exchange. This could be more costly than planned.  Further, the
limited operating history of Bright Future, Premier Power Spain, and Premier
Power Italy makes it difficult to evaluate our business. In the event that we
are not able to manage our growth and operate as a public company due to our
limited experience, our business may suffer uncertainty and failures, which
makes it difficult to evaluate our business.





We are dependent upon our suppliers
for the components used in the systems we design and install, and our major
suppliers are dependent upon the continued availability and pricing of
polysilicon and other raw materials used in solar modules.  Any increases in
the price of solar components or any interruptions to or shortage or decline in
the quality of the solar components we purchase for our solar energy systems
could adversely affect our business.





Key
components used in our systems are purchased from a limited number of
manufacturers. In particular, Canadian Solar, Sharp, SunPower Corporation,
Solyndra, and GE account for over 95% of our purchases of solar panels. We are
subject to market prices for the components that we purchase for our
installations, which are subject to fluctuation. We cannot ensure that the
prices charged by our suppliers will not increase because of changes in market
conditions or other factors beyond our control. An increase in the price of
components used in our systems could result in an increase in costs to our
customers and could have a material adverse effect on our revenues and demand
for our products and services. Our suppliers are dependent upon the availability
and pricing of polysilicon, one of the main materials used in manufacturing
solar panels. Interruptions in our ability to procure needed components for our
systems, whether due to discontinuance by our suppliers, delays or failures in
delivery, shortages caused by inadequate production capacity or unavailability,
or for other reasons, would adversely affect or limit our sales and growth. In
addition, increases in the prices of solar modules could make systems that have
been sold but not yet installed unprofitable for us. There is no assurance that
we will continue to find qualified manufacturers on acceptable terms and, if we
do, there can be no assurance that product quality will continue to be
acceptable, which could lead to a loss of sales and revenues.





Various
licenses and permits are required to operate our business, and the loss of or
failure to renew any or all of these licenses and permits could prevent us from
either completing current projects or obtaining future projects, and, thus,
materially adversely affect our business.





We hold
electrical contractor licenses in all states in which we operate, including C10,
C2, and C46. Also, we are certified by the North America Board of Certified
Energy Practitioners (NABCEP). The loss of any such licenses or certifications,
or the loss of any key personnel who hold such licenses or certifications, would
materially adversely affect our business because it could prevent us from
obtaining and/or completing solar integration projects in states where we or our
personnel lose such licenses or certifications or are in non-compliance with
state licensing or certification requirements.





We
are highly dependent on senior management and key sales and technical
personnel.  The loss and inability to replace any such persons could
have a material adverse effect on our business and operations.





We are
highly dependent on our senior management to manage our business and operations
and our key managerial, financial, sales, design, engineering, technical and
other personnel for the sale, development and installation of our solar power
systems. In particular, we rely substantially on Dean R. Marks, our President
and Chief Executive Officer, and Miguel de Anquin, our Chief Operating Officer,
and Corporate Secretary, to manage our operations. Although we have entered into
employment agreements with and obtained key-man life insurance policies for our
benefit on the lives of Messrs. Marks and de Anquin, we cannot assure their
continued services to the Company. The loss of either one of them, or any other
member of our senior management, would have a material adverse effect on our
business and operations. Competition for senior management and sales and
technical personnel is intense, and the pool of suitable candidates is limited.
We may be unable to locate a suitable replacement for any member of our senior
management or key sales and technical personnel that we lose. In addition, if
any member of our senior management or key sales and technical personnel joins a
competitor or forms a competing company, they may compete with us for customers,
business partners and other key professionals and staff members of our company.
Although
each of our senior management and key sales and technical personnel has signed a
confidentiality and non-competition agreement in connection with his employment
with us, we cannot provide assurances that we will be able to successfully
enforce these provisions in the event of a dispute between us and any member of
our senior management or key operational personnel.





If we are unable to attract, train,
and retain highly qualified personnel, the quality of our services may
decline, and we may not meet our business and financial
goals.





We
compete for qualified personnel with other solar integration companies. Intense
competition for these personnel could cause our compensation costs to increase
significantly, which, in turn, could have a material adverse effect on our
results of operations. Our future success and ability to grow our business will
depend in part on the continued service of these individuals and our ability to
identify, hire and retain additional qualified personnel. If we are unable to
attract and retain qualified employees, we may be unable to meet our business
and financial goals, which will require the retention of these qualified
employees to work on our future solar integration projects as we expand our
business.




12




Our
growth strategy may prove to be disruptive and divert management
resources.





Our
growth strategy may involve complex transactions and present financial,
managerial and operational challenges, including diversion of management
attention from our existing businesses, difficulty with integrating personnel
and financial and other systems, increased expenses, including compensation
expenses resulting from newly hired employees, the assumption of unknown
liabilities and potential disputes. We could also experience financial or other
setbacks if any of our growth strategies incur problems of which we are not
presently aware. We may also require additional financing in the future in
connection with our growth strategy.





We
may need to obtain additional debt or equity financing to fund future capital
expenditures and to meet working capital requirements, which may be obtained on
terms that are unfavorable to the Company and/or our stockholders.





Additional
equity may result in dilution to the holders of our outstanding shares of
capital stock. Additional debt financing may include conditions that would
restrict our freedom to operate our business, such as conditions
that:




·
            limit our ability to pay
      dividends or require us to seek consent for the payment of
      dividends;





·
            increase our vulnerability to
      general adverse economic and industry
  conditions;





·
            require us to dedicate a portion
      of our cash flow from operations to payments on our debt, thereby reducing
      the availability of our cash flow to fund capital expenditures, working
      capital and other general corporate purposes;
  and





·
            limit our flexibility in planning
      for, or reacting to, changes in our business and our
      industry.




We cannot
guarantee that we will be able to obtain any additional financing on terms that
are acceptable to us, or at all.





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





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




·
            failure of the expansion efforts
      to achieve expected results;





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





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





·
            risks associated with
      unanticipated events, liabilities or
  contingencies.




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




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





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




13




Our
operations are cash intensive, and our business could be adversely affected if
we fail to maintain sufficient levels of working capital.





We expend
a significant amount of cash in our operations, principally to fund our
materials procurement. Our suppliers typically provide us with credit. In turn,
we typically require our customers to make payment at various stages of the
project. We generally fund most of our working capital requirements out of cash
flow generated from operations. If we fail to generate sufficient revenues from
our sales or if we experience difficulties collecting our accounts receivables,
we may not have sufficient cash flow to fund our operating costs, and our
business could be adversely affected.





Our
operating results may fluctuate from period to period, and if we fail to meet
market expectations for a particular period, our stock price may
decline.





Our
operating results have fluctuated from period to period and are likely to
continue to fluctuate as a result of a wide range of factors, including sales
demands, electricity rate changes, changes in incentives and technological
improvements. Our production and sales are generally lower in the winter due to
weather conditions and holiday activities. Interim reports may not be indicative
of our performance for the year or our future performance, and period-to-period
comparisons may not be meaningful due to a number of reasons beyond our control.
We cannot provide assurances that our operating results will meet the
expectations of market analysts or our investors. If we fail to meet their
expectations, there may be a decline in our stock price.





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





Our
industry is highly competitive and fragmented, is subject to rapid change and
has low barriers to entry in some of the markets in which we operate. We may in
the future compete for potential customers with solar system installers and
servicers, electricians, roofers, utilities and other providers of solar power
equipment or electric power. Some of these competitors may have significantly
greater financial, technical and marketing resources and greater name
recognition than we have. We believe that our ability to compete depends in part
on a number of factors outside of our control, including:




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





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





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





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





·
            risk of local economy decline;
      and





·
            installation
      technology.




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




14




We
act as the general contractor for our customers in connection with the
installation of our solar power systems and are subject to risks associated with
construction, bonding, cost overruns, delays, and other contingencies, which
could have a material adverse effect on our business and results of
operations.





We act as
the general contractor for our customers in connection with the installation of
our solar power systems. All essential costs are estimated at the time of
entering into the sales contract for a particular project, and these are
reflected in the overall price that we charge our customers for the project.
These cost estimates are preliminary and may or may not be covered by contracts
between us or the other project developers, subcontractors, suppliers and other
parties to the project. In addition, we require qualified, licensed
subcontractors to install some of our systems. Shortages of such skilled labor
could significantly delay a project or otherwise increase our costs. Should
miscalculations in planning a project or defective or late execution occur, we
may not achieve our expected margins or cover our costs. Also, many systems
customers require performance bonds issued by a bonding agency. Due to the
general performance risk inherent in construction activities, it is sometimes
difficult to secure suitable bonding agencies willing to provide performance
bonding. In the event we are unable to obtain bonding, we will be unable to bid
on, or enter into, sales contracts requiring such bonding. Delays in solar panel
or other supply shipments, other construction delays, unexpected performance
problems in electricity generation or other events could cause us to fail to
meet these performance criteria, resulting in unanticipated and severe revenue
and earnings losses and financial penalties. Construction delays are often
caused by inclement weather, failure to timely receive necessary approvals and
permits, or delays in obtaining necessary solar panels, inverters or other
materials. We operate in international markets that have unique permitting
requirements, which, if not met, may cause delays.  The occurrence of
any of these events could have a material adverse effect on our business and
results of operations.




We
generally recognize revenue on system installations on a “percentage of
completion” basis and payments are due upon the achievement of contractual
milestones, and any delay or cancellation of a project could adversely affect
our business.





We
recognize revenue on our system installations on a “percentage of completion”
basis and, as a result, our revenue from these installations is driven by the
performance of our contractual obligations, which is generally driven by
timelines for the installation of our solar power systems at customer sites.
This could result in unpredictability of revenue and, in the short term, a
revenue decrease.  As with any project-related business, there is the
potential for delays within any particular customer project. Variation of
project timelines and estimates may impact the amount of revenue recognized in a
particular period. In addition, certain customer contracts may include payment
milestones due at specified points during a project. Because we must invest
substantial time and incur significant expense in advance of achieving
milestones and the receipt of payment, failure to achieve milestones could
adversely affect our business and cash flows.





We
are subject to particularly lengthy sales cycles with our equity fund,
commercial, and government customers, which may adversely affect our sales and
marketing efforts.





Factors
specific to certain of our customers’ industries have an impact on our sales
cycles. Our equity fund, commercial, and government customers may have longer
sales cycles due to the timing of various state and federal requirements. These
lengthy and challenging sales cycles may mean that it could take longer before
our sales and marketing efforts result in revenue, if at all, and may have
adverse effects on our operating results, financial condition, cash flows, and
stock price.





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





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




We
generally do not have long-term agreements with our solar integration customers
and, accordingly, could lose customers without warning.





Our
products are generally not sold pursuant to long-term agreements with solar
integration customers, but instead are sold on a purchase order basis. We
typically contract to perform large projects with no assurance of repeat
business from the same customers in the future. Although cancellations on our
purchase orders to date have been insignificant, our customers may cancel or
reschedule purchase orders with us on relatively short notice. Cancellations or
rescheduling of customer orders could result in the delay or loss of anticipated
sales without allowing us sufficient time to reduce, or delay the incurrence of,
our corresponding inventory and operating expenses. In addition, changes in
forecasts or the timing of orders from these or other customers expose us to the
risks of inventory shortages or excess inventory. This, in addition to the
non-repetition of large systems projects and our failure to obtain new large
system projects due to current economic conditions and reduced corporate and
individual spending, could cause our revenues to decline, and, in turn, our
operating results to suffer.





Our profitability depends, in part,
on our success in brand recognition, and we could lose our competitive
advantage if we are unable to protect our trademark against infringement. Any
related litigation could be time-consuming and
costly.





We
believe our brand has gained substantial recognition by customers in certain
geographic areas. We have trademark protection for the brand names “Premier
Power” and “Bright Futures” and have applied for trademark protection of our
sales slogan “Your Solar Electricity Specialist.”  Use of our name or
a similar name by competitors in geographic areas in which we have not yet
operated could adversely affect our ability to use or gain protection for our
brand in those markets, which could weaken our brand and harm our business and
competitive position. In addition, any litigation relating to protecting our
trademark against infringement is likely to be time consuming and
costly.




15




Our
Premier Ballasting and Premier Racking systems are untested for long-term
effectiveness and may not be patentable or may encounter other unexpected
problems, which could adversely affect our business and results of
operations.





Our
Premier Ballasting and Premier Racking systems have been tested in installation
settings but for an insufficient period of time to prove their long-term
effectiveness and benefits. These systems may not be effective or other problems
may occur that are unexpected and could have a material adverse effect on our
business or results of operations. We have not filed patent
applications for our Premier Ballasting and Premier Racking systems technology,
patents may not be issued on such technology, or we may not be able to realize
the benefits from any patents that are issued on such technology.





We
may face intellectual property infringement claims that could be time-consuming
and costly to defend and could result in our loss of significant rights and the
assessment of damages.





If we
receive notice of claims of infringement, misappropriation or misuse of other
parties’ proprietary rights, some of these claims could lead to litigation. We
cannot provide assurances that we will prevail in these actions, or that other
actions alleging misappropriation or misuse by us of third-party trade secrets,
infringement by us of third-party patents and trademarks or the validity of our
patent or trademarks, will not be asserted or prosecuted against us. We may also
initiate claims to defend our intellectual property rights. Intellectual
property litigation, regardless of outcome, is expensive and time-consuming,
could divert management’s attention from our business and have a material
negative effect on our business, operating results or financial condition. If
there is a successful claim of infringement against us, we may be required to
pay substantial damages (including treble damages if we were to be found to have
willfully infringed a third party’s patent) to the party claiming infringement,
develop non-infringing technology, stop selling our products or using technology
that contains the allegedly infringing intellectual property or enter into
royalty or license agreements that may not be available on acceptable or
commercially practical terms, if at all. Our failure to develop non-infringing
technologies or license the proprietary rights on a timely basis could harm our
business. Parties making infringement claims on any future issued patents may be
able to obtain an injunction that would prevent us from selling our products or
using technology that contains the allegedly infringing intellectual property,
which could harm our business.





Product
liability claims against us could result in adverse publicity and potentially
significant monetary damages.





As a
seller of consumer products, we face an inherent risk of exposure to product
liability claims in the event that our solar energy systems’ use results in
damages, injuries or fatalities. Since solar energy systems are electricity
producing devices, it is possible that our products could result in damage,
injury or fatality, whether by product malfunctions, defects, improper
installation or other causes. If such damages, injuries or fatalities or claims
were to occur, we could incur monetary damages, and our business could be
adversely affected by any resulting negative publicity. The successful assertion
of product liability claims against us also could result in potentially
significant monetary damages and, if our insurance protection is inadequate to
cover these claims, could require us to make significant payments from our own
resources.





We
do not carry business interruption insurance, and any unexpected business
interruptions could adversely affect our business.





Our operations are vulnerable to interruption by earthquake, fire,
power failure and power shortages, hardware and software failure, floods,
computer viruses, and other events beyond our control. In addition, we do not
carry business interruption insurance to compensate us for losses that may occur
as a result of these kinds of events, and any such losses or damages incurred by
us could disrupt our solar integration projects and other Company operations
without reimbursement.





A
decrease in the availability of credit or an increase in interest rates could
make it difficult for customers to finance the cost of solar energy systems and
could reduce demand for our services and products.





Some of
our prospective residential and commercial customers may depend on debt
financing, such as power purchase agreements of home equity loans, to fund the
initial capital expenditure required to purchase a solar energy system.
Third-party financing sources, specifically for solar energy systems, are
currently limited, especially due to recent domestic and worldwide economic
troubles. The lack of financing sources, a decrease in the availability of
credit or an increase in interest rates could make it difficult or more costly
for our potential customers to secure the financing necessary to purchase a
solar energy system on favorable terms, or at all, thus lowering demand for our
products and services and negatively impacting our business.





A
portion of our revenues is generated by construction contracts, and, thus, a
decrease in construction could reduce our construction contract-related sales
and, in turn, adversely affect our revenues.





Some of
our solar-related revenues were generated from the design and installation of
solar power products in newly constructed and renovated buildings, plants and
residences. Our ability to generate revenues from construction contracts will
depend on the number of new construction starts and renovations, which should
correlate with the cyclical nature of the construction industry and be affected
by general and local economic conditions, changes in interest rates, lending
standards and other factors. For example, the current housing slump and
tightened credit markets have resulted in reduced new home construction, which
could limit our ability to sell solar products to residential and commercial
developers.




16




We
derive most of our revenue from sales in a limited number of territories, and we
will be unable to further expand our business if we are unsuccessful in adding
additional geographic sales territories to our operations.





We
currently derive most of our revenue from sales of our solar integration
services in the United States, Italy, and Spain. This geographic concentration
exposes us to growth rates, economic conditions, and other factors that may be
specific to those territories to which we would be less subject if we were more
geographically diversified. The growth of our business will require us to expand
our operations and commence operations in other states, countries, and
territories. Any geographic expansion efforts that we undertake may not be
successful, which, in turn, would limit our growth opportunities.





We
face risks associated with international trade and currency exchange that could
have a material impact on our profitability.





We
transact business in the U.S. dollar and the Euro. Changes in exchange rates
would affect the value of deposits of currencies we hold. We do not currently
hedge against exposure to currencies. We cannot predict with certainty future
exchange rates and their impact on our operating results. Movements in the
exchange rate between the U.S. dollar and the Euro could have a material impact
on our profitability.





Our
success may depend in part on our ability to make successful
acquisitions.





As part
of our business strategy, we plan to expand our operations through strategic
acquisitions in our current markets and in new geographic markets. We cannot
accurately predict the timing, size, and success of our acquisition efforts. Our
acquisition strategy involves significant risks, including the
following:




·
            our ability to identify suitable
      acquisition candidates at acceptable
  prices;





·
            our ability to successfully
      complete acquisitions of identified
  candidates;





·
            our ability to compete
      effectively for available acquisition
  opportunities;





·
            increases in asking prices by
      acquisition candidates to levels beyond our financial capability or to
      levels that would not result in the returns required by our acquisition
      criteria;





·
            diversion of management’s
      attention to expansion
efforts;





·
            unanticipated costs and
      contingent liabilities associated with
  acquisitions;





·
            failure of acquired businesses to
      achieve expected results;





·
            our failure to retain key
      customers or personnel of acquired businesses;
  and





·
            difficulties entering markets in
      which we have no or limited
experience.




These
risks, as well as other circumstances that often accompany expansion through
acquisitions, could inhibit our growth and negatively impact our operating
results. In addition, the size, timing, and success of any future acquisitions
may cause substantial fluctuations in our operating results from quarter to
quarter. Consequently, our operating results for any quarter may not be
indicative of the results that may be achieved for any subsequent quarter or for
a full fiscal year. These fluctuations could adversely affect the market price
of our common stock.





Our
failure to integrate the operations of acquired businesses successfully into our
operations or to manage our anticipated growth effectively could materially and
adversely affect our business and operating results.





In order
to pursue a successful acquisition strategy, we must integrate the operations of
acquired businesses into our operations, including centralizing certain
functions to achieve cost savings and pursuing programs and processes that
leverage our revenue and growth opportunities. The integration of the
management, operations, and facilities of acquired businesses with our own could
involve difficulties, which could adversely affect our growth rate and operating
results. We may be unable to do any of the following:




17




·
            effectively complete the
      integration of the management, operations, facilities and accounting and
      information systems of acquired businesses with our
      own;





·
            efficiently manage the combined
      operations of the acquired businesses with our
      operations;





·
            achieve our operating, growth and
      performance goals for acquired
  businesses;





·
            achieve additional revenue as a
      result of our expanded operations;
or





·
            achieve operating efficiencies or
      otherwise realize cost savings as a result of anticipated acquisition
      synergies.




Our rate
of growth and operating performance may suffer if we fail to manage acquired
businesses profitably without substantial additional costs or operational
problems or to implement effectively combined growth and operating
strategies.




Costs
incurred because we are a public company may affect our
profitability.





As a
public company, we incur significant legal, accounting and other expenses, and
we are subject to the SEC’s rules and regulations relating to public disclosure
that generally involve a substantial expenditure of financial resources. In
addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently
implemented by the SEC, requires changes in corporate governance practices of
public companies. We expect that full compliance with these new rules and
regulations will significantly increase our legal and financial compliance costs
and make some activities more time-consuming and costly, which may negatively
impact our financial results. To the extent our earnings suffer as a result of
the financial impact of our SEC reporting or compliance costs, our ability to
develop an active trading market for our securities could be
harmed.





It may be
time-consuming, difficult and costly for us to develop and implement the
internal controls and reporting procedures required by the Sarbanes-Oxley Act,
when applicable to us. Some members of our management team have limited or no
experience operating a company with securities traded or listed on an exchange,
or subject to SEC rules and requirements, including SEC reporting practices and
requirements that are applicable to a publicly traded company. We may need to
recruit, hire, train, and retain additional financial reporting, internal
controls, and other personnel in order to develop and implement appropriate
internal controls and reporting procedures both domestically and
internationally.  If we are unable to comply with the internal
controls requirements of the Sarbanes-Oxley Act, when applicable, we may not be
able to obtain our independent accountant’s attestation report on our internal
controls over financial reporting required by the Sarbanes-Oxley
Act.




Our
business is exposed to risks associated with the ongoing financial crisis and
weakening global economy, which increases 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, forecast our operating results, make business decisions,
and identify the risks that may affect our business, financial condition and
results of operations.  If we are unable to timely and appropriately
adapt to changes resulting from the difficult macroeconomic environment, our
business, financial condition, or results of operations may be materially and
adversely affected.




18


Risks
Relating To Our Industry
 
 We have experienced technological
changes in our industry. New technologies may prove inappropriate
and result in liability to us or may not gain market acceptance by our
customers.
 
 The solar
power industry, which currently accounts for less than 1% of the world’s power
generation according to the Solar Energy Industries Association, is subject to
technological change. Our future success will depend on our ability to
appropriately respond to changing technologies and changes in function of
products and quality. If we adopt products and technologies that are not
attractive to consumers, we may not be successful in capturing or retaining a
significant share of our market. In addition, some new technologies are
relatively untested and unperfected and may not perform as expected or as
desired, in which event our adoption of such products or technologies may cause
us to lose money.
 
 A drop in the retail price of
conventional energy or non-solar alternative energy sources may negatively impact
our profitability.
 
 We
believe that a customer’s decision to purchase or install solar power
capabilities is primarily driven by the cost and return on investment resulting
from solar power systems. Fluctuations in economic and market conditions that
impact the prices of conventional and non-solar alternative energy sources, such
as decreases in the prices of oil, coal and other fossil fuels and changes in
utility electric rates and net metering policies, could cause the demand for
solar power systems to decline, which would have a negative impact on our
profitability.
 
 Existing regulations, and changes to
such regulations, may present technical, regulatory, and economic
barriers to the purchase and use of solar power products, which may
significantly reduce demand for our products.
 
 Installations
of solar power systems are subject to oversight and regulation in accordance
with national and local ordinances, building codes, zoning, environmental
protection regulation, utility interconnection requirements for metering, and
other rules and regulations. We attempt to keep up-to-date with these
requirements on a national, state, and local level, and must design, construct
and connect systems to comply with varying standards. Certain cities may have
ordinances that prevent or increase the cost of installation of our solar power
systems. In addition, new government regulations or utility policies pertaining
to solar power systems are unpredictable and may result in significant
additional expenses or delays and, as a result, could cause a significant
reduction in demand for solar energy systems and our services. For example,
there currently exists metering caps in certain jurisdictions that effectively
limit the aggregate amount of power that may be sold by solar power generators
into the power grid. Moreover, in certain markets, the process for obtaining the
permits and rights necessary to construct and interconnect a solar power system
to the grid requires significant lead time and may become prolonged, and the
cost associated with acquiring such permits and project rights may be subject to
fluctuation.
 
 Our business depends on the
availability of rebates, tax credits and other financial incentives, the reduction
or elimination of which would reduce the demand for our services.
 
 Many U.S.
states, including California, Nevada and New Jersey, offer substantial
incentives to offset the cost of solar power systems. These incentives can take
many forms, including direct rebates, state tax credits, system performance
payments, and Renewable Energy Credits (“RECs”). Moreover, although the United
States Congress recently passed legislation to extend for 8 years a 30% federal
tax credit for the installation of solar power systems, there can be no
assurance that the tax credit will be further extended once they expire.
Additionally, businesses that install solar power systems may elect to
accelerate the depreciation of their system over five years. Spain also offers
substantial incentives, including feed-in tariffs. Spain’s Industry Ministry has
implemented a capped solar subsidy program for MW installation and reduced
tariff levels.  Italy offers incentives in the form of minimum user
prices for solar electricity production and feed-in tariffs that are subject to
reduction annually for new applications.  In Italy, the current
feed-in tariff decree is effective through 2010. Subsequent decrees will
redefine rates for solar power plants commissioned thereafter. A reduction in or
elimination of such incentives could substantially increase the cost or reduce
the economic benefit to our customers, resulting in significant reductions in
demand for our products and services, which may negatively impact our
sales.
 
 If solar power technology is not
suitable for widespread adoption or sufficient demand for solar power
products does not develop or takes longer to develop than we anticipate, our sales
would decline, and we would be unable to achieve or sustain
profitability.
 
 The
market for solar power products is emerging and rapidly evolving, and its future
success is uncertain. Many factors will influence the widespread adoption of
solar power technology and demand for solar power products,
including:
  ·
              cost effectiveness of solar power
      technologies as compared with conventional and non-solar alternative
      energy technologies;
 
 ·
              performance and reliability of
      solar power products as compared with conventional and non-solar
      alternative energy products;
 
 ·
              capital expenditures by customers
      that tend to decrease if the U.S. economy slows;
  and
 
 ·
              availability of government
      subsidies and incentives.
  19
  If solar
power technology proves unsuitable for widespread commercial deployment or if
demand for solar power products fails to develop sufficiently, we would be
unable to generate enough revenue to achieve and sustain profitability. In
addition, demand for solar power products in the markets and geographic regions
we target may not develop or may develop more slowly than we
anticipate.
 
 Risks
Related to Doing Business in Spain and Italy
 
 Adverse
changes in the political and economic policies of the Spanish and Italian
governments could have a material adverse effect on the overall economic growth
of Spain and Italy, respectively, which could reduce the demand for our products
and materially and adversely affect our competitive position in those
regions.
  A
significant portion of our business operations are conducted in, and a
significant portion of our sales are made in, Spain through our subsidiary,
Premier Power Spain. In addition, we have business operations in Italy through
our wholly owned subsidiary, Premier Power Italy, and we hope to generate a
significant level of sales in Italy. Spain and Italy offer substantial
incentives, including feed-in tariffs, to encourage the growth of solar power as
a form of renewable energy. However, recently there had been significant changes
in Spain’s laws which cap the amount of kilowatts installed by solar power
installers in Spain at 66 Megawatts per quarter, effectively limiting the number
of solar module installations throughout Spain, and such new laws also created a
more complicated and lengthy permitting process in order to receive the
government funded feed-in tariffs. Accordingly, our business, financial
condition, results of operations, and prospects are affected significantly by
economic, political, and legal developments in Spain and Italy. Any adverse
change in such policies could have a material adverse effect on the overall
economic growth in Spain and Italy or on the level of our incentives, which, in
turn, could lead to a reduction in demand for our products and consequently have
a material adverse effect on our European operations and sales.
 
 Fluctuation
in the value of the Euro may have a material adverse effect on an investment in
our securities.
 
 Changes
in exchange rates would affect the value of deposits of currencies we hold. We
do not currently hedge against exposure to currencies. We cannot predict with
certainty future exchange rates and their impact on our operating results.
Movements between the U.S. dollar and the Euro could have a material impact on
our profitability.
 
 Our
business benefits from certain Spanish and Italian government incentives.
Expiration of, or changes to, these incentives could have a material adverse
effect on our operating results.
 
 The
Spanish and Italian governments have provided various incentives to solar energy
providers in order to encourage development of the solar industry. Such
incentives include feed-in tariffs and other measures. Reduction in or
elimination of such incentives or delays or interruptions in the implementation
of such favorable policies could substantially decrease the economic benefits of
solar energy to our customers, resulting in significant reductions in demand for
our products and services, which would negatively impact our sales.
 
 Effecting
service of legal process, enforcing foreign judgments, or bringing original
actions in Spain and Italy based on United States or other foreign laws against
us or our management may be difficult.
 
 We
conduct a significant amount of our business through Premier Power Spain and
Premier Power Italy, which are established in Spain and Italy, respectively, and
a portion of our assets are located in Spain and Italy. As a result, it may not
be possible to effect service of process in Spain and Italy against us or upon
our executive officers or directors, including with respect to matters arising
under U.S. federal securities laws or applicable state securities laws.
Moreover, there is uncertainty that the courts of Spain and Italy would enforce
judgments of U.S. courts against us or our directors and officers based on the
civil liability provisions of the securities laws of the United States or any
state, or entertain an original action brought in Spain and Italy based upon the
securities laws of the United States or any state.  These risks may
discourage a potential acquirer from seeking to acquire shares of our common
stock which, in turn, could reduce our stock price or prevent our stockholders
from realizing a premium over our stock price.
 
 Risk
Relating to Our Securities
 
 Generally,
we have not paid any cash dividends, and no cash dividends will be paid in the
foreseeable future, which may require our stockholders to generate a cash flow
from their investment in our securities through alternative means.
 
 We do not
anticipate paying cash dividends on our common stock in the foreseeable future,
and we may not have sufficient funds legally available to pay dividends. Even if
funds are legally available for distribution, we may nevertheless decide not to
or may be unable to pay any dividends to our stockholders. We intend to retain
all earnings for our operations. Accordingly, our stockholders may have to sell
some or all of their common stock in order to generate cash flow from their
investment. Our stockholders may not receive a gain on their investment when
they sell their common stock and may lose some or all of their investment. Any
determination to pay dividends in the future on our common stock will be made at
the discretion of our board of directors and will depend on our results of
operations, financial conditions, contractual restrictions, restrictions imposed
by applicable law, capital requirements, and other factors that our board of
directors deems relevant.
  20
  We
may need additional capital, and the sale of additional shares or other equity
securities could result in dilution to our
stockholders.  Additionally, our stockholders may face dilution from
conversion of our Series A Convertible Preferred Stock or Series B Convertible
Preferred Stock.
 
 We
believe that our current cash and cash equivalents and anticipated cash flow
from operations and our lines of credit will be sufficient to meet our
anticipated cash needs for the near future. We may, however, require additional
cash resources due to changed business conditions or other future developments,
including any investments or acquisitions we may decide to pursue. If our
resources are insufficient to satisfy our cash requirements, we may seek to sell
additional equity or debt securities or obtain an increased credit facility. The
sale of additional equity securities could result in dilution to our
stockholders. The incurrence of additional indebtedness would result in
increased debt service obligations and could result in further operating and
financing covenants that would further restrict our operations. We cannot
provide assurances that financing will be available in amounts or on terms
acceptable to us, if at all.  Additionally, there are outstanding
shares of our Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock issued by us, the conversion of which will dilute our current
stockholders.
 
 The
application of the “penny stock” rules could adversely affect the market price
of our common stock and increase our stockholders’ transaction costs to sell
those shares.
 
 Our
common stock may be subject to the “penny stock” rules adopted under Section
15(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The penny stock rules apply to companies that are not traded on a national
securities exchange whose common stock trades at less than $5.00 per share or
that have tangible net worth of less than $5,000,000 ($2,000,000 if the company
has been operating for three or more years). The “penny stock” rules impose
additional sales practice requirements on broker-dealers who sell securities to
persons other than established customers and accredited investors (generally
those with assets in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 together with their spouse). For transactions covered by these rules,
the broker-dealer must make a special suitability determination for the purchase
of securities and have received the purchaser’s written consent to the
transaction before the purchase. Additionally, for any transaction involving a
penny stock, unless exempt, the broker-dealer must deliver, before the
transaction, a disclosure schedule prescribed by the SEC relating to the penny
stock market. The broker-dealer also must disclose the commissions payable to
both the broker-dealer and the registered representative and current quotations
for the securities. Finally, monthly statements must be sent disclosing recent
price information on the limited market in penny stocks. These additional
burdens imposed on broker-dealers may restrict the ability or decrease the
willingness of broker-dealers to sell our common stock, and may result in
decreased liquidity for our common stock and increased transaction costs for
sales and purchases of our common stock as compared to other
securities.
 
 Our
common stock is thinly traded, and an active public market for our common stock
may not develop or be sustained.
 
 Although
our common stock is quoted on the Over-the-Counter Bulletin Board (“OTCBB”), we
cannot predict the extent to which an active public market for our common stock
will develop or be sustained. Our common stock has historically been
sporadically or “thinly traded” on the OTCBB, meaning that the number of persons
interested in purchasing our common stock at or near bid prices at any given
time may be relatively small or nonexistent. This situation is attributable to a
number of factors, including the fact that we are a small company that is
relatively unknown to stock analysts, stock brokers, institutional investors and
others in the investment community that generate or influence sales volume, and
that even if we came to the attention of such persons, they tend to be
risk-adverse and would be reluctant to follow an unproven company such as ours
or purchase or recommend the purchase of our shares until such time as we become
more seasoned and viable. As a consequence, there may be periods of several days
or more when trading activity in our shares is minimal or non-existent, as
compared to a seasoned issuer that has a large and steady volume of trading
activity that will generally support continuous sales without an adverse effect
on our stock price. We cannot provide assurances that a broader or more active
public trading market for our common stock will develop or be sustained, or that
current trading levels will be sustained.
 
 The
volatility of the market price of our common stock may render our stockholders
unable to sell their shares of our common stock at or near “ask” prices or at
all if they need to sell their shares to raise money or otherwise desire to
liquidate their shares.
 
 The
market price of our common stock is particularly volatile given our status as a
relatively small company with a small and thinly traded “float” that could lead
to wide fluctuations in our stock price. The price at which our common stock is
purchased may not be indicative of the price that will prevail in the trading
market. An investor in our common stock may be unable to sell their common stock
at or above their purchase price if at all, which may result in substantial
losses to such investor.
  21
  The
market for our common stock is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our stock price will
continue to be more volatile than a seasoned issuer for the indefinite future.
The volatility in our stock price is attributable to a number of factors. As
noted above, our common stock is sporadically and/or thinly traded. As a
consequence of this lack of liquidity, the trading of relatively small
quantities of shares by our stockholders may disproportionately influence the
price of those shares in either direction. The price for our shares could, for
example, decline precipitously in the event a large number of our shares are
sold on the market without commensurate demand, as compared to a seasoned issuer
which could better absorb those sales without adverse impact on its stock price.
The following factors also may add to the volatility in the price of our common
stock: actual or anticipated variations in our quarterly or annual operating
results; adverse outcomes; additions to or departures of our key personnel, as
well as other items discussed under this “Risk Factors” section, as well as
elsewhere in this prospectus. Many of these factors are beyond our control and
may decrease the market price of our common stock, regardless of our operating
performance. We cannot make any predictions or projections as to what the
prevailing market price for our common stock will be at any time, including as
to whether our common stock will sustain its current market prices, or as to
what effect the sale of shares or the availability of shares for sale at any
time will have on the prevailing market price.
 
 If
we do not meet the listing standards established by national securities exchange
markets such as Nasdaq and NYSE Alternext US LLC, our common stock may not
become listed for trading on one of those markets, which may restrict the
liquidity of shares held by our stockholders.
 
 We have
applied for listing of our common stock for trading on national securities
exchanges, and the applications are currently pending.  The listing of
our common stock on a national securities exchange may result in a more active
public market for our common stock, resulting in turn in greater liquidity of
shares held by our stockholders. National securities exchanges such as Nasdaq
and NYSE Alternext US LLC have established certain quantitative criteria and
qualitative standards that companies must meet in order to become and remain
listed for trading on these markets. We cannot guarantee that we will be able to
maintain all necessary requirements for listing; therefore, we cannot guarantee
that our common stock will be listed for trading on a national securities
exchange.
 
 Volatility
in our common stock price may subject us to securities litigation that could
result in substantial costs to our business.
 
 The
market for our common stock may be characterized by significant price volatility
when compared to seasoned issuers, and we expect our stock price will be more
volatile than a seasoned issuer for the indefinite future. In the past,
plaintiffs have often initiated securities class action litigation against a
company following periods of volatility in the market price of its securities.
We may, in the future, be the target of similar litigation. Securities
litigation could result in substantial costs and liabilities and could divert
management’s attention and resources that otherwise could have been focused on
our business operations.
 
 Past
activities of our company and affiliates may lead to future liability for our
company.
 
 Prior to
our acquisition of Premier Power California, we were a third-party logistics
provider for supply chain management, a business unrelated to our current
operations. Any liabilities relating to such prior business against which we are
not completely indemnified will be borne by us and may result in substantial
costs to the Company and could divert management’s attention and resources that
otherwise could have been focused on our business operations.
 
 We
have raised substantial amounts of capital in recent financings, and if we
inadvertently failed to comply with applicable securities laws, ensuing
rescission rights or lawsuits would severely damage our financial
position.
 
 The
securities offered in our September 9, 2008 and June 16, 2009 private placement
financings were not registered under the Act or any state “blue sky” law in
reliance upon exemptions from such registration requirements. Such exemptions
are highly technical in nature, and if we inadvertently failed to comply with
the requirements or any of such exemptive provisions, the investor would have
the right to rescind their purchase of our securities or sue for damages. If the
investor was to successfully seek such rescission or prevail in any such suit,
we would face severe financial demands that could materially and adversely
affect our financial position. Financings that may be available to us under
current market conditions frequently involve sales at prices below the prices at
which our common stock currently is quoted on the OTC or exchange on which our
common stock may in the future be listed, as well as the issuance of warrants or
convertible securities at a discount to market price.
 
 Our
principal stockholders are two members of our management.  As these
principal stockholders substantially control our corporate actions, our other
stockholders may face difficulty in exerting any influence over matters not
supported by these two members of management.
 
 Our
principal stockholders include Dean R. Marks, who is our Chairman of the Board,
President, and Chief Executive Officer, and Miguel de Anquin, who is our Chief
Operating Officer and Corporate Secretary and a member of our Board. Messrs.
Marks and de Anquin own approximately 62.0% of our outstanding shares of common
stock. These stockholders, acting individually or as a group, could exert
substantial influence over matters such as electing directors, amending our
certificate of incorporation or bylaws, and approving mergers or other business
combinations or transactions. In addition, because of the percentage of
ownership and voting concentration in these principal stockholders and their
affiliated entities, elections of our board of directors will generally be
within the control of these stockholders and their affiliated entities. While
all of our stockholders are entitled to vote on matters submitted to our
stockholders for approval, the concentration of shares and voting control
presently lies with these principal stockholders and their affiliated entities.
As such, it would be difficult for stockholders to propose and have approved
proposals not supported by these principal stockholders and their affiliated
entities. There can be no assurance that matters voted upon by our officers and
directors in their capacity as stockholders will be viewed favorably by all
stockholders of our company. The stock ownership of our principal stockholders
and their affiliated entities may discourage a potential acquirer from seeking
to acquire shares of our common stock which, in turn, could reduce our stock
price or prevent our stockholders from realizing a premium over our stock
price.
  22
  We
are responsible for the indemnification of our officers and directors, which
could result in substantial expenditures.
 
 Our
bylaws provide for the indemnification of our directors, officers, employees,
and agents, and, under certain circumstances, against attorneys’ fees and other
expenses incurred by them in litigation to which they become a party arising
from their association with or activities on behalf of the Company. This
indemnification policy could result in substantial expenditures, which we may be
unable to recoup.
 
 Our certificate of incorporation
authorizes our board to create new series of preferred stock without further
approval by our stockholders, which could adversely affect the rights of the
holders of our common stock.
 
 Our board
of directors has the authority to fix and determine the relative rights and
preferences of preferred stock. Our board of directors also has the authority to
issue preferred stock without further stockholder approval. As a result, our
board of directors could authorize the issuance of a series of preferred stock
that would grant to holders the preferred right to our assets upon liquidation,
the right to receive dividend payments before dividends are distributed to the
holders of common stock and the right to the redemption of the shares, together
with a premium, prior to the redemption of our common stock. In addition, our
board of directors could authorize the issuance of a series of preferred stock
that has greater voting power than our common stock or that is convertible into
our common stock, which could decrease the relative voting power of our common
stock or result in dilution to our existing stockholders.
 
 Contractual
limitations that restrict conversion of securities held by Vision Opportunity
Master Fund, Ltd. may not necessarily prevent substantial dilution of the voting
power and value of an investment in our securities.
 
 The
contractual limitations that restrict conversion of shares of Series A
Convertible Preferred Stock and of Series B Convertible Preferred Stock
held by Vision Opportunity Master Fund, Ltd. (“Vision”) for shares of our common
stock are limited in their application and effect and may not prevent
substantial dilution of our existing stockholders. Pursuant to the terms of such
securities, Vision may not convert the Series A Stock or the Series B Stock to
the extent that such conversion would cause Vision’s beneficial ownership,
together with its affiliates, to exceed 9.99% of the number of shares of our
outstanding common stock immediately after giving effect to the issuance of
shares of common stock as a result of a conversion.  Vision, may,
however waive this limitation upon 61 days’ notice to the Company.  In
addition, this 9.99% limitation does not prevent Vision from converting the
Series A Stock or the Series B Stock into shares of our common stock and
then reselling those shares in stages over time where Vision and its affiliates
do not, at any given time, beneficially own shares in excess of the 9.99%
limitation.  Consequently, this limitation will not necessarily
prevent substantial dilution of the voting power and value of an investment in
our securities.
 
 Item
2.  Properties.
  Our
principal executive offices are located in El Dorado Hills, California. The
table below provides a general description of our offices and facilities,
including those for our international operations:
  23
  Location
                                                                                                                                          
                                                                                                                                          Principal Activities
                                                                                                                                          
                                                                                                                                          Area (sq. ft.)
                                                                                                                                          
                                                                                                                                          Lease Expiration Date4961
      Windplay Drive, Suite 100
                                                                                                                                          
                                                                                                                                          Company
      headquarters and
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          6,700
                                                                                                                                          
                                                                                                                                          Month-to-monthEl
      Dorado Hills, California  95762
                                                                                                                                          
                                                                                                                                          warehouse3
      Newlands Circle
                                                                                                                                          
                                                                                                                                          Bright
      Future office
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          100
                                                                                                                                          
                                                                                                                                          Month-to-monthReno,
      Nevada  805091913
      Atlantic Avenue, Suite 176
                                                                                                                                          
                                                                                                                                          U.S.
      East  Coast operations
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          72
                                                                                                                                          
                                                                                                                                          Month-to-monthManasquan,
      New Jersey 087361020
      Nevada Street, #201
                                                                                                                                          
                                                                                                                                          U.S.
      Southern California
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          2,303
                                                                                                                                          
                                                                                                                                          September
      30,  2010Redlands,
      CA 92374
                                                                                                                                          
                                                                                                                                          operationsPolígono
      Industrial
                                                                                                                                          
                                                                                                                                          Spain
      headquarters
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          650
                                                                                                                                          
                                                                                                                                          April
      30, 2012Calle
      E no3 Bajo F31192
      Mutilva Baja - Navarra, SpainCentro
      de Negocios “La Garena”
                                                                                                                                          
                                                                                                                                          Spain
      regional office
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          1,100
                                                                                                                                          
                                                                                                                                          December
      30, 2013Calle
      Padre Granda, 4 2k28806
      Alcalá de Henares - Madrid, SpainC/Llull,
      321 (Edifici CINC)
                                                                                                                                          
                                                                                                                                          Spain
      regional office
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          200
                                                                                                                                          
                                                                                                                                          April
      30, 201408019
      Barcelona (22@)Contrada
      Taverna del  Cortile (Z.I.)
                                                                                                                                          
                                                                                                                                          Italy
      headquarters and
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          3,767
                                                                                                                                          
                                                                                                                                          July
      21, 2015Ripalimosani,
      Campobasso 86025 Italy
                                                                                                                                          
                                                                                                                                          warehousePiazza
      del Popolo 18
                                                                                                                                          
                                                                                                                                          Italy
      sales office
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          500
                                                                                                                                          
                                                                                                                                          Month-to-month00187
      Roma, Italy
 
 Premier
Power Spain is party to a non-cancelable lease for operating facilities in
Madrid, Spain, which expires in 2013, Navarra, Spain, which expires in 2012, and
Barcelona, Spain, which expires in 2014.  Premier Power Italy is party
to a non-cancelable renewable lease for operating facilities in Campobasso,
Italy, which expires in 2015.  We are 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 or equivalent indices in Spain and Italy. The leases
require the following payments as of December 31, 2009, subject to annual
adjustment, if any:
  (in
      thousands)2010
                              
                              $
                              1022011
                              
                              
                              752012
                              
                              
                              672013
                              
                              
                              562014
      and beyond
                              
                              
                              50$
                              350
 
 Item 3.  Legal
Proceedings.
 
 We are
not currently involved in any material legal proceedings, and we are not aware
of any material legal proceedings pending or threatened against
us.  We are also not aware of any material legal proceedings involving
any of our directors, officers, or affiliates or any owner of record or
beneficially of more than 5% of any class of our voting securities.
  In
connection with Rupinvest’s purchase of the
10% noncontrolling interest in Premier Power Italy from Esdras, Esdras has
notified Rupinvest that it does not believe that it was properly notified of the
intent to acquire and believes a premium on the purchase price was
necessary. The Company disagrees with this position. No legal proceedings have
been threatened. In the event, however, that legal proceedings are
conducted, we do not anticipate a material exposure.
 Item
4.  Submission of Matters to a Vote of Security Holders.
 
 On
December 7, 2009, we held an annual meeting of our security holders for three
purposes.
 
 The first
purpose of the annual meeting was to re-elect five directors to serve until the
2010 annual meeting of shareholders.  Each of the five
director-nominees was re-elected by casting of the following votes:
  24
  Name
      of Nominee
                                  
                                  FOR
                                  
                                  
                                  WITHHELDDean
      Marks
                                  
                                  
                                  16,393,615
                                  
                                  
                                  
                                  5,741Miguel
      de Anquin
                                  
                                  
                                  16,393,615
                                  
                                  
                                  
                                  5,741Kevin
      Murray
                                  
                                  
                                  16,397,078
                                  
                                  
                                  
                                  2,278Robert
      Medearis
                                  
                                  
                                  16,398,615
                                  
                                  
                                  
                                  741Tommy
      Ross
                                  
                                  
                                  16,398,615
                                  
                                  
                                  
                                  741
 
 The
second purpose of the annual meeting was to ratify the appointment of Macias
Gini & O’Connell, LLP(“MGO”) as our independent
registered public accounting firm for the 2009 fiscal year.  The
appointment of MGO as our independent registered public accounting firm for the
2009 fiscal year was ratified by casting of the following votes:
 
 FOR
                      
                      AGAINST
                      
                      
                      ABSTENTION16,397,847
                      
                      
                      241
                      
                      
                      
                      1,268
 
 The third
purpose of the annual meeting was to ratify our 2008 Equity Incentive
Plan.  Our 2008 Equity Incentive Plan was ratified by casting of the
following votes:
 
 FOR
                      
                      AGAINST
                      
                      
                      ABSTENTION16,391,826
                      
                      
                      7,530
                      
                      
                      
                      0
  25
  PART II
  Item
5.  Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
  Market
Information
 
 Our
common stock is traded on the Over-the-Counter Bulletin Board (“OTCBB”) under
the symbol “PPRW.”  The following table sets forth, for the periods
indicated, the reported high and low closing bid quotations for our common stock
as reported on the OTCBB.  The bid prices reflect inter-dealer
quotations, do not include retail markups, markdowns, or commissions, and do not
necessarily reflect actual transactions.
 
 Quarter
      Ended
                      
                      High
      Bid
                      
                      
                      Low
      BidDecember
      31, 2009
                      
                      $
                      3.60
                      
                      
                      $
                      1.60September
      30, 2009
                      
                      $
                      4.20
                      
                      
                      $
                      2.10June
      30, 2009
                      
                      $
                      4.37
                      
                      
                      $
                      3.50March
      31, 2009
                      
                      $
                      4.50
                      
                      
                      $
                      2.00December
      31, 2008
                      
                      $
                      5.05
                      
                      
                      $
                      2.25September
      30, 2008*
                      
                      $
                      5.90
                      
                      
                      $
                      4.05June
      30, 2008
                      
                      $
                      
                      *
                      
                      $
                      
                      *March
      31, 2008
                      
                      $
                      
                      *
                      
                      $
                      
                      *
 
 * Our
common stock had no active trading market until September 15, 2008.
  As of
March 10, 2010, the closing sales price for shares of our common stock was $2.26
per share on the OTCBB.
 
 Holders
 
 As of
March 10, 2010, we have approximately 52 stockholders of record of our issued
and outstanding common stock based upon a shareholder list provided by our
transfer agent.  Our transfer agent is Computershare located at 350
Indiana Street, Suite 800, Golden, Colorado 80401, and their telephone number is
(303) 262-0600.
 
 Dividend
Policy
  We do not
currently intend to pay any cash dividends in the foreseeable future on our
common stock and, instead, intend to retain earnings, if any, for
operations.  Any decision to declare and pay dividends in the future
will be made at the discretion of our board of directors and will depend on,
among other things, our results of operations, cash requirements, financial
condition, contractual restrictions, and other factors that our board of
directors may deem relevant.
 
 Securities
Authorized for Issuance under Equity Compensation Plans
 
 The
following table sets forth, as of December 31, 2009, certain information related
to our compensation plans under which shares of our common stock are authorized
for issuance.
  Plan Category
                            
                            COLUMN A:
                              Number of Securities
                              to be Issued upon
                              Exercise of
                              Outstanding Options
                              Warrants and Rights
                            
                            
                            Weighted-Average Exercise
                              Price of Outstanding
                              Options, Warrants and
                              Rights
                            
                            
                            Number of Securities
                              Remaining Available
                              For Future Issuance
                              Under Equity
                              Compensation Plans
                              (Excluding Securities
                              Reflected in COLUMN A)Equity
      compensation plans approved by security holders
                            
                            
                            1,320,729
                            (1)
                            
                            $
                            3.75
                            
                            
                            
                            1,631,146
                            (2)Equity
      compensation plans not approved by security holders
                            
                            
                            ―
                            
                            
                            
                            ―
                            
                            
                            
                            ―Total
                            
                            
                            1,320,729
                            
                            
                            $
                            3.75
                            
                            
                            
                            1,631,146
  (1)
                Represents outstanding options
      granted pursuant to our 2008 Equity Incentive
  Plan.
  26


(2)
              Represents shares remaining
      available for future issuance under our 2008 Equity Incentive
      Plan.




On
December 19, 2008, our board of directors approved the Premier Power Renewable
Energy, Inc. 2008 Equity Incentive Plan (the “Plan”).  All of our
employees, officers, and directors, and those of our 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
(each, an “Award”) under the Plan.  The Plan is administered by our
board, and the board establishes certain terms of option awards, including the
exercise price and duration.  Awards may be made under the Plan for up
to 2,951,875 shares of our common stock, and the maximum number of shares of
common stock with respect to which Awards may be granted to a “covered employee”
as defined by section 162(m) of the Internal Revenue Code of 1986, as amended,
is 1,500,000 shares of common stock.  The Plan allows for adjustments
for changes in common stock and certain other events, including, but not limited
to, any change in control, stock split, reverse stock split, stock dividend,
recapitalization, combination of shares, spin-off, any extraordinary
distribution, and liquidation or dissolution.





Recent
Sales of Unregistered Securities




None.





Item
6.  Selected Financial Data.





The
following selected consolidated financial data should be read in conjunction
with the “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” section and our consolidated financial statements
included in Item 8.  The selected consolidated balance sheet data as
of December 31, 2009 and 2008 and the selected consolidated statement of
operations data for the years ended December 31, 2009 and 2008 have been derived
from our audited consolidated financial statements, which are included in Item 8
to this Annual Report.  Historical results are not necessarily
indicative of the results to be expected in the future.


27





Year Ended December 31,2009
                          
                          
                          2008(in
      thousands, except per share data)Net
      sales
                          
                          $
                          30,750
                          
                          
                          $
                          44,238Cost
      of sales
                          
                          
                          (26,292
                          )
                          
                          
                          (38,711
                          )Gross
      profit
                          
                          
                          4,458
                          
                          
                          
                          5,527Operating
      expenses:Sales
      and marketing
                          
                          
                          2,910
                          
                          
                          
                          2,224Administrative
      expense
                          
                          
                          5,808
                          
                          
                          
                          2,505Total
      operating expenses
                          
                          
                          8,718
                          
                          
                          
                          4,729Operating
      (loss) income
                          
                          
                          (4,260
                          )
                          
                          
                          798Other
      income (expense):Interest
      expense
                          
                          
                          (89
                          )
                          
                          
                          (82
                          )Other
      income
                          
                          
                          23
                          
                          
                          
                          -Change
      in fair value of contingent consideration liability
                          
                          
                          4,301
                          
                          
                          
                          -Change
      in fair value of warrants
                          
                          
                          2,184
                          
                          
                          
                          -Interest
      income
                          
                          
                          44
                          
                          
                          
                          37Total
      other income (expense), net
                          
                          
                          6,463
                          
                          
                          
                          (45
                          )Income
      before income taxes
                          
                          
                          2,203
                          
                          
                          
                          753Income
      tax benefit
                          
                          
                          1,452
                          
                          
                          
                          40Net
      income (loss)
                          
                          
                          3,655
                          
                          
                          
                          793Less:
      Net income attributable to noncontrolling interest
                          
                          
                          (85
                          )
                          
                          
                          (224
                          )Net
      income attributable to Premier Power  Renewable Energy,
      Inc.
                          
                          $
                          3,570
                          
                          
                          $
                          569Earnings
      Per Share attributable to Premier Power  Renewable Energy,
      Inc.:Basic
                          
                          $
                          0.14
                          
                          
                          $
                          0.03Diluted
                          
                          $
                          0.11
                          
                          
                          $
                          0.02Weighted
      Average Shares OutstandingBasic
                          
                          
                          26,050
                          
                          
                          
                          22,666Diluted
                          
                          
                          31,273
                          
                          
                          
                          23,750





Year Ended December31,2009
                    
                    
                    2008(in thousands)Non-Cash
      Stock-Based Compensation Data:Cost
      of sales
                    
                    $
                    145
                    
                    
                    $
                    -General
      and administrative
                    
                    
                    361
                    
                    
                    
                    -Sales
      and Marketing
                    
                    
                    118
                    
                    
                    
                    -Total
      non-cash share-based compensation
                    
                    $
                    624
                    
                    
                    $
                    -




28





As of December 31,2009
                        
                        
                        2008(in
      thousands)Balance
      Sheet Data:Cash
      and cash equivalents
                        
                        $
                        3,792
                        
                        
                        $
                        5,771Total
      assets
                        
                        $
                        43,180
                        
                        
                        $
                        14,813Line
      of credit and  notes payable
                        
                        $
                        2,240
                        
                        
                        $
                        131Deferred
      revenue
                        
                        $
                        374
                        
                        
                        $
                        1,206Total
      shareholders’ equity
                        
                        $
                        12,158
                        
                        
                        $
                        7,873





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





The
following discussion and analysis of the results of operations and financial
condition of Premier Power Renewable Energy, Inc. for the fiscal years ended
December 31, 2009 and 2008 should be read in conjunction with our financial
statements and the notes to those financial statements that are included
elsewhere in this report. Our discussion includes forward-looking statements
based upon current expectations that involve risks and uncertainties, such as
our plans, objectives, expectations, and intentions. Actual results and the
timing of events could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including those
set forth under the Risk Factors, Cautionary Statement Regarding Forward-Looking
Information, and Business sections in this report. We use words such as
“anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,”
“believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions
to identify forward-looking statements.





Overview





We are a
developer, designer, and integrator of solar energy solutions. We develop,
market, sell, and maintain solar energy systems for residential, agricultural,
commercial, industrial customers in North America and Spain through Bright
Future and Premier Power Spain, both of which are wholly owned subsidiaries of
Premier Power California, which is our wholly owned subsidiary. We also
distribute solar modules and develop and integrate ground mount and rooftop
solar power systems in Italy through Premier Power Italy, the wholly owned
subsidiary of Rupinvest, which is our wholly owned subsidiary. 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 to the stockholders of Premier Power California,
which represented approximately 93.1% of the then issued and outstanding common
stock of the Company (excluding the shares issued in a related financing). As a
result of this share exchange, Premier Power California became our wholly owned
subsidiary, and we acquired the business and operations of Premier Power
California, Bright Future, and Premier Power Spain. See the “Business” section
above for additional details regarding this 2008 share exchange.





Concurrently
with the closing of the September 2008 share exchange, we raised $7 million in a
private placement financing by issuing a total of 3.5 million units, with each
unit consisting of one share of our Series A Convertible Preferred Stock,
one-half of one Series A Warrant, and one-half of one Series B Warrant to
investors at $2.00 per unit. See the “Business” section above for additional
details regarding this financing.





On June
16, 2009, we raised $3 million in a private placement financing by issuing 2.8
million shares of our Series B Preferred Stock.  In connection with
this financing, we also cancelled all issued and outstanding Series A Warrants
and Series B Warrants that were held by the investor.  See the
“Business” section above for additional details regarding this
financing.





On July
31, 2009, we purchased 100% of the issued and outstanding equity ownership of
Rupinvest from Esdras. The terms of the transaction are set forth in a Share
Exchange Agreement entered into on June 3, 2009 between the Company, Rupinvest,
and Esdras.  Prior to the closing, Rupinvest was a wholly owned
subsidiary of Esdras.  We acquired Rupinvest from Esdras in exchange
for (i) a cash payment by us to Esdras in the amount of twelve thousand five
hundred Euros (€12,500, or approximately $18,292) and (ii) the potential
transfer to Esdras of up to 3 million shares of our common stock, with the
number of shares to be transferred, if any, to be calculated based on achieving
certain sales and gross margin goals by Premier Power Italy, Rupinvest’s
subsidiary, over a three-year period. Pursuant to the terms of the transaction,
we also made a capital contribution in the amount of one million, one hundred
and twenty five thousand Euros (€1,125,000, or approximately $1,580,063) into
Premier Power Italy.


29


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




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





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





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





Goodwill and Other Intangible Assets
–The Company does not amortize goodwill, but rather tests goodwill for
impairment at least annually. We
determine the fair value using a weighted market and income
approach. Under the income approach, we calculate the fair value of a
reporting unit based on the present value of estimated future cash
flows. Under the market approach, we calculate the fair value of the
reporting unit using selected comparable company’s revenue multiples from the
Public Guideline Companiesand apply the lowest revenue multiple to the Company’s revenue. If the
fair value of the reporting unit exceeds the carrying value of the net assets
including goodwill assigned to that unit, goodwill is not impaired.  If the
carrying value of the reporting unit’s net assets including goodwill exceeds the
fair value of the reporting unit, then we determine the implied fair value of
the reporting unit’s goodwill. If the carrying value of a reporting unit’s
goodwill exceeds its implied fair value, then an impairment of goodwill has
occurred and we recognize an impairment of loss for the difference between the
carrying amount and the implied fair value of goodwill as a component of
operating income. We did not recognize any goodwill impairment charges in 2009
and 2008. Intangible
assets, consisting of a customer list, trademarks, and employee contract
are amortized over their estimated useful lifes ranging from 2-17
years.





Fair Value of Financial Instruments –The carrying value reported for cash equivalents, accounts receivable,
prepaid expenses, other receivables, accounts payable, and accrued liabilities
approximated their respective fair values at each balance sheet date due to the
short-term maturity of these financial instruments.





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





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


30


The
percentage of completion method requires the ability to estimate several
factors, including the ability of the customer to meet its obligations under the
contract, including the payment of amounts when due. If we determine that
collectability is not assured at the onset of a contract, we will defer revenue
recognition and use methods of accounting for the contract such as completed
contract method until such time we determine that collectability is reasonably
assured or through the completion of the project.
  Revenue
related to distribution sales is recognized when we have received either a
purchase order or contract, deem delivery of product to have occurred, when the
title and risk of ownership have passed to the buyer and we determine that
collection is probable.  Some Customers will pay the Company and ask
the Company to segregate and store the product separate from other
products.  The Company considers the risk has passed when payment and
segregation has occurred.




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




Income Taxes –The Company accounts for
income taxes under the liability method. Under this method, deferred tax assets
and liabilities are determined based on differences between the financial
reporting and tax reporting bases of assets and liabilities and are measured
using enacted tax rates and laws that are expected to be in effect when the
differences are expected to reverse. Realization of deferred tax assets is
dependent upon the weight of available evidence, including expected future
earnings. A valuation allowance is recognized if it is more likely than not that
some portion or all of a deferred tax asset will not be realized.Prior to September 2008, the Company
was not subject to federal income tax.
 
 Effective
September 1, 2008, the Company adopted FASB ASC 740-10 (Financial Accounting
Standards Interpretation FIN No. 48, “Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement No. 109” (FIN 48)). FASB ASC
740-10 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of uncertain tax positions taken
or expected to be taken in a company’s income tax return and provides guidance
on derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition.  As a result of the
implementation of FASB ASC 740-10, the Company recognized no change in the
liability for unrecognized tax benefits related to tax positions taken in prior
periods and no corresponding change in retained earnings.   As a
result of the implementation of FASB ASC 740-10, the Company recognized no
material adjustment in the liability for unrecognized income tax benefits as of
the September 2008 adoption date and at December 31, 2009. The Company does not
expect there to be any material change to the assessment of uncertain tax
positions over the next twelve months.
  Premier
Power Spain is organized under the laws of Spain and is subject to federal and
provincial taxes.  Premier Power Italy is recognized under the laws of
Italy and is subject to federal and provincial taxes.
  Contingent
Consideration Liability– In connection with the acquisition of
Rupinvest, contingent consideration liability of $12 million was recorded at the
time of the purchase. The contingent consideration liability relates to the
contingent issuance of 3 million shares to the sellers of
Rupinvest. In
accordance with FASB ASC 820 the Company estimates the fair value of the
contingent consideration liability at each reporting period, with changes in the
estimated fair value recorded in income.
 
 The fair
value measurement assumes that the contingent consideration liability is
transferred to a market participant at the valuation date and that the
nonperformance risk related to the contingent consideration liability remains
constant. The Company estimates the fair value using the market price of its
shares since it believes this represents the present value of its future stock
returns, discounted at the Company’s required rate of return. The Company also
estimates the number of shares to be issued based on a number of financial
scenarios weighted based on their relative probability. The Company considers
the effect of counterparty performance risk in its fair value estimate. The
Company estimates the counterparty performance risk by comparing its borrowing
rate to those of U.S. treasury notes and uses the underlying spread to
discount the estimated fair value.


Summary
of 2009 Results of Operations





Our total
net sales for the year ended December 31, 2009 was $30.7 million, a decrease of
$13.5 million, or 30%, from the year ended December 31, 2008.  U.S.
net sales was $14.0 million for the year ended December 31, 2009, a decrease of
$17.1 million, or 55%, from the prior year.  Spain’s net sales were
$5.9 million for the year ended December 31, 2009, a decrease of $7.2 million,
or 55%, from the prior year.  Our Italian operations provided $10.8
million of net sales in its first 5 months of operations.  The
decrease in our net sales was primarily due to the overall economic environment,
the resulting decrease in and/or postponements of capital spending by our
customers, and the reduction in the pricing and cost of solar systems requiring
more installations sales to match the prior year’s net sales.





Our net
income for the year ended December 31, 2009, was $3.7 million, or $0.14 per
share, compared to net income of $0.8 million, or $0.03 per share, for year
ended December 31, 2008.  Net income included $6.5 million associated
with changes in fair value of financial instruments. Our profitability is
primarily dependent upon revenue from sales to commercial, governmental,
residential, and equity fund customers.  Profitability is also
affected by the costs and expenses associated with installation of
systems.  Cost of sales decreased by $12.4 million, or 32%, in the
year ended December 31, 2009, compared to the prior fiscal year.  The
decrease was primarily the result of cost reductions and lower
sales.  Operating expenses increased by $4.0 million, or 84%, for the
year ended December 31, 2009 as compared to the year ended December 31, 2008,
due primarily to the acquisition of Premier Power Italy, the costs associated
with our first full fiscal year of being a public company following the reverse
merger in 2008, and stock-based compensation.





Sources
of Revenue





Year
      Ended December 31,(Dollars
      in thousands)
                          
                          2009
                          
                          
                          2008
                          
                          
                          Change
      %Net
      sales:United
      States
                          
                          $
                          13,987
                          
                          
                          $
                          31,074
                          
                          
                          
                          (55
                          )%Spain
                          
                          
                          5,919
                          
                          
                          
                          13,164
                          
                          
                          
                          (55
                          )%Italy
                          
                          
                          10,844
                          
                          
                          
                          -Total
      net sales
                          
                          $
                          30,750
                          
                          
                          $
                          44,238
                          
                          
                          
                          (30
                          )%





Our net
sales include revenue recognized under installation contracts using the
percentage of completion method of accounting.  Additionally, we
derive net sales from distribution sales to customers in Italy and Spain. This
decrease in the United States is largely the result of three items: the
financial crisis, which slowed business development dramatically in the first
half of the year, the lack of available project finance as a result of the
Company’s focus on larger projects, and the fact that we had one large
commercial deal in the U.S. last year.  The decrease in our Spanish
market is largely the result of more protracted sales process resulting from new
permitting laws in Spain that have taken permit timing from as little as one
month to more than 6 months.  The growth in Italian net sales is a
result of the acquisition of our Italian subsidiary in the third quarter of
2009.


31


Cost
of sales





(Dollars
      in thousands)
                                          
                                          2009
                                          
                                          
                                          2008
                                          
                                          
                                          Change %Cost
      of SalesUnited
      States
                                          
                                          $
                                          12,383
                                          
                                          
                                          $
                                          27,229
                                          
                                          
                                          
                                          (55
                                          )%Spain
                                          
                                          
                                          5,051
                                          
                                          
                                          
                                          11,482
                                          
                                          
                                          
                                          (56
                                          )%Italy
                                          
                                          
                                          8,858Total
      cost of sales
                                          
                                          $
                                          26,292
                                          
                                          
                                          $
                                          38,711
                                          
                                          
                                          
                                          (32
                                          )%Stock-based
      compensation included above
                                          
                                          $
                                          145
                                          
                                          
                                          $
                                          -Gross
      Margin PercentageUnited
      States
                                          
                                          
                                          11.5
                                          %
                                          
                                          
                                          12.4
                                          %Spain
                                          
                                          
                                          14.7
                                          %
                                          
                                          
                                          12.8
                                          %Italy
                                          
                                          
                                          18.3
                                          %
                                          
                                          
                                          -Total
                                          
                                          
                                          14.5
                                          %
                                          
                                          
                                          12.5
                                          %





Cost of sales include all direct
material and labor costs attributable to a project as well as certain indirect
costs related to contract performance, such as indirect labor, supplies, tools,
repairs, and depreciation costs.  Cost of sales for the U.S. decreased
$14.8 million, or 55%, for the year ended December 31, 2009 compared to the year
ended December 31, 2008.  The decrease was primarily the result of
cost reductions and lower sales.  U.S. gross margin decreased to 11.5%
due to the increased competitive nature of the industry and the scope and size
of projects as smaller projects typically have lower gross
margins.  Cost of sales for our Spanish operations decreased $6.4
million, or 56%, for the year ended December 31, 2009 compared to the year ended
December 31, 2008.  The decrease was primarily the result of a
decrease in net sales.  The gross margin for our Spanish operations
increased slightly to 14.7% and remains competitive in the
marketplace.  The gross margin for our Italian operations was 18.3%
and is a combination of our higher margin solar projects and our lower
margin distribution margins.





Operating
Expenses





Year Ended
December 31,(Dollars
      in thousands)
                    
                    2009
                    
                    
                    2008
                    
                    
                    Change
      %Sales
      and marketing expenses
                    
                    $
                    2,910
                    
                    
                    $
                    2,224
                    
                    
                    
                    (31
                    )%General
      and administrative expenses
                    
                    $
                    5,808
                    
                    
                    $
                    2,505
                    
                    
                    
                    (132
                    )%As
      a percent of net salesSales
      and marketing expenses
                    
                    
                    9.5
                    %
                    
                    
                    5.0
                    %General
      and administrative expenses
                    
                    
                    18.9
                    %
                    
                    
                    5.7
                    %Stock-Based
      Compensation Included Above:Sales
      and marketing expenses
                    
                    $
                    118
                    
                    
                    
                    -General
      and administrative expenses
                    
                    $
                    361
                    
                    
                    
                    -





Sales
and Marketing Expenses





Sales and marketing expenses consist
primarily of personnel costs and costs related to our sales force and marketing
staff.  They also include expenses relating to advertising, brand
building, marketing promotions and trade show events, lead generation, and
travel. Commissions are due and payable when customer payment is
received.  Accordingly, selling and marketing expense were higher in
2009 as a result of strong 2008 fourth quarter revenues. Sales and
marketing expense for the year ended December 31, 2009 increased by $.7 million,
or 31%, compared to the year ended December 31, 2008, which is due to the
addition of our newly acquired Italian operations, stock-based compensation, and
the variability in sales commission expense associated with the increase or
decrease in product revenue.


32


General
and Administrative Expenses





General and administrative expenses
consist of personnel and related costs for accounting, legal, information
systems, human resources, and other administrative functions.  They
also include professional service fees, bad debt expense, other corporate
expenses and related overhead.  General and administrative expenses
increased by $3.3 million, or 132%, for the year ended December 31, 2009
compared to the year ended December 31, 2008.  The increase was
attributable to higher professional service fees incurred for the purchase of
our Italian operations, higher auditing and legal fees associated with being a
public company for the first full fiscal year following the reverse merger in
2008, first time Italian operating expenses, and stock-based
compensation.




Other
Income and Expenses




Other income and expense consists of
change in fair value of financial instruments, interest income, interest
expense, and other income (expense).  Change in fair value of
financial instruments consists of gain on the fair value and cancellation of
warrant liability (Note 13) and changes in the fair value of contingent
consideration liability (Note 12).  Other income consists of gain on
sale of a special purpose entity in Italy.  For the year ended
December 31, 2009, interest expense increased by $7 thousand, or 9%, compared to
the year ended December 31, 2008, due to increased borrowing in
Spain.




Income
Tax Benefit




The effective tax rate in the years
ended December 31, 2009 and 2008 was (65.9)% and 4.5%,
respectively.  The effective tax rate in the year ended December 31,
2009 differed from the federal statutory rate of 34% primarily due to the
recognition of net operating losses.





Liquidity





Cash
Flows





The
Company generates cash from operations primarily from cash collections related
to its installation sales.  Net cash flow used in operating activities
was $6.2 million in the year ended December 31, 2009, compared with net cash
used by operations of $.1 million for the year ended December 31,
2008.  The decrease in net cash flow from operating activities was
primarily a result of the increase in costs and estimated earnings in excess of
billings on uncompleted contracts of $14.3 million for the solar projects in
Italy, operating loss of $4.3 million, increase in accounts receivable of $2.6
million, and decrease in billings in excess costs of $0.8 million, offset by an
increase of accounts payable and accrued liabilities of $15
million.





Net cash
flow used in investing activities was $0.3 million and $0.2 million for the
years ended December 31, 2009 and 2008, respectively.  The decrease in
net cash flow from investing activities was due to the assets purchased in
our Italian acquisition.





Net cash
flow provided by financing activities was $4.5 million and $4.8 million for
the years ended December 31, 2009 and 2008, respectively.  The
decrease in net cash flow from financing activities was mainly due to
proceeds from the issuance of preferred stock of $3 million and proceeds from
borrowings of $2.4 million.  We used cash in financing activities to
pay down debt of $0.3 million and pay for costs related to share registration of
$.6 million.




Material
Impact of Known Events on Liquidity




Our
expanding large-scale solar power project development business in Italy is
expected to have increasing liquidity requirements in the future. Solar
power project development cycles can take several months to develop. In
certain of our markets, primarily Italy, it is not uncommon to receive payment
at the end of a project. This may require us to make an advancement of costs
prior to cash receipts. To date, we have financed these up front construction
costs using working capital and cash on hand.





The
disruption in the credit markets has had a significant adverse impact on a
number of financial institutions.  As of December 31, 2009, however,
our liquidity and capital investments have not been materially adversely
impacted, and we believe that they will not be materially adversely impacted in
the near future.  We will continue to closely monitor our liquidity
and the credit markets.  Nonetheless, we cannot predict with any
certainty the impact to us of any further disruption in the credit
environment.





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


33


Capital
Resources





We have
financed our operations primarily through cash flows from operations and debt
and equity financings.  We have in place a $7.0 million credit
line with Umpqua Bank that is available for working capital and capital
expenditures, which expires on July 13, 2011, and Premier Power Spain has a
100,000 Euro credit line that is available for working capital, which expires on
May 21, 2010. The amount available for borrowing is limited by certain
financial calculations. At December 31, 2009, $0.3 million was available
under the Umpqua line.  Thus, we believe that our current cash and cash
equivalents, anticipated cash flow from operations, and our lines of credit with
banks will be sufficient to meet our anticipated cash needs, including our cash
needs for working capital and capital expenditures for at least the next 12
months. The proceeds from the private placement financings were used for general
working capital purposes, including funding the purchase of additional inventory
and advertising and marketing expenses.





Notwithstanding
the above, we may seek to raise additional cash to fund future project
investments or acquisitions we may decide to pursue. To the extent it becomes
necessary to raise additional cash in the future, we may seek to raise it
through the sale of debt or equity securities, funding from joint-venture or
strategic partners, debt financing or loans, issuance of common stock, or a
combination of the foregoing. Other than our lines of credit, 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 July
13, 2009, we entered into a loan agreement with Umpqua Bank, an Oregon
corporation, for a line of credit of up to $12 million, maturing on July 13,
2011.  The loan agreement provides for an initial line of credit of $7
million, provided, however, that we may request no more than twice prior to the
maturity date that the line of credit be increased to an amount not to exceed
$12.0 million in the event that we acquire another subsidiary and require
additional working capital for such subsidiary.  The line of credit is
secured by its assets and by the assets of Premier Power California and Bright
Future.  The line of credit bears interest at the prime rate,
provided, however, that the interest rate will not be less than five percent
(5%) per annum.  At December 31, 2009, the interest rate was
5%.  As of December 31, 2009, there is $1.5 million outstanding under
the agreement with Umpqua Bank.




The
loan agreement with Umpqua Bank contains various financial condition covenants
with which we must comply, including minimum current ratio, maximum debt to
tangible net worth ratio, and minimum tangible net worth.  Under the
loan agreement, we are also subject to customary non-financial covenants
including limitations in secured indebtedness and limitations on dividends and
other restricted payments.  We were out of compliance with
certain covenants as of December 31, 2009 primarily as a result of the
Contingent Consideration Liability.  See note 13 to our consolidated
financial statements.  As of March 24, 2010, the bank is aware of
the non-compliance and has not waived the non-compliance. The bank has not
issued a notice of default, nor instituted default rates, nor cut funding under
the line. We do not expect any of these events to occur and are currently
working with the bank to redefine our financial
covenants.




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 December 31, 2009,
and the effect these obligations are expected to have on our liquidity and cash
flows in future periods.





Payments Due by PeriodLess than 1Total
                                  
                                  
                                  year
                                  
                                  
                                  1-3 Years
                                  
                                  
                                  3-5 Years(in
      thousands)Contractual
      Obligations:Bank
      Indebtedness
                                  
                                  $
                                  2,352
                                  
                                  
                                  $
                                  1,777
                                  
                                  
                                  $
                                  570
                                  
                                  
                                  $
                                  5Operating
      Leases
                                  
                                  
                                  350
                                  
                                  
                                  
                                  102
                                  
                                  
                                  
                                  198
                                  
                                  
                                  
                                  50$
                                  2,702
                                  
                                  
                                  $
                                  1,879
                                  
                                  
                                  $
                                  768
                                  
                                  
                                  $
                                  55





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.


34


Recently
Issued Accounting Pronouncements





In
December 2007, the Financial Accounting Standards Board (“FASB”) issued FASB ASC
805 (FAS No. 141(R), “Business
Combinations” (“FASB 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.  FASB ASC 805 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 FASB ASC 805 on the Company’s consolidated
financial statements will be determined in part by the nature and timing of any
future acquisitions completed.  See Note 5.




In March
2008, the FASB issued FASB ASC 815-40 (SFAS No. 161, “Disclosures about Derivatives
Instruments and Hedging Activities, an Amendment of FASB Statement No.
133”).  FASB ASC 815-40 requires enhanced disclosures about a
company’s derivative and hedging activities. ASC 815-40 is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008. The adoption of FASB ASC 815-40 did not have a material
impact on the Company’s results of operations, cash flows, or financial
position.





In April
2008, the FASB issued FASB ASC 350-30 (FASB Staff Position (FSP) FAS No. 142-3,
“Determination of the Useful
Life of Intangible Assets”). FASB ASC 350-30 amends
the factors an entity should consider in developing renewal or extension
assumptions used in determining the useful life of recognized intangible assets
under FASB ASC 350-30 (SFAS No. 142, “Goodwill and Other Intangible
Assets”). FASB ASC 350-30 must be applied prospectively to intangible
assets acquired after the effective date. The Company applied the guidance of
the FASB ASC 350-30 to intangible assets acquired after January 1,
2009.  The Company’s adoption of FASB ASC 350-30 did not have a
material impact on its financial position, results of operations, or cash
flows.





In June
2008, the FASB ratified FASB ASC 815-40 (EITF Issue 07-5 (EITF 07-5), “Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity’s Own Stock”). FASB ASC
815-40 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 the impact of foreign currency
denominated strike prices and market-based employee stock option valuation
instruments. FASB ASC 815-40 is effective for fiscal years beginning after
December 15, 2008 and interim periods within those years.  On January 1,
2009, the Company adopted this pronouncement (see Note 12).





In April
2009, the FASB issued FASB ASC 825-10-65 and FASB ASC 270 (“FSP 107-1 and APB 28-1 Interim
Disclosures about Fair Value of Financial Instruments”), which increases
the frequency of fair value disclosures to a quarterly basis instead of on an
annual basis. The guidance relates to fair value disclosures for any financial
instruments that are not currently reflected on an entity’s balance sheet at
fair value. FASB ASC 825-10-65 and FASB ASC 270 are effective for interim and
annual periods ending after June 15, 2009. The adoption of  FASB ASC
825-10-65 and FASB ASC 270 did not have a material impact on the Company’s
results of operations, cash flows, or financial position.





In May
2009, the FASB issued FASB ASC 470 (Staff Position No. APB 14-1 “Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)”).  FASB ASC 470 clarifies that convertible debt
instruments that may be settled in cash upon conversion (including partial cash
settlement) are not addressed by FASB ASC 470-20-65-1 (paragraph 12 of APB
Opinion No. 14, “Accounting
for Convertible Debt and Debt Issued with Stock Purchase Warrants”).
Additionally, FASB ASC 470 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. FASB ASC 470 is effective for financial
statements issued for fiscal years beginning after December 15, 2008 and interim
periods within those fiscal years. The adoption of FASB ASC 470 did not have a
material effect on our consolidated financial statements.





In May
2009, the FASB issued FASB ASC 855 (SFAS No. 165, “Subsequent Events”), which
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. In particular, FASB ASC 855 sets forth (a) the
period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, (b) the circumstances
under which an entity should recognize events or transactions occurring after
the balance sheet date in its financial statements, and (c) the disclosures that
an entity should make about events or transactions that occurred after the
balance sheet date. FASB ASC 855 is effective for interim or annual financial
reporting periods ending after June 15, 2009. The adoption of FASB ASC 855 did
not have a material impact on the Company’s results of operations, cash flows,
or financial position.


35


In June
2009, the FASB issued FASB ASC 810 (SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R)”). FASB ASC 810 applies to FASB ASC 105 entities and is
effective for annual financial periods beginning after November 15, 2009 and for
interim periods within those years. Earlier application is prohibited. A
calendar year-end company must adopt this statement as of January 1, 2010. The
Company does not anticipate the adoption of FASB ASC 810 to have a material
impact on its results of operations, cash flows, or financial
position.





In June
2009, the FASB issued FASB ASC 860 (SFAS No. 166, “Accounting for Transfers of
Financial Assets-an amendment of FASB Statement No. 140”). FASB ASC 860
applies to all entities and is effective for annual financial periods beginning
after November 15, 2009 and for interim periods within those years. Earlier
application is prohibited. A calendar year-end company must adopt this statement
as of January 1, 2010. This statement retains many of the criteria of FASB ASC
860 (FASB 140, “Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities”) to determine whether a transfer of financial assets
qualifies for sale accounting, but there are some significant changes as
discussed in the statement. Its disclosure and measurement requirements apply to
all transfers of financial assets occurring on or after the effective date. Its
disclosure requirements, however, apply to transfers that occurred bothbefore and after the
effective date. In addition, because FASB ASC 860 eliminates the consolidation
exemption for Qualifying Special Purpose Entities, a company will have to
analyze all existing QSPEs to determine whether they must be consolidated under
FASB ASC 810. The Company does not anticipate the adoption of FASB ASC 860 to
have a material impact on its results of operations, cash flows, or financial
position.




In August
2009, the FASB issued ASU 2009-05, “Measuring Liabilities at Fair
Value.”ASU
2009-05 applies to all entities that measure liabilities at fair value within
the scope of FASB ASC 820, “Fair Value Measurements and
Disclosures.”ASU 2009-05 is effective for the first reporting period (including
interim periods) beginning after issuance, October 1, 2009 for the Company. The
Company does not expect the adoption of ASU 2009-05 to have a material impact on
results of operations, cash flows, or financial position.





In August
2009, an update was made to Fair Value Measurements and
Disclosures – Measuring Liabilities at Fair Value.”This
update permits entities to measure the fair value of liabilities, in
circumstances in which a quoted price in an active market for an identical
liability is not available, using a valuation technique that uses a quoted price
of an identical liability when traded as an asset, quoted prices for similar
liabilities or similar liabilities when traded as assets or the income or market
approach that is consistent with the principles ofFair Value Measurements and
Disclosures.Effective upon issuance, the Company has adopted
this guidance.  See Note 16.





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




Item
7A.  Quantitative and Qualitative Disclosures About Market
Risk.





Not
applicable.





Item
8.  Financial Statements and Supplementary Data.





Our
consolidated financial statements for the years ended December 31, 2009 and 2008
begin on the following page.




36




Report of Independent Registered
Public Accounting Firm
  Board of Directors and
Shareholders
 Premier Power Renewable Energy,
Inc.
 El Dorado Hills,California
  We have audited the accompanying
consolidated balance sheets of Premier Power Renewable Energy, Inc. and
subsidiaries as of December 31, 2009 and 2008 and the related consolidated
statements of operations, shareholders’ equity, and cash flows for the years
then ended. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
  We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board
(United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
  In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects,
the financial position of Premier Power Renewable Energy, Inc. and subsidiaries
at December 31, 2009 and 2008, and the results of their operations
and their cash flows for the years then ended in conformity with accounting
principles generally accepted in theUnited States of America.
  As
discussed in Note14to the financial
statements in 2009, the Company has changed its methodofaccounting for warrants
which are not indexed to its stockdue to the adoption ofFASB ASC
815 (EITF
07-5), DeterminingWhether
an Instrument (or embedded Feature) is Indexed to an Entity’s Own
Stock).
  
   Sacramento,California
  March 24, 2010




F-1




PREMIER
POWER RENEWABLE ENERGY, INC.


CONSOLIDATED
BALANCE SHEETS


(in
thousands, except share data)




December
      31,2009
                                    
                                    
                                    2008ASSETSCurrent
      assets:Cash
      and cash equivalents
                                    
                                    $
                                    3,792
                                    
                                    
                                    $
                                    5,771Accounts
      receivable, net of allowance for doubtful accounts of$137 and $18
      at December 31, 2009 and 2008, respectively
                                    
                                    
                                    7,676
                                    
                                    
                                    
                                    4,768Inventory
                                    
                                    
                                    1,824
                                    
                                    
                                    
                                    1,425Prepaid
      expenses and other current assets
                                    
                                    
                                    432
                                    
                                    
                                    
                                    259Costs
      and estimated earnings in excess of billings on uncompleted
      contracts
                                    
                                    
                                    13,674
                                    
                                    
                                    
                                    236Other
      receivables
                                    
                                    
                                    175
                                    
                                    
                                    
                                    94Deferred
      tax assets
                                    
                                    
                                    473
                                    
                                    
                                    
                                    229Total
      current assets
                                    
                                    
                                    28,046
                                    
                                    
                                    
                                    12,782Property
      and equipment, net
                                    
                                    
                                    615
                                    
                                    
                                    
                                    475Intangible
      assets, net
                                    
                                    
                                    970
                                    
                                    
                                    
                                    1,048Goodwill
                                    
                                    
                                    12,254
                                    
                                    
                                    
                                    483Deferred
      tax assets
                                    
                                    
                                    1,295
                                    
                                    
                                    
                                    25Total
      assets
                                    
                                    $
                                    43,180
                                    
                                    
                                    $
                                    14,813LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
                                    
                                    $
                                    18,347
                                    
                                    
                                    $
                                    3,707Accrued
      liabilities
                                    
                                    
                                    2,043
                                    
                                    
                                    
                                    1,368Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
                                    
                                    
                                    374
                                    
                                    
                                    
                                    1,206Taxes
      payable
                                    
                                    
                                    293
                                    
                                    
                                    
                                    185Borrowings,
      current
                                    
                                    
                                    1,692
                                    
                                    
                                    
                                    38Total
      current liabilities
                                    
                                    
                                    22,749
                                    
                                    
                                    
                                    6,504Borrowings,
      non-current
                                    
                                    
                                    548
                                    
                                    
                                    
                                    93Contingent
      consideration liability
                                    
                                    
                                    7,725
                                    
                                    
                                    
                                    -Deferred
      tax liabilities
                                    
                                    
                                    -
                                    
                                    
                                    
                                    343Total
      liabilities
                                    
                                    
                                    31,022
                                    
                                    
                                    
                                    6,940Commitments
      and contingencies (Note 12)Shareholders'
      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 December 31, 2009 and 2008,
      respectively
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Series
      B convertible preferred stock, par value $.0001 per share: 2,800,000
      shares designated out of 20,000,000 shares of preferred stock authorized;
      2,800,000 and 0 shares issued and outstanding at December 31, 2009 and
      2008, respectively
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Common
      stock, par value $.0001 per share; 500,000,000 shares authorized;
      29,050,250 and 26,048,075 shares issued and outstanding
      at  December 31, 2009 and 2008, respectively
                                    
                                    
                                    3
                                    
                                    
                                    
                                    3Additional
      paid-in-capital
                                    
                                    
                                    17,822
                                    
                                    
                                    
                                    7,542(Accumulated
      deficit) retained earnings
                                    
                                    
                                    (5,385
                                    )
                                    
                                    
                                    369Accumulated
      other comprehensive loss
                                    
                                    
                                    (282
                                    )
                                    
                                    
                                    (41
                                    )Total
      shareholders' equity
                                    
                                    
                                    12,158
                                    
                                    
                                    
                                    7,873Total
      liabilities and shareholders' equity
                                    
                                    $
                                    43,180
                                    
                                    
                                    $
                                    14,813




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




F-2





PREMIER
POWER RENEWABLE ENERGY, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS


(in
thousands, except per share data)




For Year Ended December 31,2009
                                        
                                        
                                        2008Net
      sales
                                        
                                        $
                                        30,750
                                        
                                        
                                        $
                                        44,238Cost
      of sales
                                        
                                        
                                        (26,292
                                        )
                                        
                                        
                                        (38,711
                                        )Gross
      profit
                                        
                                        
                                        4,458
                                        
                                        
                                        
                                        5,527Operating
      expenses:Sales
      and marketing
                                        
                                        
                                        2,910
                                        
                                        
                                        
                                        2,224General
      and administrative
                                        
                                        
                                        5,808
                                        
                                        
                                        
                                        2,505Total
      operating expenses
                                        
                                        
                                        8,718
                                        
                                        
                                        
                                        4,729Operating
      (loss) income
                                        
                                        
                                        (4,260
                                        )
                                        
                                        
                                        798Other
      income (expense):Interest
      expense
                                        
                                        
                                        (89
                                        )
                                        
                                        
                                        (82
                                        )Other
      income
                                        
                                        
                                        23
                                        
                                        
                                        
                                        -Change
      in fair value of contingent consideration liability
                                        
                                        
                                        4,301
                                        
                                        
                                        
                                        -Change
      in fair value of warrants
                                        
                                        
                                        2,184Interest
      income
                                        
                                        
                                        44
                                        
                                        
                                        
                                        37Total
      other (expense) income, net
                                        
                                        
                                        6,463
                                        
                                        
                                        
                                        (45
                                        )Income
      before income taxes
                                        
                                        
                                        2,203
                                        
                                        
                                        
                                        753Income
      tax benefit
                                        
                                        
                                        1,452
                                        
                                        
                                        
                                        40Net
      income
                                        
                                        
                                        3,655
                                        
                                        
                                        
                                        793Less:  Net
      income attributable to noncontrolling interest
                                        
                                        
                                        (85
                                        )
                                        
                                        
                                        (224
                                        )Net
      income attributable to Premier Power Renewable Energy,
Inc.
                                        
                                        $
                                        3,570
                                        
                                        
                                        $
                                        569Earnings
      Per Share attributable to Premier Power Renewable Energy,
    Inc:Basic
                                        
                                        $
                                        0.14
                                        
                                        
                                        $
                                        0.03Diluted
                                        
                                        $
                                        0.11
                                        
                                        
                                        $
                                        0.02Weighted
      Average Shares Outstanding:Basic
                                        
                                        
                                        26,050
                                        
                                        
                                        
                                        22,666Diluted
                                        
                                        
                                        31,273
                                        
                                        
                                        
                                        23,750





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




F-3




PREMIER
POWER RENEWABLE ENERGY, INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(in
thousands, except per share data)




Year Ended December 31,2009
                                                                      
                                                                      
                                                                      2008Cash
      flows from operating activities:Net
      income attributable to Premier Power Renewable Energy,
Inc.
                                                                      
                                                                      $
                                                                      3,570
                                                                      
                                                                      
                                                                      $
                                                                      569Net
      income attributable to noncontrolling interest
                                                                      
                                                                      
                                                                      85
                                                                      
                                                                      
                                                                      
                                                                      224Net
      income
                                                                      
                                                                      
                                                                      3,655
                                                                      
                                                                      
                                                                      
                                                                      793Adjustments
      to reconcile net income to net cash used in operating
      activities:Gain
      on sale of special purpose entities
                                                                      
                                                                      
                                                                      (23
                                                                      )
                                                                      
                                                                      
                                                                      -Stock
      based compensation
                                                                      
                                                                      
                                                                      624
                                                                      
                                                                      
                                                                      
                                                                      -Depreciation
      and amortization
                                                                      
                                                                      
                                                                      345
                                                                      
                                                                      
                                                                      
                                                                      197Change
      in fair value of contingent consideration liability
                                                                      
                                                                      
                                                                      (4,301
                                                                      )
                                                                      
                                                                      
                                                                      -Change
      in fair value of warrant liability
                                                                      
                                                                      
                                                                      (2,184
                                                                      )
                                                                      
                                                                      
                                                                      -Deferred
      taxes
                                                                      
                                                                      
                                                                      (1,857
                                                                      )
                                                                      
                                                                      
                                                                      (273
                                                                      )Loss
      on sale of property and equipment
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      5Changes
      in operating assets and liabilities:Accounts
      receivable
                                                                      
                                                                      
                                                                      (2,608
                                                                      )
                                                                      
                                                                      
                                                                      (2,353
                                                                      )Inventory
                                                                      
                                                                      
                                                                      (119
                                                                      )
                                                                      
                                                                      
                                                                      (15
                                                                      )Prepaid
      expenses and other current assets
                                                                      
                                                                      
                                                                      (175
                                                                      )
                                                                      
                                                                      
                                                                      (199
                                                                      )Costs
      and estimated earnings in excess of billingson uncompleted
      contracts
                                                                      
                                                                      
                                                                      (13,563
                                                                      )
                                                                      
                                                                      
                                                                      (199
                                                                      )Other
      receivables
                                                                      
                                                                      
                                                                      (78
                                                                      )
                                                                      
                                                                      
                                                                      -Accounts
      payable
                                                                      
                                                                      
                                                                      14,436
                                                                      
                                                                      
                                                                      
                                                                      1,097Accrued
      liabilities
                                                                      
                                                                      
                                                                      623
                                                                      
                                                                      
                                                                      
                                                                      857Billings
      in excess of costs and estimated earningson uncompleted
      contracts
                                                                      
                                                                      
                                                                      (833
                                                                      )
                                                                      
                                                                      
                                                                      (218
                                                                      )Taxes
      payable
                                                                      
                                                                      
                                                                      (164
                                                                      )
                                                                      
                                                                      
                                                                      192Net
      cash used in operating activities
                                                                      
                                                                      
                                                                      (6,222
                                                                      )
                                                                      
                                                                      
                                                                      (116
                                                                      )Cash
      flows from investing activities:Acquisition
      of property and equipment
                                                                      
                                                                      
                                                                      (265
                                                                      )
                                                                      
                                                                      
                                                                      (163
                                                                      )Net
      cash paid for Rupinvest acquisition
                                                                      
                                                                      
                                                                      (2
                                                                      )
                                                                      
                                                                      
                                                                      -Proceeds
      from sale of property and equipment
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      12Net
      cash used in investing activities
                                                                      
                                                                      
                                                                      (267
                                                                      )
                                                                      
                                                                      
                                                                      (151
                                                                      )Cash
      flows from financing activities:Principal
      payments on borrowings
                                                                      
                                                                      
                                                                      (306
                                                                      )
                                                                      
                                                                      
                                                                      (283
                                                                      )Sale
      of noncontrolling interest
                                                                      
                                                                      
                                                                      176
                                                                      
                                                                      
                                                                      
                                                                      -Purchase of
      noncontrolling interest
                                                                      
                                                                      
                                                                      (176
                                                                      )
                                                                      
                                                                      
                                                                      -Proceeds
      from borrowings
                                                                      
                                                                      
                                                                      2,391
                                                                      
                                                                      
                                                                      
                                                                      15Proceeds
      from issuance of preferred stock and warrants
                                                                      
                                                                      
                                                                      3,000
                                                                      
                                                                      
                                                                      
                                                                      5,512Repayment
      from shareholders
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      23Distributions
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      (452
                                                                      )Cost
      related to share registration
                                                                      
                                                                      
                                                                      (570
                                                                      )
                                                                      
                                                                      
                                                                      -Net
      cash provided by financing activities
                                                                      
                                                                      
                                                                      4,515
                                                                      
                                                                      
                                                                      
                                                                      4,815Effect
      of foreign currency
                                                                      
                                                                      
                                                                      (5
                                                                      )
                                                                      
                                                                      
                                                                      (56
                                                                      )(Decrease)
      increase in cash and cash equivalents
                                                                      
                                                                      
                                                                      (1,979
                                                                      )
                                                                      
                                                                      
                                                                      4,492Cash
      and cash equivalents at beginning of period
                                                                      
                                                                      
                                                                      5,771
                                                                      
                                                                      
                                                                      
                                                                      1,279Cash
      and cash equivalents at end of period
                                                                      
                                                                      $
                                                                      3,792
                                                                      
                                                                      
                                                                      $
                                                                      5,771Supplemental
      cash flow information:Interest
      paid
                                                                      
                                                                      $
                                                                      72
                                                                      
                                                                      
                                                                      $
                                                                      82Taxes
      paid
                                                                      
                                                                      $
                                                                      434
                                                                      
                                                                      
                                                                      $
                                                                      76Non-cash
      investing and financing activities:Common
      stock issued to acquire noncontrolling interest
                                                                      
                                                                      $
                                                                      -
                                                                      
                                                                      
                                                                      $
                                                                      1,489Issuance
      of notes to acquire equipment
                                                                      
                                                                      $
                                                                      -
                                                                      
                                                                      
                                                                      $
                                                                      157Common
      stock issued for service
                                                                      
                                                                      $
                                                                      -
                                                                      
                                                                      
                                                                      $
                                                                      91Contingent
      Consideration liability
                                                                      
                                                                      $
                                                                      12,027
                                                                      
                                                                      
                                                                      $
                                                                      -Warrant
      liability
                                                                      
                                                                      $
                                                                      11,118
                                                                      
                                                                      
                                                                      $
                                                                      -Net
      cash paid for Rupinvest acquisition:Tangible
      assets
                                                                      
                                                                      $
                                                                      616Intangible
      assets
                                                                      
                                                                      
                                                                      12,087Total
      assets
                                                                      
                                                                      
                                                                      12,703Liabilities
      assumed
                                                                      
                                                                      
                                                                      (658
                                                                      )Purchase
      price
                                                                      
                                                                      
                                                                      12,045Less:Contingent
      consideration liability
                                                                      
                                                                      
                                                                      (12,027
                                                                      )Cash
      acquired
                                                                      
                                                                      
                                                                      (16
                                                                      )Net
      cash paid for Rupinvest acquisition
                                                                      
                                                                      $
                                                                      2




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




F-4





PREMIER
POWER RENEWABLE ENERGY, INC.


CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY


For
the Year Ended December 31, 2008 and 2009


(in
thousands)




Series A -
                                                                          
                                                                          Series B -
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          Retained Earnings
                                                                          
                                                                          
                                                                          AccumulatedOther
                                                                          
                                                                          
                                                                          Premier PowerCommon Stock
                                                                          
                                                                          Preferred Stock
                                                                          
                                                                          Preferred Stock
                                                                          
                                                                          
                                                                          Additional Paid
                                                                          
                                                                          (Accumulated
                                                                          
                                                                          
                                                                          Comprehensive
                                                                          
                                                                          
                                                                          Renewable 
      Energy, Inc.
                                                                          
                                                                          
                                                                          NoncontrollingShares
                                                                          
                                                                          Amount
                                                                          
                                                                          Shares
                                                                          
                                                                          Amount
                                                                          
                                                                          Shares
                                                                          
                                                                          Amount
                                                                          
                                                                          
                                                                          In Capital
                                                                          
                                                                          Deficit)
                                                                          
                                                                          
                                                                          Income (Loss)
                                                                          
                                                                          
                                                                          Shareholders' 
      Equity
                                                                          
                                                                          
                                                                          Interest
                                                                          
                                                                          
                                                                          TotalBalance
      December 31, 2007
                                                                          
                                                                          21,160
                                                                          
                                                                          $
                                                                          3
                                                                          
                                                                          -
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          -
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          1
                                                                          
                                                                          $
                                                                          701
                                                                          
                                                                          
                                                                          $
                                                                          9
                                                                          
                                                                          
                                                                          $
                                                                          714
                                                                          
                                                                          
                                                                          $
                                                                          2
                                                                          
                                                                          
                                                                          $
                                                                          716Net
      income
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          569
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          569
                                                                          
                                                                          
                                                                          
                                                                          224
                                                                          
                                                                          
                                                                          
                                                                          793Foreign
      currency translation adjustment
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (50
                                                                          )
                                                                          
                                                                          
                                                                          (50
                                                                          )
                                                                          
                                                                          
                                                                          (23
                                                                          )
                                                                          
                                                                          
                                                                          (73
                                                                          )Comprehensive
      income
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          519
                                                                          
                                                                          
                                                                          
                                                                          201
                                                                          
                                                                          
                                                                          
                                                                          720Issuance
      of shares to purchase minority interest
                                                                          
                                                                          3,059
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          1,489
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          1,489
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          1,489Shares
      issued in connection with reverse acquisition
                                                                          
                                                                          1,800Issuance
      of Series A and Series B
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          1,794
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          1,794
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          1,794warrantsIssuance
      of Series A convertible preferred stock
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          3,500
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          3,718
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          3,718
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          3,718Issuance
      of shares for service
                                                                          
                                                                          30
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          91
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          91
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          91Purchase
      of noncontrolling interest in Premier Power Spain
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (203
                                                                          )
                                                                          
                                                                          
                                                                          (203
                                                                          )Distributions
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (452
                                                                          )
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (452
                                                                          )
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (452
                                                                          )Deemed
      constructive contribution(distribution)
      of S-Corp undistributed earnings
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          449
                                                                          
                                                                          
                                                                          (449
                                                                          )
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          -Balance
      December 31, 2008
                                                                          
                                                                          26,049
                                                                          
                                                                          
                                                                          3
                                                                          
                                                                          3,500
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          7,542
                                                                          
                                                                          
                                                                          369
                                                                          
                                                                          
                                                                          
                                                                          (41
                                                                          )
                                                                          
                                                                          
                                                                          7,873
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          7,873Cummulative
      effect of adjustment upon adoption of EITF 07-5 (restated)
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (1,794
                                                                          )
                                                                          
                                                                          (9,324
                                                                          )
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (11,118
                                                                          )
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (11,118
                                                                          )Balance
      January 1, 2009 (restated)
                                                                          
                                                                          26,049
                                                                          
                                                                          
                                                                          3
                                                                          
                                                                          3,500
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          5,748
                                                                          
                                                                          
                                                                          (8,955
                                                                          )
                                                                          
                                                                          
                                                                          (41
                                                                          )
                                                                          
                                                                          
                                                                          (3,245
                                                                          )
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (3,245
                                                                          )Net
      income
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          3,570
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          3,570
                                                                          
                                                                          
                                                                          
                                                                          85
                                                                          
                                                                          
                                                                          
                                                                          3,655Foreign
      currency translation adjustment
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (241
                                                                          )
                                                                          
                                                                          
                                                                          (241
                                                                          )
                                                                          
                                                                          
                                                                          (21
                                                                          )
                                                                          
                                                                          
                                                                          (262
                                                                          )Comprehensive
      income
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          3,329
                                                                          
                                                                          
                                                                          
                                                                          64
                                                                          
                                                                          
                                                                          
                                                                          3,393Stock
      based compensation
                                                                          
                                                                          1
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          624
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          624
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          624Cost
      related to share registration
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (570
                                                                          )
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (570
                                                                          )
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (570
                                                                          )Sale
      of noncontrolling interest
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          176
                                                                          
                                                                          
                                                                          
                                                                          176Purchase
      of noncontrolling interest
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (155
                                                                          )
                                                                          
                                                                          
                                                                          (155
                                                                          )Noncontrolling
      interest income
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          85
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          85
                                                                          
                                                                          
                                                                          
                                                                          (85
                                                                          )
                                                                          
                                                                          
                                                                          -Gain
      on settlement of warrant liability
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          1,435
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          1,435
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          1,435Issuance
      of series B convertible preferred stock
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          2,800
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          10,500
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          10,500
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          10,500Issuance
      of escrow shares related to Rupinvest acquisition
                                                                          
                                                                          3,000Balance
      December 31, 2009
                                                                          
                                                                          29,050
                                                                          
                                                                          $
                                                                          3
                                                                          
                                                                          3,500
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          2,800
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          17,822
                                                                          
                                                                          $
                                                                          (5,385
                                                                          )
                                                                          
                                                                          $
                                                                          (282
                                                                          )
                                                                          
                                                                          $
                                                                          12,158
                                                                          
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          12,158








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




F-5





PREMIER
POWER RENEWABLE ENERGY, INC.


Notes to Consolidated Financial
Statements




1.
            ORGANIZATION
AND NATURE OF BUSINESS




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





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% noncontrolling 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%
noncontrolling interest is as follows:





(in thousands)Fair
      value of shares exchanged
                              
                              $
                              1,489Tangible
      assets acquired
                              
                              
                              (1,034
                              )Amortizing
      intangible assets acquired
                              
                              
                              (1,110
                              )Liabilities
      assumed
                              
                              
                              1,138Goodwill
                              
                              $
                              483




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 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.




Concurrently
with the closing of the share exchange on September 9, 2008, the Company raised
$7 million in a private placement financing in which Vision Opportunity Master
Fund, Ltd. (“Vision”) was the investor (the “Financing”) by issuing a total of
3.5 million units (the “Units”) at $2.00 per Unit, with each Unit consisting of
one share of the Company’s Series A Convertible Preferred Stock, one-half of one
Series A Warrant, and one-half of one Series B Warrant.





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




F-6





PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements





On July
31, 2009, the Company purchased 100% of the issued and outstanding equity
ownership of Rupinvest, a corporation duly organized and existing under the laws
of Luxembourg, from Esdras Ltd., a corporation duly organized and existing under
the laws of Cyprus (“Esdras”).  Rupinvest distributes, develops, and
integrates ground mount and rooftop solar power systems in Italy through its
then majority-owned subsidiary, Premier Power Italy (formerly known as ARCO
Energy, SRL), a private limited liability company organized under the laws of
Italy.  The terms of the transaction are set forth in a Share Exchange
Agreement entered into on June 3, 2009 between the Company, Rupinvest, and
Esdras.  Prior to the closing, Rupinvest was a wholly owned subsidiary
of Esdras.  The Company acquired 100% of the issued and outstanding
equity ownership interest in Rupinvest from Esdras in exchange for: (a) a cash
payment by us to Esdras in the amount of twelve thousand five hundred Euros
(€12,500, or approximately $18,292); and (b) the potential transfer to Esdras of
up to three million shares of  the Company’s restricted common stock,
with the number of shares to be transferred, if any, to be calculated based on
achieving certain sales by Premier Power Italy over a three-year
period.  The Company opened escrow for the Rupinvest acquisition on
July 9, 2009 under an Escrow Agreement, which was subsequently amended on
July 22, 2009 and July 30, 2009.  Capita Trust Company Limited, a
private limited company incorporated in England and Wales (the “Escrow Agent”),
acted as escrow agent.  The Company delivered to the Escrow Agent the
stock certificate evidencing three million restricted shares of the Parent’s
common stock, which certificate is registered in the name of the Escrow Agent’s
custodial delegate. Such shares are presented as issued and outstanding on the
Company’s December 31, 2009 balance sheet and statement of shareholders’ equity.
 Pursuant to the closing of this transaction, the Company conducts
operations in Italy through Premier Power Italy.





On
December 31, 2009, Rupinvest purchased the remaining 10% interest of Premier
Power Italy from Esdras at Esdras’s initial capital contribution per the Share
Exchange Agreement, and Premier Power Italy became the wholly owned subsidiary
of Rupinvest.





2.
            SIGNIFICANT
ACCOUNTING POLICIES




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





Concentrations and Credit Risk –Two customers accounted for more than 10% of the Company’s sales for the
year ended December 31, 2009.  One customer accounted for 18% and two
customers accounted for 12% each of the Company’s sales for the year ended
December 31, 2008.  Accounts receivable primarily consist of trade
receivables and amounts due from state agencies and utilities for rebates on
solar systems installed.  At December 31, 2009, the Company had two
customers that accounted for 22.9% and 10.9% of the Company’s accounts
receivables.  At December 31, 2008, the Company had four customers
that accounted for 27%, 13%, 11%, and 10% of the Company’s accounts
receivables.  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 $.1 million and $.02 million
as of December 31, 2009 and 2008, respectively.




The
Company purchases its solar modules 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 modules will be available.




F-7




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements





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, the valuation of contingent consideration related to business
combinations and derivative instruments, and income taxes. 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 the statutory insured limits of the jurisdiction in which
the accounts are held.  The Company has not experienced any losses on
these investments. At December 31, 2009, the Company had $2.5 million in cash in
bank accounts in excess of the various deposit insurance limits of the
jurisdictions in which the balances were held.





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




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





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





Goodwill and Other Intangible Assets
–The Company does not amortize goodwill, but rather tests goodwill for
impairment at least annually. We
determine the fair value using a weighted market and income approach. Under
the income approach, we calculate the fair value of a reporting unit based on
the present value of estimated future cash flows. Under the market approach, we
calculate the fair value of the reporting unit using selected comparable
companies’ revenue multiples and apply an average of such companies’ multiples
to the Company’s revenue. If the fair value of the reporting unit exceeds the
carrying value of the net assets including goodwill assigned to that unit,
goodwill is not impaired. If the carrying value of the reporting unit’s net
assets including goodwill exceeds the fair value of the reporting unit, then we
determine the implied fair value of the reporting unit’s goodwill. If the
carrying value of a reporting unit’s goodwill exceeds its implied fair value,
then an impairment of goodwill has occurred and we recognize an impairment of
loss for the difference between the carrying amount and the implied fair value
of goodwill as a component of operating income. We did not recognize any
goodwill impairment charges in 2009 and 2008. Intangible
assets, consisting of a customer list, trademarks, and an employee contract, are
amortized over their estimated useful lifes ranging from 2-17
years.




Fair Value of Financial Instruments –The carrying value reported for cash equivalents, accounts receivable,
prepaid expenses, other receivables, accounts payable and accrued liabilities
approximated their respective fair values at each balance sheet date due to the
short-term maturity of these financial instruments.





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




F-8





PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements





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




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




Revenue
related to distribution sales is recognized when we have received either a
purchase order or contract, deem delivery of product to have occurred, when the
title and risk of ownership have passed to the buyer and we determine that
collection is probable.  Some customers will pay the Company and ask
the Company to segregate and store the product separate from other
products.  The Company considers the risk has passed when payment and
segregation has occurred.




Advertising –The Company
expenses advertising costs as they are incurred. Advertising costs were $.8
million and $.4 million for the year ended December 31, 2009 and 2008,
respectively.





Product Warranties –The
Company warrants its projects for labor and materials associated with its
installations.  The Company’s warranty is ten years in California and
generally five to ten years elsewhere in the U.S. depending upon each state’s
specific requirements, and is one year in Spain for all contracts signed after
December 31, 2006.  Italy provides a ten year warranty covering the
labor and materials associated with its installations.  Solar panels
and inverters are warranted by the manufacturer for 25 years and 10 years,
respectively. Since the
Company does not have sufficient historical data to estimate its exposure, we
have looked to our historical data and the historical data reported by other
solar system installers.Activity in the Company’s accrued warranty
reserve for the year ended December 31, 2009 and 2008 was as
follows:




December
      31,2009
                                          
                                          
                                          2008(in
      thousands)Beginning
      accrued warranty balance
                                          
                                          $
                                          367
                                          
                                          
                                          $
                                          172Accruals
      related to warranties issued during period
                                          
                                          
                                          159
                                          
                                          
                                          
                                          275Reduction
      for labor payments and claims made under the warranty
                                          
                                          
                                          (167
                                          )
                                          
                                          
                                          (80
                                          )Ending
      accrued warranty balance
                                          
                                          $
                                          359
                                          
                                          
                                          $
                                          367





F-9




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements





Foreign Currency –The
functional currency of Premier Power Spain and Italy is the Euro. Their 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 and Italy 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 year ended December 31, 2009 and 2008, the foreign currency
transaction gain was $0.3 million and $0.01 million,
respectively.




Noncontrolling Interest –The
noncontrolling interest reflected in the statement of operations for the year
ended December 31, 2008 represents the 49% shareholdings of the noncontrolling
shareholders in the Company’s Spanish operations, Premier Power Spain through
September 9, 2008.  Concurrent with the reverse merger, these
shareholdings were converted into shares of the Company’s common stock and no
longer reported as noncontrolling interest effective September 9,
2008.





The
noncontrolling interest reflected in the statement of operations for the year
ended December 31, 2009 represents the 10% shareholdings of the noncontrolling
shareholders in the Company’s Italian operations, Premier Power
Italy.  On December 31, 2009, Rupinvest purchased the 10%
noncontrolling interest from Esdras; thus, as of December 31, 2009, there is no
longer a noncontrolling interest in the Company’s operations.





FASB ASC
Topic 810, “Consolidation” (SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51”) was
effective on January 1, 2009 for the Company and established accounting
reporting standards for noncontrolling interests in a subsidiary.  The
retrospective presentation and disclosure requirements outlined by the
consolidation guidance have been incorporated into this Annual Report on Form
10-K for the years ended December 31, 2009 and 2008.




In
accordance with the new guidance on noncontrolling interests, the Company
revised all previous references to “minority interests” in the consolidated 2008
financial statements to “noncontrolling interest,” and also made the following
changes to the 2008 consolidated financial statements:





●
            The
      Consolidated Statements of Operations now present “Net income (loss),”
      which includes “Net income (loss) attributable to noncontrolling interest”
      and “Net income (loss) attributable to Premier Power Renewable Energy,
      Inc.”  Earnings per share is now identified as attributable to
      Premier Power Renewable Energy, Inc.●
            The
      Consolidated Balance Sheets now present “Noncontrolling interest” as a
      component of “Shareholders’ equity.”  The Premier Power
      Renewable Energy, Inc. shareholders’ equity is equivalent to the
      previously reported “Total shareholders’
  equity.”


●
            The
      Consolidated Statements of Shareholders’ Equity separately displays
      noncontrolling interest activity.





A summary
of activity related to noncontrolling interests in the Company’s subsidiaries is
as follows:




December
      31,2009
                          
                          
                          2008(in
      thousands)Beginning balance
                          
                          $
                          -
                          
                          
                          $
                          2Sale
      of noncontrolling interest in Premier Power Italy
                          
                          
                          176
                          
                          
                          
                          -Net
      income attributed to noncontrolling interest
                          
                          
                          85
                          
                          
                          
                          224Foreign
      currency tanslation adjustment
                          
                          
                          (21
                          )
                          
                          
                          (23
                          )Purchase of
      noncontrolling interest in Premier Power Spain
                          
                          
                          -
                          
                          
                          
                          (203
                          )Purchase
      of noncontrolling interest in Premier Power Italy
                          
                          
                          (155
                          )
                          
                          
                          -Noncontrolling interest income
                          
                          
                          (85
                          )Ending
      balance
                          
                          $
                          -
                          
                          
                          $
                          -




F-10





PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements





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




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





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




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




Contingent Consideration Liability– In connection with the acquisition of Rupinvest, contingent
consideration liability of $12 million was recorded at the time of the purchase.
The contingent consideration liability relates to the contingent issuance of 3
million shares to the sellers of Rupinvest.
  ’
  Recently
Issued Accounting Pronouncements




In
December 2007, the Financial Accounting Standards Board (“FASB”) issued FASB ASC
805 (FAS No. 141(R), “Business
Combinations” (“FASB 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.  FASB ASC 805 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 FASB ASC 805 on the Company’s consolidated
financial statements will be determined in part by the nature and timing of any
future acquisitions completed.  See Note 5.




In March
2008, the FASB issued FASB ASC 815-40 (SFAS No. 161, “Disclosures about Derivatives
Instruments and Hedging Activities, an Amendment of FASB Statement No.
133”).  FASB ASC 815-40 requires enhanced disclosures about a
company’s derivative and hedging activities. ASC 815-40 is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008. The adoption of FASB ASC 815-40 did not have a material
impact on the Company’s results of operations, cash flows, or financial
position.




F-11





PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements





In April
2008, the FASB issued FASB ASC 350-30 (FASB Staff Position (FSP) FAS No. 142-3,
“Determination of the Useful Life of
Intangible
Assets”). FASB ASC 350-30 amends
the factors an entity should consider in developing renewal or extension
assumptions used in determining the useful life of recognized intangible assets
under FASB ASC 350-30 (SFAS No. 142, “Goodwill and Other
Intangible
Assets”). FASB ASC 350-30 must be applied prospectively to intangible
assets acquired after the effective date. The Company applied the guidance of
the FASB ASC 350-30 to intangible assets acquired after January 1,
2009.  The Company’s adoption of FASB ASC 350-30 did not have a
material impact on its financial position, results of operations, or cash
flows.




In June
2008, the FASB ratified FASB ASC 815-40 (EITF Issue 07-5 (EITF 07-5), “Determining Whether an Instrument
(or an Embedded Feature) Is Indexedto an Entity’s Own Stock”). FASB ASC
815-40 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 the impact of foreign currency
denominated strike prices and market-based employee stock option valuation
instruments. FASB ASC 815-40 is effective for fiscal years beginning after
December 15, 2008 and interim periods within those years.  On January 1,
2009, the Company adopted this pronouncement (see Note 12).




In April
2009, the FASB issued FASB ASC 825-10-65 and FASB ASC 270 (“FSP 107-1 and APB 28-1 Interim
Disclosures about Fair Value of FinancialInstruments”), which
increases the frequency of fair value disclosures to a quarterly basis instead
of on an annual basis. The guidance relates to fair value disclosures for any
financial instruments that are not currently reflected on an entity’s balance
sheet at fair value. FASB ASC 825-10-65 and FASB ASC 270 are effective for
interim and annual periods ending after June 15, 2009. The adoption of
 FASB ASC 825-10-65 and FASB ASC 270 did not have a material impact on the
Company’s results of operations, cash flows, or financial position.




In May
2009, the FASB issued FASB ASC 470 (Staff Position No. APB 14-1 “Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)”).  FASB ASC 470 clarifies that convertible debt
instruments that may be settled in cash upon conversion (including partial cash
settlement) are not addressed by FASB ASC 470-20-65-1 (paragraph 12 of APB
Opinion No. 14, “Accounting
for Convertible Debt and Debt Issued with Stock Purchase Warrants”).
Additionally, FASB ASC 470 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. FASB ASC 470 is effective for financial
statements issued for fiscal years beginning after December 15, 2008 and interim
periods within those fiscal years. The adoption of FASB ASC 470 did not have a
material effect on our consolidated financial statements.




In May
2009, the FASB issued FASB ASC 855 (SFAS No. 165, “Subsequent Events”), which establishes
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. In particular, FASB ASC 855 sets forth (a) the period
after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition
or disclosure in the financial statements, (b) the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet
date in its financial statements, and (c) the disclosures that an entity should
make about events or transactions that occurred after the balance sheet date.
FASB ASC 855 is effective for interim or annual financial reporting periods
ending after June 15, 2009. The adoption of FASB ASC 855 did not have a material
impact on the Company’s results of operations, cash flows, or financial
position.




In June
2009, the FASB issued FASB ASC 810 (SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R)”). FASB ASC 810 applies to FASB ASC 105 entities and is
effective for annual financial periods beginning after November 15, 2009 and for
interim periods within those years. Earlier application is prohibited. A
calendar year-end company must adopt this statement as of January 1, 2010. The
Company does not anticipate the adoption of FASB ASC 810 to have a material
impact on its results of operations, cash flows, or financial
position.




F-12





PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements





In June
2009, the FASB issued FASB ASC 860 (SFAS No. 166, “Accounting for Transfers of Financial Assets-an amendment
of FASB Statement No. 140”). FASB ASC 860 applies to all entities and is
effective for annual financial periods beginning after November 15, 2009 and for
interim periods within those years. Earlier application is prohibited. A
calendar year-end company must adopt this statement as of January 1, 2010. This
statement retains many of the criteria of FASB ASC 860 (FASB 140, “Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities”) to
determine whether a transfer of financial assets qualifies for sale accounting,
but there are some significant changes as discussed in the statement. Its
disclosure and measurement requirements apply to all transfers of financial
assets occurring on or after the effective date. Its disclosure requirements,
however, apply to transfers that occurred bothbefore and after the
effective date. In addition, because FASB ASC 860 eliminates the consolidation
exemption for Qualifying Special Purpose Entities, a company will have to
analyze all existing QSPEs to determine whether they must be consolidated under
FASB ASC 810. The Company does not anticipate the adoption of FASB ASC 860 to
have a material impact on its results of operations, cash flows, or financial
position.




In August
2009, the FASB issued ASU 2009-05, “Measuring Liabilities at Fair
Value.”ASU 2009-05 applies to
all entities that measure liabilities at fair value within the scope of FASB ASC
820, “Fair Value Measurements
and Disclosures.”ASU 2009-05 is
effective for the first reporting period (including interim periods) beginning
after issuance, October 1, 2009 for the Company. The Company does not expect the
adoption of ASU 2009-05 to have a material impact on results of operations, cash
flows, or financial position.




In August
2009, an update was made to Fair Value Measurements and
Disclosures–Measuring Liabilities at Fair
Value.”This update permits
entities to measure the fair value of liabilities, in circumstances in which a
quoted price in an active market for an identical liability is not available,
using a valuation technique that uses a quoted price of an identical liability
when traded as an asset, quoted prices for similar liabilities or similar
liabilities when traded as assets or the income or market approach that is
consistent with the principles ofFair Value Measurements and
Disclosures.Effective upon issuance, the Company has adopted
this guidance.  See Note 16.




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




3.           EARNINGS
PER SHARE





Earnings
per share is computed in accordance with the provisions of FASB ASC Topic 260
(SFAS No. 128, “Earnings Per
Share”). Basic net income (loss) per share is computed using the
weighted-average number of common shares outstanding during the period.
 Diluted earnings per share is computed using the weighted-average number
of common shares outstanding during the period, as adjusted for the dilutive
effect of the Company’s outstanding convertible preferred shares using the “if
converted” method and dilutive potential common shares. Potentially dilutive
securities include convertible preferred stock, employee stock options,
restricted shares, and contingently issuable shares for the purchase of
Rupinvest.   For the year ended December 31 2008, there were no
anti-dilutive shares.





F-13




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements





Years Ended December 31,2009
                          
                          
                          2008(in thousands,except per share data)Net
      income attributable to Premier Power Renewable Energy,
Inc.
                          
                          $
                          3,570
                          
                          
                          $
                          569Earnings
      Per Share:Basic
                          
                          $
                          0.14
                          
                          
                          $
                          0.03Diluted
                          
                          $
                          0.11
                          
                          
                          $
                          0.02Weighted
      Average Shares Outstanding:Basic
                          
                          
                          26,050
                          
                          
                          
                          22,666Diluted
      effect of convertible preferred stock, series A
                          
                          
                          3,500
                          
                          
                          
                          1,084Diluted
      effect of unissued restricted shares
                          
                          
                          91
                          
                          
                          
                          -Diluted
      effect of contingent liability
                          
                          
                          113
                          
                          
                          
                          -Diluted
      effect of convertible preferred stock, series B
                          
                          
                          1,519
                          
                          
                          
                          -Diluted
                          
                          
                          31,273
                          
                          
                          
                          23,750




At
December 31, 2009, there were stock options for 1,320,729 shares of common stock
which were anti-dilutive due to their exercise price.  There were no
stock options outstanding at December 31, 2008.  For the year ended
December 31, 2008, warrants to purchase 3.5 million of the Company’s common
shares were excluded as their exercise price exceeded the average market price
of the Company’s common shares, and were anti-dilutive.





4.
            INTANGIBLE
ASSETS





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





December
      31,2009
                                
                                
                                2008(inthousands)Trademark
                                
                                $
                                814
                                
                                
                                $
                                865Customer
      List
                                
                                
                                89
                                
                                
                                
                                -Employee
      contract
                                
                                
                                67
                                
                                
                                
                                157Backlog
                                
                                
                                -
                                
                                
                                
                                26Subtotal
                                
                                
                                970
                                
                                
                                
                                1,048Goodwill
                                
                                
                                12,254
                                
                                
                                
                                483$
                                13,224
                                
                                
                                $
                                1,531




Amortization
periods for the intangibles are as follows: trademark – 17 years, customer list
– 3 years, employee contract – 2 years, and backlog – 6 months. Amortization for
the years ended December 31, 2009, and 2008 was $.2 million and $.06
million. Accumulated amortization was $.3 million and $.06 million at December
31, 2009, and 2008, respectively.




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




Year
                      
                      Amount2010
                      
                      $
                      1192011
                      
                      
                      522012
                      
                      
                      522013
                      
                      
                      522014
                      
                      
                      52




The
change in the carrying amount of goodwill for the year ended December 31, 2009
and 2008 was as follows:





December
      31,2009
                            
                            
                            2008(inthousands)Beginning
      balance, January 1, 2009
                            
                            $
                            483
                            
                            
                            $
                            -Goodwill
      from acquisitions
                            
                            
                            11,771
                            
                            
                            
                            483Ending
      balance, December 31, 2009
                            
                            $
                            12,254
                            
                            
                            $
                            483




F-14


PREMIER POWER RENEWABLE ENERGY,
INC.


Notes
to Consolidated Financial Statements





5.           ACQUISITION





On July
31, 2009, the Company acquired Rupinvest and its then majority-owned subsidiary,
Premier Power Italy.  The Company acquired Rupinvest from Esdras in
exchange for (i) a cash payment to Esdras in the amount of twelve thousand five
hundred Euros (12,500 or approximately $18,292), and (ii) the potential transfer
to Esdras of up to 3 million shares of the Company’s common stock, with the
number of shares to be transferred, if any, to be calculated based on achieving
certain sales and gross margin goals by Premier Power Italy over a
three-year period (“Contingent Consideration”).  The fair value
assigned to the Contingent Consideration was approximately $12 million. In
conjunction with the acquisition of Rupinvest, the Company made a capital
contribution of $1.6 million to Premier Power Italy.





The
Contingent Consideration is to be distributed over a three-year period based
upon Premier Power Italy achieving certain sales and gross margin goals during
such period.  The fair value of the Contingent Consideration was
determined by an independent third party.  The valuation of the
contingent liability at the time of the acquisition used a discounted cash flow
model which was incorporated into the universal income projections for the
Company for the years 2009 through 2011 and further analyzed from a cash flow
perspective in order to determine the overall value of the Company and the
related fair value of the Company’s outstanding stock in 2009, 2010, and
2011.  The projected 2009, 2010, and 2011 fair value of the Company’s
stock price was then multiplied against a yearly estimate of shares earned by
Rupinvest.  The specific calculation of the shares earned was
determined by utilizing a probability weighted approach.  A discount
rate of 20% was used in the valuation model, based on the aggregate of 3
factors: [1] risk free rate of return, [2] market equity premium, and [3]
special company risk premium determined by the independent third party
valuation.   The resulting value materially approximated the
number of shares estimated by the Company to be earned by the seller multiplied
by the then share price of the Company’s common stock.





At December
31, 2009, an independent third party estimated the fair value of the contingent
liability using a probability weighted estimated of the number of the shares to
be earned by the seller, multiplied by the market price of the Company’s
shares.  The Company determined that the effect of counterparty
performance risk was not material to the estimated fair value of the contingent
liability.  The change in fair value of the contingent liability of
$4.3 million was recorded to other income. The
reduction in fair value was primarily due to the reduction in the Company’s
stock price since the date of acquisition.





The
acquisition of Rupinvest and Premier Power Italy was accounted for under the
accounting guidance for business combination FASB ASC 805 (FASB statement
141(R)).  Accordingly, goodwill has been measured as the excess of the
total consideration on the acquisition date over the amounts assigned to the
identifiable assets acquired and liabilities assumed.





The total
purchase price of Rupinvest and Premier Power Italy of approximately $12 million
was allocated to the net tangible assets and intangible assets acquired based
upon their estimated fair value as of July 31, 2009, as set forth
below.  The excess of the purchase price over the net tangible assets
and intangible assets was recorded as goodwill.





A summary
of the acquired tangible and intangible assets and liabilities is as follows (in
thousands):





Cash
                      
                      $
                      16Accounts
      Receivable
                      
                      
                      315Inventory
                      
                      
                      247Intangible
      assets - customer list
                      
                      
                      105Fixed
      assets
                      
                      
                      38Accounts
      payable and accrued liabilities
                      
                      
                      (381
                      )Taxes
      payable
                      
                      
                      (277
                      )Goodwill
                      
                      
                      11,982$
                      12,045




The
following table provides pro forma results of operations for the years ended
December 31, 2009 and 2008, as if the acquisition had been completed on January
1, 2008. Accordingly, such pro forma amounts are not necessarily indicative of
the results that actually would be occurred had the acquisition been completed
on the dates indicated, nor are they indicative of the future operating results
of the combined company.
 
 Year
      Ended
                              December
      31, 2009
                              (unaudited)
                            
                            
                            Year
      Ended
                              December
      31, 2008
                              (unaudited)(in
      thousands)Total
      Revenue
                            
                            $
                            33,532
                            
                            
                            $
                            51,923Net income
                            
                            $
                            3,503
                            
                            
                            $
                            838
 
 For the
year ended December 31, 2009, the statement of operations contains $10.8
million and $0.8 million of revenue and net loss, respectively,
relating to the consolidated operations of Rupinvest.




F-15





PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements





Intangible
assets consist of the estimated fair value of acquired customer
lists.  In estimating the fair value the Company used an income
approach, utilizing a discount rate of 20%.  The Company estimated the
useful life of the acquired customer lists to be three years. The gross
contractual accounts receivable amount was $.3 million.  The
qualitative factors that make up goodwill recognized include, among other
factors, Premier Power Italy management and knowledge of local business
practices and regulations.  The large premium over the fair value of the
net assets acquired is related to the stage of Premier Power Italy’s development
and the Company’s perception of the Italian marketplace.  The Company
viewed the Italian solar market as being very attractive and was willing to pay
a premium to obtain access to the market.  However, at the time of
acquisition, Premier Power Italy had not yet undertaken the development of solar
projects and as a result, the Company and Esdras, the seller of Rupinvest,
agreed to a payment structure in which substantially all of the consideration is
contingent on Premier Power Italy’s ability to perform.





6.
            PROPERTY AND
EQUIPMENT





Property
and equipment consists of the following:




December
      31,2009
                            
                            
                            2008(inthousands)Equipment
                            
                            $
                            217
                            
                            
                            $
                            204Furniture
      and computers
                            
                            
                            204
                            
                            
                            
                            59Vehicles
                            
                            
                            651
                            
                            
                            
                            5051,072
                            
                            
                            
                            768Less:
      accumulated depreciation
                            
                            
                            (457
                            )
                            
                            
                            (293
                            )$
                            615
                            
                            
                            $
                            475





Depreciation
expense was $.2 million and $.1 million for the years ended December 31, 2009
and 2008, respectively.





7.
            ACCRUED
LIABILITIES





Accrued
liabilities consist of the following:




December
      31,2009
                          
                          
                          2008(inthousands)Payroll
                          
                          $
                          363
                          
                          
                          $
                          477401K
      plan
                          
                          
                          -
                          
                          
                          
                          20Warranty
      reserve
                          
                          
                          359
                          
                          
                          
                          367Sales
      and local taxes
                          
                          
                          176
                          
                          
                          
                          302Workers
      compensation insurance
                          
                          
                          -
                          
                          
                          
                          20Accrued
      subcontractor's costs
                          
                          
                          998
                          
                          
                          
                          79Other  operational
      accruals
                          
                          
                          147
                          
                          
                          
                          103$
                          2,043
                          
                          
                          $
                          1,368




F-16





PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements





8.           INCOME
TAXES


The
domestic and foreign components of income before income tax expense were as
follows:
 
 Year
      Ended December 31,2009
              
              
              2008Domestic
              
              $
              1,617
              
              
              $
              124Foreign
              
              
              586
              
              
              
              629Total
              
              $
              2,203
              
              
              $
              753


The
Company is subject to federal, state and foreign corporate income
taxes.  The benefit for income taxes consists of the
following:





Year Ended December 31,2009
                                  
                                  
                                  2008(in thousands)Current:Federal
                                  
                                  $
                                  (15
                                  )
                                  
                                  $
                                  33State
                                  
                                  
                                  3
                                  
                                  
                                  
                                  3Foreign
                                  
                                  
                                  446
                                  
                                  
                                  
                                  142$
                                  434
                                  
                                  
                                  $
                                  178Deferred:Federal
                                  
                                  $
                                  (1,237
                                  )
                                  
                                  $
                                  (153
                                  )State
                                  
                                  
                                  (379
                                  )
                                  
                                  
                                  (40
                                  )Foreign
                                  
                                  
                                  (270
                                  )
                                  
                                  
                                  (25
                                  )$
                                  (1,886
                                  )
                                  
                                  $
                                  (218
                                  )Total
      Benefit
                                  
                                  $
                                  (1,452
                                  )
                                  
                                  $
                                  (40
                                  )




The
Company intends to permanently reinvest all foreign earnings in foreign
jurisdictions and has calculated its tax liability and deferred tax assets and
deferred tax liabilities accordingly.




A
reconciliation of the provision for income taxes at the federal statutory rate
compared to the Company’s actual tax benefit is as follows:





Year Ended December 31,2009
                          
                          
                          2008(in thousands)Federal
      income tax expense at U.S. statutory rate
                          
                          $
                          749
                          
                          
                          $
                          306State
      income taxes, net of federal benefit
                          
                          
                          (261
                          )
                          
                          
                          (24
                          )Foreign
      income and withholding taxes
                          
                          
                          (21
                          )
                          
                          
                          122Share-based
      compensation
                          
                          
                          157
                          
                          
                          
                          -Effect
      of change in statutory tax rates on deferred taxes
                          
                          
                          -
                          
                          
                          
                          (444
                          )Gain
      on change in fair value of contingent liability
                          
                          
                          (1,463
                          )
                          
                          
                          -Warrant
      revaluation
                          
                          
                          (742
                          )
                          
                          
                          -Unrecognized
      tax benefit
                          
                          
                          87
                          
                          
                          
                          -Other,
      net
                          
                          
                          42
                          
                          
                          
                          -$
                          (1,452
                          )
                          
                          $
                          (40
                          )




Prior to
the conversion of the Company to C-corporation tax status for U.S. federal tax
purposes during the quarter ended December 31, 2008, all income and losses from
the operations of the Company generally flowed through to its shareholders. The
Company was not subject to U.S. federal income taxes at the corporate level and
was only subject to state income taxes. Since the Company operated as an
S-corporation prior to September 9, 2008, the U.S. statutory rate was 0%. As a
result of the change in tax reporting status, the effective tax rate for U.S.
purposes for the year ended December 31, 2008 has been adjusted to account for
the zero rate for the income and deductions during the majority of the year. The
Company recorded a deferred tax benefit of approximately $200,000 during the
quarter ended December 31, 2008 due to the effect of the change in statutory tax
rates on its deferred tax assets.




F-17




PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements





The
components of deferred tax assets and liabilities are as follows:




Year Ended December 31,2009
                                
                                
                                2008(in thousands)Deferred
      tax assets:Accrued
      expenses
                                
                                $
                                234
                                
                                
                                $
                                253Share-based
      compensation
                                
                                
                                15
                                
                                
                                
                                -Net
      operating losses
                                
                                
                                1,845
                                
                                
                                
                                -Other
                                
                                
                                -
                                
                                
                                
                                1Total
      deferred tax assets
                                
                                $
                                2,094
                                
                                
                                $
                                254Deferred
      tax liabilities:Intangibles
                                
                                
                                (264
                                )
                                
                                
                                (314
                                )Depreciable
      assets
                                
                                
                                (62
                                )
                                
                                
                                (29
                                )Total
      deferred tax liabilities
                                
                                
                                (326
                                )
                                
                                
                                (343
                                )Net
      deferred tax assets
                                
                                $
                                1,768
                                
                                
                                $
                                (89
                                )




As of
December 31, 2009, the Company’s federal, state, foreign net operation loss
carryforwards for income tax purposes are approximately $4.1 million, $4.5
million, $.3 million, respectively, which begins to expire in 2024 through
2029.  The Company files income tax returns in the U.S. federal
jurisdiction, and various state and foreign jurisdictions.  The
Company adopted the provisions of accounting for uncertain tax positions in
accordance with the Income
Taxes (ASC 740) topic on September 8, 2008, and accordingly, performed a
comprehensive review of the Company’s uncertain tax positions as of that
date.  In this regard, an uncertain tax position represents its
expected treatment of a tax position taken in a filed tax return, or planned to
be taken in a future tax return, that has not been reflected in measuring income
tax expense for financial reporting purposes.  A reconciliation of the
Company’s total unrecognized tax benefits at December 31, 2009 and 2008
follows:





Year Ended December 31,2009
                        
                        
                        2008(in thousands)Balance
      at beginning of year
                        
                        $
                        -
                        
                        
                        $
                        -Addition
      based on tax positions in the current period
                        
                        
                        219
                        
                        
                        
                        -Balance
      at end of year
                        
                        $
                        219
                        
                        
                        $
                        -




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





The
liability for uncertain tax positions is recorded in accrued expenses in the
Company’s consolidated balance sheet.  The Company recognizes interest
and penalties related to uncertain tax positions in the income tax
provision.  Interest and penalties are computed based upon the
difference between its uncertain tax positions under ASC 740 and the amount
deducted or expected to be deducted in its tax returns.  During 2009
and 2008, the Company did not accrue or pay for any interest and
penalties.




F-18


PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements





9.
           
BORROWINGS





Notes
Payable





Notes
payable were $0.6 million and $0.1 million at December 31, 2009 and 2008,
respectively.  Notes payable of $0.1 million are secured by vehicles
and have maturities through 2014.   The annual interest rates on
the notes range from 2.9% to 6.4%. Premier Power Spain has an unsecured
loan for $0.4 million with Instituto de Crédito Oficial as of December 31, 2009,
with the first payment due on December 18, 2010 and each additional payment due
six months thereafter until June 18, 2013, which is the last payment due
date.  Payment amounts are $0.1 million.




Lines of
Credit





On July
13, 2009, the Company entered into a loan agreement with Umpqua Bank, an Oregon
corporation, for a line of credit of up to $12 million, maturing on July 13,
2011.  The loan agreement provides for an initial line of credit of $7
million, provided, however, that the Company may request no more than twice
prior to the maturity date that the line of credit be increased to an amount not
to exceed $12 million in the event the Company acquires another subsidiary and
require additional working capital for such subsidiary.  The line of
credit is secured by its assets and by the assets of Premier Power California
and Bright Future.  The line of credit bears interest at the prime
rate, provided, however, that the interest rate will not be less than five
percent (5%) per annum.  At December 31, 2009, the interest rate was
5%. As of December 31, 2009, there is $1.5 million outstanding under the
agreement with Umpqua Bank.




The
loan agreement with Umpqua Bank contains various financial condition covenants
with which the Company must comply, including minimum current ratio, maximum
debt to tangible net worth ratio, and minimum tangible net
worth.  Under the loan agreement, the Company is also subject to
customary non-financial covenants including limitations in secured indebtedness
and limitations on dividends and other restricted payments.  The
Company was out of compliance of certain covenants as of December
31, 2009 that did not take into account our Contingent Consideration Liability
as noted in Note 13.  As of March 24, 2010, the bank is aware of
the non-compliance and has not waived the non-compliance. The bank has not
issued a notice of default, nor instituted default rates, nor cut funding under
the line. We do not expect any of these events to occur and are currently
working with the bank to redefine our financial covenants.








(in thousands)2010
              
              $
              1,6922011
              
              
              3132012
              
              
              2202013
              
              
              102014
              
              
              5$
              2,240




10.           EQUITY


Preferred Stock
  The Company has authorized 20,000,000 shares of
preferred stock, par value $0.0001 per share (“Preferred Stock”). The Preferred Stock may be issued
from time to time in series having such designated preferences and
rights, qualifications and to such limitations
as the Board of Directors may determine.
  The Company has designated5,000,000 shares of Preferred Stock as
SeriesAConvertible Preferred Stock
(“Series A Stock”). The holders of Series A Stock have no
voting rightsexcept with regards to certain
corporate events, enjoys a $2.40 liquidation preference
per share, subject toadjustment, over holders of common stock, and may convert each share of SeriesAStock into one share of common stock at
any time. Series A stock convertsautomatically upon the occurrence
ofanoffering meeting certain criteria.
Holders of the Series A Stock have certain redemption
rights. The Company has determined that the
eventstriggering such rightsare either in control of the Company or
in the case of such eventswhere the Company is not deemed to
exercise control; the redemption right is limited
to the ability to
convert into shares of the
Company’s common stock. As of December
31,2009 and 2008, there were 3,500,000
shares of Series A Stock outstanding.
  The Company has designated 2,800,000
shares of Preferred Stock as Series B Convertible Preferred Stock (“Series B Stock”). The holders ofSeries B Stock have no voting
rightsexcept with regards to certain
corporate eventsand may convert each share of Series B
Stock into one share of common stock at any time. Series B stock
convertsautomatically upon the occurrence of an offering
meeting certain criteria. Holders of the Series B Stock have certain redemption
rights. The Company has determined that theeventstriggering such rightsare either in control of the Company or
in the case of such eventswhere the Company is not deemed to
exercise control; the redemption right is limited to the ability to convert into
shares of the Company’s common stock. As of December 31,2009 and 2008, there were 2,800,000
and0Series B Stock outstanding, respectively.
  Warrants
 
 In September 2008, the Company issued
SeriesAWarrantsand SeriesBWarrantsto purchase 1,750,000 and 1,750,000
shares of common stock, respectively, in connection with the issuance of Series
A Stock. Both the SeriesAand B Warrantshad four year lives.The Company had the right to call for
cancellation of each outstanding Series A Warrant or Series B
Warrant under certain circumstances. The Series A Warrantshad an exercise price of$2.50 and a fair value of $.15 per warrant. The SeriesBWarrantshadan exercise price of $3.00 and a fair
value of $.13 per warrant. All of the issued and
outstanding Series A Warrants and Series B Warrants were cancelled on June 16,
2009 in connection with a sale of our Series B Stock.
  The significant assumptions used to determine the fair values
of the warrantsare as follows:
  Risk-free interest rate at grant
      date
                          
                          
                          4.5
                          %Expectedstock pricevolatility
                          
                          
                          95
                          %Expected dividend
      payout
                          
                          
                          -Expectedoption
      life-years
                          
                          4
  yrs
 
 In September 2008, the Company issued 3,500,000
units, consisting each of 1 share of
Preferred Stock,1⁄2of a SeriesAWarrant, and1⁄2of a Series B Warrant in exchange for
$7,000,000 in gross
proceeds. The fair value of the preferred stock was calculated based on the
estimatedfair value and underlying number of
common shares it would convert into at the time of the transaction.Theestimated fair value of our common stock
onthe transaction date was
$.42 per share, and the preferred stock would have converted into 3,500,000
common shares, thus deriving a fair value of $1,470,000 for the underlyingcommon shares.
  Based on
the relative fair values of the preferred stock and the warrants, we allocated
$5,206,013 and $1,793,987 of the $7,000,000 gross proceeds, before issuance
costs, to the preferred stock and warrants, respectively. The aggregate net
proceeds received from the issuance of the preferred stock and
warrants was $5,511,895, giving effect to an aggregate $1,488,105 of
financing-related costs. The Company determined that the issuance of the
warrants did not result in significant incremental financing-related costs
and, as a result, netted such costs against the gross proceeds allocated to the
preferred stock. Net of financing-related costs, the Company allocated
$3,717,908 and $1,793,987 of the net proceeds to the preferred stock and
warrants, respectively.
 11.           RELATED
PARTY TRANSACTIONS
 
 Certain
stockholders have guaranteed certain obligations under the Company’s borrowings
and operating leases.
  F-19
 
 PREMIER
POWER RENEWABLE ENERGY, INC.
 Notes
to Consolidated Financial Statements
 
 12.
            COMMITMENTS
AND CONTINGENCIES
 
 Premier
Power Spain is party to three non-cancelable leases for operating facilities in
Navarro, Madrid, and Barcelona, Spain, which expire in 2012, 2013, and 2014,
respectively.  Premier Power Italy is party to a non-cancelable lease for
operating facilities in Campobasso, Italy, which expires in
2015.  Premier Power California is party to a non-cancelable lease for
operating facilities in Redlands, California, which expires in
2010.  These leases provide for annual rent increases tied to the
Consumer Price Index. The leases require the following payments as of December
31, 2009, subject to annual adjustment, if any:
 
 (in thousands)2010
                        
                        $
                        1022011
                        
                        
                        752012
                        
                        
                        672013
                        
                        
                        562014
      and beyond
                        
                        
                        50$
                        350
  We are
not currently involved in any material legal proceedings, and we are not aware
of any material legal proceedings pending or threatened against us. We are also
not aware of any material legal proceedings involving any of our directors,
officers, or affiliates or any owner of record or beneficially of more than 5%
of any class of our voting securities.
  In
connection with Rupinvest’s purchase of the 10% noncontrolling interest in
Premier Power Italy from Esdras, Esdras has notified Rupinvest that it does not
believe that it was properly notified of the intent to acquire and believes a
premium on the purchase price was necessary. The Company disagrees with this
position. No legal proceedings have been threatened. In the event, however, that
legal proceedings are conducted, we do not anticipate a material
exposure.
 13.           CONTINGENT
CONSIDERATION LIABILITY
 
 In
connection with the acquisition of Rupinvest (See Note 5), contingent
consideration liability of $12 million was recorded at the time of the purchase
to reflect the estimated fair value of 3 million contingently issuable shares of
the Company’s
common stock.
    (i)
              375,000 shares for
      each ten million Euros (€10
      million, or approximately $14.2 million) worth of Sales (as defined below)
      achieved by Premier Power Italy from July 9, 2009, the escrow opening
      date, to December 31, 2009 (the “First
      Issuance”),
      with the maximum number of shares released as part of the First Issuance
      to be 1,500,000 shares (any number of shares not issuable as part of the
      First Issuance solely due to the fact that the 1,500,000 shares threshold
      was exceeded is hereinafter referred to as the “Excess
      Issuable Amount”);
  (ii)
              50% of the Excess
      Issuable Amount, if any, plus 200,000 shares for each ten million Euros
      (€10
      million, or approximately $14.2 million) worth of Sales achieved by
      Premier Power Italy from January 1, 2010 to December 31, 2010 (the “Second
      Issuance)”).
      The maximum combined number of shares to be released as part of the First
      Issuance and the Second Issuance, in the aggregate, shall not exceed
      3,000,000 shares; and
  (iii)
              100,000 shares for
      each ten million Euros (€10
      million, or approximately $14.2 million) worth of Sales achieved by
      Premier Power Italy from January 1, 2011 to December 31, 2011 (the “Third
      Issuance”).
      The maximum combined number of shares to be released as part of the First
      Issuance, the Second Issuance, and the Third issuance, in the aggregate,
      shall not exceed 3,000,000
shares.
    14.
          DERIVATIVE
INSTRUMENT
 
 On
January 1, 2009, the Company adopted FASB ASC 815 (EITF 07-5, Determining Whether an
Instrument (or embedded Feature) is Indexed to an Entity’s Own Stock). As
part of the adoption of FASB ASC 815, the Company determined that its warrants
are not indexed to its stock as a result of the basis of an exercise price reset
that occurs when the Company sells its common stock at a lower price, even if
such price is at fair value. Thus, the value of the warrants has been recorded
as a liability.
 
 The
Company recorded a warrant liability in the amount of $11.1 million upon
adoption of FASB ASC 815.  The Company determined the fair value of
the warrant liability to be $8.9 million as of June 16, 2009, immediately prior
to retiring the warrants.  As a result of the changes in fair value,
the Company recorded income of $2.2 million for the year ended December 31,
2009.
  F-20
 
 PREMIER
POWER RENEWABLE ENERGY, INC.
 Notes
to Consolidated Financial Statements
 
 On June
16, 2009, the Company entered into a Securities Purchase Agreement with
Vision.  The terms of the agreement called for the cancellation of
Series A and Series B warrants held by Vision exercisable for an aggregate 3.5
million shares of common stock held by Vision. The cancellation of warrants
resulted in the elimination of all the Company’s issued and outstanding
warrants.  As a result of the cancellation, the Company derecognized
the warrant liability of $8.9 million and recorded the gain on its
extinguishment of $1.4 million in additional paid in capital in accordance with
the provisions of APB No. 26, Early Extinguishment of
Debt.
 
 The
Company uses the Black-Scholes pricing model to calculate fair value of its
warrant liability. Key assumptions used are as follows:
 
 Number of Shares
                        included in
                        Warrant
                      
                      Dividend Yield
                      
                      
                      Volatility
                      
                      
                      Risk-Free
                        Rate
                      
                      
                      Expected Life
                        (in years)
                      
                      
                      Stock Price1,750,000
                      
                      
                      0.0
                      %
                      
                      
                      95.0
                      %
                      
                      
                      4.5
                      %
                      
                      
                      4.0
                      
                      
                      $
                      2.501,750,000
                      
                      
                      0.0
                      %
                      
                      
                      95.0
                      %
                      
                      
                      4.5
                      %
                      
                      
                      4.0
                      
                      
                      $
                      3.00
 
 15. 
         STOCK-BASED
COMPENSATION
 
 The
Company’s 2008 Equity Incentive Plan (the “Incentive Plan”) provides for the
issuance of incentive stock options and non-statutory stock options. The board
of directors determines to whom grants are made and the vesting, timing,
amounts, and other terms of such grants, subject to the terms of the Incentive
Plan. Incentive stock options may be granted only to employees of the Company,
while non-statutory stock options may be granted to the Company’s employees,
officers, directors, certain consultants, and certain advisors. Options under
the Incentive Plan vest as determined by the Board.  The term of the
options granted under the Incentive Plan may not exceed 10 years, and the
maximum number of shares of common stock that may be issued pursuant to
stock options and stock awards granted under the Incentive
Plan is 2,951,875 shares in the aggregate. Options convertible into an
aggregate 1,320,729 shares of common stock were outstanding under the Incentive
Plan as of December 31, 2009.  The Company did not grant stock options
prior to January 2009, and there was no stock compensation expense prior to this
period.
 
 The
following table sets forth a summary stock option activity for the year ended
December 31, 2009:
 
 Weighted-
                                                        
                                                        Weighted-Number of
                                                        
                                                        Average Date
                                                        
                                                        Average DateShares
                                                        
                                                        Fair Value
                                                        
                                                        Exercise PriceDecember 31, 2009Outstanding
      and not vested beginning balance
                                                        
                                                        
                                                        -
                                                        
                                                        $
                                                        -
                                                        
                                                        $
                                                        -Granted
      during the year
                                                        
                                                        
                                                        1,710,979
                                                        
                                                        $
                                                        3.00
                                                        
                                                        $
                                                        3.86Forfeited/cancelled
      during the year
                                                        
                                                        
                                                        (390,250
                                                        )
                                                        $
                                                        3.32
                                                        
                                                        $
                                                        4.25Released/vested
      during the year
                                                        
                                                        
                                                        -
                                                        
                                                        $
                                                        -
                                                        
                                                        $
                                                        -Outstanding
      and not vested at December 31, 2009
                                                        
                                                        
                                                        1,320,729
                                                        
                                                        $
                                                        2.99
                                                        
                                                        $
                                                        3.75
 
 Stock-based
compensation expense relating to these shares is being recognized over a
weighted-average period of 4.5 years.  The Company recognized
stock-based compensation expense of approximately $0.5 million during the year
ended December 31, 2009.
 
 At
December 31, 2009, there was $3.3 million of total unrecognized compensation
cost related to nonvested stock options.  The Company expects to
recognize that cost over a weighted average period of 4.1 years.
  F-21
 
 PREMIER
POWER RENEWABLE ENERGY, INC.
 Notes
to Consolidated Financial Statements
  The
following tables summarize the total stock-based compensation expense
the Company recorded for the year ended December 31, 2009:
 
 (in thousands)Cost
      of goods sold
                        
                        $
                        145Administration
                        
                        
                        200Sales
      and marketing
                        
                        
                        118Total
      stock-based compensation expense
                        
                        $
                        463
  (in thousands)Stock
      option awards to employees
                        
                        $
                        463Restricted
      stock grants to board of directors
                        
                        
                        161Total
      stock-based compensation expense
                        
                        $
                        624
  WeightedAverageWeighted
                                                          
                                                          RemainingAverage
                                                          
                                                          Contractual
                                                          
                                                          
                                                          AggregateNumber of
                                                          
                                                          Exercise
                                                          
                                                          Term
                                                          
                                                          
                                                          IntrinsicOptions
                                                          
                                                          Price
                                                          
                                                          (in years)
                                                          
                                                          
                                                          ValueOptions
      expected to vest
                                                          
                                                          940,208
                                                          
                                                          $
                                                          3.84
                                                          
                                                          8.66
                                                          
                                                          $
                                                          -
 
 The
Company defines in the money options at December 31, 2009 as options that had
exercise prices that were lower than the $2.75 fair market value of its common
stock at that date.  The aggregate intrinsic value of options
outstanding at December 31, 2009 is calculated as the difference between the
exercise price of the underlying options and the fair market value of the
Company’s common stock.  At December 31, 2009, the aggregate intrinsic
value was zero.
 
 The fair
value of stock option grants during the year ended December 31, 2009 was
estimated on the date of grant using the Black-Scholes option-pricing model with
the following assumptions:
 
 Expected
      volatitity
                    
                    
                    93.60
                    %Expected
      dividends
                    
                    
                    0
                    %Expected
      term
                    
                    6.5
      yearsRisk-free
      interest rate
                    
                    
                    1.88
                    %Weighted-average
      fair value per share
                    
                    $
                    3.00
 
 Valuation and Amortization Method —The Company estimates the fair value of service-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 three to five years. 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.
  F-22
 
 PREMIER
POWER RENEWABLE ENERGY, INC.
 Notes
to Consolidated Financial Statements
 
 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
FASB ASC 718-10-S99-1 (Staff Accounting Bulletin No. 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.  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.
 
 The
weighted-average fair value per share of the stock options as determined on the
date of grant was $3.00 for the 1,710,979 stock options granted during the year
ended December 31, 2009. The total fair value of stock options vested during the
year ended December 31, 2009 was $0 as no stock options vested in
2009.
 
 Restricted
Stock Awards
 
 During
2009, the Company began issuing restricted stock awards to certain directors,
officers, and employees under the Incentive Plan.  Compensation
expense for such awards, based on the fair market value of the awards on the
grant date, is recorded during the vesting period.
 
 A summary
of restricted stock awards activity follows:
  WeightedAverageNumber of
                            
                            
                            FairShares
                            
                            
                            PriceOutstanding,
      December 31, 2008
                            
                            
                            -
                            
                            
                            $
                            -Granted
                            
                            
                            1,500
                            
                            
                            $
                            3.70Vested
      and issued
                            
                            
                            (1,500
                            )
                            
                            $
                            3.70Forfeited
                            
                            
                            -
                            
                            
                            $
                            -Outstanding,
      December 31, 2009
                            
                            
                            -
                            
                            
                            $
                            -
  In August
2009, the Company issued 1,500 shares of its common stock under the 2008 Equity
Incentive Plan to employees for services. The shares were immediately vested,
and there were no restrictions. Additionally, as of December 31, 2009, the
Company owed an aggregate 33,000 restricted shares of common stock to certain
members of the board of directors pursuant to their director agreements, which
were issued on March 10, 2010. The fair value of these shares was not
significant. ASC Topic 718 requires the cash flows as a result of the tax
benefits resulting from tax deductions in excess of the compensation cost
recognized (excess tax benefits) to be classified as financing cash flows. There
are no excess tax benefits for the year ended December 31, 2009, and therefore,
there is no impact on the accompanying consolidated statements of cash
flows.
  F-23





PREMIER POWER RENEWABLE ENERGY,
INC.


Notes
to Consolidated Financial Statements





16. 
         EMPLOYEE BENEFITS





The
Company has a 401(k) 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. The Company makes discretionary matching contributions to
employees who qualify for the Plan and were employed on the last day of the Plan
year. Such contributions totaled $0 and $20,000 for the year ended December 31,
2009 and 2008, respectively. Employees are vested 100% after 3 years of service.
Neither Bright Future, Premier Power Spain, nor Premier Power Italy offers
defined contribution or defined benefit plans to employees.





17.
          FAIR VALUE OF FINANCIAL
INSTRUMENTS





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




The
following disclosure is made in accordance with FASB ASC 820 (FASB Staff
Position (FSP) FAS 107-1, Interim Disclosures about Fair Value
of Financial Instruments): The carrying amounts of cash and cash
equivalents and accounts receivable, prepaid expenses, costs and estimated
earnings in excess of billings, accounts payable, billings in excess of costs
and estimated earnings on uncompleted contracts, and accrued liabilities
approximate their fair values at each balance sheet date due to the short-term
maturity of these financial instruments. The fair value of the Company’s
borrowings is based upon current interest rates for debt instruments with
comparable maturities and characteristics and approximates carrying
values.




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





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





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





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





The table
below sets forth, the Company’s Level 3 financial assets and liabilities that
are accounted for at fair value. (in thousands):




2009
                                                                
                                                                
                                                                2008(in thousands)
                                                                
                                                                
                                                                (in thousands)Level
      1
                                                                
                                                                
                                                                Level
      2
                                                                
                                                                
                                                                Level 3
                                                                
                                                                
                                                                Level
      1
                                                                
                                                                
                                                                Level
      2
                                                                
                                                                
                                                                Level
      3Liabilities:
      Contingent consideration
                                                                
                                                                $
                                                                -
                                                                
                                                                
                                                                $
                                                                -
                                                                
                                                                
                                                                $
                                                                7,725
                                                                
                                                                
                                                                $
                                                                -
                                                                
                                                                
                                                                $
                                                                -
                                                                
                                                                
                                                                $
                                                                -




ContingentConsiderationLiability(in
      thousands):Beginning
      balance
                    
                    $
                    -Acquisition
      of Rupinvest
                    
                    
                    12,026Total
      gain realized
                    
                    
                    (4,301
                    )Ending
      balance
                    
                    $
                    7,725




18.           SUBSEQUENT
EVENTS





The
Company evaluated subsequent events through the date the financial statements
were issued.




F-24





PREMIER POWER RENEWABLE ENERGY,
INC.


Notes
to Consolidated Financial Statements




19.           CONTINGENCIES





Legal
Matters


The
Company is subject to legal proceedings, claims, and litigation arising in the
ordinary course of business.  The Company is not currently involved in
any litigation, the outcome of which would, based on information currently
available, have a material adverse effect on the Company’s financial position,
results of operations, or cash flows.





Indemnifications


The
Company indemnifies its directors and executive officers for costs associated
with any fees, expenses, judgments, fines and settlement amounts incurred by
them in any action or proceeding to which any of them is, or is threatened to
be, made a party by reason of his or her services in their role as a director or
officer.





20.           SEGMENT
INFORMATION





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





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


●
            Spain
      – consists of rooftop solar installations generally ranging 5kWh to 1MW
      provided primarily to businesses that own commercial buildings or
      warehouses.


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








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





Year
      Ended December 31, 2009United States
                          
                          
                          Spain
                          
                          
                          Italy
                          
                          
                          Total(in
      thousands)Net
      sales
                          
                          $
                          13,987
                          
                          
                          $
                          5,919
                          
                          
                          $
                          10,844
                          
                          
                          $
                          30,750Cost
      of sales
                          
                          
                          (12,383
                          )
                          
                          
                          (5,051
                          )
                          
                          
                          (8,858
                          )
                          
                          
                          (26,292
                          )Gross
      profit
                          
                          $
                          1,604
                          
                          
                          $
                          868
                          
                          
                          $
                          1,986
                          
                          
                          
                          4,458Total
      operating expenses
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          8,718Operating
      loss
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          (4,260
                          )




F-25





PREMIER
POWER RENEWABLE ENERGY, INC.


Notes
to Consolidated Financial Statements




(Restated)Year Ended December 31, 2008United States
                                                
                                                
                                                Spain
                                                
                                                
                                                Total(in thousands)Net sales
                                                
                                                $
                                                31,074
                                                
                                                
                                                $
                                                13,164
                                                
                                                
                                                $
                                                44,238Cost
      of sales
                                                
                                                
                                                (27,229
                                                )
                                                
                                                
                                                (11,482
                                                )
                                                
                                                
                                                (38,711
                                                )Gross
      profit
                                                
                                                $
                                                3,845
                                                
                                                
                                                $
                                                1,682
                                                
                                                
                                                
                                                5,527Total
      operating expenses
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                4,729Operating
      income
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                $
                                                798Year EndedDecember 31,2009
                                                
                                                
                                                2008(Restated)(in thousands)Net
      salesUnited
      States
                                                
                                                
                                                
                                                
                                                
                                                $
                                                13,987
                                                
                                                
                                                $
                                                31,074Spain
                                                
                                                
                                                
                                                
                                                
                                                
                                                5,919
                                                
                                                
                                                
                                                13,164Italy
                                                
                                                
                                                
                                                
                                                
                                                
                                                10,844
                                                
                                                
                                                
                                                -$
                                                30,750
                                                
                                                
                                                $
                                                44,238





At
December 31, 2009 and 2008, property and equipment located in the United States,
net of accumulated depreciation and amortization was approximately $0.3 million
and $0.4 million, respectively.  At December 31, 2009 and 2008,
property and equipment located in foreign countries, net of accumulated
depreciation and amortization was approximately $0.3 million and $0.1 million,
respectively.




F-26




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





There
have been no changes in or disagreements with our independent auditors, Macias
Gini & O’Connell LLP.





Item
9A.  Controls and Procedures.




Disclosure
Controls and Procedures





Regulations
under the Exchange Act, require public companies to maintain “disclosure
controls and procedures,” which are defined to mean a company’s controls and
other procedures that are designed to ensure that information required to be
disclosed in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized, and reported, within the time periods specified
in the SEC’s rules and forms.  Our Chief Executive Officer and Chief
Financial Officer carried out an evaluation of the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this
report.  Based on those evaluations, as of December 31, 2009, our CEO
and CFO believe that:




(i)
              our disclosure controls and
      procedures are designed to ensure that information required to be
      disclosed by us in the reports we file under the Exchange Act is recorded,
      processed, summarized, and reported within the time periods specified in
      the SEC’s rules and forms, and that such information is accumulated and
      communicated to our management, including the CEO and CFO, as appropriate,
      to allow timely decisions regarding required disclosure;
      and





(ii)
              our disclosure controls and
      procedures are
effective.





Internal
Control over Financial Reporting





Management’s
annual report on internal control over financial reporting.





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting.  Internal control over financial
reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated
under the Exchange Act as a process designed by, or under the supervision of,
the Company’s principal executive officer and principal financial officer and
effected by the Company’s board of directors, management, and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles and includes those policies and
procedures that:





·
            Pertain to the maintenance of
      records that in reasonable detail accurately and fairly reflect the
      transactions and dispositions of the assets of the
      Company;





·
            Provide reasonable assurance that
      transactions are recorded as necessary to permit preparation of financial
      statements in accordance with generally accepted accounting principles,
      and that receipts and expenditures of the Company are being made only in
      accordance with authorizations of management and directors of the Company;
      and





·
            Provide reasonable assurance
      regarding prevention or timely detection of unauthorized acquisition, use,
      or disposition of the Company’s assets that could have a material effect
      on the financial statements.





Because
of its inherent limitations, the Company’s internal control over financial
reporting may not prevent or detect misstatements.  Therefore, even
those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and
presentation.  Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.




Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2009. In making this assessment, management used
the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal
Control—Integrated
 Framework.  Based
on our assessment,management concluded that, as of December 31, 2009, the Company’s
internal controls over financial reporting were ineffective due to the following
significant deficiency that existed on December 31, 2009, which deficiency was
first discovered by the Company in conjunction with its first filing of an
annual report on Form 10-K following the share exchange transaction in September
2008, which Form 10-K was for the year ended December 31, 2008, and which
deficiency was again noted by Teresa Kelley, our former Chief Financial Officer,
in the second quarter of 2009 in connection with our acquisition of Rupinvest
and Premier Power Italy:
 
 ·
              Expanded
      Financial Reporting Resources: The Company has limited finance and
      accounting resources. The Company needed additional resources to ensure
      that it is able to comply with its financial reporting obligations in an
      accurate and timely manner. Remedial steps were taken, which steps are
      described below.




37





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





Changes
in internal control over financial reporting.




There
were changes in our internal control over financial reporting identified in
connection with the evaluation required by Rule 13a-15(d) or
Rule15d-15(d) promulgated under the Exchange Act that occurred during our
fourth fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.  As
a result of the previously identified significant deficiency, we made
significant changes in our internal controls as described below. Given that our
remediation efforts continue, these actions also serve as additional procedures
and analyses to ensure that our consolidated financial statements are prepared
in accordance with generally accepted accounting principles in the United States
of America.





·
            The
      Company implemented a formal process for preparing and controlling journal
      entries to prevent processing erroneous or unauthorized entries by
      restricting preparation of monthly journal entries to certain authorized
      personnel; implementing a system of sequential numbering and numeric
      accounting of each journal entry; implementing a system of attaching
      supporting documentation to each journal entry; and implementing a system
      of independent review of each journal
entry.





·
            We
      hired additional experienced accounting personnel in an effort to increase
      the experience level within our accounting department; including the
      hiring of a new corporate controller and chief financial officer who are
      individuals with significant experience applying generally accepted
      accounting principles. Our new chief financial officer participated in the
      December 31, 2009 financial close and reporting processes, and our new
      controller participated in the September 30, 2009 and December 31,
      2009 financial close and reporting processes, which added an additional
      level of supervisory review.





·
            We
      hired an external consultant to provide internal control reviews and
      provide suggestions for
improvement.





·
            We
      implemented a detailed financial performance review with management and
      our Board of Directors.








Item
9B. Other Information





None.





38





PART III





Item
10. Directors, Executive Officers and Corporate Governance.




Current
Management





Our
directors and executive officers, their ages, their respective offices and
positions, and their respective dates of election or appointment are as
follows:





Name
                    
                    Age
                    
                    Position Held
                    
                    Officer/Director sinceDean
      R. Marks
                    
                    53
                    
                    Chairman
      of the Board, President, and Chief Executive Officer
                    
                    September
      9, 2008Miguel
      de Anquin
                    
                    42
                    
                    Chief
      Operating Officer, Corporate Secretary, and Director
                    
                    September
      9, 2008Frank
      J. Sansone
                    
                    38
                    
                    Chief
      Financial Officer
                    
                    November
      5, 2009Kevin
      Murray
                    
                    60
                    
                    Director
                    
                    December
      8, 2008Robert
      Medearis
                    
                    77
                    
                    Director
                    
                    December
      8, 2008Tommy
      Ross
                    
                    56
                    
                    Director
                    
                    March
      18, 2009





Business
Experience Descriptions





Set forth
below is a summary of our executive officers’ and directors’ business experience
for the past 5 years. The experience and background of each of the directors, as
summarized below, were significant factors in their previously being nominated
as directors of the Company.





Dean
R. Marks - Chairman of the Board, President, and Chief Executive
Officer





Dean R.
Marks has been a key player in the solar sector since the early 1980's. In 1984,
Mr. Marks established a solar sales organization with over 2,000 employees in
over 26 markets across the nation. Since that time, Mr. Marks has pioneered
multiple applications of solar energy in the residential, commercial, and
industrial market. As President and CEO of Premier Power California since 2001,
he built Premier Power California into one of the most stable market leaders in
the industry. Mr. Marks has overseen Premier Power California’s expansion from
residential to commercial, agricultural, and industrial markets as well as
international expansion. Under Mr. Marks leadership, Premier Power California
has distinguished itself from the competition by developing a number of
innovative and propriety installation systems in use today. Mr. Marks has served
on the California Solar Energy Industry Association (CALSEIA) board and has been
an active participant in the solar industry for over 20 years. He has
co-authored several preeminent papers promoting renewable energy. Mr. Marks
holds a Bachelor of Science degree from Auburn University, with special emphasis
in Environmental Science.





Miguel
de Anquin - Director, Chief Operating Officer, and Corporate
Secretary





Miguel de
Anquin serves as Executive Vice President and President of World Wide Sales at
Premier Power California since 2001. In his role at Premier Power California,
Mr. de Anquin achieved company success in growing sales and profits. An
accomplished corporate strategist, his strategic approach to building a business
is reflected in his work as Director of Marketing for Nordic Information System
and Next Information System. He was a Technology Advisor for General Electric
and IBM and he developed the data security auditing system for Bank of America.
At Premier Power California, Mr. de Anquin’s understanding of international
opportunities, his vision and expertise in business performance have driven
notable enterprise wide growth. Mr. de Anquin led Premier Power California’s
expansion into international markets, and he has increased Premier Power
California's profitability through brand revitalization that included major
shifts in brand strategy, operations, marketing communications, and sales
tactics. He has focused Premier Power California on data driven decision making
processes that have separated Premier Power California from its competitors. He
holds a Masters in Business Administration from the University of California at
Davis and a Bachelor of Science degree in Computer Science from the Universidad
de Belgrano in Buenos Aires, Argentina.





Frank
J. Sansone - Chief Financial Officer





Mr.
Sansone was appointed Chief Financial Officer of the Company on November 5,
2009.  He has over 16 years of finance experience.  Prior to
his appointment as the registrant’s Chief Financial Officer, Mr. Sansone was the
Chief Financial Officer and a member of the Board of Directors of LiveOffice
LLC, a provider of software-as-a service email archiving and Hosted Exchange
2007 solutions, from 2008 to 2009.  From 2002 to 2008, he was the
Chief Financial Officer of Guidance Software, Inc., a Nasdaq-listed company with
operations in digital investigative solutions.  Mr. Sansone graduated
from the University of La Verne with a bachelor’s degree in
accounting.  He is an inactive member of the American Institute
of Certified Public Accountants and the California Society of Certified Public
Accountants.  Mr. Sansone is currently a member of the Board of
Directors of Ditech Networks, Inc., a Nasdaq-listed company, and one other
private company.





39





Kevin
Murray - Director





Mr.
Murray was elected to the board of directors on December 8, 2008.  He
is currently a Senior Vice President at the William Morris Agency (“WMA”),
working primarily in its corporate consulting division, a position he has held
since re-joining WMA in 2007 after serving twelve years in the California State
Legislature.  From 1998 to 2006, Mr. Murray was a Senator in the
California State Senate.  Concurrent to his directorship with the
Company, Mr. Murray sits on the board of the Federal Home Loan Bank of San
Francisco.  Mr. Murray graduated from California State University,
Northridge with a degree in business administration and accounting and holds a
Masters of Business Administration from Loyola Marymount University and a Juris
Doctorate from Loyola Law School.





Robert
Medearis - Director





Mr.
Medearis was elected to the board of directors on December 8, 2008. He is
currently retired as a management consultant and professor, and has been for the
past 5 years, but he sits on the board of several private companies, including
Solaicx, Inc., Geographic Expeditions, and Visual Network Design Inc., and the
non-profit organization Freedom From Hunger. Mr. Medearis graduated from
Stanford University with a degree in civil engineering and holds a Masters of
Business Administration from the Harvard Graduate School of Business
Administration.





Tommy
Ross - Director





Mr. Ross
was elected to the board of directors on March 18, 2009.  He is currently
the President and Chief Executive Officer of Pinnacle Strategic Group, a
business and political consulting firm.  From 2003 to 2008, he was employed
at Southern California Edison, at which he served as Vice President of Public
Affairs from 2007 to 2008.  Mr. Ross’ experience in the political arena
also include holding positions to which he was appointed by California Governor
Arnold Schwarzenegger, former California Governor Pete Wilson, and former
California Governor Jerry Brown.  He is the former Chairman and founding
member of the California African American Political Action Committee, a Lincoln
Fellow at The Claremont Institute, and the founder, Chairman and President of
The Research and Policy Institute of California.  Mr. Ross graduated from
Claremont Men’s College with a degree in political
science.




Family
Relationships




There are
no family relationships among our directors and executive officers.




Involvement
in Certain Legal Proceedings





None of
our directors or executive officers has, during the past ten years:




·
            Had any petition under the
      federal bankruptcy laws or any state insolvency law filed by or against,
      or had a receiver, fiscal agent, or similar officer appointed by a court
      for the business or property of such person, or any partnership in which
      he was a general partner at or within two years before the time of such
      filing, or any corporation or business association of which he was an
      executive officer at or within two years before the time of such
      filing;





·
            Been convicted in a criminal
      proceeding or a named subject of a pending criminal proceeding (excluding
      traffic violations and other minor
  offenses);





·
            Been the subject of any order,
      judgment, or decree, not subsequently reversed, suspended, or vacated, of
      any court of competent jurisdiction, permanently or temporarily enjoining
      him from, or otherwise limiting, the following
      activities:





(i)
            Acting as a futures commission
      merchant, introducing broker, commodity trading advisor, commodity pool
      operator, floor broker, leverage transaction merchant, any other person
      regulated by the Commodity Futures Trading Commission, or an associated
      person of any of the foregoing, or as an investment adviser, underwriter,
      broker or dealer in securities, or as an affiliated person, director or
      employee of any investment company, bank, savings and loan association or
      insurance company, or engaging in or continuing any conduct or practice in
      connection with such
activity;





(ii)
            Engaging in any type of business
      practice; or





(iii)
            Engaging in any activity in
      connection with the purchase or sale of any security or commodity or in
      connection with any violation of federal or state securities laws or
      federal commodities laws;





·
            Been the subject of any order,
      judgment, or decree, not subsequently reversed, suspended, or vacated, of
      any federal or state authority barring, suspending, or otherwise limiting
      for more than 60 days the right of such person to engage in any activity
      described in (i) above, or to be associated with persons engaged in any
      such activity;




40




·
            Been found by a court of
      competent jurisdiction in a civil action or by the SEC to have violated
      any federal or state securities law, where the judgment in such civil
      action or finding by the SEC has not been subsequently reversed,
      suspended, or vacated; or




·
            Been found by a court of
      competent jurisdiction in a civil action or by the Commodity Futures
      Trading Commission to have violated any federal commodities law, where the
      judgment in such civil action or finding by the Commodity Futures Trading
      Commission has not been subsequently reversed, suspended, or
      vacated.





·
            Been
      the subject of, or a party to, any federal or state judicial or
      administrative order, judgment, decree, or finding, not subsequently
      reversed, suspended or vacated, relating to an alleged violation
      of:





(i)
            Any
      federal or state securities or commodities law or regulation;
      or





(ii)
            Any
      law or regulation respecting financial institutions or insurance companies
      including, but not limited to, a temporary or permanent injunction, order
      of disgorgement or restitution, civil money penalty or temporary or
      permanent cease-and-desist order, or removal or prohibition order;
      or





(iii)
            Any
      law or regulation prohibiting mail or wire fraud or fraud in connection
      with any business entity; or





·
            Been
      the subject of, or a party to, any sanction or order, not subsequently
      reversed, suspended or vacated, of any self-regulatory organization (as
      defined in Section 3(a)(26) of the Securities Exchange Act of 1934), any
      registered entity (as defined in Section 1(a)(29) of the Commodity
      Exchange Act), or any equivalent exchange, association, entity or
      organization that has disciplinary authority over its members or persons
      associated with a member.





Compliance
with Section 16(a) of the Securities Exchange Act of 1934





Our
executive officers, directors, and persons who beneficially own more than 10% of
a registered class of our equity securities are not currently subject to Section
16(a) of the Exchange Act.





Code
of Ethics




We have
adopted a Code of Business Conduct and Ethics that applies to our executive
officers, directors, and employees, a copy of which was filed with the SEC as
Exhibit 14.1 to our Registration Statement on Form S-1 on November 7,
2008.





Recommendation
of Nominees to the Board





There
were no changes to the procedures by which our stockholders may recommend
nominees to our board of directors.





Diversity





While the Company does not have a
policy regarding diversity of its board members, diversity is one of a number of
factors that is typically taken into account in identifying board
nominees.  We believe that we have a very diverse board of
directors  in terms of previous business experience and educational
and personal background of the members of our board.





Audit
Committee; Audit Committee Financial Expert





We formed
an audit committee of our board of directors on March 18, 2009.  The
charter for such committee was adopted by the board on December 19,
2008.  The members of our audit committee are Kevin Murray, Robert
Medearis, and Tommy Ross.  The board of directors has determined that Mr.
Medearis is an “audit committee financial expert” as defined by SEC rules, and
he is an independent member of the board as defined by the SEC and the Nasdaq
Capital Market.





Item
11.  Executive Compensation.




The
following summary compensation table indicates the cash and non-cash
compensation earned during the fiscal years ended December 31, 2009, 2008,
and 2007 by (i) our Chief Executive Officer (principal executive officer), (ii)
our Chief Financial Officer (principal financial officer), (iii) the three most
highly compensated executive officers other than our CEO and CFO who were
serving as executive officers at the end of our last completed fiscal year,
whose total compensation exceeded $100,000 during such fiscal year ends, and
(iv) up to two additional individuals for whom disclosure would have been
provided but for the fact that the individual was not serving as an executive
officer at the end of our last completed fiscal year, whose total compensation
exceeded $100,000 during such fiscal year ends.




41




Summary
Compensation Table




Name and
                                              Principal
                                              Position
                                            
                                            Year
                                            
                                            Salary
                                              ($)
                                            
                                            
                                            Bonus
                                              ($)
                                            
                                            
                                            Stock
                                              Awards
                                              ($)(1)
                                            
                                            
                                            Option
                                              Awards
                                              ($)(2)
                                            
                                            
                                            Non-Equity
                                              Incentive
      Plan
                                              Compensation ($)
                                            
                                            
                                            Non-qualified
                                              Deferred
                                              Compensation
                                              Earnings
      ($)
                                            
                                            
                                            All Other
                                              Compensation
                                              ( $)
                                            
                                            
                                            Total
                                              ($)Dean
      R. Marks,
                                            
                                            2009
                                            
                                            $
                                            184,231
                                            (3)
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            24,104
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            21,392
                                            (4)
                                            
                                            $
                                            221,667Chairman
      of the  Board,
                                            
                                            2008
                                            
                                            $
                                            158,077
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            158,077President,
      and CEO
                                            
                                            2007
                                            
                                            $
                                            159,466
                                            
                                            
                                            $
                                            1,344
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            9,322
                                            (5)
                                            
                                            $
                                            170,132—Miguel
      de Anquin,
                                            
                                            2009
                                            
                                            $
                                            184,231
                                            (3)
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            24,104
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            21,392
                                            (4)
                                            
                                            $
                                            221,667COO,
      former CFO, Corporate
                                            
                                            2008
                                            
                                            $
                                            153,462
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            153,462Secretary,
      and Director
                                            
                                            2007
                                            
                                            $
                                            126,624
                                            
                                            
                                            $
                                            1,344
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            8,037
                                            (6)
                                            
                                            $
                                            136,005Frank
      Sansone,
                                            
                                            2009
                                            
                                            $
                                            24,231
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            9,768
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            33,999CFO
      (7)
                                            
                                            2008
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —2007
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —Teresa
      Kelley
                                            
                                            2009
                                            
                                            $
                                            130,931
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            740
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            131,671former
      CFO (8)
                                            
                                            2008
                                            
                                            $
                                            25,962
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            25,9622007
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —
                                            
                                            
                                            $
                                            —





(1)
            Reflects dollar amount expensed
      by the Company during the applicable fiscal year for financial statement
      reporting purposes pursuant to FASB ASC 805.  (FAS 123R)
      requires the Company to determine the overall value of the stock award as
      of the date of grant, and to then expense that value over the service
      period over which the stock award becomes exercisable
      (vested).  As a general rule, for time in service based stock
      awards, the Company will immediately expense any stock award or portion
      thereof that is vested upon grant, while expensing the balance on a pro
      rata basis over the remaining vesting term of the stock
      award.





(2)
            Reflects dollar amount expensed
      by the Company during the applicable fiscal year for financial statement
      reporting purposes pursuant to FASB ASC 805.  (FAS 123R)
      requires the Company to determine the overall value of the options as of
      the date of grant, and to then expense that value over the service period
      over which the options becomes exercisable (vested).  As a
      general rule, for time in service based options, the Company will
      immediately expense any option or portion thereof that is vested upon
      grant, while expensing the balance on a pro rata basis over the remaining
      vesting term of the option.





(3)
            The amount shown includes $4,231
      that was earned during the 2009 fiscal year as a result of an extra pay
      period during the year.





(4)
            The amount shown represents a
      $12,560 pay-out for sick leave, an $8,400 automobile allowance, and $432
      in life insurance premiums paid for the named executive
      officer.





(5)
            The amount shown represents
      compensation earned under the 401(k)
  Plan.





(6)
            The amount shown represents the
      following: (a) $67 as the dollar amount recognized for life insurance
      premiums paid for the named executive officer, and (b) $7,970 as
      compensation earned under the 401(k)
  Plan.





(7)
            Mr. Sansone was appointed as our
      Chief Financial Officer on November 5,
  2009.





(8)
            Ms. Kelley was our Chief
      Financial Officer from October 24, 2008 to her resignation on October 30,
      2009.




Grants
of Plan-Based Awards


All
      Other
                                      
                                      
                                      All
      OtherStock
                                      
                                      
                                      Option
                                      
                                      
                                      ExerciseAwards:
                                      
                                      
                                      Awards:
                                      
                                      
                                      or
      Base
                                      
                                      
                                      Grant
      DateEstimated
      Future Payouts Under
                                      
                                      
                                      Estimated
      Future Payouts Under
                                      
                                      
                                      Number
                                      
                                      
                                      Number
      of
                                      
                                      
                                      Price
      of
                                      
                                      
                                      Fair
      ValueNon-Equity
      Incentive Plan Awards
                                      
                                      
                                      Equity
      Incentive Plan Awards
                                      
                                      
                                      of
      Shares
                                      
                                      
                                      Securities
                                      
                                      
                                      Option
                                      
                                      
                                      of
      StockGrant
                                      
                                      Thres-
                                      
                                      
                                      Target
                                      
                                      
                                      Max-
                                      
                                      
                                      Thres-
                                      
                                      
                                      Target
                                      
                                      
                                      Max-
                                      
                                      
                                      of
      Stock
                                      
                                      
                                      Underlying
                                      
                                      
                                      Awards
                                      
                                      
                                      and
      OptionName
                                      
                                      Date
                                      
                                      hold
      ($)
                                      
                                      
                                      ($)
                                      
                                      
                                      imum
      ($)
                                      
                                      
                                      hold
      ($)
                                      
                                      
                                      ($)
                                      
                                      
                                      imum
      ($)
                                      
                                      
                                      or
      Units (#)
                                      
                                      
                                      Options
      (#)
                                      
                                      
                                      ($/Sh)
                                      
                                      
                                      Awards
      (1)Dean
      Marks (2)
                                      
                                      1/9/09
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―$
                                      
                                      
                                      
                                      ―
                                      
                                      
                                      
                                      ―
                                      
                                      
                                      
                                      83,932
                                      
                                      
                                      $
                                      4.675
                                      
                                      
                                      $
                                      24,104Miguel
      de Anquin(2)
                                      
                                      1/9/09
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―$
                                      
                                      
                                      
                                      ―
                                      
                                      
                                      
                                      ―
                                      
                                      
                                      
                                      83,932
                                      
                                      
                                      $
                                      4.675
                                      
                                      
                                      $
                                      24,104Teresa
      Kelley (3)(4)
                                      
                                      1/9/09
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―$
                                      
                                      
                                      
                                      ―
                                      
                                      
                                      
                                      ―
                                      
                                      
                                      
                                      100,000
                                      
                                      
                                      $
                                      4.25
                                      
                                      
                                      $
                                      36,399Teresa
      Kelley (3)(5)
                                      
                                      1/9/09
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―$
                                      
                                      
                                      
                                      ―
                                      
                                      
                                      
                                      ―
                                      
                                      
                                      
                                      250,000
                                      
                                      
                                      $
                                      4.25
                                      
                                      
                                      $
                                      60,706Teresa
      Kelley (3)
                                      
                                      8/28/09
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―$
                                      
                                      
                                      
                                      ―
                                      
                                      
                                      
                                      200
                                      
                                      
                                      
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      740Frank
      Sansone (4)
                                      
                                      11/5/09
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―
                                      
                                      
                                      $
                                      ―$
                                      
                                      
                                      
                                      ―
                                      
                                      
                                      
                                      ―
                                      
                                      
                                      
                                      250,000
                                      
                                      
                                      $
                                      2.90
                                      
                                      
                                      $
                                      9,767







42




(1)
            Reflects
      dollar amount expensed by the Company during the applicable fiscal year
      for financial statement reporting purposes pursuant to FAS
      123R.





(2)
            The
      vesting schedule for these options is as follows: 20% on each of the
      1st,
      2nd,
      3rd,
      4th,
      and 5th
      year anniversary of the grant date.





(3)
            Ms.
      Kelley was our Chief Financial Officer from October 24, 2008 to her
      resignation on October 30, 2009.  Ms. Kelley’s grants expired on
      January 31, 2010.





(4)
            The
      vesting schedule for these options is as follows: 25% on each of the
      1st,
      2nd,
      3rd,
      and 4th
      year anniversary of the grant date.





(5)
            The
      vesting schedule for these options is as follows: 33.33% on each of the
      2nd,
      3rd,
      and 4th
      year anniversary of the grant date.





Employment
Agreements





The
following are summaries of our employment agreements with our current and former
executive officers whose compensation is listed in the Summary Compensation
Table above.





The
Company entered into an Employment Agreement with Frank Sansone on November 5,
2009 in connection with his services as Chief Financial Officer over a four-year
term.  Mr. Sansone’s compensation will consist of an annual base
salary of $180,000 and options granted under the Company’s 2008 Equity Incentive
Plan to purchase an aggregate 250,000 shares of the Company’s common stock,
exercisable at a price equal to the closing price of the Company’s common stock
on the day the Board of Directors approves the option grant.  The
stock options will vest 25% per year for each year of employment from the date
of grant. A sale of over 50% of the Company’s common stock to a third party will
trigger accelerated vesting where the portion that would have vested at the next
annual anniversary of the grant date will vest in full on the date of the
triggering event. The Company agreed to indemnify Mr. Sansone against any claims
arising from his services as Chief Financial Officer unless such claims are due
to his gross negligence or misconduct.  The Company may terminate Mr.
Sansone’s employment during the first 90 days of employment by providing four
days’ written notice or at any time without notice for cause.  After
the first 90 days of employment, the Company may terminate the Employment
Agreement without cause upon a triggering event.  In the event the
Company terminates Mr. Sansone without cause after the first 90 days of
employment, Mr. Sansone is entitled to a severance payment equal to six months
of his annual compensation.  Mr. Sansone agreed not to enter into any
business with operations that compete directly with the Company for a period of
three years after his employment agreement terminates.





The
Company entered into an Employment Agreement with Teresa Kelley on October 24,
2008 for her services as Chief Financial Officer. Ms. Kelley’s annual
compensation is $150,000. She will receive an annual 20% bonus based on her
efforts in helping the Company achieve the following targets: minimum growth
revenue of 80% in the first year of her employment, 80% growth in the second
year, 70% growth in the third year, and 60% growth in the fourth year (each
growth revenue percentage which may be revised by the Company’s Chief Executive
Officer over the term of Ms. Kelley’s office); annual EBITDA and net income in
excess of the prior year’s EBIDTA and net income; net income margins in excess
of 5%; and acquisitions to secure revenue growth, margin growth, and market
share domestically and internationally.  These goals are closely
monitored by the Chief Executive Officer and Board of Directors, and Ms.
Kelley’s efforts will be measured by quarterly and annual performance
evaluations by the Chief Executive Officer and Chief Operating Officer, except
that Ms. Kelley’s efforts at helping the Company acquire other businesses will
be measured quarterly by the Board of Directors, which will review her reports
analyzing potential acquisitions. Ms. Kelley will also receive, for her first
year of employment, 100,000 stock options to purchase the Company’s common
stock, exercisable at a price equal to the closing price of the Company’s common
stock on the day the Board approves the option issuance. Such stock options will
vest 25% per year for each year of employment from the date of issue. For her
second year of employment, Ms. Kelley will receive an additional 125,000 stock
options to purchase the Company’s common stock, exercisable at a price equal to
the closing price of the Company’s common stock on the day the Board approves
the stock issuance. Such stock options will vest 33% per year for each year of
employment from the date of issue. In the event of any sale, merger, acquisition
of over 51% of the Company’s capital stock by a third party, or other change of
control event, any stock options issued to Ms. Kelley under the Employment
Agreement will be fully vested for such year.  Ms. Kelley resigned on
October 31, 2009.





Premier
Power California entered into an Employment Agreement with Dean R. Marks on
August 22, 2008 for his services as its President and Chief Executive Officer.
Mr. Marks’ total annual salary is $180,000, and he is to receive additional
compensation in the form of, and based on, the following: (i) 0.5% of Premier
Power California’s annual earnings before interest, taxes, depreciation, and
amortization (“EBITDA”) in excess of $200,000 if Premier Power California’s
annual EBITDA margin is less than 5%, and (ii) 1.5% of Premier Power
California’s annual EBITDA in excess of $200,000 if Premier Power California’s
annual EBITDA margin is greater than 5%, both forms of additional compensation
of which is due to Mr. Marks within 90 days of Premier Power California’s fiscal
year-end and which payments will be accelerated upon a sale of Premier Power
California, merger involving Premier Power California, or public offering of
Premier Power California’s securities. Mr. Marks is entitled to a severance
payment of $180,000 upon termination by Premier Power California without cause
if such termination occurs between December 31, 2008 and December 31, 2010, and
a severance payment of $90,000 upon termination by Premier Power California
without cause if such termination occurs between December 31, 2010 and the
expiration of the agreement.  The term of the agreement is for five
years. On August 22, 2008, Mr. Marks also entered into a Non-Disclosure and
Non-Competition Agreement with Premier Power California in connection with his
employment.




43




Premier
Power California entered into an Employment Agreement with Miguel de Anquin on
August 22, 2008 for his services as its Executive Vice President of Worldwide
Operations. Mr. de Anquin’s total annual salary is $180,000, and he is to
receive additional compensation in the form of, and based on, the following: (i)
0.5% of Premier Power California’s annual EBITDA in excess of $200,000 if
Premier Power California’s annual EBITDA margin is less than 5%, and (ii) 1.5%
of Premier Power California’s annual EBITDA in excess of $200,000 if Premier
Power California’s annual EBITDA margin is greater than 5%, both forms of
additional compensation of which is due to Mr. de Anquin within 90 days of
Premier Power California’s fiscal year-end and which payments will be
accelerated upon a sale of Premier Power California, merger involving Premier
Power California, or public offering of Premier Power California’s securities.
Mr. de Anquin is entitled to a severance payment of $180,000 upon termination by
Premier Power California without cause if such termination occurs between
December 31, 2008 and December 31, 2010, and a severance payment of $90,000 upon
termination by Premier Power California without cause if such termination occurs
between December 31, 2010 and the expiration of the agreement. The term of the
agreement is for five years. On August 22, 2008, Mr. de Anquin also entered into
a Non-Disclosure and Non-Competition Agreement with Premier Power California in
connection with his employment.




Outstanding
Equity Awards at Fiscal Year-End





Option
      Awards
                                        
                                        Stock
      AwardsName
                                        
                                        Number of
                                          Securities
                                          Underlying
                                          Unexercised
                                          Options
      (#)
                                          Exercisable
                                        
                                        
                                        Number of
                                          Securities
                                          Underlying
                                          Unexercised
                                          Options
      (#)
                                          Unexercisable
                                        
                                        
                                        Equity
                                          Incentive
                                          Plan
                                          Awards:
                                          Number of
                                          Securities
                                          Underlying
                                          Unexercised
                                          Unearned
                                          Options
      (#)
                                        
                                        
                                        Option
                                          Exercise
                                          Price
      ($)
                                        
                                        Option
                                          Expiration
                                          Date
                                        
                                        Number
                                          ofShares
                                          or Units
                                          of Stock
                                          That
                                          HaveNot
                                          Vested
                                          (#)
                                        
                                        
                                        Market
                                          Value
      of
                                          Shares or
                                          Units of
                                          Stock That
                                          Have Not
                                          Vested
      ($)
                                        
                                        
                                        Equity
                                          Incentive
                                          Plan
                                          Awards:
                                          Number of
                                          Unearned
                                          Shares,
                                          Units,or
                                          Other
                                          Rights
                                          That
                                          Have Not
                                          Vested
      (#)
                                        
                                        
                                        Equity
                                          Incentive
                                          Plan Awards:
                                          Market or
                                          Payout
                                          Value
      of
                                          Unearned
                                          Shares, Units,
                                          or Other
                                          Rights That
                                          Have Not
                                          Vested
      (#)Dean
      Marks
                                        
                                        
                                        16,786
                                        (1)
                                        
                                        
                                        67,146
                                        (1)
                                        
                                        
                                        ―
                                        
                                        
                                        $
                                        4.675
                                        
                                        1/9/19
                                        
                                        
                                        ―
                                        
                                        
                                        
                                        ―
                                        
                                        
                                        
                                        ―
                                        
                                        
                                        
                                        ―Miguel
      de Anquin
                                        
                                        
                                        16,786
                                        (1)
                                        
                                        
                                        67,146
                                        (1)
                                        
                                        
                                        ―
                                        
                                        
                                        $
                                        4.675
                                        
                                        1/9/19
                                        
                                        
                                        ―
                                        
                                        
                                        
                                        ―
                                        
                                        
                                        
                                        ―
                                        
                                        
                                        
                                        ―Frank
      Sansone
                                        
                                        
                                        ―
                                        
                                        
                                        
                                        250,000
                                        (2)
                                        
                                        
                                        ―
                                        
                                        
                                        $
                                        2.90
                                        
                                        11/5/19
                                        
                                        
                                        ―
                                        
                                        
                                        
                                        ―
                                        
                                        
                                        
                                        ―
                                        
                                        
                                        
                                        ―





(1)
            20% of this named executive
      officer’s options vest(ed) on January 1, 2010, January 1, 2011, January 1,
      2012, January 1, 2013, and January 1,
  2014.




(2)
            25% of this named executive
      officer’s options vest on November 5, 2010, November 5, 2011, November 5,
      2012, and November 5, 2013.





Director
Compensation





The
following table provides compensation information for our directors during the
fiscal year ended December 31, 2009:





Name
                
                Fees
                  Earned or
                  Paid in Cash
                  ($)
                
                
                Stock
                  Awards
                  ($)(1)
                
                
                Option
                  Awards ($)
                
                
                Non-Equity
                  Incentive Plan
                  Compensation ($)
                
                
                Non-Qualified
                  Deferred
                  Compensation
                  Earnings ($)
                
                
                All Other
                  Compensation
                  ($)
                
                
                Total
                  ($)Dean
      Marks (2)
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―Miguel
      de Anquin (2)
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―Kevin
      Murray
                
                $
                23,750
                
                
                $
                58,333
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                82,083Robert
      Medearis
                
                $
                32,000
                
                
                $
                58,333
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                90,333Tommy
      Ross
                
                $
                26,250
                
                
                $
                41,438
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                ―
                
                
                $
                67,688





(1)
            Reflects
      dollar amount expensed by the Company during the applicable fiscal year
      for financial statement reporting purposes pursuant to FAS
      123R.  FAS 123R requires the Company to determine the overall
      value of the stock award as of the date of grant, and to then expense that
      value over the service period over which the stock award becomes
      exercisable (vested).  As a general rule, for time in service
      based stock awards, the Company will immediately expense any stock award
      or portion thereof that is vested upon grant, while expensing the balance
      on a pro rata basis over the remaining vesting term of the stock
      award.




44





(2)
            This
      individual’s compensation as a director is reflected in the Summary
      Compensation Table above.





On
December 19, 2008, the Company entered into an Amended and Restated Agreement to
Serve as Member of the Board of Directors with Kevin Murray for his services as
director.  Pursuant to the terms of the agreement, Mr. Murray agreed
to serve on the Board until October 15, 2011, such term being subject to
re-election at our subsequent annual meeting of shareholders.  Mr.
Murray is required to attend at least two Board meetings via teleconference and
at least two Board meetings in person per year, and he will be compensated for
his services to the Board with $1,250 for each Board meeting he attends via
teleconference and $2,500 for each Board meeting he attends in
person.  Mr. Murray will also receive 50,000 shares of the our common
stock according to the following schedule: (i) 16,500 common stock shares after
the first year of service on the Board, which shares will be issued to Mr.
Murray even if the our shareholders fail to re-elect Mr. Murray at the first
annual meeting of shareholders following Mr. Murray’s election to the Board,
(ii) 16,500 common stock shares after the second year of service on the Board,
and (iii) 17,000 common stock shares after the third year of service on the
Board.





On
December 19, 2008, the Company entered into an Amended and Restated
Agreement to Serve as Member of the Board of Directors with Robert Medearis for
his services as a director.  Pursuant to the terms of the agreement,
Mr. Medearis agreed to serve on the Board until October 15, 2011, such term
being subject to his re-election at the our subsequent annual meeting of
shareholders.  Mr. Medearis is required to attend at least two Board
meetings via teleconference and at least two Board meetings in person per
year.  The agreement further provides that Andrew Hargadon may attend
up to 50% of the our Board meetings as Mr. Medearis’ designee, provided,
however, that Mr. Medearis agreed that he would not delegate to Mr. Hargadon,
and that he would personally perform, any and all of his business managerial
duties and obligations as a director for the Company, including but not limited
to any director voting decisions regarding the Company and its
business.  Mr. Medearis will be compensated for his services with
$1,250 for each Board meeting he attends via teleconference and $2,500 for each
Board meeting he attends in person.  Mr. Medearis will also receive
50,000 shares of our common stock according to the following schedule: (i)
16,500 common stock shares after the first year of service on the Board, which
shares will be issued to Mr. Medearis even if our shareholders fail to re-elect
Mr. Medearis to the Board at the first annual meeting of shareholders following
Mr. Medearis’ election to the Board, (ii) 16,500 common stock shares after
the second year of service on the Board, and (iii) 17,000 common stock shares
after the third year of service on the Board.




On March
23, 2009, the Company entered into a Director Agreement with Tommy Ross for his
services as a director.  Pursuant to the terms of the agreement, Mr.
Ross agreed to serve on the Board until March 11, 2011, such term being subject
to re-election at our subsequent annual meeting of shareholders.  Mr.
Ross is required to attend at least two Board meetings via teleconference and at
least two Board meetings in person per year, and he will be compensated for his
services to the Board with $1,250 for each Board meeting he attends via
teleconference and $2,500 for each Board meeting he attends in
person.  Mr. Ross will also receive 50,000 shares of our common stock
according to the following schedule: (i) 16,500 common stock shares after the
first year of service on the Board, which shares will be issued to Mr. Ross even
if our shareholders fail to re-elect Mr. Ross at the first annual meeting of
shareholders following Mr. Ross’ election to the Board, (ii) 16,500 common stock
shares after the second year of service on the Board, and (iii) 17,000 common
stock shares after the third year of service on the Board.  We are
required to maintain a Directors’ Errors and Omissions insurance policy insuring
the entire Board, including Mr. Ross, for a policy amount of no less than
$2,000,000, and in the event the policy coverage is insufficient to cover losses
occasioned by actions of the Board, we also agreed to indemnify and hold Mr.
Ross harmless from and against any loss, damages, costs, expenses, liabilities,
and or causes of action that may arise as a result of his dutiful and
responsible performance of his duties as a Board member.





Item
12.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.




Securities
Authorized for Issuance under Equity Compensation Plans or Individual
Compensation Arrangements





Please
see the section titled “Securities Authorized for Issuance under Equity
Compensation Plans” under Item 5 above.





Security
Ownership of Certain Beneficial Owners and Management




The
following table sets forth information regarding the beneficial ownership of our
common stock as of March 10, 2010, for each of the following
persons:




•
            each of our directors and each of
      the named executive
officers;





•
            all directors and named executive
      officers as a group; and





•
            each person who is known by us to
      own beneficially 5% or more of our common
  stock.




45




Beneficial
ownership is determined in accordance with the rules of the SEC. Unless
otherwise indicated in the table, the persons and entities named in the table
have sole voting and sole investment power with respect to the shares set forth
opposite the stockholder’s name. Unless otherwise indicated, the address of each
beneficial owner listed below is 4961 Windplay Drive, Suite 100, El Dorado
Hills, California 95762. The percentage of class beneficially owned set forth
below is based on 29,083,250 shares of common stock outstanding on March 10,
2010.





Name and Position
                        
                        Number of Shares of
                          Common Stock
                          Beneficially Owned (1)
                        
                        
                        % of Shares of Common
                          Stock Beneficially
                          Owned (1)(2)Dean
      R. Marks,
                          Chairman
      of the Board, President, and Chief Executive Officer
                        
                        
                        11,256,601
                        (3)
                        
                        
                        38.7
                        %Miguel
      de Anquin,
                          Chief
      Operating Officer, Corporate Secretary, and Director
                        
                        
                        6,761,424
                        (4)
                        
                        
                        23.2
                        %Frank
      Sansone,
                          Chief
      Financial Officer
                        
                        
                        500
                        
                        
                        
                        *Kevin
      Murray,
                          Director
                        
                        
                        16,500
                        
                        
                        
                        *Robert
      Medearis,
                          Director
                        
                        
                        16,500
                        
                        
                        
                        *Tommy
      Ross,
                          Director
                        
                        
                        2,690
                        (5)
                        
                        
                        *Teresa
      Kelley,
                          Former
      Chief Financial Officer (6)
                        
                        
                        200
                        
                        
                        
                        *5%
      Stockholders:Bjorn
      Persson
                        
                        
                        2,560,699
                        (7)
                        
                        
                        8.8
                        %Genesis
      Capital Advisors, LLC (8)
                        
                        
                        1,580,598
                        
                        
                        
                        5.4
                        %Vision
      Opportunity Master Fund, Ltd. (9)
                        
                        
                        2,905,022
                        (10)
                        
                        
                        9.99
                        %(10)All Executive Officers and
      Directors as a Group (6 persons)
                        
                        
                        18,054,215
                        
                        
                        
                        62.0
                        %





* Less
than 1%





(1)
            Under Rule 13d-3, a beneficial
      owner of a security includes any person who, directly or indirectly,
      through any contract, arrangement, understanding, relationship, or
      otherwise has or shares: (i) voting power, which includes the power to
      vote, or to direct the voting of shares; and (ii) investment power, which
      includes the power to dispose or direct the disposition of shares. Certain
      shares may be deemed to be beneficially owned by more than one person (if,
      for example, persons share the power to vote or the power to dispose of
      the shares). In addition, shares are deemed to be beneficially owned by a
      person if the person has the right to acquire the shares (for example,
      upon exercise of an option) within 60 days of the date as of which the
      information is provided. In computing the percentage ownership of any
      person, the amount of shares outstanding is deemed to include the amount
      of shares beneficially owned by such person (and only such person) by
      reason of these acquisition rights. As a result, the percentage of
      outstanding shares of any person as shown in this table does not
      necessarily reflect the person's actual ownership or voting power with
      respect to the number of shares of common stock actually
      outstanding.





(2)
            Pursuant to the terms of the 2008
      share exchange, we issued 24,218,750 shares of common stock, equal to
      approximately 93.1% of our issued and outstanding common stock as of the
      closing date of the 2008 share exchange. After the issuance of shares in
      connection with the closing of the 2008 share exchange, there were
      approximately 26,018,750 issued and outstanding shares of our common
      stock. Percentage totals may vary slightly due to rounding. Also, in
      connection with the closing of the $7 Million Financing, we issued a total
      of 3,500,000 units to one accredited investor, each unit consisting of one
      share of our Series A Preferred Stock, one-half of one Series A Warrant,
      and one-half of one Series B Warrant. Each one share of Series A Preferred
      Stock will be convertible into one share of our common stock.   Each
      Series A Warrant and Series B Warrant entitled the holder to purchase one
      share of our common stock at an exercise price of $2.50 and $3.00 per
      share, respectively, of our common stock. On June 16, 2009, all of the
      Series A Warrants and Series B Warrants held by this holder were cancelled
      by the Company.





(3)
            This number includes 16,786
      shares of common stock issuable upon exercise of stock options that were
      granted to this stockholder on January 9, 2009, 200 shares of common stock
      held by the stockholder’s wife, and 5,400 shares of common stock issuable
      upon exercise of stock options that were granted to this stockholder’s
      wife on January 9, 2009.





(4)
            This number includes 16,786
      shares of common stock issuable upon exercise of stock options that were
      granted to this stockholder on January 9,
  2009.




46





(5)
            This number includes an aggregate
      1,270 shares of common stock held by the shareholder’s children, and 370
      shares of common stock held in the stockholder’s IRA
      account.




(6)
            The address for this stockholder
      is 4135 Meadow Wood Drive, El Dorado Hills, CA
    95762.




(7)
            This number includes 13,573
      shares of common stock issuable upon exercise of stock options that were
      granted to this stockholder on January 9,
  2009.





(8)
            The address for this stockholder
      is 15760 Ventura Blvd., Suite 1550, Encino, CA 91436. Ronald Andrikian and
      Charles Gilreath, as the members of this stockholder, have shared
      dispositive and voting power over these securities and may be deemed to be
      the beneficial owner of these
securities.




(9)
            The address for this stockholder
      is c/o Ogier Fiduciary Services (Cayman) Limited, 89 Nexus Way, Camana
      Bay, Grand Cayman, KY1-9007, Cayman Islands. Adam Benowitz, as the
      managing member of Vision Capital Advisors, LLC, the investment advisor to
      this stockholder, has dispositive and voting power over these securities
      and may be deemed to be the beneficial owner of these
      securities.





(10)
            This number includes 2,178,000
      shares of common stock and 471,359 shares of common stock issuable
      upon conversion of 471,359 shares of our Series A Preferred Stock, which
      are presently convertible. This number does not include (i) 3,028,641
      shares of common stock underlying its shares of Series A Preferred Stock,
      (ii) 2,800,000 shares of common stock underlying its shares of Series B
      Preferred Stock, or (iii) 1,600,000 shares of common stock underlying an
      option to purchase such shares because each of these securities held by
      the stockholder contains a restriction on conversion or exercise, as the
      case may be, limiting such holder’s ability to convert or exercise to the
      extent that such conversion or exercise would cause the beneficial
      ownership of the holder, together with its affiliates, to exceed 9.99% of
      the number of shares of common stock outstanding immediately after giving
      effect to the issuance of shares of common stock as a result of a
      conversion or exercise. The stockholder may waive this limitation upon 61
      days’ notice to the Company.  As of March 24, 2010, however, the
      Company has not received any such
notice.





Item
13.  Certain Relationships and Related Transactions, and Director
Independence.





Transactions
with Related Persons





On June
16, 2009, we cancelled 3,500,000 warrants held by Vision Opportunity Master
Fund, Ltd., a shareholder of the Company, pursuant to the terms of a Securities
Purchase Agreement we entered into with Vision under which we sold Vision
2,800,000 shares of our Series B Convertible Preferred Stock. This cancellation
resulted in the elimination of all our issued and outstanding warrants. We
recorded $1,435,076 as a gain on share settled debt from this
cancellation.





Director
Independence




Our board
of directors has determined that it currently has 3 members who
qualify as “independent” as the term is used in Section 803A and Rule
10A-3(b)(ii) promulgated thereunder of the Exchange Act and the listing
standards of the Nasdaq Capital Market.  The independent directors are
Kevin Murray, Robert Medearis, and Tommy Ross.





Item
14.  Principal Accounting Fees and Services.





Macias
Gini & O’Connell LLP served as our independent registered public accounting
firm for our fiscal years ended December 31, 2009 and 2008.  The
following table shows the fees that were billed for audit and other services
provided by this firm during the 2009 and 2008 fiscal years:




Fiscal Year Ended December 31,2009
                            
                            
                            2008Audit
      Fees (1)
                            
                            $
                            200,266
                            
                            
                            $
                            185,000Audit-Related
      Fees (2)
                            
                            
                            156,456
                            
                            
                            
                            214,000Tax
      Fees (3)
                            
                            
                            ―
                            
                            
                            
                            ―All
      Other Fees (4)
                            
                            
                            ―
                            
                            
                            
                            ―Total
                            
                            $
                            356,722
                            
                            
                            $
                            399,000




47




(1)
            Audit
      Fees– This category
      includes the audit of our annual financial statements, review of financial
      statements included in our Quarterly Reports on Form 10-Q, and services
      that are normally provided by independent auditors in connection with
      statutory and regulatory filings or the engagement for fiscal
      years.  This category also includes advice on audit and
      accounting matters that arose during, or as a result of, the audit or the
      review of interim financial
statements.





(2)
            Audit-Related
      Fees– This category
      consists of assurance and related services by our independent auditors
      that are reasonably related to the performance of the audit or review of
      our financial statements and are not reported above under "Audit
      Fees."  The services for the fees disclosed under this category
      include consultation regarding our correspondence with the
      SEC.




(3)
            Tax
      Fees– This category
      consists of professional services rendered by our independent auditors for
      tax compliance and tax advice.  The services for the fees
      disclosed under this category include tax return preparation and technical
      tax advice.





(4)
            All Other
      Fees– This category
      consists of fees for other miscellaneous
  items.




Pre-Approval
Policies and Procedures of the Audit Committee





Our audit
committee approves the engagement of our independent auditors and is also
required to pre-approve all audit and non-audit expenses.  During the
fiscal year ended December 31, 2009, all of our audit and non-audit expenses
were approved by our audit committee.





48





PART
IV





Item
15.  Exhibits, Financial Statement Schedules.





Financial
Statements; Schedules





Our
consolidated financial statements for the years ended December 31, 2009 and
2008 begin on page F-1 of this annual report.  We are not required to
file any financial statement schedules.





Exhibit
Table





Exhibit
                  Number
                
                Description2.1
                
                Share
      Exchange Agreement by and among the Registrant, its majority stockholder,
      Premier Power Renewable Energy, Inc., and its stockholders, dated
      September 9, 2008 (3)2.2
                
                Share Exchange Agreement between
      the Registrant, Rupinvest Sarl, and Esdras Ltd., dated June 3, 2009
      (15)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 (7)3.7
                
                Amendment
      to Bylaws (9)3.8
                
                Certificate
      of Designation of Preferences, Rights and Limitations of Series B
      Convertible Preferred Stock, filed with the Delaware Secretary of State on
      June 12, 2009 (16)10.1
                
                Master
      Commercial Solar Terms and Conditions of Schüco USA, L.P.
    (3)10.2
                
                Authorized
      Dealer Agreement between Premier Power Renewable Energy, Inc. and SunPower
      Corporation, dated June 20, 2008 (3)10.3
                
                Employment
      Agreement between Premier Power Renewable Energy, Inc. and Dean R. Marks,
      dated August 22, 2008 (3)10.4
                
                Employment
      Agreement between Premier Power Renewable Energy, Inc. and Miguel de
      Anquin, dated August 22, 2008 (3)10.5
                
                Premier
      Management Consulting Agreement between Genesis Capital Advisors, LLC and
      Premier Power Renewable Energy, Inc., dated November 13, 2007
      (3)10.6
                
                Engagement
      Agreement between GT Securities and Genesis Capital Advisors, LLC with and
      on behalf of Premier Power Renewable Energy, Inc., dated November 13, 2007
      (3)10.7
                
                Form
      of Securities Purchase Agreement
(3)





49





10.8
              
              Form
      of Registration Rights Agreement (3)10.9
              
              Form
      of Series A Common Stock Purchase Warrant (3)10.10
              
              Form
      of Series B Common Stock Purchase Warrant (3)10.11
              
              Form
      of Lock-up Agreement (3)10.12
              
              Purchase
      and Sale Agreement between Harry’s Trucking, Inc. and Haris Tajyar and
      Omar Tajyar, dated September 9, 2008 (3)10.13
              
              Guaranty
      of Payment by Premier Power Renewable Energy, Inc. in favor of Guaranty
      Bank, dated September 9, 2008 (3)10.14
              
              Employment
      Agreement between Premier Power Renewable Energy, Inc. and Teresa Kelley,
      date October 24, 2008 (4)10.15
              
              First
      Amendment to Registration Rights Agreement between Premier Power Renewable
      Energy, Inc., Genesis Capital Advisors, LLC, and Vision Opportunity Master
      Fund, Ltd., dated October 31, 2008 (5)10.16
              
              Amended
      and Restated Agreement to Serve as Member of the Board of Directors
      between Premier Power Renewable Energy, Inc. and Kevin Murray, dated
      December 19, 2008 (8)10.17
              
              Amended
      and Restated Agreement to Serve as Member of the Board of Directors
      between Premier Power Renewable Energy, Inc. and Robert Medearis, dated
      December 19, 2008 (8)10.18
              
              Voting
      Agreement between Dean Marks and Miguel de Anquin, signed June 16, 2008
      (and addendum) (10)10.19
              
              Voting
      Agreement between Dean Marks and Miguel de Anquin, dated January 21, 2009
      (10)10.20
              
              Voting
      Agreement between Dean Marks, Sarilee Marks, and Miguel de Anquin, dated
      January 21, 2009 (10)10.21
              
              Second
      Amendment to Registration Rights Agreement between Premier Power Renewable
      Energy, Inc., Genesis Capital Advisors, LLC, and Vision Opportunity Master
      Fund, Ltd., dated May 1, 2009 (14)10.22
              
              Securities
      Purchase Agreement between the Registrant and Vision Opportunity Master
      Fund, Ltd., dated June 16, 2009 (16)10.23
              
              Waiver
      of Anti-Dilution Rights of Series A Preferred Stock by Vision Opportunity
      Master Fund, Ltd., dated June 16, 2009 (16)10.24
              
              Loan
      Agreement (Asset Based) between Umpqua Bank and Premier Power Renewable
      Energy, Inc., dated July 13, 2009 (17)10.25
              
              Promissory
      Note (Line of Credit Note) between Umpqua Bank and Premier Power Renewable
      Energy, Inc., dated July 13, 2009 (17)10.26
              
              Form
      of Modification to Promissory Note (Line of Credit Note) and Loan
      Agreement between Umpqua Bank and Premier Power Renewable Energy, Inc.
      (17)10.27
              
              Commercial
      Security Agreement between Umpqua Bank and Premier Power Renewable Energy,
      Inc., dated July 13, 2009 (17)10.28
              
              Commercial
      Security Agreement (Premier Power California) between Umpqua Bank and
      Premier Power Renewable Energy, Inc., dated July 13, 2009
    (17)10.29
              
              Rider
      to Security Agreement Executed by Non-Borrower Grantor (Premier Power
      California) between Umpqua Bank and Premier Power Renewable Energy, Inc.,
      dated July 13, 2009 (17)10.30
              
              Commercial
      Security Agreement (Bright Futures Technologies, LLC) between Umpqua Bank
      and Bright Futures Technologies, LLC, dated July 13, 2009
    (17)





50





10.31
              
              Rider
      to Security Agreement Executed by Non-Borrower Grantor (Bright Futures
      Technologies, LLC) between Umpqua Bank and Bright Futures Technologies,
      LLC, dated July 13, 2009 (17)10.32
              
              Commercial
      Security Agreement (Premier Power, Sociedad Limitada) between Umpqua Bank
      and Premier Power, Sociedad Limitada, dated July 13, 2009
(17)10.33
              
              Rider
      to Security Agreement Executed by Non-Borrower Grantor (Premier Power,
      Sociedad Limitada) between Umpqua Bank and Premier Power, Sociedad
      Limitada, dated July 13, 2009 (17)10.34
              
              Agreement
      to Provide Insurance between Umpqua Bank and Premier Power Renewable
      Energy, Inc., dated July 13, 2009 (17)10.35
              
              Disbursement
      Request and Authorization between Umpqua Bank and Premier Power Renewable
      Energy, Inc., dated July 13, 2009 (17)10.36
              
              Landlord’s
      Release and Waiver among Umpqua Bank, Premier Power Renewable Energy, Inc.
      and Wagner Family ILP, dated July 13, 2009 (17)10.37
              
              Landlord’s
      Release and Waiver among Umpqua Bank, Premier Power Renewable Energy,
      Inc., and MKJ – McCalla Investments, LLC dated July 13, 2009
      (17)10.38
              
              Landlord’s
      Release and Waiver  among Umpqua Bank, Premier Power Renewable
      Energy, Inc. and 33 Partners, Inc., dated July 13, 2009
    (17)10.39
              
              Escrow
      Agreement between the Registrant, Rupinvest SARL, Esdras Ltd., and Capita
      Trust Company Limited, dated July 9, 2009 (18)10.40
              
              Escrow
      Agreement Amendment No. 1 between the Registrant, Rupinvest SARL, Esdras
      Ltd., and Capita Trust Company Limited, dated July 22, 2009
      (19)10.41
              
              Waiver
      and Amendment between the Registrant, Rupinvest SARL, Esdras Ltd., and
      Capita Trust Company Limited, dated July 30, 2009 (20)10.42
              
              Employment
      Agreement between Premier Power Renewable Energy, Inc. and Frank Sansone,
      dated November 5, 2009 (21)14.1
              
              Code
      of Business Conduct and Ethics (6)21.1
              
              List
      of Subsidiaries (3)31.1
              
              Section
      302 Certificate of Chief Executive Officer *31.2
              
              Section
      302 Certificate of Chief Financial Officer *32.1
              
              Section
      906 Certificate of Chief Executive Officer *32.2
              
              Section
      906 Certificate of 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.





(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 October 30, 2008
      as an exhibit to our Current Report on Form 8-K, and incorporated herein
      by reference.





(5)
            Filed
      on November 6, 2008 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.





(6)
            Filed on November 7, 2008 as an
      exhibit to our Registration Statement on Form S-1, and incorporated herein
      by reference.





51





(7)
            Filed on November 26, 2008 as an
      exhibit to our Current Report on Form 8-K, and incorporated herein by
      reference.





(8)
            Filed
      on December 29, 2008 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.





(9)
            Filed on January 16, 2009 as an
      exhibit to our Current Report on Form 8-K, and incorporated herein by
      reference.





(10)
            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.





(11)
            Filed on March 12, 2009 as an
      exhibit to our Current Report on Form 8-K, and incorporated herein by
      reference.





(12)
            Filed on March 24, 2009 as an
      exhibit to our Current Report on Form 8-K, and incorporated herein by
      reference.





(13)
            Filed on March 31, 2009 as an
      exhibit to our Annual Report on Form 10-K, and incorporated herein by
      reference.





(14)
            Filed
      on May 4, 2009 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.





(15)
            Filed
      on June 8, 2009 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.





(16)
            Filed
      on June 18, 2009 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.





(17)
            Filed
      on July 13, 2009 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.





(18)
            Filed
      on July 15, 2009 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.





(19)
            Filed
      on July 23, 2009 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.





(20)
            Filed
      on August 5, 2009 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.





(21)
            Filed
      on November 5, 2009 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.





52





SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





PREMIER
      POWER RENEWABLE ENERGY, INC./s/ Dean R. MarksDean
      R. Marks, Chief Executive Officer and PresidentDate:
      May 3, 2010





Pursuant
to the requirements of the Securities Exchange of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.





NAME
                  
                  TITLE
                  
                  DATE/s/ Dean R. Marks
                  
                  Chairman
      of the Board, Chief Executive Officer, and
      President (PrincipalExecutive Officer)
                  
                  May
      3, 2010Dean
      R. Marks/s/ Miguel de Anquin
                  
                  Chief
      Operating Officer and Director
                  
                  May
      3, 2010Miguel
      de Anquin/s/ Frank J. Sansone
                  
                  Chief
      Financial Officer (Principal Financial and Accounting
      Officer)
                  
                  May
      3, 2010Frank
      J. Sansone/s/Tommy
      Ross
                  
                  Director
                  
                  May
      3, 2010Tommy
      Ross





53