UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
(Mark One)

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

For the fiscal year ended: December 31, 2008
 
o  TRANSITION REPORT UNDER 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.
(Name of small business issuer in its charter)

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

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

(916) 939-0400
 (Registrant’s telephone number)

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o 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. o 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  o 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. o

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

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

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:  The registrant’s common stock had no active trading market until after its most recently completed second fiscal quarter.

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.  o Yes  o 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:  26,048,750 shares of common stock as of March 30, 2009.

DOCUMENTS INCORPORATED BY REFERENCE

None

 
TABLE OF CONTENTS
 
 
Page No.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
2
   
PART I
  
   
Item 1. Business
3
   
Item 1A. Risk Factors
6
   
Item 2. Properties
17
   
Item 3. Legal Proceedings
18
   
Item 4. Submission of Matters to a Vote of Security Holders
18
   
PART II
 
   
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
19
   
Item 6. Selected Financial Data
20
   
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
20
   
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
24
   
Item 8. Financial Statements and Supplementary Data
24
   
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
25
   
Item 9A. Controls and Procedures
25
   
Item 9B. Other Information
26
   
PART III
  
   
Item 10. Directors, Executive Officers and Corporate Governance
27
   
Item 11. Executive Compensation
29
   
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
32
   
Item 13. Certain Relationships and Related Transactions, and Director Independence
33
   
Item 14. Principal Accounting Fees and Services
33
   
PART IV
  
   
Item 15. Exhibits, Financial Statement Schedules
35
   
SIGNATURES
39

 
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, 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.

2
 
PART I
  
ITEM 1.
BUSINESS

Overview

We are a developer, designer, and integrator of solar energy solutions for residential, commercial, and industrial customers in North America and Spain through our wholly owned subsidiary Premier Power Renewable Energy, Inc., a California corporation (“Premier Power California”), and Premier Power California’s two wholly owned subsidiaries, Bright Future Technologies, LLC, a Nevada limited liability company (“Bright Future”) and Premier Power Sociedad Limitada, a limited liability company formed in Spain (“Premier Power Spain”). We use solar components from the industry’s leading suppliers and manufacturers such as General Electric (“GE”), Sharp, Fronius, Wattsun, SMA, Satcon, Xantrex, Schuco and SunPower Corporation. Our clients 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.

Corporate History

We were originally incorporated as “Harry’s Trucking, Inc.” in Delaware on August 31, 2006 and had business operations as a third-party logistics provider for supply chain management through a wholly owned subsidiary, “Harry’s Trucking, LLC,” which was formed on April 2, 2004 as a limited liability company in California. In connection with the closing of the share exchange transaction discussed more fully below, we sold 100% of our interest in Harry’s Trucking, LLC to Haris Tajyar and Omar Tajyar. Effective September 5, 2008, we changed our name to “Premier Power Renewable Energy, Inc.” On September 9, 2008, we consummated a share exchange transaction discussed more fully below, and, as a result, we now operate through our subsidiaries as a developer, designer, and integrator of solar energy solutions.

Share Exchange

On September 9, 2008 (the “Closing Date”), we closed a share exchange transaction (the “Closing”) under a Share Exchange Agreement (the “Exchange Agreement”) entered into by and among the Company, our majority stockholder, Premier Power California, and the stockholders of Premier Power California, consisting of four individuals and one entity, who, immediately prior to the Closing, collectively held 100% of Premier Power California’s issued and outstanding share capital (the “PPG Owners”). Hereinafter, this share exchange transaction is described as the “Share Exchange.” We completed the acquisition of all of the equity interests of Premier Power California held by the PPG Owners through the issuance of 24,218,750 shares of our common stock, par value $0.0001 per share (“Common Stock”) to the PPG Owners. Immediately prior to the Exchange Agreement transaction and taking into account the cancellation of 25,448,000 shares of our common stock held by Vision Opportunity Master Fund, Ltd. (“Vision”) concurrent with the Closing, we had 1,800,000 shares of common stock issued and outstanding. Immediately after the issuance of the shares to the PPG Owners, we had 26,018,750 shares of common stock issued and outstanding.

As a result of the Share Exchange, the PPG Owners became our controlling stockholders, and Premier Power California became our wholly owned subsidiary. In connection with Premier Power California becoming our wholly owned subsidiary, we acquired the business and operations of Premier Power California, and Premier Power California’s wholly owned subsidiaries, Bright Future and Premier Power Spain, became our indirect wholly owned subsidiaries.

Principal Products and Services

Premier Power California’s main business is the installation of solar energy systems and all related components for use by residential homeowners, commercial and industrial enterprises, municipalities, and other solar energy providers.

We also provide after-market maintenance services for solar energy systems such as cleaning, and we design the manner in which solar energy systems are installed.  About 5% of the racking and installation systems for the solar energy systems we install are manufactured by the Company, and about 95% are manufactured by our solar module suppliers.

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 manufactures and suppliers. We have also offered direct power purchase agreement programs through our relationships with Samsung and GE.

Market and Industry Overview

According to the Energy Information Administration (“EIA”), a section of the United States Department of Energy, energy markets are seeing dramatic use demands and price increases. In fact the EIA’s outlook in 2008 was that global energy consumption would increase by 50% from 2005 to 2030. 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.
 
3
 
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. 137 countries have voluntarily ratified the Kyoto Protocol and are required to reduce greenhouse gas emissions to target levels. The U.S. has the Renewable Portfolio Standard, which requires the purchase of a certain amount of power from renewable sources.
 
The demand for viable alternate sources of fuel for electric power generation in order to address the increasing demand for electricity coupled with government regulations and incentive programs in countries such as Germany, Japan, Spain, and the U.S. that encourage more rapid development of, and the adoption by businesses and individuals of, solar energy power systems have accelerated the growth of the solar energy industry.

We believe that solar energy is one of the most direct and unlimited alternate energy sources. Our beliefs have been supported by various studies, including a study titled "Review of Solutions to Global Warming, Air Pollution, and Energy Security" by Mark Z. Jacobson, a professor of civil and environment engineering at Stanford University, published in “Energy & Environment Science,” that found solar energy to be a top alternative energy solution. Solar energy is the underlying energy source for renewable fuel sources, including biomass fuels and hydroelectric energy. By extracting energy directly from the sun and converting it into an immediately usable form, either as heat or electricity, intermediate steps normally involved in converting fuel to electric power are eliminated. Solar energy can be converted into usable forms of energy either through the photovoltaic effect (generating electricity from photons) or by generating heat (solar thermal energy). Solar thermal systems include traditional domestic hot water collectors (“DHW”), swimming pool collectors, and high temperature thermal collectors (used to generate electricity in central generating systems). DHW thermal systems are typically distributed on rooftops to generate heat for the building on which they are situated. High temperature thermal collectors typically use concentrating mirror systems and are located in remote sites.

The Utility Solar Assessment (USA) Study, produced by clean-tech research and publishing firm Clean Edge and green-economy nonprofit Co-op America, provides a comprehensive roadmap for utilities, solar companies, and regulators to enable solar to reach 10% of all U.S. electricity generation by 2025.  The USA Study found that solar power offers a variety of advantages over other sources of power, including an absence of the need for fossil fuel, environmental cleanliness, location-based energy production, greater efficiency during peak demand periods, high reliability, and modularity:
 
·
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.
 
4
 
Competition

Major Domestic Competitors

Premier Power California is active in the North American and international markets and has a very limited number of direct competitors that are concurrently active in both of those markets. SunPower Corporation is one such competitor. Further, in the U.S., the solar design and integration market is highly fragmented, and we face direct competition in these markets from a number of smaller local installers within many U.S. cities. In certain U.S. cities and regions such as Los Angeles, the San Francisco Bay Area, and California’s Central Valley, Premier Power California experiences intermittent competition from regional installers such as Borrego Solar, Akeena Solar, SPG, and Solar City. Based on Premier Power California’s geographic diversification, buying power and unique installation methods, the effects of any one installer on Premier Power California are limited but growing. In particular, among the commercial grade opportunities, there are only a few companies with the level of experience Premier Power California possesses. Only a few competitors qualify under larger scale “Request for Proposal” (“RFP”) projects, and therefore the pool of competitors on many mid-size commercial installations is limited. There are a greater number of competitors in the small business and residential markets. Premier Power California seeks to distinguish itself from the competition by marketing its depth of experience, complex engineering and design capabilities, customer satisfaction and its “on-time” and “on-budget” installations.

Major Spanish Competitors

In the Spanish market, Premier Power Spain faces competition from Acciona and Tudela Solar, among other companies. However, most of the competition in Spain results from companies being accustomed to building large-scale solar farms, which have proliferated commensurate with the national feed-in tariffs. Premier Power Spain’s business is unique because it is not dependent on the large-scale solar farm subsidies or feeding tariffs, and sets itself apart from the large scale solar farm developers. 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. Premier Power Spain is focused on the smaller commercial roof top installation, which has greater design and installation challenges, and has developed and secured exclusivity on various components of its ballast mount roof system that reduces the cost and time to complete installations.

Principal Suppliers

The components used in our solar energy systems consist of solar modules, inverters, racking, wire, hardware, monitoring equipment, and electrical equipment. Premier Power California and Premier Power Spain purchases these components from leading solar energy product suppliers including Sharp, SunPower Corporation, GE, Schüco USA, L.P. (“Schüco”), Kyocera, Fronius, SMA, and Watsun. In particular, Sharp, SunPower Corporation, and GE account for over 80% of our purchases of solar panels.

Premier Power California constantly evaluates 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.

Customers
 
In 2008, our largest customers were Solar Power Partners, which represented 18% of our total sales, and Sutter Home and Otis, each representing 12% of our total sales.    For the year ended December 31, 2008, 84% of our revenue was derived from sales to commercial and industrial customers, and 16% of our revenue was derived from sales to residential customers.  One customer accounted for 16% of the Company’s revenues in 2007.  For the fiscal year ended December 31, 2007, 57% of our revenue was derived from sales to commercial and industrial customers and 43% of our revenue was derived from sales to residential customers.

In addition to our residential customers, our commercial and industrial customers have included PG&E, Sierra Pacific Power Company, AT&T, Princeton University, Millennium Sports Club, KB Homes, and General Electric. Our agricultural customers have included Shafer Vineyards, Silverado Vineyards, Chateau Montelena, St. Supery, Spottswoode, Larkmead Vineyards, Madroña Vineyards, Redwood Ranch & Vineyards, Nicol Vineyards, L’Aventure Vineyards, Saxum Vineyards, Sierra Vista Vineyards, Domain de la Terre Rouge (Easton) Vineyards, Chateau Chapellet, and KT Winco.

Intellectual Properties and Licenses

Premier Power California has applied with the U.S. Patent and Trademark Office for trademark protection for the brand names “Premier Power” and “Bright Futures” and its sales slogan, “Your Solar Electricity Specialist.”  Applications for these trademarks are currently pending.
 
Government Approval and Regulation

All products resold by Premier Power California are guaranteed by the manufacturer to have passed all required government approval and regulation requirements.  Some of the electrical services provided by Premier Power California are regulated and require licensing.  The installations of electrical components that are connected to the electric meter require a C10 license in California and C2 license in Nevada.  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.  Premier Power California possesses and maintains all the necessary licenses required for the services it provides.  Premier Power California 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

Premier Power California is 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.

Research and Development

Premier Power California employs best practices in its design and installation of systems. Dean R. Marks, our President and Chief Executive Officer, first become a member of the California Solar Energy Industry Association (CALSEIA) in 1984, and his experience has been key in the development of many innovative solar solutions. Premier Power California leveraged its research and development capability to 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. Premier Power California’s lead engineer, Ken Baker, has been an electric engineer for over 30 years, including 10 years of experience in renewable energy. The research and development team at Premier Power California constantly looks for new and innovative ways to address space constraints, time and cost saving designs that will increase efficiencies and drive added revenue.
 
Employees

As of March 31, 2009, we had approximately 85 employees, all of which are full-time employees.
  
Principal Executive Offices

Our principal executive office is located at 4961 Windplay Drive, Suite 100, El Dorado Hills, California 95762, and our telephone number is (916) 939-0400.
 
5
 
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.

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.

Our current management has limited experience in operating a public company, and 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 Share Exchange that could be more costly than planned.  Further, the limited operating history of Bright Future and Premier Power Spain 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 panels. 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, Sharp, SunPower Corporation, and General Electric account for over 80% 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. The world market for solar panels recently experienced a shortage of supply due to insufficient availability of silicon and limited manufacturing capacity. This shortage caused the prices for solar panels to increase. Interruptions in our ability to procure needed components for our systems, whether due to discontinuance by our suppliers, delays or failures in delivery, shortages caused by inadequate production capacity or unavailability, or for other reasons, would adversely affect or limit our sales and growth. In addition, increases in the prices of solar panels could make systems that have been sold but not yet installed unprofitable for us. There is no assurance that we will continue to find qualified manufacturers on acceptable terms and, if we do, there can be no assurance that product quality will continue to be acceptable, which could lead to a loss of sales and revenues.

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.
 
6
 
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 research and development 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.

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

Our growth strategy may involve large 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:
 
7
 
· 
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.

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

Our obligations under our current loan and security agreement with Guaranty Bank are secured by all of Premier Power California’s assets. If we default under the credit facility, we could be required to repay all of our borrowings thereunder. In addition, Guaranty Bank could foreclose its security interest and liquidate some or all of our assets, which could cause us to curtail or cease operations.  As of March 31, 2009, there were no amounts outstanding under our agreement with Guaranty Bank.

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

The terms of the current credit facility with Guaranty Bank may limit our ability, without Guaranty Bank’s consent, to, among other things, enter into certain transactions (such as an acquisition of another company) and create additional liens on our assets, and could adversely affect our liquidity and our ability to attract additional funding if required for our business.

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 and our line of credit. 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.
 
8
 
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. 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.

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. 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 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 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.
 
9
 
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 applied for trademark protection for the brand names “Premier Power” and “Bright Futures” and 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.

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

Our Premier Ballasting and Premier Racking systems are new and have not been tested in installation settings for a sufficient 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. While we anticipate filing 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.

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.
 
10
 
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 customers may depend on debt financing, such as 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.

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 California 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.
 
11

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:

· 
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.

If we fail to develop and maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in our financial reports, which could harm our business and stock price.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We are currently required to provide an assessment of our internal controls over financial reporting. Beginning with the annual report for our fiscal year ended December 31, 2009, under Section 404 of the Sarbanes-Oxley Act of 2002, our independent registered public accounting firm must provide an annual attestation report on our internal control over financial reporting. The process of strengthening our internal controls and complying with Section 404 is expensive and time-consuming, and requires significant management attention, especially given that we have just initiated efforts to comply with the requirements of Section 404. We cannot be certain that the measures we will undertake will ensure that we will maintain adequate controls over our financial processes and reporting in the future. Furthermore, if we are able to rapidly grow our business, the internal controls that we will need will become more complex, and significantly more resources will be required to ensure our internal controls remain effective. Failure to implement required controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. The disclosure of any material weaknesses in our internal controls that are identified by our auditors, even if the weakness is quickly remedied, could diminish investors’ confidence in our financial statements and harm our stock price. In addition, non-compliance with Section 404 could subject us to a variety of administrative sanctions, including the suspension of trading, ineligibility for listing on a national securities exchange, and the inability of registered broker-dealers to make a market in our common stock, which would further reduce our stock price.

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, require 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.
 
As a public company, we also expect that these new rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.
 
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. 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.
 
12

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 about these requirements on a national, state, and local level, and must design systems to comply with varying standards. Certain cities may have ordinances that prevent or increase the cost of installation of our solar power systems. In addition, new government regulations or utility policies pertaining to solar power systems are unpredictable and may result in significant additional expenses or delays and, as a result, could cause a significant reduction in demand for solar energy systems and our services. For example, there currently exist metering caps in certain jurisdictions that effectively limit the aggregate amount of power that may be sold by solar power generators into the power grid.

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

Many 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 they 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.  A reduction in or elimination of such incentives could substantially increase the cost 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.

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.
 
13
 
Risks Related to Doing Business in Spain

Adverse changes in the political and economic policies of the Spanish government could have a material adverse effect on the overall economic growth of Spain, which could reduce the demand for our products and materially and adversely affect our competitive position.

A significant portion of our business operations are conducted in Spain through our indirect wholly owned subsidiary, Premier Power Spain, and a significant portion of our sales are made in Spain. Spain offers substantial incentives, including feed-in tariffs, to encourage the growth of solar power as a form of renewable energy. Accordingly, our business, financial condition, results of operations, and prospects are affected significantly by economic, political, and legal developments in Spain. Any adverse change in such policies could have a material adverse effect on the overall economic growth in Spain or 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 businesses.

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 government incentives. Expiration of, or changes to, these incentives could have a material adverse effect on our operating results.

The Spanish government has 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 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 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 our indirect wholly owned subsidiary, Premier Power Spain, which is established in Spain, and a portion of our assets are located in Spain. As a result, it may not be possible to effect service of process in Spain 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 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 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 the amount 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.
 
14
 
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 exercise of our warrants or conversion of our Series A Convertible Preferred Stock.

We believe that our current cash and cash equivalents, anticipated cash flow from operations, and net proceeds from our September 9, 2008 financing 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 warrants and shares of our Series A Convertible Preferred Stock issued by us, the exercise or conversion, respectively, of which may also dilute our 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. 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 (“OTC”), 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 OTC, 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.

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 report. 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.
 
15
 
If we do not meet the listing standards established by Nasdaq, NYSE Alternext US LLC, or other similar markets, 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.

As soon as reasonably practicable, we intend to apply to list our common stock for trading on a national securities exchange such as the Nasdaq Stock Market (“Nasdaq”) or NYSE Alternext U.S. LLC (the “Alternext”).  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. Nasdaq and the Alternext 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 meet or 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 a recent financing, 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 private placement were not registered under the Securities 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 69% 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.

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 or exercise 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 and exercise of shares of Series A Convertible Preferred Stock (“Series A Stock”) and Series A and Series B Warrants (collectively, the “Warrants”) 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 exercise the Warrants to the extent that such conversion or exercise 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 or exercise.  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 into, or exercising the Warrant for, 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.
 
16
 
ITEM 2.
PROPERTIES

Our principal executive offices are located at 4961 Windplay Drive, Suite 100, El Dorado Hills, California. The table below provides a general description of our offices and facilities, including those for our international operations:

Location
  
Principal Activities
  
Area (sq. ft.)
  
Lease Expiration Date
  
4961 Windplay Drive, Suite 100
El Dorado Hills, California 95762
  
Company headquarters and warehouse
  
6,700
  
Month-to-month
  
               
3 Newlands Circle
Reno, Nevada 80509
  
Bright Future office
  
100
  
Month-to-month
  
               
Atlantic Office Suites, LLC
1913 Atlantic Avenue
Manasquan, NJ 08736
  
East Coast operations
  
72
  
Month-to-month
  
               
1020 Nevada St., #201
Redlands, CA 92374
  
Southern California operations
  
2,303
  
September 30, 2010
  
               
Pol Ind, Calle E, n3
Oficina 0F
31192 Mutilva Baja (Navarra)
Spain 
  
Spanish headquarters
  
500
  
May 2012
  
               
Centro de Negocios La Garena, 2K  
Calle Granda s/n
Alcala de Henares, 28806 Madrid
Spain
  
Spanish regional office
  
1,100
  
December 30, 2013
  
 
Premier Power Spain is party to a non-cancelable lease for operating facilities in Madrid, Spain, which expires in 2013, and a non-cancelable lease for operating facilities in Navarra, Spain, which expires in 2012.  Premier Power California is party to a non-cancelable lease for operating facilities in Redlands, California, which expires in 2010.  These leases provide for annual rent increases tied to the Consumer Price Index. The leases require the following payments as of December 31, 2008, subject to annual adjustment, if any:
 
2009
  
$
    78,003
  
2010
    
43,845
  
2011
    
43,845
  
2012
    
35,319
  
2013
    
23,293
  
         
Total
  
$
224,305
  
 
17
 
 
We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation.  There are no proceedings in which any of our directors, officers, or affiliates, or any registered or beneficial holder of more than 5% of our voting securities, or any associate of such persons, is an adverse party or has a material interest adverse to our company.
 
 
On November 14, 2008, an amendment to our Certificate of Incorporation to increase the number of authorized shares of common stock, par value $.0001 per share, from 100,000,000 shares to 500,000,000 shares (the “Amendment”) was submitted to the holders of an aggregate 69.1% of our voting stock (“Majority Stockholders”).  The Majority Stockholders approved the Amendment by written consent without a meeting.

18
 
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 Bid
  
             
December 31, 2008
   $ 5.05     $ 2.25  
September 30, 2008*
   $ 5.90     $ 4.05  
June 30, 2008
   $ *     $ *  
March 31, 2008
   $ *     $ *  
                 
December 31, 2007
   $ *     $ *  
September 30, 2007
   $ *     $ *  
June 30, 2007
   $ *     $ *  
March 31, 2007
   $ *     $ *  

* Our common stock had no active trading market until September 15, 2008.
 
As of March 30, 2009, the closing sales price for shares of our common stock was $3.80 per share on the OTCBB.

Holders

As of March 31, 2009, we have approximately 44 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, 2008, 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
     ―       ―       ―  
                         
Equity compensation plans not approved by security holders
     0 (1)     ― (1)     2,951,8759 (2)
Total
                        

 
(1)
 At December 31, 2008, no options were granted pursuant to our 2008 Equity Incentive Plan.
 
(2)
 This number represents shares of our common stock 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. 
 
19
 
ITEM 6.
SELECTED FINANCIAL DATA

Not applicable.


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 ending December 31, 2008 and 2007 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 were originally incorporated on August 31, 2006 in the State of Delaware under our former name “Harry’s Trucking, Inc.”  As a result of a share exchange transaction that closed on September 9, 2008, our business is the development, design, and integration of solar energy solutions. We develop, market, sell, and maintain solar energy systems for residential, commercial, and industrial customers in North America and Spain through our wholly owned subsidiary Premier Power Renewable Energy, Inc., a California corporation (“Premier Power California”), and Premier Power California’s two wholly owned subsidiaries, Bright Future Technologies, LLC, a Nevada limited liability company (“Bright Future”) and Premier Power Sociedad Limitada, a limited liability company formed in Spain (“Premier Power Spain”).

Critical Accounting Policies and Estimates

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

While our significant accounting policies are more fully described in Note 1 to our 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 consolidated financial statements include the accounts of Premier Power Renewable Energy, Inc. and its subsidiaries.  All significant 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.

Revenue Recognition – Revenue on photovoltaic system installation contracts is recognized using the percentage of completion method of accounting. At the end of each period, the Company measures the cost incurred on each project and compares the result against its estimated total costs at completion. The percent of cost incurred determines the amount of revenue to be recognized. Payment terms are generally defined by the contract and as a result may not match the timing of the costs incurred by the Company and the related recognition of revenue. Such differences are recorded as costs and estimated earnings in excess of billings on uncompleted contracts or billings in excess of costs and estimated earnings on uncompleted contracts. The Company determines its customer’s credit worthiness at the time the order is accepted. Sudden and unexpected changes in a customer’s financial condition could put recoverability at risk.
 
Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation costs. Selling and general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Profit incentives are included in revenues when their realization is reasonably assured.
 
20

Earnings per Share – Earnings per share is computed in accordance with the provisions of SFAS No. 128, “Earnings Per Share.” Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted-average number of common shares outstanding during the period, as adjusted for the dilutive effect of the Company’s outstanding convertible preferred shares using the “if converted” method and dilutive potential common shares. For all of the periods presented, the Company had no dilutive potential common shares except for outstanding convertible preferred shares during the year ended December 31, 2008.  Warrants to purchase 3,500,000 of the Company’s common shares were excluded as their exercise price exceeded the average market price of the Company’s common shares.

    
2008
    
2007
  
Net income
   $ 569,068     $ 843,865  
                 
Earnings Per Share:
                
Basic
   $  0.03     $ 0.04  
Diluted
   $ 0.02     $ 0.04  
Weighted Average Shares Outstanding:
                
Basic
     22,666,138       21,159,451  
Diluted effect of convertible preferred stock
     1,083,562       -  
Diluted
     23,749,700       21,159,451  
 
Product Warranties – Prior to January 1, 2007, the Company provided a five year warranty covering the labor and materials associated with its installations. Effective January 1, 2007, the Company changed the coverage to generally be ten years in the U.S. and to one year in Spain for all contracts signed after December 31, 2006. Solar panels and inverters are warranted by the manufacturer for 25 years and 10 years, respectively. Activity in the Company’s warranty reserve for the years ended December 31, 2008 and 2007 was as follows:

   
2008
    
2007
  
Balance at beginning of period
   $ 172,002     $ 58,375  
                 
Warranty expense
     275, 108       132,533  
                 
Less: warranty claims
     (79,860 )     (18,906 )
                 
Balance at end of period
   $ 367,250     $ 172,002  
 
Comprehensive Income – 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.

Recently Issued Accounting Pronouncements

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

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

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

In December 2007, the FASB issued FAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements (as amended)” (“FAS 160”), which improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling (minority) interests in subsidiaries in the same way as equity consolidated financial statements. Moreover, FAS 160 eliminates the diversity that currently exists in accounting from transactions between an entity and non-controlling interests by requiring they be treated as equity transactions. FAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008; earlier adoption is prohibited.
 
21
 
In March 2008, the FASB issued FAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133”  (“FAS 161”), which requires additional disclosures about the objectives of the derivative instruments and hedging activities, the method of accounting for such instruments under SFAS No. 133 and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. FAS 161 is effective beginning January 1, 2009. We are currently assessing the potential impact that adoption of FAS 161 may have on our financial statements.

In April 2008, the FASB issued FASB Staff Position (FSP) FAS No. 142-3, “Determination of the Useful Life of Intangible Assets.” The FSP amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FAS No. 142, “Goodwill and Other Intangible Assets.” The FSP must be applied prospectively to intangible assets acquired after the effective date. The Company will apply the guidance of the FSP to intangible assets acquired after January 1, 2009.
 
In May 2008, the FASB issued FAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“FAS 162”), which identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States of America (the GAAP hierarchy). This statement is effective November 15, 2008 which is 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments of AU Section 411, “The Meaning of Presents Fairly in Conformity with Generally Accepted Accounting Principles.”  The adoption of FAS 162 did not have a material effect on our financial statements.
 
Results of Operations

The following table sets forth the results of our operations for the years ended December 31, 2008 and 2007:

   
Year ended December 31,
  
   
2008
    
% of  
Revenues
    
2007
    
% of  
Revenues
  
Net sales
  $ 44,237,984       100.0 %   $ 16,685,690       100.0 %
Cost of sales    
     (38,710,592 )     87.5 %     (12,440,839 )     74.6 %
Gross profit    
     5,527,392       12.5 %     4,244,851       25.4 %
Operating expenses    
     4,729,542       10.7 %     3,371,778       20.2 %
Operating income
     797,850       1.8 %     873,073       5.2 %
Other income (expense)
     (45,324 )     (0.1 )5     (5,882 )     0.0 %
Income before income taxes
     752,526       1.7 %     867,191       5.2 %
Income tax expense (benefit)
     (40,857 )     (0.1 )%     39,873       0.2 %
Minority interest
     (224,315 )     (0.5 )%     16,547       0.1 %
Net income    
   $ 569,068       1.3 %   $ 843,865       5.1 %

Net sales.   During the 2008 fiscal year, we had net sales of $44,237,984 as compared to net sales of $16,685,690 during the 2007 fiscal year, an increase of approximately 165%.  The increase is attributable to strong sales growth in Spain and increased commercial sales in the U.S., which grew almost 585% and 125%, respectively.  We had growth in Spain and U.S. commercial sales because of increased sales efforts in those markets.  There was also continued growth in our U.S. residential business as a result of a new Southern California residential sales office that opened during 2008.

Cost of sales.   Cost of sales for the 2008 fiscal year was $38,710,592 as compared to $12,440,839 for the 2007 fiscal year, an increase of approximately 211%.   The increase in cost of sales is attributable to the growth in our commercial sales as commercial projects carry a higher cost of sales relative to net sales.  During 2008, we were awarded and completed a large commercial project performing only installation services, which did not involve the high level of integration that we normally provide.

Gross profit.  Our gross profit for the 2008 fiscal year was $5,527,392 as compared to a gross profit of $4,244,851 for the 2007 fiscal year, representing gross margins of approximately 12.5 % and 25.4%, respectively.  The decrease in gross profit percent is directly related to our decision to increase our commercial contracts, which generally have lower gross profit margins.

Operating expenses.   Our operating expenses consist of sales and marketing expenses and administrative expenses.  During the 2008 fiscal year, total operating expenses were $4,729,542, consisting of sales and marketing costs of $2,224,362 and administrative costs of $2,505,180, while total operating expenses for the 2007 fiscal year were $3,371,778, consisting of sales and marketing costs of $1,493,890 and administrative costs of $1,877,888, representing an increase of approximately 40%.  As a percentage of sales, operating expenses were 10.7% and 20.2% for the twelve months ended December 31, 2008 and 2007, respectively.  The increase in operating expenses from 2007 to 2008 is due to growth in our commercial sales force and increased professional costs related to becoming a public company through our share exchange transaction that closed in 2008.

Other expense.  We had other expenses of $45,324 for the 2008 fiscal year as compared to other expenses of $5,882 for the 2007 fiscal year.  The increase in other expenses was due to increased interest expense from greater use of the Company’s line of credit.

Net income.  We had net income of $569,068 for the 2008 fiscal year as compared to net income of $843,865 for the 2007 fiscal year.  The decrease in net income is attributable to growth in our commercial business, which has lower gross profit margins as compared to our residential sales, and an increase in operating expenses.
 
22
 
LIQUIDITY

Cash Flows

Net cash flow used in operating activities was $115,769 for the 2008 fiscal year while net cash flow provided by operating activities was $844,698 for the 2007 fiscal year.  The decrease in net cash flow from operating activities was mainly due to an increase in accounts receivable and a decrease in billings in excess of costs and estimated earnings on uncompleted contracts, which was not significantly offset by an increase in net cash flow attributable to a decrease in inventory and accounts payable.

Net cash flow used in investing activities was $150,868 for 2008 fiscal year and net cash flow provided by investing activities was $3,740 for the 2007 fiscal year.  The decrease in net cash flow from investing activities was due to increased purchases of assets to support operations.

Net cash flow provided by financing activities was $4,815,118 for the 2008 fiscal year while net cash flow used in financing activities was $508,275 for the 2007 fiscal year.  The increase in net cash flow from financing activities was mainly due to net proceeds from our $7 million financing that closed on September 9, 2008.
 
Material Impact of Known Events on Liquidity
 
Our business is exposed to risks associated with the ongoing financial crisis and weakening global economy, which may have a material impact on our short-term and long-term liquidity as a result of the uncertainty of project financing for commercial solar installations and the risk of non-payment from both commercial and residential customers.  The recent severe tightening of the credit markets, turmoil in the financial markets, and weakening global economy are contributing to slowdowns in the solar industry, which slowdowns may worsen if these economic conditions are prolonged or deteriorate further.  The market for installation of solar power systems depends largely on commercial and consumer capital spending.  Economic uncertainty exacerbates negative trends in these areas of spending, and may cause our customers to push out, cancel, or refrain from placing orders, which may reduce our net sales.  Difficulties in obtaining capital and deteriorating market conditions may also lead to the inability of some customers to obtain affordable financing, including traditional project financing and tax-incentive based financing and home equity-based financing, resulting in lower sales to potential customers with liquidity issues, and may lead to an increase of incidents where our customers are unwilling or unable to pay for systems they purchase, and additional bad debt expense for the Company.  Further, these conditions and uncertainty about future economic conditions may make it challenging for us to obtain equity and debt financing to meet our working capital requirements to support our business.
 
There are no other known events that are expected to have a material impact on our short-term or long-term liquidity.
 
CAPITAL RESOURCES

We have financed our operations primarily through cash flows from operations and borrowings. On September 9, 2008, we received gross proceeds of $7,000,000 from a private placement financing transaction. We also have a credit line that is utilized solely for working capital and capital expenditures, which expires on May 27, 2009.  We plan to renew it with the lender or replace it with a credit line with a new lender. Additionally, as the credit markets tighten, we continue to strengthen our balance sheet, allowing us to continue to receive favorable credit terms as needed.  Thus, we believe that our current cash and cash equivalents, anticipated cash flow from operations, net proceeds from the private placement financing, and line of credit will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures for at least the next 12 months. The proceeds from the private placement financing will be used for general working capital purposes (including funding the purchase of additional inventory and advertising and marketing expenses) and for acquisitions we may decide to pursue.

We may, however, require additional cash due to changes in business conditions or other future developments, including any investments or acquisitions we may decide to pursue. To the extent it becomes necessary to raise additional cash in the future, we may seek to raise it through the sale of debt or equity securities, funding from joint-venture or strategic partners, debt financing or loans, issuance of common stock or a combination of the foregoing. Other than our lines of credit with banks, we currently do not have any binding commitments for, or readily available sources of, additional financing. We cannot provide any assurances that we will be able to secure the additional cash or working capital we may require to continue our operations.
   
CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

Line of Credit
 
On March 9, 2009, Premier Power California entered into an agreement with Guaranty Bank for a $3,000,000 line of credit that became effective on February 27, 2009 and matures on May 27, 2009.  This line of credit renewed a $3,000,000 line of credit that Premier Power California had with Guaranty Bank that matured on February 26, 2009.  The line of credit is secured by the assets of Premier Power California and personal guaranties issued by our Chairman and Chief Executive Officer, Dean Marks; Sarilee Marks, the wife of Dean Marks; and Bright Future.  The line of credit bears interest at the prime rate plus 1%.  At December 31, 2008, the interest rate was 6%.  As of March 31, 2009, there were no amounts outstanding under our agreement with Guaranty Bank.
 
23
 
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, 2008, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.
 
   
Payments Due by Period
  
   
Total
    
Less than 1
year
    
1-3 Years
    
3-5 Years
    
5 Years +
  
Contractual Obligations:
                              
Bank Indebtedness
  
$
115,190
      
22,783
      
50,147
      
37,911
      
4,349
  
Other Indebtedness
    
15,528
      
15,528
      
―
      
―
      
―
  
Operating Leases
    
224,305
      
78,003
      
87,690
      
58,612
      
―
  
Totals:
  
$
355,023
      
116,314
      
137,837
      
96,523
      
4,349
  
 
Off-Balance Sheet Arrangements

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


ITEM 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, 2008 and 2007 begin on the following page.
 
24
 
PREMIER POWER RENEWABLE ENERGY, INC.
CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

Index to Consolidated Financial Statements
 
   
Pages
  
       
Report of Independent Registered Public Accounting Firm
    
F-2
  
         
Consolidated Balance Sheets
    
F-3
  
         
Consolidated Statements of Operations
    
F-4
  
         
Consolidated Statements of Shareholders’ Equity
    
F-5
  
         
Consolidated Statements of Cash Flows
    
F-6
  
         
Notes to Consolidated Financial Statements
    
F-7
  
 
F-1
 
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. as of December 31, 2008 and 2007, 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Premier Power Renewable Energy, Inc. at December 31, 2008 and 2007, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
 

 
/s/ Macias Gini & O’Connell LLP
 
Sacramento, California
 
March 31, 2009
 
F-2
 
PREMIER POWER RENEWABLE ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2008 and 2007
 
   
2008
    
2007
  
ASSETS
            
Current assets:
              
Cash and cash equivalents
   $ 5,770,536     $ 1,278,651  
Accounts receivable, net of allowance for doubtful accounts of
                
$18,000 at December 31, 2008 and $10,000 at December 31, 2007
     4,767,653       2,437,851  
Inventory
     1,424,910       1,417,338  
Prepaid expenses and other current assets
     259,328       69,332  
Costs and estimated earnings in excess of billings
                
   on uncompleted contracts
     235,929       37,245  
Other receivables
     93,775       —  
Due from shareholders
     —       23,458  
Deferred tax assets
     228,835       —  
Total current assets
     12,780,966       5,263,875  
                 
Property and equipment, net
     474,905       314,166  
Intangible assets
     1,048,420       —  
Goodwill
     483,496       —  
Deferred tax assets, long-term
     24,867       —  
Total assets
   $ 14,812,654     $ 5,578,041  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                
Current liabilities:
                
Accounts payable
   $ 3,707,141     $ 2,611,162  
Accrued liabilities
     1,368,018       527,550  
Billings in excess of costs and estimated earnings
                
   on uncompleted contracts
     1,206,403       1,451,637  
Income taxes payable