Premier Power Renewable Energy, Inc. - FORM 10-Q

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - Premier Power Renewable Energy, Inc.	Financial_Report.xls
EX-32.1 - EXHIBIT 32.1 - Premier Power Renewable Energy, Inc.	v240218_ex32-1.htm
EX-32.2 - EXHIBIT 32.2 - Premier Power Renewable Energy, Inc.	v240218_ex32-2.htm
EX-31.2 - EXHIBIT 31.2 - Premier Power Renewable Energy, Inc.	v240218_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - Premier Power Renewable Energy, Inc.	v240218_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2011

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

Commission File No. 333-140637

PREMIER POWER RENEWABLE ENERGY, INC.

(Exact name of registrant as specified in it charter)

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

4961 Windplay Drive, Suite 100

El Dorado Hills, CA 95762

(Address of principal executive offices) (Zip Code)

(916) 939-0400

(Registrant's telephone number, including area code)

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

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

29,316,209 shares of the issuer’s common stock, $0.0001 par value per share, are issued and outstanding as of November 14, 2011.

PREMIER POWER RENEWABLE ENERGY, INC.

TABLE OF CONTENTS

TO QUARTERLY REPORT ON FORM 10-Q

FOR QUARTER ENDED SEPTEMBER 30, 2011

		Page
PART I - FINANCIAL INFORMATION		3

Item 1.	Financial Statements	3

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4

Item 4.	Controls and Procedures	13

PART II - OTHER INFORMATION		14

Item 6.	Exhibits	14

Signatures		15

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

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

PREMIER POWER RENEWABLE ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(Unaudited)

	September 30,			December 31,
	2011			2010

ASSETS
Current assets:
Cash and cash equivalents	$	4,923		$	3,390
Accounts receivable, net of allowance for doubtful accounts of $ 414 and $ 235 at September 30, 2011 and December 31, 2010, respectively		15,491			14,365
Inventory		7,418			15,371
Prepaid expenses and other current assets		1,277			1,486
Costs and estimated earnings in excess of billings on uncompleted contracts		561			1,108
Other receivables		44			226
Deferred tax assets		519			258
Total current assets		30,233			36,204

Property and equipment, net		374			463
Intangible assets, net		759			812
Goodwill		11,650			11,368
Other noncurrent assets		624			-
Total assets	$	43,640		$	48,847

LIABILITIES, CONTINGENTLY REDEEMABLE PREFERRED STOCK, AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	19,291		$	17,191
Accrued liabilities		3,226			4,279
Billings in excess of costs and estimated earnings on uncompleted contracts		6,108			13,200
Taxes payable		493			527
Customer deposits		154			159
Borrowings, current		724			358
Total current liabilities		29,996			35,714

Borrowings, non-current		326			219
Contingent consideration liability		-			1,472
Other noncurrent liabilities		1,440			-
Total liabilities		31,762			37,405

Commitments and contingencies (Notes 7 and 8)

Contingently redeemable preferred stock:
Series C convertible preferred stock, contingently redeemable at $2,350,000, par value $.0001 per share: 2,350,000 shares designated; 20,000,000 shares of preferred stock authorized; 2,350,000 and 0 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively		1,797			-

Shareholders' equity:
Series A convertible preferred stock, par value $.0001 per share: 5,000,000 shares designated; 20,000,000 shares of preferred stock authorized; 3,500,000 shares issued and outstanding at September 30, 2011 and December 31, 2010		-			-
Series B convertible preferred stock, par value $.0001 per share: 2,800,000 shares designated; 20,000,000 shares of preferred stock authorized; 2,800,000 shares issued and outstanding at September 30, 2011 and December 31, 2010		-			-
Common stock, par value $.0001 per share; 60,000,000 shares authorized; 29,290,876 and 29,099,750 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively		3			3
Additional paid-in-capital		23,355			18,906
Accumulated deficit		(12,306	)		(6,101	)
Accumulated other comprehensive loss		(971	)		(1,366	)
Total shareholders' equity		10,081			11,442
Total liabilities, contingently redeemable preferred stock, and shareholders' equity	$	43,640		$	48,847

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

F-1

PREMIER POWER RENEWABLE ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010

Revenues	$	15,285		$	28,289		$	54,646		$	40,714
Cost of revenues		(13,895	)		(26,770	)		(52,289	)		(38,715	)
Gross margin		1,390			1,519			2,357			1,999

Operating expenses:
Selling and marketing		761			1,436			3,001			2,948
General and administrative		958			1,666			4,482			4,847
Total operating expenses		1,719			3,102			7,483			7,795

Operating loss		(329	)		(1,583	)		(5,126	)		(5,796	)

Other income (expense):
Interest expense		(17	)		(38	)		(98	)		(113	)
Other income (expense)		79			21			178			(43	)
Change in fair value of contingent consideration liability		-			48			(92	)		5,824
Loss on extinguishment of contingent consideration liability		-			-			(952	)		-
Interest income		33			-			34			6
Total other income (expense), net		95			31			(930	)		5,674

Loss before income taxes		(234	)		(1,552	)		(6,056	)		(122	)

Income tax benefit (provision)		(230	)		364			(53	)		(1,145	)

Net loss		(464	)		(1,188	)		(6,109	)		(1,267	)

Less: Deemed dividend related to beneficial conversion feature on issuance of Series C Preferred Stock		-			-			(96	)		-

Loss attributable to common shareholders	$	(464	)	$	(1,188	)	$	(6,205	)	$	(1,267	)

Loss Per Share:

Basic	$	(0.02	)	$	(0.04	)	$	(0.22	)	$	(0.05	)
Diluted	$	(0.02	)	$	(0.04	)	$	(0.22	)	$	(0.05	)

Weighted Average Shares Outstanding:

Basic		28,940			26,602			28,317			26,588
Diluted		28,940			26,602			28,317			26,588

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

F-2

PREMIER POWER RENEWABLE ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	For the Nine Months Ended
	September 30,
	2011			2010

Cash flows from operating activities:
Net loss	$	(6,109	)	$	(1,267	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Share-based compensation		1,327			713
Shares issued in exchange for third party services		84			-
Depreciation and amortization		202			269
Change in fair value of contingent consideration liability		92			(5,824	)
Loss on extinguishment of contingent consideration liability		952			-
Deferred taxes		(256	)		1,100
Share registration costs for terminated offering		-			251
Changes in operating assets and liabilities:
Accounts receivable		(803	)		(11,800	)
Inventory		8,042			(1,508	)
Prepaid expenses and other current assets		384			(2,445	)
Costs and estimated earnings in excess of billings on uncompleted contracts		567			4,348
Other receivables		194			(450	)
Other noncurrent assets		(646	)		-
Accounts payable		1,980			12,002
Accrued liabilities		(1,081	)		362
Billings in excess of costs and estimated earnings on uncompleted contracts		(7,101	)		4,003
Taxes payable		(133	)		(201	)
Customer deposits		(10	)		1,003
Other noncurrent liabilties		1,463			-
Net cash (used in) provided by operating activities		(852	)		556

Cash flows from investing activities:
Acquisition of property and equipment		(53	)		(72	)
Net cash paid for Rupinvest acquisition		-			(3	)
Net cash used in investing activities		(53	)		(75	)

Cash flows from financing activities:
Principal payments on borrowings		(846	)		(239	)
Proceeds from borrowings		1,152			166
Repayments on borrowings under line of credit		-			(1,346	)
Proceeds from issuance of preferred stock and warrants, net of costs		2,122			-
Cost related to share registration		-			(251	)
Net cash provided (used in) by financing activities		2,428			(1,670	)
Effect of foreign currency		10			(11	)
Increase (decrease) in cash and cash equivalents		1,533			(1,200	)
Cash and cash equivalents at beginning of period		3,390			3,792
Cash and cash equivalents at end of period	$	4,923		$	2,592

Supplemental cash flow information:
Interest paid	$	98		$	113
Taxes paid	$	662		$	262
Noncash investing and financing activities:
Reclassification of contingent consideration liability to equity	$	2,516
Financing of prepaid insurance premiums through short term notes payable	$	163
Deemed dividend related to beneficial conversion feature on issuance of Series C Preferred Stock	$	96
Extinguishment of liability through issuance of common stock	$	102

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

F-3

PREMIER POWER RENEWABLE ENERGY, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the Nine Months Ended September 30, 2011

(in thousands)

(Unaudited)

																			Accumulated
						Series A - Preferred				Series B - Preferred				Additional					Other
	Common Stock					Stock				Stock				Paid - In		Accumulated			Comprehensive
	Shares			Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Loss			Total

Balance at January 1, 2011		29,100		$	3		3,500	$	-		2,800	$	-	$	18,906	$	(6,101	)	$	(1,366	)	$	11,442

Net loss																	(6,109	)					(6,109	)
Foreign currency translation adjustment																				395			395
Comprehensive loss																							(5,714	)
Issuance of common stock for services provided		165			-										84								84
Issuance of common stock for extinguishment of liability		200			-										102								102
Issuance of common stock warrants		-			-										304								304
Deemed dividend related to beneficial conversion feature on issuance of Series C Preferred Stock		-			-										96		(96	)					-
Extinguishment of contingent consideration liability		(453	)		-										2,536								2,536
Share-based compensation		279			-										1,327								1,327

Balance at September 30, 2011		29,291		$	3		3,500	$	-		2,800	$	-	$	23,355	$	(12,306	)	$	(971	)	$	10,081

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

F-4

PREMIER POWER RENEWABLE ENERGY, INC.

Notes to Consolidated Financial Statements

(unaudited)

1. ORGANIZATION AND NATURE OF BUSINESS

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

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation – The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles accepted in the United States (“GAAP”) for interim financial information. They should be read in conjunction with the consolidated financial statements and related notes to the Company’s consolidated financial statements for the years ended December 31, 2010 and 2009 appearing in the Company’s Form 10-K for the fiscal year ended December 31, 2010 that is filed with the Securities and Exchange Commission. The September 30, 2011 and 2010 unaudited interim consolidated financial statements on Form 10-Q have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for smaller reporting companies. Certain information and note disclosures normally included in the annual financial statements on Form 10-K have been condensed or omitted pursuant to those rules and regulations, although the Company’s management believes the disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the entire year.

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

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

Concentrations and Credit Risk –Three customers accounted for 19%, 12%, and 11%, respectively, of the Company’s revenues for the three months ended September 30, 2011. Three customers accounted for 31%, 15%, and 11%, respectively, of the Company’s revenues for the three months ended September 30, 2010. Two customers accounted for 26% and 11%, respectively, of the Company’s revenues for the nine months ended September 30, 2011. Two customers accounted for 22% and 10%, respectively, of the Company’s revenues for the nine months ended September 30, 2011. Accounts receivable primarily consist of trade receivables and amounts due from state agencies and utilities for rebates on solar systems installed. At September 30, 2011, the Company had two customers that accounted for 35% and 10% of the Company’s accounts receivable. At December 31, 2010, the Company had one customer that accounted for 32% of the Company’s accounts receivable. The Company monitors account balances and follows up with accounts that are past due as defined in the terms of the contract with the customer. The Company maintains an allowance for doubtful accounts receivable based on the expected collectability of its accounts receivable. The allowance for doubtful accounts is based on assessments of the collectability of specific customer accounts and the aging of the accounts receivable. If there is a deterioration of a major customer’s credit worthiness or actual defaults are higher than historical experience, the allowance for doubtful accounts is increased. The allowance for doubtful accounts was $0.4 million and $0.2 million as of September 30, 2011 and December 31, 2010, respectively. The change of $0.2 million in allowance for doubtful accounts was due to an increase in estimated reserves resulting in $0.2 million of bad debt expense for the nine months ended September 30, 2011.

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

F-5

Goodwill and Other Intangible Assets – The Company does not amortize goodwill, but rather tests goodwill for impairment at least annually. We determine the fair value using a weighted market and income approach. Under the income approach, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows. Under the market approach, we calculate the fair value of the reporting unit using selected comparable companies’ revenue multiples and apply an average of such companies’ multiples to the reporting unit’s revenue. If the fair value of the reporting unit exceeds the carrying value of the net assets including goodwill assigned to that unit, goodwill is not impaired. If the carrying value of the reporting unit’s net assets including goodwill exceeds the fair value of the reporting unit, then we determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then an impairment of goodwill has occurred, and we recognize an impairment loss for the difference between the carrying amount and the implied fair value of goodwill as a component of operating income. The Company performed its annual impairment analysis as of September 30, 2011. No impairment charge was recorded as a result of either of these tests.

Product Warranties – The Company warrants its projects for labor and materials associated with its installations. The Company’s warranty is ten years in California and generally five to ten years elsewhere in the U.S. depending upon each state’s specific requirements. Premier Power Italy provides a ten year warranty covering the labor and materials associated with its installations. Premier Power Spain provides a one year warranty for all contracts signed after December 31, 2006. Since the Company does not have sufficient historical data to estimate its exposure, we have looked to our historical data and the historical data reported by a peer company solar system installer. Solar panels and inverters are warranted by the manufacturer for 25 years and 10 years, respectively. Activity in the Company’s accrued warranty reserve for the three and nine months ended September 30, 2011 and 2010 were as follows:

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
	(in thousands)						(in thousands)
Beginning accrued warranty balance	$	643		$	351		$	577		$	359

Accruals related to warranties issued during period		-			55			103			80

Reduction for labor payments and claims made under the warranty		(15	)		(10	)		(52	)		(43	)

Ending accrued warranty balance	$	628		$	396		$	628		$	396

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

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

Foreign Currency – The functional currency of Premier Power Italy, Premier Power Development, and Premier Power Spain is the Euro. Their assets and liabilities are translated at period-end exchange rates, including goodwill, except for certain non-monetary balances, which are translated at historical rates. All income and expense amounts of Premier Power Italy, Premier Power Development and Premier Power Spain are translated at average exchange rates for the respective period. Translation gains and losses are not included in determining net income (loss) but are accumulated in a separate component of shareholders’ equity. Foreign currency transaction gains and losses are included in the determination of net income (loss) in the period in which they occur. For the three and nine months ended September 30, 2011, the foreign currency transaction gain (loss) was $0.2 million and $0.1 million, respectively. For the three and nine months ended September 30, 2010, the foreign currency transaction loss was $(0.01) million and $(0.04) million, respectively. Foreign Currency transaction gain (loss) is recorded as other income (expense).

F-6

Income Taxes – The Company does not expect there to be any material changes to the assessment of uncertain tax positions over the next twelve months. The Company is subject to routine corporate income tax audits in the United States and foreign jurisdictions. The statute of limitations for the Company’s 2008, 2009 and 2010 tax years remains open for U.S. purposes. Most foreign jurisdictions have statute of limitations that range from three to six years. For the three and nine months ended September 30, 2011, the income tax provision of $0.2 million and $0.1 million, respectively, relates to the Company’s foreign operations. The Company has provided a full valuation allowance against the net deferred tax assets relating to its U.S. operations. The valuation allowance was originally recorded during the nine months ended September 30, 2010, which is the primary reason for the tax provision of $1.1 million for that period.

Contingent Consideration Liability – In connection with the 2009 acquisition of Rupinvest (Italian operations), contingent consideration liability of approximately $12 million was recorded at the time of the purchase. The contingent consideration liability relates to the contingent issuance of 3 million shares to the sellers of Rupinvest. In accordance with FASB ASC 820, “Fair Value Measurements and Disclosures”, the Company estimates the fair value of the contingent consideration liability at each reporting period, with changes in the estimated fair value recorded in income.

The fair value measurement assumes that the contingent consideration liability is transferred to a market participant at the valuation date and that the nonperformance risk related to the contingent consideration liability remains constant. The Company estimates the fair value using the market price of its shares since it believes this represents the present value of its future stock returns, discounted at the Company’s required rate of return. The Company also estimates the number of shares to be issued based on a number of financial scenarios weighted based on their relative probability. The Company considers the effect of counterparty performance risk in its fair value estimate. The Company estimates the counterparty performance risk by comparing its borrowing rate (5.0% at March 31, 2011) to those of U.S. treasury notes and uses the underlying spread to discount the estimated fair value.

On March 31, 2011, this contingent consideration liability was extinguished. See discussion at Note 7.

Recently Issued Accounting Pronouncements

In January 2010, the FASB issued Accounting Standards Update No. 2010-06, Improving Disclosures about Fair Value Measurements (Topic 820) — Fair Value Measurements and Disclosures (ASU 2010-06) to add additional disclosures about the different classes of assets and liabilities measured at fair value, the valuation techniques and inputs used, the activity in Level 3 fair value measurements, and the transfers between Levels 1, 2, and 3. Levels 1, 2, and 3 of fair value measurements are defined in Note 11 below. The Company has adopted the provisions of this guidance. There was no impact on the Company’s results of operations, cash flows, or financial position resulting from the adoption of this guidance.

In October 2009, the FASB ratified FASB ASC 605-25 (the EITF’s final consensus on Issue 00-21, “Revenue Arrangements with Multiple Deliverables”). FASB ASC 605-25 is effective for fiscal years beginning on or after June 15, 2010. Earlier adoption is permitted on a prospective or retrospective basis. The Company has adopted the provisions of this guidance. There was no impact on the Company’s results of operations, cash flows, or financial position resulting from the adoption of this guidance.

In July 2009, the FASB issued Accounting Standards Update No. 2010-28, When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (ASU 2010-28) which modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 if it is more likely than not that a goodwill impairment exists, based on whether there are any adverse qualitative factors indicating a possible impairment. Any resulting goodwill impairment after Step 2 is performed should be recorded as a cumulative-effect adjustment to beginning retained earnings in the period of adoption. Any goodwill impairments occurring after the initial adoption should be included in earnings as required by ASC 350-25-35. For public entities, this ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2010. Early adoption is not permitted. There was no material effect on the Company’s results of operations, cash flows or financial position from the adoption of this ASU.

In June 2011, the FASB issued Accounting Standards Update No. 2011-11, Presentation of Comprehensive Income (Topic 220) (ASU 2011-05), which changes how other comprehensive income (OCI) is presented. Companies will have the option to present OCI in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-5 is effective for interim and annual periods beginning after December 15, 2011. The Company is assessing the impact of this ASU on its financial statements.

F-7

3. EARNINGS PER SHARE

Earnings per share is computed in accordance with the provisions of FASB ASC Topic 260. Basic net (loss) income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted-average number of common shares outstanding during the period, as adjusted for the dilutive effect of the Company’s outstanding convertible preferred shares using the “if converted” method and dilutive potential common shares. Potentially dilutive securities include convertible preferred stock, employee stock options, stock warrants, restricted shares, and until March 31, 2011, contingently issuable shares for the purchase of Rupinvest. Potentially dilutive common shares from employee incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options and the assumed vesting of outstanding restricted stock.

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
	(in thousands, except per share data)						(in thousands, except per share data)

Net loss attributable to Premier Power Renewable Energy, Inc.	$	(464	)	$	(1,188	)	$	(6,109	)	$	(1,267	)
Less: Deemed dividend related to beneficial conversion feature on Series C Preferred Stock		-			-			(96	)		-
Net loss available to common shareholders	$	(464	)	$	(1,188	)	$	(6,205	)	$	(1,267	)

Loss Per Share:
Basic	$	(0.02	)	$	(0.04	)	$	(0.22	)	$	(0.05	)
Diluted	$	(0.02	)	$	(0.04	)	$	(0.22	)	$	(0.05	)

Weighted Average Shares Outstanding:
Basic		28,940			26,602			28,317			26,588
Diluted		28,940			26,602			28,317			26,588

For the three and nine months ended September 30, 2011, there were issued and outstanding stock options exercisable for an aggregate 2,245,865 and 185,000 shares of common stock, respectively, and stock warrants exercisable for an aggregate 2,000,000 and 0 shares of common stock, respectively, that were anti-dilutive as their weighted average exercise price exceeded the average market price of the Company’s common stock. For the three and nine months ended September 30, 2010, there were issued and outstanding stock options exercisable for an aggregate 2,333,600 and 1,972,705 shares of common stock, respectively, and stock warrants exercisable for an aggregate 0 and 0 shares of common stock, respectively, that were anti-dilutive as their weighted average exercise price exceeded the average market price of the Company’s common stock. For the three and nine months ended September 30, 2011 and the nine months ended September 30, 2010, there were additional 8,650,000 and 6,300,000 securities, respectively, that were anti-dilutive due to the Company’s reported net loss. The Company has determined its Series C Preferred Stock (see Note 10) constitute a participating security under ASC260. However, the Series C Preferred Stock shareholder has no obligation to share in the Company's losses, the Company has determined that the use of the two class method for the three and nine month periods ended September 30, 2011 is not appropriate.

4. GOODWILL

The change in the carrying amount of goodwill for the nine months ended September 30, 2011 and 2010 was as follows:

	For the Nine Months Ended
	September 30,
	2011		2010
	(in thousands)
Beginning balance	$	11,368	$	12,254
Changes due to foreign currency fluctuations		282		(591	)
Ending balance	$	11,650	$	11,663

F-8

The carrying amount of goodwill by reportable segment was as follows:

	September 30,		December 31,
	2011		2010
	(in thousands)
Other European	$	483	$	483
Italy		11,167		10,885
	$	11,650	$	11,368

5. ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

	September 30,		December 31,
	2011		2010
	(in thousands)
Payroll	$	481	$	1,459
Warranty reserve		628		577
Sales and local taxes		261		1,511
Accrued subcontractor's costs		1,543		407
Other operational accruals		313		325
	$	3,226	$	4,279

6. FINANCINGS

Notes Payable

Notes payable were $1.1 million and $0.6 million at September 30, 2011 and December 31, 2010, respectively. We have $0.1 million in short term unsecured notes associated with various insurance policies. Additionally, there were three loans made to the Company by its founders in the total amount of $0.2 million. These loans bear interest at 6% per annum and are payable on demand from the lender. Premier Power Spain has two unsecured loans totaling €0.5 million (€0.3 million and €0.2 million) and a short term line of credit for another €0.1 million (maximum borrowing allowed is €0.2 million) as of September 30, 2011. Payments on the two loans began in March 2011 and March 2012, respectively. The €0.3 million loan requires monthly principal payments of €5.5 thousand to the maturity date of February 2016 and the €0.2 million loan requires one payment of €0.2 million by March 2012. The annual interest rates on these notes range from 6.94% to 7.3%. At September 30, 2011, the outstanding balance on the Premier Power Spain loans was $0.8 million. The short term line bears interest at EURIBOR plus 3.25%, or 4.85% at September 30, 2011.

Factoring Arrangement

In November 2010, the Company entered into a factoring agreement with Prestige Capital Corporation (“Prestige”). The initial period of the agreement is through November 2011, with certain automatic extension provisions in the absence of written notice of cancellation by either party. Under the agreement, the Company agreed to sell certain trade receivables to Prestige. At the time of each transfer of approved receivables, Prestige assumes collections efforts and will earn increasing discounts on the sales price on the following scale: 2.25% if collected within 30 days, 3.25% if collected within 45 days, 4.25% if collected within 60 days, 5.25% if collected within 60 days, with an incremental 2% for each 15 day period thereafter until collected. Prestige maintains recourse to the Company for any accounts that are ultimately uncollectible for any reason other than customer insolvency. The Company receives 75% of the sales price of approved receivables in advance, with the remaining 25% remitted to the Company at the time the receivables are collected by Prestige, net of any discounts and other amounts owed by the Company to Prestige. Due to the recourse provisions, the Company does not remove factored receivables from its books at the time of transfer and instead records advances received as a factoring liability. Under the terms of the agreement, net amounts due to Prestige cannot exceed $2 million at any time and are secured by certain assets of the Company. At September 30, 2011 and December 31, 2010, there were no advances due to Prestige. There were no discounts paid to Prestige under this agreement during the period ended September 30, 2011.

F-9

The future principal payments on all outstanding borrowings as of September 30, 2011 are as follows (in thousands):

Through
September 30,	Amount
2012	$	724
2013		103
2014		95
2015		91
2016		37
	$	1,050

7. CONTINGENT CONSIDERATION LIABILITY

On July 31, 2009, the Company acquired Rupinvest and its then majority-owned subsidiary, Premier Power Italy, from Esdras Ltd. (“Esdras”). In connection with this acquisition, contingent consideration liability of $12 million was recorded at the time of the purchase to reflect the estimated fair value of 3 million contingently issuable shares of the Company’s common stock.

At December 31, 2010, the Company estimated the fair value of the contingent consideration liability at $1.5 million, assuming 1,362,100 shares of its common stock would be issued, a share price of $1.00 and an adjustment for counterparty performance risk. The Company has estimated that the amount of shares earned by the seller was approximately 460,000 and 502,100 for each of the periods ended December 31, 2010 and 2009, respectively, but no such shares had yet been distributed. The change in fair value of the contingent liability of $0.1 million loss and a $5.8 million gain was recorded to other income for the nine months periods ended September 30, 2011 and 2010, respectively. The change in fair value of the contingent liability of $0.0 million loss and $0.1 million gain was recorded to other income for the three months ended September 30, 2011 and 2010, respectively. The changes in fair value were primarily due to a change in the estimated shares to be issued and the reduction in the Company’s stock price.

On March 31, 2011, the Company and Esdras amended the share exchange agreement removing the contingency and agreeing to distribute 2,547,126 shares of common stock in full satisfaction of the obligation. Each share is fully earned and owned by Esdras, as of March 31, 2011 however the shares have limited trading restrictions which include obtaining written authorization from Company. Written authorization will occur provided if either of the following occur; a) certain Premier shareholders sell an equivalent amount of shares from their personal holdings or b) the date of April 30, 2015. In addition, the employment contracts of certain Premier Power Italy executives will be extended with no changes in any term of employment. As a result, the contingent consideration liability was revalued to the amended share amount as of March 31, 2011 and extinguished, resulting in an increase in additional paid in capital of $2,536,000 and a loss on extinguishment of $952,000. A summary of the changes in the contingent consideration liability balance are as follows:

	Contingent
	Consideration
	Liability
	(in thousands)
Balance at December 31, 2010	$	1,472
Loss on fair value		92
Extinguishment of contingent consideration liability		(1,564	)
Balance at September 30, 2011	$	-

8. COMMITMENTS AND CONTINGENCIES

Premier Power Spain is party to a month to month lease with thirty days’ notice for operating facilities in Pamplona, Spain. Premier Power Italy is party to a non-cancelable renewable lease for operating facilities in Campobasso, Italy, which expires in 2015. During the three months ended September 30, 2011, we exited our lease for offices in Anaheim, California and no loss on termination accurred. These leases provide for annual rent increases tied to the Consumer Price Index or equivalent indices in Spain and Italy. The leases require the following future payments as of September 30, 2011, subject to annual adjustment, if any (in thousands):

F-10

Through
September 30,	Amount
2012	$	102
2013		93
2014		34
2015		24
	$	253

At times we enter into take or pay agreements with our suppliers. This provides pricing advantages to the Company in return for supply certainty. During 2010, the Company, as part of the purchase of solar modules from a vendor for distribution in the Czech Republic, entered into a take or pay agreement of which 500 kilowatts of solar modules with a value of approximately $1.0 million which expired during 2010. This agreement was supported by a Letter of Credit. As of September 30, 2011, there were no take or pay commitments outstanding and we have incurred no losses as a result of these types of agreements.

In September 2011, a solar panel manufacturer that the Company utilized for certain of the Company's solar facility installation projects declared bankruptcy. On certain of these projects, the Company’s customers were not satisfied with the performance of the solar panels and did not pay the Company for all amounts due. Prior to September 2011, the Company and this manufacturer had entered into an arrangement under which unpaid amounts due the Company from such customers would be paid by the manufacturer or netted against amounts due by the Company. At September 30, 2011, the Company was due $0.6 million related to such projects and owed $1.4 million for solar panels provided to it. As a result of the bankruptcy filing by the manufacturer, the Company recorded such amounts as long term assets and liabilities. The Company believes that its agreement will be honored by the bankruptcy trustee of the solar panel manufacturer. However, such an agreement may be challenged by the bankruptcy trustee or others and such challenges could result in the loss of all or a portion of the payments due the Company, while the Company could be obligated to pay amounts due in full. Based on its assessment of the performance of the panels, and its agreement with the manufacturer, the Company ultimately believes that it will not suffer a loss upon the resolution of the bankruptcy. At September 30, 2011, the Company has not recorded an allowance for any of the amounts due it from this manufacturer.

Legal Matters

The Company is subject to legal proceedings, claims, and litigation arising in the ordinary course of business. The Company is not currently involved in any litigation, the outcome of which would, based on information currently available, have a material adverse effect on the Company’s financial position, results of operations, or cash flows. We are also not aware of any material legal proceedings involving any of our directors, officers, or affiliates or any owner of record or beneficially of more than 5% of any class of our voting securities.

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

The following table sets forth a summary stock option activity for the nine months ended September 30, 2011:

				Weighted-		Weighted-
	Number of			Average Fair		Average
	Shares			Value		Exercise Price		Vested
Outstanding at January 1, 2011		2,517,229		$	2.32	$	3.75		488,092
Granted during the period		2,731,729		$	1.92	$	0.75
Forfeited/cancelled during the period		(2,835,229	)	$	1.90	$	2.46
Outstanding at September 30, 2011		2,413,729		$	2.06	$	0.75		577,125

Share-based compensation expense relating to these shares is being recognized over a weighted-average period of 4.2 years. The Company recognized share-based compensation expense related to these shares of approximately $0.3 million and $0.2 million during the three months ended September 30, 2011 and 2010, respectively. The Company recognized share-based compensation expense related to these shares of approximately $1.3 million and $0.7 million during the nine months ended September 30, 2011 and 2010, respectively.

F-11

At September 30, 2011, there was $2.3 million of total unrecognized share-based compensation cost related to non-vested stock options. The Company expects to recognize that cost over a weighted average period of 2.6 years.

On May 12, 2011, the Board of Directors approved the repricing of all outstanding common stock options to the Company’s common stock closing price on May 12, 2011. Therefore, the Company repriced options for 2,286,229 shares of common stock to $0.75 per share. There were no other changes to the outstanding stock option grant agreements. The repricing resulted in $0.4 million of incremental share-based compensation, of which $0.1 million related to fully vested shares and was expensed at the time of repricing.

The following tables summarize the total share-based compensation expense the Company recorded for the three and nine months ended September 30, 2011 and 2010:

	For the Three Months Ended September 30,
	2011		2010
	(in thousands)
Cost of revenues	$	129	$	40
Selling and marketing		66		76
General and administrative		99		113
Total share-based compensation expense	$	294	$	229

Stock options awards to employees	$	214	$	175
Restricted stock grants		80		54
Total share-based compensation expense	$	294	$	229

	For the Nine Months Ended September 30,
	2011		2010
	(in thousands)
Cost of revenues	$	229	$	163
Selling and marketing		545		277
General and administrative		553		273
Total share-based compensation expense	$	1,327	$	713

Stock options awards to employees	$	896	$	563
Restricted stock grants		431		150
Total share-based compensation expense	$	1,327	$	713

Average

Weighted

Remaining

Number of

Average

Contractual

Aggregate

Options

Exercise Price

Term (in years)

Intrinsic Value

Options expected to vest

350,472

0.75

8.00

The fair value of original stock option grants during the nine months ended September 30, 2011 was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Expected volatility		92.76	%
Expected dividends		0.00	%
Expected term	4.21 years
Risk-free interest rate		1.43	%
Weighted-average fair value per share	$	1.92

F-12

Restricted Stock Awards

A summary of restricted stock awards activity during the nine months ended September 30, 2011 is as follows:

				Weighted Average
	Number of Shares			Fair Price
Outstanding at January 1, 2011		183,000		$	2.80
Granted		602,000		$	0.93
Vested and issued		(279,000	)	$	1.48
Forfeited		(53,000	)	$	1.02
Outstanding at September 30, 2011		453,000		$	1.34

In the nine months ended September 30, 2011 and 2010, the Company issued 279,000 and 49,500 shares of its common stock, respectively, in connection with vested restricted stock awards. In the nine months ended September 30, 2011 and 2010, the Company issued 217,000 and 0 shares, respectively, of its common stock as share based compensation with immediate vesting.

ASC Topic 718 requires the cash flows as a result of the tax benefits resulting from tax deductions in excess of the compensation cost recognized (excess tax benefits) to be classified as financing cash flows. There are no excess tax benefits for the nine months ended September 30, 2011 and 2010, and therefore, there is no impact on the accompanying consolidated statements of cash flows.

10. EQUITY

Preferred Stock

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

The Company has designated 5,000,000 shares of Preferred Stock as Series A Convertible Preferred Stock (“Series A Stock”). The holders of Series A Stock have no voting rights except with regards to certain corporate events, enjoys a $2.40 liquidation preference per share, subject to adjustment, over holders of common stock, and may convert each share of Series A Stock into one share of common stock at any time. Series A stock converts automatically upon the occurrence of an offering meeting certain criteria. Holders of the Series A Stock have certain redemption rights. The Company has determined that the events triggering such rights are either in control of the Company or in the case of such events where the Company is not deemed to exercise control; the redemption right is limited to the ability to convert into shares of the Company’s common stock. As of September 30, 2011 and December 31, 2010, there were 3,500,000 shares of Series A Stock outstanding.

The Company has designated 2,800,000 shares of Preferred Stock as Series B Convertible Preferred Stock (“Series B Stock”). The holders of Series B Stock have no voting rights except with regards to certain corporate events and may convert each share of Series B Stock into one share of common stock at any time. Series B stock converts automatically upon the occurrence of an offering meeting certain criteria. Holders of the Series B Stock have certain redemption rights. The Company has determined that the events triggering such rights are either in control of the Company or in the case of such events where the Company is not deemed to exercise control; the redemption right is limited to the ability to convert into shares of the Company’s common stock. As of September 30, 2011 and December 31, 2010, there were 2,800,000 Series B Stock outstanding, respectively.

The Company has designated 2,600,000 shares of Preferred Stock as Series C Convertible Preferred Stock (“Series C Stock”). In June 2011, the Company issued 2,350,000 shares of Series C Stock, a warrant to purchase 2,000,000 shares of the Company’s common stock (“Series C warrant”) and a six month option to acquire 250,000 additional shares of the Series C Stock (“Series C Option”) in exchange for $2,350,000. The Company incurred expenses of $250,000 related to the offering, resulting in net proceeds of $2,100,000. The Series C Stock is convertible into shares of the Company’s common stock and have a stated value equal to $1.30 and a conversion value of $1.00 per share. At the time of closing the Company’s stock price was $0.69 per common share. The Preferred Stock shares in any dividends declared to common stockholders. Additionally, beginning in December 2012, the Series C Stock holders are due a monthly dividend of $0.01667 per share ($.20 per year) if a defined change in control of the Company does not occur prior to June 2012. At the option of the Company, these dividends may be paid in shares of common stock of the Company.

In the event of a change in control of the Company, the Company and the holder of the Series C Stock have call and put rights, respectively. The Company’s call right is subject to the payment of a call premium which is the greater of $.10 per share or 20% per annum. As of September 30, 2011 and December 31, 2010, there were 2,350,000 and 0 shares of Series C Stock outstanding, respectively.

F-13

The Series C warrant have a five year life, an exercise price of $1.00 per share and the Company has the right to call for cancellation of the warrant under certain circumstances. Using a binomial model and the assumptions noted below, the Company estimated the fair value of the Series C warrant to be $367,000.

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

Risk-free interest rate at grant date		1.76	%
Expected stock price volatility		60	%
Expected dividend payout		-
Expected option life-years	5 yrs

The aggregate proceeds received from the issuance of the preferred stock and warrant were $2.4 million. Based on their relative fair values, we allocated $2.1 million and $0.3 of the $2.4 million gross proceeds, to the preferred stock and warrant, respectively. The allocated proceeds of the Series C Stock, net of $0.3 million of issuance costs, have been classified as temporary equity in accordance with ASC 480-10-S99 as the holders have certain redemption rights in the event of a change in control of the Company in which the Company is not liquidated. The Series C Stock is not being accreted to its full redemption amount since the contingent redemption event is not currently probable. The allocated proceeds associated with the Series C warrant have been classified in equity as they contain only standard anti-dilutive provisions.

Based on the Series C Stock allocated proceeds of $1.8 million, assumed 3,055,000 shares of common stock issuable upon conversion and a market price of $0.69 at the time the Series C Stock was issued, the Company determined that a beneficial conversion feature of $0.1 million existed as defined in ASC 470-20 (Emerging Issue Task Force (“EITF”) Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, and EITF Issue No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments). The Company calculated a beneficial conversion feature for the Series C Stock of $0.1 million, which equals the amount by which the estimated fair value of the common stock issuable upon conversion of the issued Series C Stock exceeded the allocated proceeds from such issuances. The beneficial conversion feature was recorded as an increase in additional paid in capital and is currently recognized as a deemed dividend because the Series C Stock could be converted into common stock currently.

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

●

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

●

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

F-14

●

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

The table below sets forth, the Company’s Level 3 financial assets and liabilities that are accounted for at fair value as of September 30, 2011 and December 31, 2010 (in thousands):

	September 30, 2011						December 31, 2010
	(in thousands)						(in thousands)
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3

Liabilities: Contingent consideration	$	-	$	-	$	-	$	-	$	-	$	1,472

12. SEGMENT INFORMATION

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

●

North America – consists of (i) commercial ground mount or rooftop solar energy projects generally ranging from 100kWh to 20MW provided to corporate, municipal, agricultural, and utility customers in the United States and Canada and (ii) residential that consists mainly of rooftop solar installations generally ranging from 5kWh to 40KWh provided to residential customers primarily in California. In 2011, the Company determined that it would reduce its residential activities in this segment. The Company does not distinguish the cashflows and operating results of its residential activities from the North America segment as a whole and the North America segment is managed as a single operating unit.

●

Italy – consists of distribution, ground mount, roof mount, and solar power plant installations, ranging from 10 kWh to 2 mWh.

●

Other European – consists of rooftop solar installations generally ranging 5 kWh to 1 MW provided primarily to businesses that own commercial buildings or warehouses. The segment primarily serves countries other than Italy. In addition, our Other European segment consists of large scale international distribution and business development as well as EPC. The service we provide to our customers consists of large scale procurement, EPC, and consulting. Thru our relationship with several key manufacturers we can provide pricing and availability advantages over the competition.

During the three months ended September 30, 2010, the Company renamed the segments previously known as Spain and United States to Other European and North America, respectively, to reflect an increased level of sales outside of these specific countries. Prior to 2010, these segments’ activities were almost exclusively conducted within Spain and United States, respectively.

Currently, the Company does not separately allocate operating expenses to these segments, nor does it allocate specific assets to these segments. Therefore, segment information reported includes only revenues, cost of revenues, and gross margin. The following tables present the operations by each operating segment:

F-15

	For the Three Months Ended September 30, 2011
							Other
	North America			Italy			European			Total
	(in thousands)
Revenues	$	3,035		$	7,965		$	4,284		$	15,284
Cost of revenues		(3,009	)		(6,995	)		(3,891	)		(13,895	)
Gross margin	$	26		$	970		$	393			1,389
Total operating expenses											(1,720	)
Operating loss										$	(331	)

	For the Three Months Ended September 30, 2010
							Other
	North America			Italy			European			Total
	(in thousands)
Revenues	$	4,223		$	3,061		$	21,005		$	28,289
Cost of revenues		(3,944	)		(2,394	)		(20,432	)		(26,770	)
Gross margin	$	279		$	667		$	573			1,519
Total operating expenses											(3,102	)
Operating loss										$	(1,583	)

	For the Nine Months Ended September 30, 2011
	North America			Italy			Other European			Total
	(in thousands)
Revenues	$	20,307		$	21,313		$	13,026		$	54,646
Cost of revenues		(21,044	)		(19,067	)		(12,178	)		(52,289	)
Gross (loss) margin	$	(737	)	$	2,246		$	848			2,357
Total operating expenses											(7,483	)
Operating loss										$	(5,126	)

	For the Nine Months Ended September 30, 2010
	North America			Italy			Other European			Total
	(in thousands)
Revenues	$	6,206		$	7,368		$	27,140		$	40,714
Cost of revenues		(6,291	)		(6,366	)		(26,058	)		(38,715	)
Gross (loss) margin	$	(85	)	$	1,002		$	1,008			1,999
Total operating expenses											(7,795	)
Operating loss										$	(5,796	)

At September 30, 2011 and December 31, 2010, property and equipment located in North America, net of accumulated depreciation and amortization was approximately $0.2 million and $0.3 million, respectively. Property and equipment located in foreign countries, net of accumulated depreciation and amortization was approximately $0.2 million and $0.2 million at September 30, 2011 and December 31, 2010, respectively.

F-16

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

Forward-Looking Statements

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

Overview

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

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

We procure solar components from the solar industry’s leading suppliers and manufacturers that include Sun Tech, Sharp, Jinko and various other Chinese module manufacturers, Power One, Advanced Energy, and SunPower Corporation. We procure solar components that best fit the respective project and do not have any exclusive supplier relationships.

Critical Accounting Policies and Estimates

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

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

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

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

The fair value measurement assumes that the contingent consideration liability is transferred to a market participant at the valuation date and that the nonperformance risk related to the contingent consideration liability remains constant. The Company estimates the fair value using the market price of its shares since it believes this represents the present value of its future stock returns, discounted at the Company’s required rate of return. The Company also estimates the number of shares to be issued based on a number of financial scenarios weighted based on their relative probability. The Company considers the effect of counterparty performance risk in its fair value estimate. The Company estimates the counterparty performance risk by comparing its borrowing rate (5.0% at December 31, 2010) to those of U.S. treasury notes and uses the underlying spread to discount the estimated fair value.

On March 31, 2011, this contingent consideration liability was extinguished in exchange for 2,547,126 shares of the Company’s common stock resulting in a loss of $952,000.

Recently Issued Accounting Pronouncements

In January 2010, the FASB issued Accounting Standards Update No. 2010-06, Improving Disclosures about Fair Value Measurements (Topic 820) — Fair Value Measurements and Disclosures (ASU 2010-06) to add additional disclosures about the different classes of assets and liabilities measured at fair value, the valuation techniques and inputs used, the activity in Level 3 fair value measurements, and the transfers between Levels 1, 2, and 3. Levels 1, 2, and 3 of fair value measurements are defined in Note 11 of the Notes to the Financial Statements. The Company has adopted the provisions of this guidance. There was no impact on the Company’s results of operations, cash flows, or financial position resulting from the adoption of this guidance.

In October 2009, the FASB ratified FASB ASC 605-25 (the EITF’s final consensus on Issue 00-21, “Revenue Arrangements with Multiple Deliverables”). FASB ASC 605-25 is effective for fiscal years beginning on or after June 15, 2010. There was no impact on the Company’s results of operations, cash flows, or financial position resulting from the adoption of this guidance.

Results of Operations

Comparison of Three Months Ended September 30, 2011 and 2010

Our revenues for the three months ended September 30, 2011 were $15.3 million, a decrease of $13.0 million, or 46%, from the prior year period. North America revenues were $3.0 million for the three months ended September 30, 2011, a decrease of $1.2 million, or 28% from the prior year period. Our Italian operations provided $8.0 million of revenues for the three months ended September 30, 2011, an increase of $4.9 million, or 160% from the prior year period. Other European revenues were $4.3 million for the three months ended September 30, 2011, a decrease of $16.7 million, or 80% from the prior year period. The decrease in our revenues was primarily the result of reductions in revenue from our Other European segment. In 2010, our revenues from this segment were heavily weighted from distribution sales in the Czech Republic. In 2011, the Czech Republic solar market has reduced its available incentives, and as a result we have decreased revenue from this market.

We had a net loss for the three months ended September 30, 2011 of $0.5 million, or $(0.02) per share, compared to net loss of $1.2 million, or $(0.04) per share, for the three months ended September 30, 2010. Our profitability is primarily dependent upon revenue from sales to commercial, governmental, residential, and equity fund customers. Profitability is also affected by the costs and expenses associated with installation of systems. Cost of revenues decreased by $12.9 million, or 48%, in the period ended September 30, 2011, compared to the prior fiscal year. The decrease in cost of revenues directly correlates to the related decrease in revenues, however the increase in overall margin percentages from 5.4% in the prior year to 9.1% in the current year highlights the effects of increased margins from EPC contracts from our Other European segment. In prior quarters, we experienced margin compression as a result of the increase in our distribution business which typically carries lower margins than our traditional EPC revenue. Operating expenses decreased by $1.4 million, or 45%, for the period ended September 30, 2011 as compared to the same period in the prior year.

Sources of Revenue

	For the Three Months Ended September 30,
(Dollars in thousands)	2011		2010		Change %
Revenues
North America	$	3,036	$	4,223		-28	%
Italy		7,965		3,061		160	%
Other European		4,284		21,005		-80	%
Total revenues	$	15,285	$	28,289		-46	%

Our revenues include revenue recognized under installation contracts using the percentage of completion method of accounting. Additionally, we derive revenues from distribution sales to customers throughout Europe. The decrease in North America was largely due to the timing related to the start of several commercial projects. Most of these projects began construction in late third quarter and will be constructed in the fourth quarter. We have continued to build a strong project pipeline and backlog in North America, and we have partnered with several power purchase agreement providers and have signed projects from these efforts. The growth in Italian revenues is largely due to increased distribution and EPC efforts in Italy. The decrease in Other European revenues was largely the result of the delay of the start of several large Bulgarian EPC projects that did not commence construction until early fourth quarter. In addition, we experienced decreased distribution efforts in the Czech Republic.

Cost of Revenues

	For the Three Months Ended September 30,
(Dollars in thousands)	2011			2010			Change %
Cost of Revenues
North America	$	3,009		$	3,944			-24	%
Italy		6,995			2,394			192	%
Other European		3,891			20,432			-81	%
Total cost of revenues	$	13,895		$	26,770			-48	%

Share-based compensation included above	$	129		$	40			223	%

Gross Margin Percentage
North America		0.9	%		6.6	%
Italy		12.2	%		21.8	%
Other European		9.2	%		2.7	%
Total		9.1	%		5.4	%

Cost of revenues include product costs for distribution sales and all direct material and labor costs attributable to a project as well as certain indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation costs. The 48% decrease in cost of revenues was primarily the result of decreased recognized revenues. Cost of revenues for North America decreased $0.9 million, or 24%, for the period ended September 30, 2011 compared to the same period in the prior year. North America gross margin decreased to 0.9% due to a lower volume of revenues to cover fixed operational costs as partially offset by reduced margins on individual projects due to competition and an increase in the scope and size of our projects (larger projects typically have lower gross margins). The increase in Italian cost of revenues of $4.6 million, or 192%, correlates to the related increase in Italian revenues. The gross margin for our Italian operations was 12.2%, down 9.6% from the prior year. This decrease was largely the result of increased distribution sales in Italy. In addition, with higher incentives in the prior year we experienced higher margins on our distribution efforts. Cost of revenues for our Other European operations decreased $16.5 million, or 81%, from the same period in the prior year, which correlates to the decrease in revenues from the Other European segment. The gross margin for our Other European operations was 9.2%, up 6.5% from the prior year. The increase is from higher margin EPC contracts. In prior quarters, we experienced margin compression as the result of the increase in our distribution business, which typically carries lower margins than our traditional EPC revenue.

Operating Expenses

	For the Three Months Ended September 30,
(Dollars in thousands)	2011			2010			Change %
Selling and marketing expenses	$	761		$	1,436			-46.9	%
General and administrative expenses	$	958		$	1,666			-42.5	%

As a percent of revenue:
Selling and marketing expenses		5.0	%		5.1	%
General and administrative expenses		6.3	%		5.9	%

Share-based compensation included above:
Selling and marketing expenses	$	66		$	76			-13.2	%
General and administrative expenses	$	99		$	113			-12.4	%

Selling and Marketing Expense

Selling and marketing expenses consist primarily of personnel costs and costs related to our sales force and marketing staff. They also include expenses relating to advertising, brand building, marketing promotions and trade show events, lead generation, share-based compensation, and travel. Commissions are due and payable when customer payment is received. Selling and marketing expense for the three months ended September 30, 2011 decreased $0.7 million, or 47% compared to the prior period, as result of reductions in our residential sales and marketing efforts and residential sales personnel headcount. In addition, in 2010 our Italian and Other European segments with higher sales volumes, we experienced increased selling and marketing costs as compared to 2011.

General and Administrative Expenses

General and administrative expenses consist of personnel and related costs for accounting, legal, information systems, human resources, and other administrative functions. They also include professional service fees, bad debt expense, other corporate expenses and related overhead. General and administrative expenses decreased by $0.7 million, or 43%, for the period ended September 30, 2011 compared to the same period ended September 30, 2010, largely as result of the settlement of several liabilities that resulted in a settlement of approximately $0.1 million less than their carrying value. In addition, in the period ended September 30, 2010, we incurred a one-time expense of $0.3 million related to the write-off of costs related to the termination of a secondary public offering. Also, in North America we reduced our general and administrative head count by 40% primarily as a result of a reduction in our residential sales efforts.

Other Income and Expenses

Other income and expense consists of interest income, interest expense, transaction foreign currency gains (losses), and other income (expense). Other income, net of expense, was $0.0 million for the period ended September 30, 2010 and increased by $0.1 million, or 99%, to other income of $0.1 million for the period ended September 30, 2011.

Income Tax Benefit (Provision)

Our effective tax rate (provision) benefit was (98.0%) and 23.5% for the three months ended September 30, 2011, and 2010, respectively. The effective tax rate in the three months ended September 30, 2011 differed from the federal statutory rate of 34% primarily due to a valuation allowance against net operating loss benefits generated in the U.S. due to uncertainty as to their future utilization.

Comparison of Nine Months Ended September 30, 2011 and 2010

Our revenues for the nine months ended September 30, 2011 were $54.6 million, an increase of $13.9 million, or 34%, from the prior year period. North America revenues were $20.3 million for the nine months ended September 30, 2011, an increase of $14.1 million, or 227% from the prior year period. Our Italian operations provided $21.3 million of revenues for the nine months ended September 30, 2011, an increase of $13.9 million, or 189% from the prior year period. Other European revenues were $13.0 million for the nine months ended September 30, 2011, a decrease of $14.1 million, or 52% from the prior year period. The increase in our revenues was primarily the result of our continued efforts to expand our global reach through solar farm opportunities and distribution. In addition, with growth in the North America economy we have seen increases in demand for our services.

We had a net loss for the nine months ended September 30, 2011 of $6.1 million, or $(0.22) per share, compared to net loss of $1.3 million, or $(0.05) per share, for nine months ended September 30, 2010. Net loss in the period ended September 30, 2010 included a noncash gain of $5.8 million associated with the change in fair value of the contingent consideration liability. Our profitability is primarily dependent upon revenue from sales to commercial, governmental, residential, and equity fund customers. Profitability is also affected by the costs and expenses associated with installation of systems. Cost of revenues increased by $13.6 million, or 35%, in the period ended September 30, 2011, compared to the prior fiscal year. The increase in cost of revenues directly correlates to the related increase in revenues, however the decrease in overall margin percentages from 4.9% in the prior year to 4.3% in the current year highlights the effects of the competitive overall economic environment, resulting in the reduction in the pricing of solar systems to maintain high margin sales volumes. Additionally, we have experienced margin compression as the result of lower margin distribution business, which typically carries lower margins than our traditional EPC revenue. Operating expenses decreased by $0.3 million, or 4%, for the period ended September 30, 2011 as compared to the same period in the prior year, due primarily to the increases in recognized share-based compensation of approximately $0.5 million offset by reductions from a reduction in our residential market sales efforts.

Sources of Revenue

	For the Nine Months Ended September 30,
(Dollars in thousands)	2011		2010		Change %
Revenues
North America	$	20,307	$	6,206		227	%
Italy		21,313		7,368		189	%
Other European		13,026		27,140		-52	%
Total revenues	$	54,646	$	40,714		34	%

Our revenues include revenue recognized under installation contracts using the percentage of completion method of accounting. Additionally, we derive revenues from distribution sales to customers throughout Europe. The increase in North America was largely due to the expansion of our commercial projects offset by the reduction in volume in our residential installations. The growth in North American commercial projects was driven by the Company executing on several megawatt projects that were signed in 2010 as our customers have shown greater ability to access project finance. We have continued to build a strong project pipeline and backlog in North America, and we have partnered with several power purchase agreement providers and have signed projects from these efforts. The growth in Italian revenues is largely due to increased distribution efforts in Italy and the completion of a 2mW solar farm project. The decrease in Other European revenues was largely the result of the delay of the start of several large Bulgarian EPC projects that did not commence construction until early fourth quarter. In addition, we experienced decreased distribution efforts in the Czech Republic.

Cost of Revenues

	For the Nine Months Ended September 30,
(Dollars in thousands)	2011			2010			Change %
Cost of Revenues
North America	$	21,044		$	6,291			235	%
Italy		19,067			6,366			200	%
Other European		12,178			26,058			-53	%
Total cost of revenues	$	52,289		$	38,715			35	%

Share-based compensation included above	$	229		$	163			40	%

Gross Margin Percentage
North America		-3.6	%		(1.4	)%
Italy		10.5	%		13.6	%
Other European		6.5	%		4.0	%
Total		4.3	%		4.9	%

Cost of revenues include project costs for distribution sales and all direct material and labor costs attributable to a project as well as certain indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation costs. The 35% increase in cost of revenues was primarily the result of increased recognized revenues across most of our business segments. Cost of revenues for North America increased $14.8 million, or 235%, for the nine month period ended September 30, 2011 compared to the same period in the prior year. North America gross margin (loss) increased to (3.6)% due to a higher volume of revenues to cover fixed operational costs. The increase in Italian cost of revenues of $12.7 million, or 200%, correlates to the increase in Italian revenues. The gross margin for our Italian operations was 10.5%, down from 13.6% during the same period in the prior year. This decrease was largely the result of increased lower margin distribution and EPC efforts in Italy and the completion of a 2mW project that was below expected operational gross margins. Cost of revenues for our Other European operations decreased by $13.9 million, or 53%, from the same period in the prior year, which correlates to the decrease in revenues from the Other European segment. The gross margin for our Other European operations was 6.5%, up from 4.0% from the prior year as a result of higher margin EPC contract compared to lower margin distribution in the prior period.

Operating Expenses

	For the Nine Months Ended September 30,
(Dollars in thousands)	2011			2010			Change %
Selling and marketing expenses	$	3,001		$	2,948			1.8	%
General and administrative expenses	$	4,482		$	4,847			-7.5	%

As a percent of revenue:
Selling and marketing expenses		5.5	%		7.2	%
General and administrative expenses		8.2	%		11.9	%

Share-based compensation included above:
Selling and marketing expenses	$	544		$	277			96.4	%
General and administrative expenses	$	553		$	273			102.6	%

Sales and Marketing Expenses

Selling and marketing expenses consist primarily of personnel costs and costs related to our sales force and marketing staff. They also include expenses relating to advertising, brand building, marketing promotions and trade show events, lead generation, share-based compensation and travel. Commissions are due and payable when customer payment is received. Selling and marketing expense for the nine months ended September 30, 2011 increased $0.1 million, or 2% compared to the prior period, due to an increase of $0.3 million in share-based compensation over the same period in the prior year offset by decreases in our selling and marketing expenditures related to a reduction in sales efforts in the residential market.

General and Administrative Expenses

General and administrative expenses consist of personnel and related costs for accounting, legal, information systems, human resources, and other administrative functions. They also include professional service fees, bad debt expense, other corporate expenses and related overhead. General and administrative expenses decreased by $0.4 million, or 8%, for the nine month period ended September 30, 2011 compared to the same period ended September 30, 2010, as result of a one-time expense of $0.3 million related to the write-off of costs related to the termination of a secondary public offering. In addition, in North America, we reduced our general and administrative head count by 40% primarily as a result of a reduction in our residential sales efforts. This is offset by an increase of $0.3 million in share-based compensation and an increase in bad debt expense associated with the greater allowance for doubtful accounts.

Other Income and Expenses

Other income and expense consists of change in fair value of contingent consideration liability, loss on extinguishment of contingent consideration liability, interest income, interest expense, transaction foreign currency gains (losses), and other income (expense). Other income, net of expense, was $5.7 million for the period ended September 30, 2010 and decreased by $6.6 million, or 116%, to other expense of $0.9 million for the period ended September 30, 2011. In the 2010 period, we recognized a gain of $5.8 million on the change in fair value of the contingent consideration. During the period ended September 30, 2011, we recognized a loss on the change in fair value of the contingent consideration of $0.1 million and a loss on extinguishment of the contingent consideration of $1.0 million.

Income Taxes

Our effective tax rate was 1% and 939% for the nine months ended September 30, 2011 and 2010, respectively. The effective tax rate in the nine months ended September 30, 2011 differed from the federal statutory rate of 34% primarily due to a valuation allowance against net operating loss benefits generated in the U.S. due to uncertainty as to their future utilization. The valuation allowance was originally recorded during the nine months ended September 30, 2010 resulting in the increased effective tax rate for that period.

LIQUIDITY

Cash Flows

	For the Nine Months Ended
	September 30,
	2011			2010
	(in thousands)
Net cash (used in) provided by operating activities	$	(852	)	$	556
Net cash used in investing activities	$	(53	)	$	(75	)
Net cash provided by (used in) financing activities	$	2,428		$	(1,670	)
Increase (decrease) in cash and cash equivalents	$	1,533		$	(1,200	)

We generate cash from operations primarily from cash collections related to our installation and distribution sales. Net cash flow used in operating activities was $0.9 million for the nine months ended September 30, 2011, compared with net cash provided by operating activities of $0.6 million for the nine months ended September 30, 2010. Our largest source of operating cash flows for the nine months ended September 30, 2011, was the reduction of inventories and an increase in accounts payable. Our primary uses of cash from operating activities are our increase in accounts receivable, accrued liabilities, and decrease in billings in excess of cost and estimated earnings on uncompleted contracts.

The change in cash flows from investing activities was minimal for the nine months ended September 30, 2011 and 2010 with minimal capital asset purchases.

The net change in cash provided by financing activities for the nine months ended September 30, 2011 primarily relates to proceeds from the issuance of Series C convertible preferred stock and a warrant. The net cash used in financing activities for the nine months ended September 30, 2010 was mainly the result of principal payments on debt and costs related to share registration.

Material Impact of Known Events on Liquidity

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

Additionally, a majority of our cash is held offshore, and while we do not currently believe there are any material limitations or restrictions on our ability to repatriate profits there may be tax consequence or changes in statutory rules which would affect our ability to do so.

The disruption in the credit markets has had a significant adverse impact on a number of financial institutions. As of September 30, 2011, however, our liquidity and capital investments have not been materially adversely impacted, and we believe that they will not be materially adversely impacted in the near future. We will continue to closely monitor our liquidity and the credit markets. Nonetheless, we cannot predict with any certainty the impact to us of any further disruption in the credit environment, as we currently have limited financing options.

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

Capital Resources

As of September 30, 2011, we had $4.9 million of cash and cash equivalents. We have financed our operations primarily through operating activities and equity financings. We have three outstanding loans from our founders in the total amount of $0.2 million. These loans bear interest at 6% per annum and are payable on demand. Premier Power Spain has two unsecured loans totaling €0.5 million (€0.3 million and €0.2 million) and a short term line of credit for another €0.1 million as of September 30, 2011. Payments on the two loans began in March 2011 and March 2012, respectively. The €0.3 million loan requires monthly principal payments of €5.5 thousand to the maturity date of February 2016 and the €0.2 million loan requires one payment of €0.2 million by March 2012. The annual interest rates on these notes range from 6.94% to 7.3%. At September 30, 2011, the outstanding balance on the Premier Power Spain loans was $0.8 million. The short term line bears interest at EURIBOR plus 3.25%, or 4.85% at September 30, 2011.

In November 2010, we entered into a factoring agreement with Prestige Capital Corporation (“Prestige”). The initial period of the agreement is through November 2011, with certain automatic extension provisions in the absence of written notice of cancellation by either party. Under the agreement, we agreed to sell from time-to-time certain trade receivables to Prestige. At the time of each transfer, Prestige assumes collections efforts and will earn increasing discounts on the sales price on the following scale: 2.25% if collected within 30 days, 3.25% if collected within 45 days, 4.25% if collected within 60 days, 5.25% if collected within 60 days, with an incremental 2% for each 15 day period thereafter until collected. Prestige maintains recourse to the Company for any accounts that are ultimately uncollectible for any reason other than customer insolvency. We will receive 75% of the sales price of approved receivables in advance, with the remaining 25% remitted to the Company at the time the receivables are collected by Prestige, net of any discounts and other amounts owed by the Company to Prestige. Under the terms of the agreement, net amounts due to Prestige cannot exceed $2 million at any time and are secured by certain of our assets. At September 30, 2011, there were no advances due to Prestige. We believe that this arrangement helps to reduce the amount of capital tied up in uncollected receivables and allows these funds to be utilized for other operating purposes.

In June 2011, we issued 2,350,000 shares of Series C Convertible Preferred Stock (“Series C Stock”), a warrant to purchase 2,000,000 shares of our common stock (“Series C Warrant”), and a six month option to acquire 250,000 additional shares of Series C Stock (“Series C Option”) in exchange for $2,350,000. We incurred expenses of $250,000 related to the offering, resulting in net proceeds of $2,100,000.

The Series C Stock shares in any dividends declared to common stock holders. Additionally, beginning in December 2012, the Series C Stock holders are due a monthly dividend of $0.01667 per share ($.20 per year) if a defined change in control of the Company does not occur prior to June 2012. At our option, these dividends may be paid in shares of our common stock. The Series C Stock converts automatically upon the occurrence of a change in control meeting certain criteria. Holders of the Series C Stock have certain redemption rights.

We have contracted backlog in the amount of approximately $10.0 million in North America, $22.4 million in Other European and $4.5 million in Italy as of September 30, 2011, consisting of non-cancellable signed contracts for projects that we expect to complete within the next 12 months.

In addition, we have approximately 1MW of projects in Spain that we continue to evaluate as the Spanish government adjusts it solar incentives that has an effect on the value of the 1MW, and therefore we are excluding from our current backlog until the incentives are finalized. We have a signed supply agreement with a Danish company estimated to produce 3 to 4 million euro in revenue per year.

Thus, we believe that our current cash and cash equivalents, cash flow from operations, our factoring arrangement, and our lines of credit are sufficient to continue operations for at least the next 12 months. However, we anticipate that we will need to obtain additional debt and/or equity financing in order to achieve our growth objectives and revenue targets. We may seek to raise such proceeds through the sale of debt or equity securities, funding from joint-venture or strategic partners, debt financing or loans, issuance of common stock, or a combination of the foregoing. We cannot provide any assurances that we will be able to secure the additional cash or working capital we will require to achieve our growth objectives and revenue targets.

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

Borrowings

Premier Power Spain has two unsecured loans totaling €0.5 million (€0.3 million and €0.2 million) and a short term line of credit for another €0.1 million (maximum borrowing allowed is €0.2 million) as of September 30, 2011. Payments on the two loans began in March 2011 and March 2012, respectively. The €0.3 million loan requires monthly principal payments of €5.5 thousand to the maturity date of February 2016, and the €0.2 million loan requires one payment of €0.2 million by March 2012. The annual interest rates on these notes range from 6.94% to 7.3%.

At September 30, 2011, the outstanding balance on the Premier Power Spain loans were $0.8 million. The short term line bears interest at EURIBOR plus 3.25%, or 4.85% at September 30, 2011. At September 30, 2011, we had a factoring agreement with Prestige for up to $2 million of advances against eligible receivables. There were no advances due to Prestige at September 30, 2011.

Additionally, there were three loans made to the Company by our founders in the total amount of $0.2 million. These loans bear interest at 6% per annum and are payable on demand from Lender.

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 (principal and interest) as of September 30, 2011, 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
	(in thousands)
Contractual Obligations:
Bank indebtedness	$	1,127	$	763	$	229	$	135
Operating leases		253		102		127		24
	$	1,380	$	865	$	356	$	159

At times we enter into take or pay agreements with our suppliers. This provides pricing advantages to the Company in return for supply certainty. We currently have no take or pay commitments outstanding and have incurred no losses as a result of these types of agreements.

Off-Balance Sheet Arrangements

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

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

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

PART II - OTHER INFORMATION

Item 6. Exhibits.

Exhibit
Number		Description
3.1		Certificate of Incorporation, as amended (1)
3.2		Bylaws, as amended (2)
31.1		Section 302 Certification by the Corporation’s Principal Executive Officer *
31.2		Section 302 Certification by the Corporation’s Principal Financial and Accounting Officer *
32.1		Section 906 Certification by the Corporation’s Principal Executive Officer *
32.2		Section 906 Certification by the Corporation’s Principal Financial and Accounting Officer *
101.INS**		XBRL Instance Document
101.SCH**		XBRL Taxonomy Extension Schema
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase
101.DEF**		XBRL Taxonomy Extension Definition Linkbase
101.LAB**		XBRL Taxonomy Extension Label Linkbase
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase

*	Filed herewith.

**	In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”

(1)	Filed on August 15, 2011 as an exhibit to our Quarterly Report on Form 10-Q, and incorporated herein by reference.

(2)	Filed on August 24, 2011 as an exhibit to Amendment No. 1 to our Quarterly Report on Form 10-Q/A, and incorporated herein by reference.

SIGNATURES

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

	PREMIER POWER RENEWABLE ENERGY, INC.
	(Registrant)

Date: November 14, 2011	By:	/s/ Dean R. Marks
		Dean R. Marks
		Chief Executive Officer
		(Principal Executive Officer)

Date: November 14, 2011	By:	/s/ Frank J. Sansone
		Frank J. Sansone
		Chief Financial Officer
		(Principal Financial & Accounting Officer)

Attached files

Premier Power Renewable Energy, Inc. Reports

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