posam

As filed with the Securities and Exchange Commission on April 28, 2008

Registration No. 333-148526

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Post-Effective Amendment No. 1

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

SOLAR POWER, INC.

(Name of small business issuer in its charter)


California	3674	20-4956638
(State or jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
incorporation or organization)	Classification Code Number)	Identification No.)

1115 Orlando Avenue
Roseville, CA 95661-5247
(916) 745-0900
(Address and telephone number of principal executive offices)

1115 Orlando Avenue
Roseville, CA 95661-5247
(916) 745-0900
(Address of principal place of business)

Stephen C. Kircher
Chief Executive Officer
1115 Orlando Avenue
Roseville, CA 95661-5247
(916) 745-0900
(Name, address and telephone number of agent for service)

Copies to:
David C. Adams, Esq.
WEINTRAUB GENSHLEA CHEDIAK
400 Capitol Mall, Suite 1100
Sacramento, California 95814
Telephone: (916) 558-6028

Approximate date of proposed sale to the public:

From time to time after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. þ

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the Prospectus is expected to be made pursuant to Rule 434, please check the following box. o

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


Large accelerated filer o		Accelerated filer o	Non-accelerated filer o (Do not check if a smaller reporting company)			Smaller reporting company þ

CALCULATION OF REGISTRATION FEE

Proposed

Amount of

maximum

Amount of

Title of each class of

shares to be

offering price

aggregate

Registration

securities to be registered

Registered

per share

offering price

Fee

Common Stock

5,813,911

$4.095

$23,807,966

$935.65

Common Stock underlying warrants

1,489,580(1)

$4.095(2)

$6,099,830

$239.72

Total

7,303,491

$29,907,796

$1,175.37(3)

(1)		Represents the number of shares of common stock offered for resale following the exercise of warrants.

(2)		Calculated in accordance with Rule 457(g) of the Securities Act of 1933, as amended (“Securities Act”). Estimated for the sole purpose of calculating the registration fee.

(3)		Fee previously paid.

We hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until it shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

SUBJECT TO COMPLETION, DATED April 28, 2008

PROSPECTUS

7,303,491 Shares

SOLAR POWER, INC.

Common Stock

This Prospectus relates to the resale of up to 7,303,491 shares of common stock, $.0001 par value, by the Selling Security Holders listed under “Selling Security Holders” on page 67 including the resale of 1,489,580 shares of our common stock by certain Selling Security Holders upon the exercise of outstanding warrants. We will not receive any proceeds from the resale of any common stock by the Selling Security Holders sold pursuant to this Prospectus. We will receive gross proceeds of $5,809,362 if all of the warrants are exercised for cash by the Selling Security Holders.

Our common stock is traded on the OTC Bulletin Board under the Symbol “SOPW.OB.” On April 21, 2008, the last reported sale price of our common stock on the OTC Bulletin Board was $1.34 per share.

The Selling Security Holders may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock registered under this Prospectus on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, or at negotiated prices. The Selling Security Holders may use any one or more of the following methods when selling shares: (i) ordinary brokerage transactions and transactions in which the broker-dealer solicits investors; (ii) block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; (iii) purchases by a broker-dealer as principal and resale by the broker-dealer for its account; (iv) at prevailing market prices or privately negotiated prices on the OTC Bulletin Board or other applicable exchange; (v) privately negotiated transactions; (vi) to cover short sales after the date the registration statement of which this Prospectus is a part is declared effective by the Securities and Exchange Commission; (vii) broker-dealers may agree with the Selling Security Holders to sell a specified number of such shares at a stipulated price per share; (viii) a combination of any such methods of sale; and (ix) any other method permitted pursuant to applicable law.

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE “RISK FACTORS” BEGINNING ON PAGE 7 OF THIS PROSPECTUS.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The information in this Prospectus is not complete and may be changed. The Selling Security Holders may not sell these securities until the registration statement filed with the Securities and Exchange Commission becomes effective. This Prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such state.

The date of this Prospectus is January 22, 2008.

You should rely only on the information contained in this Prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information provided by this Prospectus is accurate as of any date other than the date on the front cover page of this Prospectus.

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed information and the financial statements appearing elsewhere in this Prospectus. This Prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” and elsewhere in this Prospectus. Unless the context indicates or suggests otherwise, the terms “we,” “our” and “us” means Solar Power, Inc., and its subsidiaries.

The Offering


Issuer		Solar Power, Inc.

Securities Offered for Resale		Up to 7,303,491 shares of our common stock, which amount includes 1,489,580 shares issuable upon exercise of warrants to purchase our common stock

Common Stock to be Outstanding After the Offering		37,573,263 shares¹

Use of Proceeds		We will not receive any proceeds from the resale of any of the shares offered hereby. We will, however, receive proceeds upon exercise of the warrants, to the extent exercised. The warrants have an exercise price of $3.90 and expire on December 20, 2012.

Trading		Our common stock is quoted on the OTC Bulletin Board under the symbol “SOPW.OB”

Risk Factors		You should carefully consider the information set forth in the section entitled “Risk Factors” beginning on page ___of this prospectus in deciding whether or not to invest in our common stock


¹		Unless the context indicates otherwise, all share and per-share information in this prospectus is based on 37,655,325 shares of our common stock outstanding as of March 31, 2008. Shares of common stock to be outstanding after this offering, excluding shares issuable upon exercise of the warrants, assumes that all shares registered under this prospectus are sold by the selling stockholders.

Our Business

Corporate History

As discussed in this prospectus, we became the registrant through a reverse merger with Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.), on December 29, 2006, and we are considered the accounting acquirer and registrant following that merger. Welund Fund Inc. was originally incorporated in the State of Delaware on July 16, 2002 under that name, and effective January 2006, pursuant to authorization of its stockholders, it changed its domicile from the State of Delaware to the State of Nevada through a merger with and into its wholly-owned subsidiary which was a Nevada corporation. On October 4, 2006, it changed its name from Welund Fund Inc. to Solar Power Inc., and it effected a one-for-three reverse stock split. For purposes of discussion and

disclosure, we refer to the predecessor as Solar Power, Inc., a Nevada Corporation (formerly Welund Fund, Inc.), to distinguish it from the registrant and accounting acquirer, Solar Power, Inc., a California corporation.

On August 6, 2006, Solar Power, Inc., a California corporation, entered into share exchange agreement with all the shareholders of International Assembly Solutions, Limited (“IAS HK”), which was incorporated in Hong Kong on January 18, 2005 with limited liability. Solar Power, Inc. a California corporation was originally incorporated in the State of California to facilitate creation of a U.S. holding company for IAS HK operations and to engage in sales, installation and integration of photovoltaic systems in the U.S. Pursuant to the share exchange agreements, the equity owners of IAS HK transferred all their equity interest in IAS HK in exchange for a total of 14,000,000 shares of Solar Power, Inc. a California corporation, in November 2006. As a result, IAS HK became a wholly owned subsidiary of Solar Power, Inc., a California corporation. There were a total of sixteen shareholders in IAS Hong Kong including the controlling shareholders Stephen Kircher, Gerald Moore and Bradley Ferrell. Mr. Kircher Chairman of the Board of IAS HK, held dispositive and voting control of 8,100,000 shares or approximately 58% of the outstanding shares. Mr. Kircher remains Chairman of the Board of IAS HK. Mr. Moore and Mr. Ferrell owned 4,100,000 (29%) and 1,500,000 (11%) shares respectively. Neither Mr. Moore nor Mr. Ferrell was a director of IAS HK. IAS HK does not have company officers and management and business decisions were made by Mr. Kircher. Being a group reorganization entered into among entities under common control, the Company combined the historical financial statements of IAS HK and its wholly owned subsidiary, IAS Electronics (Shenzhen) Co., Ltd. (“IAS Shenzhen”). Messers. Kircher, Moore and Sam Lau were directors of IAS Shenzhen from inception until July 15, 2006, at which time our CFO replaced Mr. Moore as director. Mr. Kircher made business decisions for IAS Shenzhen, and it does not have formal officers.

On August 23, 2006, Solar Power Inc., a Nevada Corporation (formerly Welund Fund Inc.) entered into an Agreement and Plan of Merger with Solar Power, Inc., a California corporation and Welund Acquisition Corp., a Nevada corporation and wholly-owned subsidiary (“Merger Sub”). Solar Power, Inc., a California corporation, also entered into a merger agreement with Dale Renewables Consulting, Inc. (“DRCI”) in order to accelerate its entry into the solar integration and installation business in California. On November 15, 2006 we closed that merger and assumed the existing installation contracts and retained DRCI’s employees. On December 29, 2006, Merger Sub merged with Solar Power, Inc., a California corporation and Solar Power, Inc., a California corporation became a wholly-owned subsidiary (the “Merger”). In connection with the Merger, (a) Solar Power Inc., a Nevada Corporation (formerly Welund Fund Inc.) sold its pool of finance receivables, (b) issued 14,500,000 shares of our common stock to the shareholders of Solar Power, Inc., a California corporation, (c) substituted 2,000,000 restricted stock awards and options of Solar Power, Inc., a California corporation with restricted stock awards and options to purchase shares of common stock on the same terms and conditions of the Solar Power, Inc., a California corporation options and restricted stock awards, and (d) Solar Power Inc., a Nevada Corporation (formerly Welund Fund Inc.) directors and officers were replaced with the officers and directors of Solar Power, Inc., a California corporation who assumed control of the combined companies. As a result of the Merger, Solar Power Inc., a Nevada Corporation (formerly Welund Fund Inc.) discontinued its former auto loans business and changed its focus and strategic direction and pursued operations in the solar power business. On February 15, 2007, Solar Power Inc., a Nevada Corporation (formerly Welund Fund Inc.) re-domiciled in the State of California pursuant to a merger with Solar Power, Inc., a California corporation as further described below under the section titled “Recent Events.”

Recent Events

On January 3, 2007, Solar Power, Inc., a California corporation repaid loans and notes payable to Stephen C. Kircher, Solar Power, Inc., a California corporation’s CEO and Chairman of $327,562 which included principal of $320,000 and accrued interest of $7,562. The loan was paid prior to its due date due to the fact that its interest rate was greater than the interest the cash used to repay the loan could earn.

In January 2007, Solar Power, Inc., a California corporation repaid loans payable to Hannex Investment Ltd. of $270,829 which included principal of $245,000 and accrued interest of $25,829. The loan was paid prior to its due date due to the fact that its interest rate was greater than the interest the cash used to repay the loan could earn.

In January 2007, Solar Power, Inc., a California corporation paid $175,000 in cash and in February 2007, Solar Power, Inc., a California corporation issued 31,435 shares of its common stock, fair valued at $31,435 to the shareholders of Sundance Power, LLC. in partial satisfaction of the contingent payment obligation accrued at December 31, 2006, in conjunction with a Revenue Sharing Agreement between Sundance Power, LLC and Solar Power, Inc., a California corporation.

On February 7, 2007, the stockholders approved Solar Power, Inc., a California corporation’s 2006 Equity Incentive Plan which permits us to grant stock options to directors, officers or employees or others to purchase shares of common stock of Solar Power,

Inc., a California corporation through awards of Incentive and Nonqualified Stock Options (“Options”), Stock (“Restricted Stock” or “Unrestricted Stock”) and Stock Appreciation Rights (“SARs”). The Plan was approved by the Stockholders subsequent to year-end.

On February 15, 2007, we completed our redomicile into the State of California. The redomicile was duly approved by both our respective Board of Directors and a majority of our stockholders at our annual meeting of shareholders held on February 7, 2007. The redomicile was completed by means of a merger between us and Solar Power, Inc., a California corporation, which was our wholly-owned subsidiary at that time, with Solar Power, Inc., a California corporation being the surviving corporation. We redomiciled to change the corporate law governing us to California law, the state of our U.S. operations.

As part of the redomicile, on February 15, 2007, each outstanding share of our common stock, par value $.0001, was automatically converted into one share, par value $.0001, of Solar Power, Inc., a California corporation common stock, all of our property, rights, privileges, and powers vested in Solar Power, Inc., a California corporation, and all of our debts, liabilities and duties became the debts, liabilities and duties of Solar Power, Inc., a California corporation. Additionally, the Amended and Restated Articles of Incorporation of Solar Power, Inc., a California corporation and the Bylaws of Solar Power, Inc., a California corporation, became the governing documents of the surviving corporation. The directors and officers of Solar Power, Inc., a California corporation immediately prior to the effective date of the re-domicile, continue to be the directors and officers of the surviving corporation. The redomicile resulted in no change in our management because all of our directors and officers were also directors and officers of Solar Power, Inc., a California corporation prior to the re-incorporation.

On March 21, 2007 we, through our wholly-owned subsidiary, Solar Power Integrators, Commercial, Inc. (“SPIC”) entered into a General Partnership Agreement with J.R. Conkey and Associates, Inc. (“JRC”). JRC is owned by James R. Conkey. Mr. Conkey invested $100,000 into Solar Power, Inc.’s (formerly Welund Fund, Inc.) private placement in October 2006. He acquired 100,000 shares in that transaction. Mr. Conkey’s shares are being registered as part of our registration statement pending with the Securities and Exchange Commission. The 100,000 shares represent the total of Mr. Conkey’s investment in Solar Power, Inc., a California corporation and he is not a related party to the Company. The partnership will engage in the sales, design and installation of solar systems in certain market segments for solar contracts within California. As initial capital contributions to the partnership, JRC is contributing $25,500 and SPIC is contributing $24,500. JRC is the managing partner of the partnership and will manage and conduct the day-to-day business affairs of the partnership. Additionally, JRC will be responsible for all marketing and sales efforts, establishing and maintaining customer relationships, and contract management. SPIC will be responsible for exclusively supplying all solar panels or other solar materials to the partnership and for design, engineering, and installation of all solar systems for customers. SPIC will control financial and accounting records. The Company has determined that this partnership will be subject to consolidation based on its interpretation of FIN 46(R) Consolidation of Variable Interest Entities (as amended). Specifically under FIN 46(R), paragraph 5(a)(4), the Company has additional risk with loans that will be advanced to the partnership. We entered into the partnership in an effort to capitalize on certain government relationships which JRC has through its VA certification. Through April 28, 2008, no activity has occurred in the partnership. In addition, neither JRC or the Company has contributed initial capital or performed any of the stated responsibilities.

On April 9, 2007, we entered into a standard Securities Purchase Agreement with E-Ton Solar Tech, Co. Ltd. a foreign accredited investor as part of a private placement to raise $500,000 (the “Financing”). In connection with the Financing, we sold an aggregate of 500,000 shares of restricted common stock par value $0.0001 per share, at a purchase price of $1.00 per (the per share value of our most recent private placement) share for an aggregate sale price of $500,000 to the investor. E-Ton Solar Tech, Co. Ltd. is one of several of our solar panel suppliers and not considered to be a related party to the Company. These shares are not being registered as part of our SB-2 registration statement with the Securities and Exchange Commission. The transaction was viewed as a strategic relationship with a significant player in our industry.

On April 12 and 17, 2007 we issued standby letters of credit totaling $800,000 to two suppliers, Sharp Electronics and Kyocera Solar. The letters of credit were issued in support of our line of credit to purchase solar panels from these suppliers. The suppliers have no interest in us and are not considered related parties. The term of the letters of credit are twelve months and are collateralized by $800,000 of our cash. The letters of credit support our purchase of product and materials from those entities related to our business.

On June 5, 2007, the Company entered into a capitalized lease agreement with California First Leasing Corporation to finance the purchase approximately $581,000 of software and hardware. The term of the lease is thirty-six months; the Company paid an initial security deposit of approximately $9,000 and secured the lease with a letter of credit collateralized by the Company’s cash deposits.

On June 8, 2007, the Company issued a standby letter of credit in the amount of $1,000,000 in favor of China Merchants Bank as collateral for the line of credit of its subsidiary, IAS Electronics (Shenzhen) Co., Ltd. The letter of credit is for a term of one year and is secured by the Company’s cash deposits.

On June 20, 2007, the Company issued a standby letter of credit to California First Leasing Corporation in the amount of $284,367 as security for a capital lease agreement. The term of the letter of credit is one year and is secured by the Company’s cash deposits. On July 31, 2007 that letter of credit was increased to $601,100 to secure an increase to principal and interest to the capital lease agreement.

On July 25, 2007, the Company entered into an office lease for the relocation of the Company headquarters. The building is located in Roseville, California and has approximately 19,000 square feet. The term of the lease is five years commencing on August 1, 2007, with an initial rent of approximately $343,000 per year and has an option to renew for an additional five years. On July 25, 2007, the Company paid a security deposit and first-months rent of approximately $60,000.

On August 14, 2007, through its wholly owned subsidiary Yes! Solar, Inc., the Company filed with the State of California Department of Corporations a Uniform Franchise Offering Circular (“UFOC”) for approval and Solar Power, Inc. executed a Guarantee of Performance of Yes! Solar, Inc. to the State of California Department of Corporations. The Company has received approval of the UFOC and has begun marketing its franchise program. In March 2008, Yes! Solar, Inc. entered into two franchise agreements for territories in California.

On December 13, 2007, the Company and its wholly-owned subsidiary, Yes! Solar, Inc. (“YES”) entered into a Retailer Program Agreement (the “Agreement”) with GE Money Bank to provide to YES retail customers a vehicle to finance solar systems purchased from YES. The agreement provides that the Company will provide a standby letter of credit equal to the greater of $50,000 or one percent of sales under the Agreement. A standby letter of credit in the amount of $50,000 was issued on November 14, 2007 as a condition to the execution of the Agreement. The term of the letter of credit is for one year. As of April 21, 2008 there were no sales under this Agreement.

On December 20, 2007, the Company completed a private placement of 4,513,911 shares of its common stock at $2.60 per share. Gross proceeds from the placement were approximately $11,736,000. In conjunction with the private placement the Company issued 1,489,580 shares underlying warrants to purchase our common stock at an exercise price of $3.90 per share.

Overview

We are currently engaged in manufacturing and selling cable, wire and mechanical assemblies, in designing, distributing and installing complete photovoltaic systems for industrial, commercial and residential facilities located primarily in the United States and manufacturing photovoltaic modules, utilizing both Monocrystalline and Multicrystalline silicone, in our China factory. Currently, the factory utilizes approximately fifty percent of its capacity. The remaining un-utilized capacity is being reserved for photovoltaic module and balance of system expansion.

We bring our solar power products to market by utilizing strategic company-owned store operations and intend to establish a national franchise network. We opened our first energy outlet in Northern California in October 2007. Company-owned store operations market, sell and install our products within a locally defined geographic area.

Outside of Company-owned store operations, we intend to work with franchisee partners who will have exclusive geographical territories that include specific application focus. Each franchise partner will establish retail operations in a defined geographic area to market, sell and install photovoltaic systems. In March 2008, the Company entered into its first two franchise sale agreements.

In our early history, our revenue was derived principally from the sale of cable and wire harnesses, and mechanical assemblies. With the launch of our solar module business, and efforts in installation and sale of those modules, we have realized increased revenues. We anticipate that revenues from our solar module business will continue as we expand our market for installation contracts. We anticipate similar increases in the future from our franchising for residential projects. With our efforts increasingly directed at solar module manufacturing and installation in the U.S., we will continue to assess our internal resource needs. We have made a significant number of hires recently to manage construction projects, and anticipate continued hiring as we grow the business. Currently, significant resources have been used in the establishment of our corporate structure for finance, reporting, and governance, and we would anticipate that such expenses will decrease, as a percentage of revenue, as our business from solar installation increases.

Additionally, we have expended resources directed at creating our franchise model and roll out, including documentation associated with those efforts, and have not recognized any revenue from that component of our business.

As a result of the Merger described previously, our operations are now conducted through Solar Power, Inc., a California corporation, and our wholly-owned subsidiaries located in California and in China.

Management is considering the impact of the following areas as it implements the manufacturing of complete photovoltaic systems and planned business model:

•

Solar cell pricing trends around the world: Recently the key material in the production of solar cells (silicon) has been in limited in supply. Consequently, prices and availability of solar modules have been limited. Solar cells are the major component cost in a photovoltaic module. The Company has responded by seeking long-term supply agreements for solar cells where pricing is adjusted quarterly to market rates. To date the Company has not entered into any long-term supply agreements for solar cells. Our intent is secure ample solar cell supply to meet our growth needs and to avoid the risk of long-term contract pricings with suppliers whose products are expected to see a decline in the average selling price. Industry experts believe that additional planned expansion of silicon processing factories coming on line over the next 18 months will produce enough raw materials to create an oversupply on projected demand. Failure to effectively manage our supply will hinder our expected growth and our component costs may have an adverse affect on the Company’s profitability; and

•

Government subsidies: Federal and State subsidies relating directly to solar installations are an important factor in the planned growth of the solar industry. These subsidies are very important to growing the market for photovoltaic systems because they provide a significant economic incentive to all buyers. Without these incentives, industry growth would likely stall. These regulations are constantly being amended and will have a direct effect on our rollout of our planned franchise network among those states that offer superior incentives to the solar industry.

Our Strategy and Products

Our business strategy is to develop, manufacture and market solar panels and system component products as a complete photovoltaic system to industrial, commercial and residential facilities located primarily in the United States.

Our principal products include the following:

•

Modules. A solar module is an assembly of solar cells that have been electrically interconnected and laminated in a physically durable and weather-tight package. A typical solar module can produce from 20 to 300 watts of power and range in size from 2 to 25 square feet. Our typical commercial module will range from 180 to 220 watts.

•

Systems. A solar system is an assembly of one or more solar modules that have been physically mounted and electrically interconnected to produce electricity. System components include inverters, meters, racking systems, cables and wiring. Typical residential on-grid systems produce between 2,000 to 6,000 watts of power.

If our development programs are successful, we expect to continue to increase the conversion efficiency and power of our solar modules as we expand our manufacturing capacity and increase our efficiencies through ongoing process improvement with a specific emphasis on reducing labor on installations.

Principal Offices

Our principal executive offices are located at 1115 Orlando Avenue, Roseville, CA 95661-5247 which is also our mailing address. Our telephone number is (916) 745-0900.

Transfer Agent

Our transfer agent is Computershare Trust Co., Inc., and is located at 350 Indiana Street, Suite 800, Golden, CO 80401. Their telephone number is (303) 262-0600.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

Except for statements of historical facts, this Prospectus contains forward-looking statements involving risks and uncertainties. The words “expect,” “estimate,” “anticipate,” “predict,” “believe,” and similar expressions and variations thereof are intended to identify forward-looking statements. Such statements appear in a number of places in this Prospectus and include statements regarding our intent, belief or current expectations regarding our strategies, plans and objectives, our product release schedules, our ability to design, develop, manufacture and market products, our intentions with respect to strategic acquisitions, the ability of our products to achieve or maintain commercial acceptance and our ability to obtain financing for our obligations. Any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those projected in this Prospectus, for the reasons, among others, described within the various sections of this Prospectus, specifically the section entitled “Risk Factors” beginning on page 10. You should read this Prospectus carefully, and should not place undue reliance on any forward-looking statements, which speak only as of the date of this Prospectus. We undertake no obligation to release publicly any updated information about forward-looking statements to reflect events or circumstances occurring after the date of this Prospectus or to reflect the occurrence of unanticipated events. Unless the context indicates or suggest otherwise reference to “we”, “our”, “us”, and the “Company” in this section refers to the consolidated operations of Solar Power, Inc., a California corporation, DRCI and Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.), on a post-Merger and post Reincorporation basis, and references to “SPI Nevada” refers to Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) prior to the Merger and Reincorporation.

The risks described below are the ones we believe are most important for you to consider. These risks are not the only ones that we face. If events anticipated by any of the following risks actually occur, our business, operating results or financial condition could suffer and the price of our common stock could decline.

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and all other information contained in our public filings before making an investment decision about our common stock. While the risks described below are the ones we believe are most important for you to consider, these risks are not the only ones that we face. If any of the following risks actually occurs, our business, operating results or financial condition could suffer, the trading price of our common stock could decline and you could lose all or part of your investment.

Factors, Risks and Uncertainties That May Affect our Business

With the exception of historical facts stated herein, the matters discussed in this report on Form SB-2 are “forward looking” statements that involve risks and uncertainties that could cause actual results to differ materially from projected results. Such “forward looking” statements include, but are not necessarily limited to statements regarding anticipated levels of future revenues and earnings from the operations of Solar Power, Inc. and its subsidiaries, projected costs and expenses related to our operations, liquidity, capital resources, and availability of future equity capital on commercially reasonable terms. Factors that could cause actual results to differ materially are discussed below. We disclaim any intent or obligation to publicly update these “forward looking” statements, whether as a result of new information, future events or otherwise. Unless the context indicates or suggest otherwise reference to “we”, “our”, “us”, and the “Company” in this section refers to the consolidated operations of Solar Power, Inc., a California corporation, DRCI and Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.), on a post-Merger and post Reincorporation basis, and references to “SPI Nevada” refers to Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) prior to the Merger and Reincorporation.

Risks Related to Our Business

We have limited experience manufacturing solar systems on a commercial basis and have a limited operating history on which to base our prospects and anticipated results of operations.

We commenced solar power-related operations in June 2006 and began manufacturing solar modules in April 2007. As a result, we have limited experience manufacturing solar systems on a commercial basis. Our IAS (Shenzhen) Electronics Co., Ltd. subsidiary completed its first mechanical assembly manufacturing line in May 2005 and began commercial shipment of its cable, wire and mechanical products in June 2005. Although we are continuing to develop our solar manufacturing capabilities and processes, we do not know whether the processes we have developed will be capable of supporting large-scale manufacturing, or whether we will be able to develop the other processes necessary for large-scale manufacturing of solar systems that meet the requirements for cost, schedule, quality, engineering, design, production standards and volume requirements. If we fail to develop or obtain the necessary manufacturing capabilities it will significantly alter our business plans and could have a material adverse effect on our business, prospects, results of operations and financial condition. Moreover, due to our limited operating history, our historical operating results may not provide a meaningful basis for evaluating our business, financial performance and prospects. We have incurred net losses since our inception and, as of December 31, 2007, had an accumulated deficit of $9.4 million. We may be unable to achieve or maintain profitability in the future.

Our operating results may fluctuate significantly from period to period; if we fail to meet the expectations of securities analysts or investors, our stock price may decline significantly.

Several factors can contribute to significant quarterly and other periodic fluctuations in our results of operations. These factors may include but are not limited to the following:

	•		the timing of orders;

	•		the volume of orders relative to our capacity;

	•		the availability and pricing of raw materials, such as solar cells and wafers;

	•		delays in delivery of components or raw materials by our suppliers, which could cause delays in our delivery of products to our customers;

	•		delays in our product sales, design and qualification processes, which vary widely in length based upon customer requirements;

	•		product introductions and market acceptance of new products or new generations of products;

	•		effectiveness in managing manufacturing processes;

	•		changes in cost and availability of labor and components;

	•		product mix;

	•		pricing and availability of competitive products and services;

	•		changes in government regulations;

	•		changes or anticipated changes in economic conditions;

	•		delays in installation of specific projects due to inclement weather;

	•		political uncertainties in China;

	•		changes in tax-based incentive programs;

	•		changes in currency translation rates affecting margins and pricing levels; and availability of financing for customers.

We base our planned operating expenses in part on our expectations of future revenue, and we believe a significant portion of our expenses will be fixed in the short-term. If revenue for a particular quarter is lower than we expect, we likely will be unable to proportionately reduce our operating expenses for that quarter, which would harm our operating results for that quarter. This may cause us to miss analysts’ guidance or any guidance announced by us. If we fail to meet or exceed analyst or investor expectations or our own future guidance, even by a small amount, our stock price could decline, perhaps substantially.

Our business strategy depends on the widespread adoption of solar power technology, and if demand for solar power products fails to develop sufficiently, our revenues and ability to achieve or maintain profitability could be harmed.

The market for solar power products is emerging and rapidly evolving, and its future success is uncertain. If solar power technology proves unsuitable for widespread commercial deployment or if demand for solar power products fails to develop sufficiently, we may not be able to generate enough revenues to achieve and sustain profitability. The factors influencing the widespread adoption of solar power technology include but are not limited to:

	•		cost-effectiveness of solar power technologies as compared with conventional and non-solar alternative energy technologies;

	•		performance and reliability of solar power products as compared with conventional and non-solar alternative energy products;

	•		success of other alternative distributed generation technologies such as fuel cells, wind power and micro turbines;

	•		fluctuations in economic and market conditions which impact the viability of conventional and non-solar alternative energy sources, such as increases or decreases in the prices of oil and other fossil fuels; and

	•		availability of government subsidies and incentives.

If we do not obtain sufficient supply of solar cells and other components and materials to conduct our business, our revenues and operating results could suffer.

There are a limited number of solar cell suppliers. Our estimate regarding our supply needs may not be correct and our purchase orders may be cancelled by our suppliers. If our suppliers cancel our purchase orders or change the volume or pricing associated with these purchase orders, we may be unable to meet existing and future customer demand for our products, which could cause us to lose customers, market share and revenue.

Our component and materials suppliers may fail to meet our needs. We manufacture all of our solar power products using materials and components procured from a limited number of third-party suppliers. We do not currently have long-term supply contracts with our suppliers. This generally serves to reduce our commitment risk but does expose us to supply risk and to price increases that we may not be able to pass on to our customers. In some cases, supply shortages and delays in delivery may result in curtailed production or delays in production, which could contribute to a decrease in inventory levels and loss of profit. We expect that shortages and delays in deliveries of some components will occur from time to time. If we are unable to obtain sufficient components on a timely basis, we may experience manufacturing delays, which could harm our relationships with current or prospective customers and reduce our sales. We also depend on a select number of suppliers for certain supplies that we use in our business. If we are unable to continue to purchase components from these limited source suppliers or are unable to identify alternative suppliers, our business and operating results could be materially and adversely affected. In addition our competitors may be able to obtain better pricing.

The execution of our growth strategy is dependent upon the continued availability of third-party financing arrangements for our customers.

For many of our projects, our customers have entered into agreements to pay for solar energy over an extended period of time based on energy savings generated by our solar power systems, rather than paying us to purchase our solar power systems. For these types of projects, most of our customers choose to purchase solar electricity under a power purchase agreement with a financing company that purchases the system from us. These structured finance arrangements are complex and may not be feasible in some situations. In addition, customers opting to finance a solar power system may forgo certain tax advantages associated with an outright purchase on an accelerated basis which may make this alternative less attractive for certain potential customers. If financing companies are unwilling or unable to finance the cost of our products, or if the parties that have historically provided this financing cease to do so, or only do so on terms that are substantially less favorable for us or these customers, our growth will be adversely affected.

Subsidies provided by foreign governments impact the supply and price of solar cells and could make it difficult for us to compete effectively.

Several foreign countries, including Germany, Italy, Spain and Portugal, provide manufacturers of solar products with substantial subsidies to encourage their production of clean solar energy. In many instances, these subsidies are greater than the subsidies we are able to obtain in the U.S. for our operations, which increases the ability of solar product manufacturers in these countries to pay more than we can pay for solar cells while still remaining profitable. If worldwide demand for solar cells from companies located in countries with large solar subsidy programs increases, our suppliers may increase the price they charge to purchase solar cells and allocate available supplies of solar cells to manufacturers located in countries with higher solar subsidies than those provided in the U.S. This risk will increase if more countries implement policies to further subsidize solar technologies. These increased costs and supply constraints could materially and adversely affect our results of operations and our ability to compete effectively.

The solar power industry is currently experiencing an industry-wide shortage of polysilicon. This shortage poses several risks to our business, including possible constraints on revenue growth and possible decreases in our gross margins and profitability.

There is currently an industry-wide shortage of polysilicon, which has resulted in significant price increases in solar cells. Polysilicon is an essential raw material used in the production of solar cells. We expect that the average spot price of polysilicon will continue to increase in the near-term. Increases in polysilicon prices could increase the price we pay for solar cells, which could impact our manufacturing costs and our net income. Even with these price increases, demand for solar cells has increased, and many of our principal competitors have announced plans to add additional manufacturing capacity. As this manufacturing capacity becomes operational, it may increase the demand for polysilicon in the near-term and further exacerbate the current shortage. Polysilicon is also used in the semiconductor industry generally and any increase in demand from that sector will compound the shortage. The production of polysilicon is capital intensive and adding additional capacity requires significant lead time. While we are aware that several new facilities for the manufacture of polysilicon are under construction, we do not believe that the supply imbalance will be remedied in the near-term, which could lead to higher prices for, and reduced availability of, solar cells.

As polysilicon supply increases, the corresponding increase in the global supply of solar cells and panels may cause substantial downward pressure on the prices of our products, resulting in lower revenues and earnings.

The scarcity of polysilicon has resulted in the underutilization of solar panel manufacturing capacity at many of our competitors and potential competitors, particularly in China. As additional polysilicon becomes available, we expect solar panel production globally to increase. Decreases in polysilicon pricing and increases in solar panel production could each result in substantial downward pressure on the price of solar cells and panels, including our products. Such price reductions could have a negative impact on our revenue and earnings, and materially adversely affect our business and financial condition.

If we do not achieve satisfactory yields or quality in manufacturing our solar modules or if our suppliers furnish us with defective solar cells, our sales could decrease and our relationships with our customers and our reputation may be harmed.

The success of our business depends upon our ability to incorporate high quality and yield solar cells into our products. We test the quality and yield of our solar products and the solar cells that we incorporate into our solar products, and we source our solar cells from manufacturers we believe are reputable. Nonetheless, our solar modules may contain defects that are not detected until after they are shipped or are installed because we cannot test for all possible scenarios. These defects could cause us to incur significant re-engineering costs, divert the attention of our engineering personnel from product development efforts and significantly affect our customer relations and business reputation. In addition, we may not be able to fulfill our purchase orders if we purchase a large number of defective solar cells. The number of solar cells that we purchase at any time is based upon expected demand for our products and an assumed ratio of defective to non-defective solar cells. If this ratio is greater than expected, we may not have an adequate number of non-defective solar cells to allow us to fulfill our purchase orders on time. If we do not fulfill orders for our products because we have a shortage of non-defective solar cells or deliver modules with errors or defects, or if there is a perception that these solar cells or solar modules contain errors or defects, our credibility and the market acceptance and sales of our products could be harmed.

Potential strategic acquisitions or alliances may not achieve our objectives.

We are currently exploring additional strategic acquisitions or alliances designed to enhance or complement our technology or to work in conjunction with our technology, increase our manufacturing capacity, provide additional know-how, components or supplies and develop, introduce and distribute products and services utilizing our technology and know-how. If we make any acquisitions we may assume unknown or contingent liabilities. Any future acquisitions by us also may result in significant write-offs or the incurrence of debt and contingent liabilities, any of which could harm our operating results. We may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all. Any strategic acquisitions or alliances entered into may not achieve our strategic objectives, and parties to our strategic acquisitions or alliances may not perform as contemplated.

We may not be able to efficiently integrate the operations of our acquisitions, products or technologies.

From time to time, we may acquire new and complementary technology, assets and companies. We do not know if we will be able to complete any acquisitions or if we will be able to successfully integrate any acquired businesses, operate them profitably or retain key employees. Integrating any other newly acquired business, product or technology could be expensive and time-consuming, disrupt our ongoing business and distract our management. We may face competition for acquisition targets from larger and more established companies with greater financial resources. In addition, in order to finance any acquisitions, we might be forced to obtain equity or debt financing on terms that are not favorable to us and, in the case of equity financing our stockholders interests may be diluted. If we are unable to integrate effectively any newly acquired company, product or technology, our business, financial condition and operating results could suffer.

Failure to optimize our manufacturing potential and cost structure could materially and adversely affect our business and operating results.

We have one manufacturing facility in China. We strive to fully utilize the manufacturing capacity of our facility but may not do so on a consistent basis. Our factory utilization will be dependent on predicting volatility, timing volume sales to our customers, balancing our productive resources with product mix, and planning manufacturing services for new or other products that we intend to produce. Demand for manufacturing of these products may not be as high as we expect, and we may fail to realize the expected benefit from our investment in our manufacturing facilities. Our profitability and operating results are also dependent upon a variety of other

factors, including: utilization rates of our manufacturing lines, downtime due to product changeover, impurities in raw materials causing shutdowns, maintenance of operations and availability of power, water and labor resources.

The reduction or elimination of government and economic incentives could cause our revenue to decline.

We believe that the growth of the market for “on-grid” applications, where solar power is used to supplement a customer’s electricity purchased from the utility network, depends in large part on the availability and size of government-generated economic incentives. At present, the cost producing solar energy generally exceeds the price of electricity in the U.S. from traditional sources. As a result, to encourage the adoption of solar technologies, the U.S. government and numerous state governments have provided subsidies in the form of cost reductions, tax write-offs and other incentives to end users, distributors, systems integrators and manufacturers of solar power products. Reduction, elimination and/or periodic interruption of these government subsidies and economic incentives because of policy changes, fiscal tightening or other reasons may result in the diminished competitiveness of solar energy, and materially and adversely affect the growth of these markets and our revenues. Electric utility companies that have significant political lobbying powers may push for a change in the relevant legislation in our markets. The reduction or elimination of government subsidies and economic incentives for on-grid solar energy applications, especially those in our target markets, could cause our revenues to decline and materially and adversely affect our business, financial condition and results of operations. The existing Federal Investment Tax Credit is scheduled to expire on December 31, 2008 unless renewed by the United States Government.

We face intense competition, and many of our competitors have substantially greater resources than we do.

We operate in a competitive environment that is characterized by price fluctuation and technological change. We compete with major international and domestic companies. Our major system integrator competitors include SunPower/Powerlight, SPG Solar, Akeena Solar, Sun Edison, Global Solar plus numerous other regional players, and other similar companies primarily located in California and New Jersey. Manufacturing competitors include multinational corporations such as BP Solar, Kyocera Corporation, Mitsubishi, Solar World AG, Sharp Corporation, SunPower/Powerlight and Sanyo Corporation. More specifically, our solar power system integrator competitors who have manufacturing facilities in Asia include SunPower/Powerlight. Some of our current and potential competitors have greater market recognition and customer bases, longer operating histories and substantially greater financial, technical, marketing, distribution, purchasing, manufacturing, personnel and other resources than we do. In addition, many of our competitors are developing and are currently producing products based on new solar power technologies that may ultimately have costs similar to, or lower than, our projected costs. As a result, they may be able to respond more quickly to changing customer demands or to devote greater resources to the development, promotion and sales of solar and solar-related products than we can.

Our business relies on sales of our solar power products and our competitors with more diversified product offerings may be better positioned to withstand a decline in the demand for solar power products. Some of our competitors own, partner with, have longer term or stronger relationships with solar cell providers which could result in them being able to obtain solar cells on a more favorable basis than us. It is possible that new competitors or alliances among existing competitors could emerge and rapidly acquire significant market share, which would harm our business. If we fail to compete successfully, our business would suffer and we may lose or be unable to gain market share.

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

Our industry is highly competitive and fragmented, subject to rapid change and has low barriers to entry. We may in the future compete for potential customers with solar and HVAC systems installers and servicers, electricians, utilities and other providers of solar power equipment or electric power. Some of these competitors may have significantly greater financial, technical and marketing resources and greater name recognition than we have.

We believe that our ability to compete depends in part on a number of factors outside of our control, including:

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

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

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

	•		the extent of our competitors’ responsiveness to customer needs; and

	•		installation technology.

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

Our growth plans depend in large part on our ability to identify, attract and retain qualified franchisees and to manage our proposed franchise business.

We expect to grow our business through franchise partners who will establish retail operations in defined geographic areas to market, sell and install photovoltaic systems. As a result, our future growth will depend on our ability to attract and retain qualified franchisees, the franchisees’ ability to execute our business concept, create and maintain brand recognition, develop retail stores and to market and install our products. We may not be able to recruit franchisees who have sufficient expertise in our business or financial resources necessary to effectively open, manage and operate retail stores, or who will conduct operations in a manner consistent with our concept and standards. Also, our franchisees may not be able to operate the retail stores in a profitable manner.

Federal Trade Commission rules require us to furnish prospective franchisees with a franchise disclosure document containing prescribed information before entering into a binding agreement or accepting any payment for the franchise. Numerous states, including California, also have state franchise sales or business opportunity laws which require us to add to the federal disclosure document additional state-specific disclosures and to register our offering with a state agency before we may offer franchises for locations in the state or to state residents. Applicable laws in these states vest state examiners with discretion to disapprove registration applications based on a number of factors. There can be no assurance that we will be successful in obtaining registration in all states where we intend to operate franchises or be able to continue to comply with these regulations, which could have a material adverse effect on our business and results of operations.

Finally, our franchise operations will be dependent upon our ability to:

	•		develop, maintain and enhance our brands;

	•		maintain satisfactory relations with our franchisees;

	•		develop consistency in installation, training and service among our franchisees;

	•		monitor and audit the reports and payments received from franchisees; and

	•		monitor the quality of the installations completed by our franchisees.

A few customers account for a significant portion of our sales, and the loss of any of these could harm our business.

For the year ended December 31, 2007, three customers contributed 53% of our total sales revenue, including one customer who contributed 34% to our revenue. This compares to the similar period in calendar 2006 when four customers contributed 73% of total sales revenue, including one customer which contributed 38% of our revenue. Under present conditions, the loss of any combination of these customers could have a material adverse effect on our performance, liquidity and prospects.

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

Our products are generally not sold pursuant to long-term agreements with customers, but instead are sold on a purchase order basis. We typically contract to perform large projects with no assurance of repeat business from the same customers in the future. Although cancellations on our purchase orders to date have been insignificant, our customers may cancel or reschedule purchase orders with us on relatively short notice. Cancellations or rescheduling of customer orders could result in the delay or loss of anticipated sales without allowing us sufficient time to reduce, or delay the incurrence of, our corresponding inventory and operating expenses. In

addition, changes in forecasts or the timing of orders from these or other customers expose us to the risks of inventory shortages or excess inventory. This, in addition to the completion and non-repetition of large systems projects, in turn could cause our operating results to fluctuate.

Decrease in construction could adversely affect our business.

During 2007, all of our solar-related revenues were generated from the design and installation of solar power products in newly constructed and renovated buildings, plants and residences. Our ability to generate revenues from construction contracts will depend on the number of new construction starts and renovations, which should correlate with the cyclical nature of the construction industry and be affected by general and local economic conditions, changes in interest rates, lending standards and other factors. For example, the current housing slump and tightened credit markets have resulted in reduced new home construction, which could limit our ability to sell solar products to residential and commercial developers.

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

We act as the general contractor for our customers in connection with the installation of our solar power systems. All essential costs are estimated at the time of entering into the sales contract for a particular project, and these are reflected in the overall price that we charge our customers for the project. These cost estimates are preliminary and may or may not be covered by contracts between us or the other project developers, subcontractors, suppliers and other parties to the project. In addition, we require qualified, licensed subcontractors to install most of our systems. Shortages of such skilled labor could significantly delay a project or otherwise increase our costs. Should miscalculations in planning a project or defective or late execution occur, we may not achieve our expected margins or cover our costs. Also, many systems customers require performance bonds issued by a bonding agency. Due to the general performance risk inherent in construction activities, it has become increasingly difficult recently to secure suitable bonding agencies willing to provide performance bonding. In the event we are unable to obtain bonding, we will be unable to bid on, or enter into, sales contracts requiring such bonding.

Delays in solar panel or other supply shipments, other construction delays, unexpected performance problems in electricity generation or other events could cause us to fail to meet these performance criteria, resulting in unanticipated and severe revenue and earnings losses and financial penalties. Construction delays are often caused by inclement weather, failure to timely receive necessary approvals and permits, or delays in obtaining necessary solar panels, inverters or other materials. The occurrence of any of these events could have a material adverse effect on our business and results of operations.

Existing regulations and policies of the electric utility industry and changes to these regulations and policies may present technical, regulatory and economic barriers to the purchase and use of our products, which may significantly reduce demand for our products.

The market for electricity generating products is strongly influenced by federal, state and local government regulations and policies concerning the electric utility industry, as well as policies promulgated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. In the U.S., these regulations and policies are being modified and may continue to be modified. Customer purchases of alternative energy sources, including solar power technology, could be deterred by these regulations and policies, which could result in a significant reduction in the demand for our solar power products. For example, without a regulatory-mandated exception for solar power systems, utility customers are often charged interconnection or standby fees for putting distributed power generation on the electric utility grid. These fees could increase the cost to our customers and make our solar power products less desirable.

The failure to increase or restructure the net metering caps could adversely affect our business. Currently all grid-tied photovoltaic systems are installed with cooperation by the local utility providers under guidelines created through statewide net metering policies. These policies require local utilities to purchase from end users excess solar electricity for a credit against their utility bills. The amount of solar electricity that the utility is required to purchase is referred to as a net metering cap. If these net metering caps are reached and local utilities are not required to purchase solar power, or if the net metering caps do not increase in the locations where we install our solar product, demand for our products could decrease. The solar industry is currently lobbying to extend these arbitrary net metering caps, and replace them with either notably higher numbers, or with a revised method of calculation that will allow the industry to continue our expansion in a manner consistent with both the industry and state and federal desires.

Moreover, we anticipate that our solar power products and our installation will be subject to oversight and regulation in accordance with national and local ordinances relating to building codes, safety, environmental protection, utility interconnection and metering and related matters. It is difficult to track the requirements of individual states and design equipment to comply with the varying standards. Any new government regulations or utility policies pertaining to our solar power products may result in significant additional expenses to us, our resellers, and our customers and, as a result, could cause a significant reduction in demand for our solar power products.

Compliance with environmental regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages and fines.

As our manufacturing processes generate noise, wastewater, gaseous and other industrial wastes, we are required to comply with all national and local regulations regarding protection of the environment. If we fail to comply with present or future environmental regulations, we may be required to pay substantial fines, suspend production or cease operations. In addition, our cost to comply with future regulations may increase, which could adversely impact the price of our products and our profitability.

If we do not retain key personnel, our business will suffer.

The success of our business is heavily dependent on the leadership of our key management personnel, specifically Stephen C. Kircher. In addition, the company currently relies on Todd Lindstrom’s construction experience and management for the installation of solar systems. If either of these people were to leave us, it would be difficult to replace them, and our business may be harmed. We will also need to retain additional highly-skilled individuals if we are to effectively grow our business. Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization. Competition in our industry for qualified employees is intense, and we anticipate that certain of our competitors may directly target our employees and officers, all of whom are at-will employees and not parties to employment agreements with us. Our continued ability to compete effectively depends on our ability to attract new qualified employees and to retain and motivate our existing employees and officers.

The growth of our business is dependent upon sufficient capitalization.

The growth of our business depends on our ability to finance new products and services. We operate in a rapidly changing industry. Technological advances, the introduction of new products and new design and manufacturing techniques could adversely affect our business unless we are able to adapt to the changing conditions. To remain competitive, we may incur additional costs in product development, equipment, facilities and integration resources. These additional costs may result in greater fixed costs and operating expenses. As a result, we could be required to expend substantial funds for and commit significant resources to the following:

•

research and development activities on existing and potential product solutions;

	•		additional engineering and other technical personnel;

	•		advanced design, production and test equipment;

	•		manufacturing services that meet changing customer needs;

	•		technological changes in manufacturing processes;

	•		long cycle times for payment collection after incurring capital costs;

	•		manufacturing capacity; and

	•		developing a franchise network.

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

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

We are subject to particularly lengthy sales cycles in some markets.

Our focus on developing a customer base that requires our solar power products means that it may take longer to develop strong customer relationships or partnerships. Moreover, factors specific to certain industries also have an impact on our sales cycles. Some of our customers may have longer sales cycles that could occur due to the timing of various state and federal subsidies. These lengthy and challenging sales cycles may mean that it could take longer before our sales and marketing efforts result in revenue, if at all, and may have adverse effects on our operating results, financial condition, cash flows and stock price.

Products we manufacture for third parties may contain design or manufacturing defects, which could result in customer claims.

We often manufacture products to our customers’ requirements, which can be highly complex and may at times contain design or manufacturing failures. Any defects in the products we manufacture, whether caused by a design, manufacturing or component failure or error, may result in returns, claims, delayed shipments to customers or reduced or cancelled customer orders. If these defects occur, we will incur additional costs and if in large quantity or too frequent, we may sustain loss of business, loss of reputation and may incur liability.

We may not be able to prevent others from using our trademarks in connection with our solar power products, which could adversely affect the market recognition of our brand names and our revenue.

We have filed applications to register the following trademarks related to our franchise business: Yes! Solar Solutions, Yes! Energy Series and Yes! Independence Series (the “Marks”) for use with our solar power products. There is no assurance that we will be successful in obtaining such marks. In addition, if someone else has already established trademark rights in the Marks, we may face trademark disputes and may have to market our products with other trademarks, which also could hurt our marketing efforts. Furthermore, we may encounter trademark disputes with companies using marks which are confusingly similar to our Marks which if not resolved favorably could cause our branding efforts to suffer. Trademark litigation carries an inherent risk and we cannot guarantee we will be successful in this type of litigation. In addition, we may have difficulty in establishing strong brand recognition with consumers if others use similar marks for similar products.

Our SkyMount racking system is untested and may not be effective or patentable or may encounter other unexpected problems, which could adversely affect our business and results of operations.

Our SkyMount racking system is new and has not been tested in installation settings for a sufficient period of time to prove its long-term effectiveness and benefits. The SkyMount racking system may not be effective or other problems may occur that are unexpected and could have a material adverse effect on our business or results of operations. While we anticipate filing a patent application for our SkyMount racking system technology, a patent may not be issued on such technology or we may not be able to realize the benefits from any patent that is issued.

Our competitive position depends in part on maintaining intellectual property protection.

Our ability to compete and to achieve and maintain profitability depends in part on our ability to protect our proprietary discoveries and technologies. We currently rely on a combination of copyrights, trademarks, trade secret laws and confidentiality agreements, to protect our intellectual property rights. We also rely upon unpatented know-how and continuing technological innovation to develop and maintain our competitive position.

From time to time, the United States Supreme Court, other federal courts, the U.S. Congress or the U.S. Patent and Trademark Office may change the standards of patentability and any such changes could have a negative impact on our business.

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

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

We are exposed to risks associated with product liability claims in the event that the use or installation of our products results in injury or damage, and we have limited insurance coverage to protect against such claims and those losses resulting from business interruptions or natural disasters.

Since our products are electricity-producing devices, it is possible that users could be injured or killed by our products, whether by product malfunctions, defects, improper installation or other causes. As a manufacturer, distributor, and installer of products that are used by consumers, we face an inherent risk of exposure to product liability claims or class action suits in the event that the use of the solar power products we sell or install results in injury or damage. We commenced commercial shipment of our solar modules in 2007 and, due to our limited historical experience, we are unable to predict whether product liability claims will be brought against us in the future or the effect of any resulting adverse publicity on our business. Moreover, to the extent that a claim is brought against us we may not have adequate resources in the event of a successful claim against us. We rely on our general liability insurance to cover product liability claims and have not obtained separate product liability insurance. The successful assertion of product liability claims against us could result in potentially significant monetary damages and, if our insurance protection is inadequate, could require us to make significant payments which could have a materially adverse effect on our financial results. Any business disruption or natural disaster could result in substantial costs and diversion of resources.

Since we cannot test our solar panels for the duration of our standard 20-year warranty period, we may be subject to unexpected warranty expense; if we are subject to warranty and product liability claims, such claims could adversely affect our business and results of operations.

The possibility of future product failures could cause us to incur substantial expense to repair or replace defective products. We have agreed to indemnify our customers and our distributors in some circumstances against liability from defects in our solar cells. A successful indemnification claim against us could require us to make significant damage payments, which would negatively affect our financial results.

Our current standard product warranty for our solar panel systems include a 10-year warranty period for defects in materials and workmanship and a 20-year warranty period for declines in power performance. We believe our warranty periods are consistent with industry practice. Due to the long warranty period, we bear the risk of extensive warranty claims long after we have shipped product and recognized revenue. We have sold solar panels since September 2007. Any increase in the defect rate of our products would cause us to increase the amount of warranty reserves and have a corresponding negative impact on our results. Although we conduct accelerated testing of our solar panels, our solar panels have not and cannot be tested in an environment simulating the 20-year warranty period. As a result of the foregoing, we may be subject to unexpected warranty expense, which in turn would harm our financial results.

Like other retailers, distributors and manufacturers of products that are used by consumers, we face an inherent risk of exposure to product liability claims in the event that the use of the solar power products into which our solar panels are incorporated results in injury. We may be subject to warranty and product liability claims in the event that our solar power systems fail to perform as expected or if a failure of our solar power systems results, or is alleged to result, in bodily injury, property damage or other damages. Since our solar power products are electricity producing devices, it is possible that our products could result in injury, whether by product malfunctions, defects, improper installation or other causes. In addition, since we only began selling our solar panels in late 2007 and the products we are developing incorporate new technologies and use new installation methods, we cannot predict whether or not product liability claims will be brought against us in the future or the effect of any resulting negative publicity on our business. Moreover, we may not have adequate resources in the event of a successful claim against us. We have evaluated the potential risks we face and believe that we have appropriate levels of insurance for product liability claims. We rely on our general liability insurance to cover product liability claims and have not obtained separate product liability insurance. However, a successful warranty or product liability claim against us that is not covered by insurance or is in excess of our available insurance limits could require us to make significant payments of damages. In addition, quality issues can have various other ramifications, including delays in the recognition of revenue, loss of revenue, loss of future sales opportunities, increased costs associated with repairing or replacing products, and a negative impact on our goodwill and reputation, which could also adversely affect our business and operating results.

Warranty and product liability claims may result from defects or quality issues in certain third-party technology and components that we incorporate into our solar power systems, particularly solar cells and panels, over which we have no control. While our agreements with our suppliers generally include warranties, those provisions may not fully compensate us for any loss associated with third-party claims caused by defects or quality issues in these products. In the event we seek recourse through warranties, we will also be dependent on the creditworthiness and continued existence of these suppliers.

We offer the industry standard of 20 years for our solar modules and industry standard five (5) years or inverters and balance of system components. Due to the warranty period, we bear the risk of extensive warranty claims long after we have completed a project and recognized revenues. Future product failures could cause us to incur substantial expenses to repair or replace defective products. While we generally pass through manufacturer warranties we receive from our suppliers to our customers, we are responsible for repairing or replacing any defective parts during our warranty period, often including those covered by manufacturers’ warranties. If the manufacturer disputes or otherwise fails to honor its warranty obligations, we may be required to incur substantial costs before we are compensated, if at all, by the manufacturer. Additionally, in September 2007 we began installing our own manufactured solar panels where the warranty responsibility will be borne by us. Furthermore, our warranties may exceed the period of any warranties from our suppliers covering components included in our systems, such as inverters.

Our failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new products could reduce our ability to compete and could harm our business.

We expect that our existing cash and cash equivalents, together with cash flows from operations in 2008, will be sufficient to meet our anticipated cash needs for at least the next twelve months. However, the timing and amount of our working capital and capital expenditure requirements may vary significantly depending on numerous factors, including:

	•		the level and timing of product revenues;

	•		the costs and timing of expansion of product development efforts and the success of these development efforts;

	•		the extent to which our existing and new products gain market acceptance;

	•		the costs and timing of expansion of sales and marketing activities;

	•		competing technological and marketing developments;

	•		the extent of international operations;

	•		the need to adapt to changing technologies and technical requirements;

	•		the existence of opportunities for expansion and for acquisitions of, investments in, complementary businesses, technologies or product lines; and

•

access to and availability of sufficient management, technical, marketing and financial personnel.

We may not be able to obtain additional financing on acceptable terms, if at all. If we raise additional equity financing, our shareholders may experience significant dilution of their ownership interests and the per share value of our common stock could decline. If we engage in debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness and force us to maintain specified liquidity or other ratios, any of which could harm our business, operating results and financial condition. If we need additional capital and cannot raise it on acceptable terms, we may not be able to, among other things:

	•		develop or enhance our products and services;

	•		continue to expand our product development sales and marketing organizations;

	•		acquire complementary technologies, products or businesses;

	•		expand operations, in the United States or internationally;

	•		hire, train and retain employees; or

	•		respond to competitive pressures or unanticipated working capital requirements.

Our failure to do any of these things could seriously harm our business, operating results and financial condition.

We must effectively manage our growth.

Failure to manage our growth effectively could adversely affect our operations. We may increase the number of our manufacturing facilities and products and may plan to expand further the number and diversity of our products in the future and may further increase the number of locations from which we manufacture and sell. Our ability to manage our planned growth will depend substantially on our ability to:

	•		enhance our operational, financial and management systems;

	•		maintain adequate capital resources to pay our production costs before our customers pay us;

	•		expand usage of our facilities and equipment;

	•		successfully integrate our franchise operations while effectively managing our related expenses; and

	•		successfully hire, train and motivate additional employees, including the technical personnel necessary to operate our production facilities and staff our installation teams.

An expansion and diversification of our product range, manufacturing and sales and franchise locations and customer base may result in increases in our overhead and selling expenses. We may also be required to increase staffing and other expenses as well as our expenditures on plant, equipment and property in order to meet the anticipated demand of our customers. Any increase in expenditures in anticipation of future orders that do not materialize would adversely affect our profitability. Customers may require rapid increases in design and production services that place an excessive short-term burden on our resources.

We may not be able to increase or sustain our recent growth rate, and we may not be able to manage our future growth effectively.

We may not be able to continue to expand our business or manage future growth. We plan to significantly increase our production capacity between 2007 and 2010. To do so will require successful execution of expanding our existing manufacturing facilities, developing new manufacturing facilities, ensuring delivery of adequate solar cells, developing more efficient solar power systems, maintaining adequate liquidity and financial resources, and continuing to increase our revenues from operations. Expanding our manufacturing facilities or developing facilities may be delayed by difficulties such as unavailability of equipment or supplies or

equipment malfunction. Ensuring delivery of adequate solar cells is subject to many market risks including scarcity, significant price fluctuations and competition. Maintaining adequate liquidity is dependent upon a variety of factors including continued revenues from operations and compliance with our indentures and credit agreements. If we are unsuccessful in any of these areas, we may not be able to achieve our growth strategy and increase production capacity as planned during the foreseeable future.

Our recent expansion has placed, and our planned expansion and any other future expansion will continue to place, a significant strain on our management, personnel, systems and resources. We plan to purchase additional equipment to significantly expand our manufacturing capacity and to hire additional employees to support an increase in manufacturing, research and development and our sales and marketing efforts. We anticipate that we will need to hire a significant number of highly skilled technical, manufacturing, sales, marketing, administrative and accounting personnel. The competition for qualified personnel is intense in our industry. We may not be successful in attracting and retaining sufficient numbers of qualified personnel to support our anticipated growth. To successfully manage our growth and handle the responsibilities of being a public company, we believe we must effectively:

	•		hire, train, integrate and manage additional qualified engineers for research and development activities, sales and marketing personnel, and financial and information technology personnel;

	•		retain key management and augment our management team, particularly if we lose key members;

	•		continue to enhance our customer resource management and manufacturing management systems;

	•		implement and improve additional and existing administrative, financial and operations systems, procedures and controls, including the need to update and integrate our financial internal control systems as well as our ERP system in our China facility with those of our Roseville, California headquarters;

	•		expand and upgrade our technological capabilities; and

	•		manage multiple relationships with our customers, suppliers and other third parties.

We may encounter difficulties in effectively managing the budgeting, forecasting and other process control issues presented by rapid growth. If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, develop new solar modules and other products, satisfy customer requirements, execute our business plan or respond to competitive pressures.

We may be unable to achieve our goal of reducing the cost of installed solar systems, which may negatively impact our ability to sell our products in a competitive environment, resulting in lower revenues, gross margins and earnings.

To reduce the cost of installed solar systems, as compared against the current cost, we will have to achieve cost savings across the entire value chain from designing to manufacturing to distributing to selling and ultimately to installing solar systems. We have identified specific areas of potential savings and are pursuing targeted goals. However, such cost savings are especially dependent upon decreasing silicon prices and lowering manufacturing costs. Additionally, we are increasing production capacity at our existing manufacturing facilities while seeking to improve efficiencies. We also expect to develop additional manufacturing capacity. As a result, we expect these improvements will decrease our per unit production costs. However, if we are unsuccessful in our efforts to lower the cost of installed solar systems, our revenues, gross margins and earnings may be negatively impacted in the competitive environment and particularly in the event that governmental and fiscal incentives are reduced or an increase in the global supply of solar cells and solar panels causes substantial downward pressure on prices of our products.

Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.

We will be required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which will require annual management assessments of the effectiveness of our internal control over financial reporting for our fiscal year ended December 31, 2007 and a report by our independent registered public accounting firm that attests to the effectiveness of our internal control over financial reporting beginning with our fiscal year ending December 31, 2008. During the course of our testing for the 2008 reporting period, we may identify deficiencies which we may not be able to remediate in time to meet our deadline for compliance with Section 404. Testing and maintaining internal control can divert our management’s attention from other matters that are important to our business. We expect to incur increased expense and to devote additional management

resources to Section 404 compliance. We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 or our independent registered public accounting firm may not be able or willing to issue an unqualified report on the effectiveness of our internal control over financial reporting. If we conclude that our internal control over financial reporting is not effective, we cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or their effect on our operations since there is presently no precedent available by which to measure compliance adequacy. If either we are unable to conclude that we have effective internal control over financial reporting or our independent registered public accounting firm is unable to provide us with an unqualified report as required by Section 404, then investors could lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

Risks Related to Our International Operations

We are dependent on our Chinese manufacturing operations.

Our current manufacturing operations are located in China and our sales and administrative offices are in the U.S. The geographical distances between these facilities create a number of logistical and communications challenges. In addition, because of the location of the manufacturing facilities in China, we could be affected by economic and political instability there, including problems related to labor unrest, lack of developed infrastructure, variances in payment cycles, currency fluctuations, overlapping taxes and multiple taxation issues, employment and severance taxes, compliance with local laws and regulatory requirements, and the burdens of cost and compliance with a variety of foreign laws. Moreover, inadequate development or maintenance of infrastructure in China, including adequate power and water supplies, transportation, raw materials availability or the deterioration in the general political, economic or social environment could make it difficult, more expensive and possibly prohibitive to continue to operate our manufacturing facilities in China.

We may not be able to retain, recruit and train adequate management and production personnel.

Our continued operations are dependent upon our ability to identify, recruit and retain adequate management and production personnel in China. We require trained graduates of varying levels and experience and a flexible work force of semi-skilled operators. Many of our current employees come from the more remote regions of China as they are attracted by the wage differential and prospects afforded by our operations. With the growth currently being experienced in China and competing opportunities for our personnel, there can be no guarantee that a favorable employment climate will continue and that wage rates where we manufacture our products in China will continue to be internationally competitive.

The Chinese government could change its policies toward, or even nationalize, private enterprise, which could harm our operations.

All of our manufacturing is conducted in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. Over the past several years, the Chinese government has pursued economic reform policies, including the encouragement of private economic activities and decentralization of economic regulation. The Chinese government may not continue to pursue these policies or may significantly alter them to our detriment from time to time without notice. Changes in policies by the Chinese government resulting in changes in laws or regulations, our interpretation of laws or regulations, or the imposition of confiscatory taxation, restrictions on currency conversion or imports and sources of supply could materially and adversely affect our business and operating results. The nationalization or other expropriation of private enterprises by the Chinese government could result in the total loss of our investment in China.

Our results could be harmed if compliance with new environmental regulations becomes too burdensome.

Our manufacturing processes may result in the creation of small amounts of hazardous and/or toxic wastes, including various gases, epoxies, inks, solvents and other organic wastes. We are subject to Chinese governmental regulations related to the use, storage and disposal of such hazardous wastes. The amounts of our hazardous waste may increase in the future as our manufacturing operations increase, and therefore, our cost of compliance is likely to increase. In addition, sewage produced by dormitory facilities which house our labor force is coming under greater environmental legislation. Although we believe we are operating in compliance with applicable environmental laws, there is no assurance that we will be in compliance consistently as such laws and regulations, or our interpretation and implementation, change. Failure to comply with environmental regulation could result in the imposition of fines, suspension or halting of production or closure of manufacturing operations. Additionally, we may incur substantial costs to comply with future regulations, which could adversely impact our results of operations.

The Chinese legal system has inherent uncertainties that could materially and adversely impact our ability to enforce the agreements governing our operations.

We conduct our manufacturing through our wholly owned Chinese subsidiary, IAS Electronics (Shenzhen) Co., Ltd. We lease the actual factory. The performance of the agreements and the operations of our factory are dependent on our relationship with the local government. Our operations and prospects would be materially and adversely affected by the failure of the local government to honor our agreements or an adverse change in the laws governing us. In the event of a dispute, enforcement of these agreements could be difficult in China. China tends to issue legislation which is subsequently followed by implementing regulations, interpretations and guidelines that can render immediate compliance difficult. Similarly, on occasion, conflicts are introduced between national legislation and implementation by the provinces that take time to reconcile. These factors can present difficulties in our compliance. Unlike the U.S., China has a civil law system based on written statutes in which judicial decisions have limited precedential value. The Chinese government has enacted laws and regulations to deal with economic matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, the Chinese government experience in implementing, interpreting and enforcing these laws and regulations is limited, and our ability to enforce commercial claims or to resolve commercial disputes is therefore unpredictable. These matters may be subject to the exercise of considerable discretion by agencies of the Chinese government, and forces and factors unrelated to the legal merits of a particular matter or dispute may influence our determination, which may limit legal protections available to us. In addition, any litigation in China may result in substantial costs and diversion of resources and management attention.

Because our operations are international, we are subject to significant worldwide political, economic, legal and other uncertainties.

We are incorporated in the United States and have subsidiaries in the U.S., Hong Kong S.A.R. and the Peoples’ Republic of China. Because we manufacture all of our products in China, substantially all of the net book value of our fixed assets is located there. Although we currently sell our products only to customers in the U.S., we may sell our products to customers located outside of the U.S. in the future. Protectionist trade legislation in the U.S. or foreign countries, such as a change in export or import legislation, tariff or duty structures, or other trade policies, could adversely affect our ability to sell products in these markets, or even to purchase raw materials or equipment from foreign suppliers. Moreover, we are subject to a variety of U.S. laws and regulations, changes to which may affect our ability to transact business with non-U.S. customers or in certain product categories.

We are also subject to numerous national, state and local governmental regulations, including environmental, labor, waste management, health and safety matters and product specifications. We are subject to laws and regulations governing our relationship with our employees, including: wage and hour requirements, working and safety conditions, citizenship requirements, work permits and travel restrictions. These include local labor laws and regulations, which may require substantial resources for compliance. We are subject to significant government regulation with regard to property ownership and use in connection with our leased facility in China, import restrictions, currency restrictions and restrictions on the volume of domestic sales and other areas of regulation, all of which impact our profits and operating results.

We are exposed to the limit of the availability and price of electricity.

The primary energy supply to our operations in China is electricity from the local power company. There is not an extensive and resilient connection to a national or regional power grid. Thus, we may be exposed to power outages and shut downs which our standby generators would only partially mitigate. Fluctuations in world oil prices and supply could affect our supply and cost of electricity. The electricity producers that supply us with electricity in our facility in China generate their electricity from oil, and our back-up generators create electricity from diesel fuel. Accordingly, fluctuations in world oil product prices and supply could affect our supply and cost of electricity at our manufacturing facilities.

We face risks associated with international trade and currency exchange.

We transact business in a variety of currencies including the U.S. dollar and the Chinese Yuan Renminbi, or RMB. Although we make all sales in U.S. dollars, we incur approximately 22% of our operating expenses, such as payroll, land rent, electrical power and other costs associated with running our facilities in China, in RMB. Changes in exchange rates would affect the value of deposits of currencies we hold. In July 2005 the Chinese government announced that the RMB would be pegged to a basket of currencies, making it possible for the RMB to rise and fall relative to the U.S. dollar. We do not currently hedge against exposure to currencies. We

cannot predict with certainty future exchange rates and thus their impact on our operating results. We do not have any long-term debt valued in RMB. Movements between the U.S. dollar and the RMB could have a material impact on our profitability.

Changes to Chinese tax incentives and heightened efforts by the Chinese tax authorities to increase revenues could subject us to greater taxes.

Under applicable Chinese law, we have been afforded profits tax concessions by Chinese tax authorities on our operations in China for specific periods of time, which has lowered our cost of operations in China. However, the Chinese tax system is subject to substantial uncertainties with respect to interpretation and enforcement. Recently, the Chinese government has attempted to augment its revenues through heightened tax collection efforts. Continued efforts by the Chinese government to increase tax revenues could result in revisions to or changes to tax incentives or new interpretations by the Chinese government of the tax benefits we should be receiving currently, which could increase our future tax liabilities or deny us expected concessions or refunds.

Future outbreaks of severe acute respiratory syndrome or other communicable diseases may have a negative impact on our business and operating results.

In 2003, several economies in Asia, including China, where our operations are located, were affected by the outbreak of severe acute respiratory syndrome, or SARS. If there is a recurrence of an outbreak of SARS, or similar infectious or contagious diseases such as avian flu, it could adversely affect our business and operating results. For example, a future SARS outbreak could result in quarantines or closure to our factory, and our operations could be seriously disrupted as the majority of our work force is housed in one dormitory. In addition, an outbreak could negatively affect the willingness of our customers, suppliers and managers to visit our facilities.

Risks Related to our Common Stock

We have not paid and are unlikely to pay cash dividends in the foreseeable future.

We have not paid any cash dividends on our common stock and may not pay cash dividends in the future. Instead, we intend to apply earnings, if any, to the expansion and development of the business. Thus, the liquidity of your investment is dependent upon active trading of our stock in the market.

Any future financings and subsequent registration of common stock for resale will result in a significant number of shares of our common stock available for sale, and such sales could depress our common stock price. Further, no assurances can be given that we will not issue additional shares which will have the effect of diluting the equity interest of current investors. Moreover, sales of a substantial number of shares of common stock in any future public market could adversely affect the market price of our common stock and make it more difficult to sell shares of common stock at times and prices that either you or we determine to be appropriate.

We expect our stock price to be volatile.

Should a public market develop, the trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including:

	•		the depth and liquidity of the market for the common stock;

	•		developments generally affecting the energy industry;

	•		investor perceptions of the business;

	•		changes in securities analysts’ expectations or our failure to meet those expectations;

	•		actions by institutional or other large stockholders;

	•		terrorist acts;

	•		actual or anticipated fluctuations in results of operations;

	•		announcements of technological innovations or significant contracts by us or our competitors;

	•		introduction of new products by us or our competitors;

	•		our sale of common stock or other securities in the future;

	•		changes in market valuation or earnings of our competitors;

	•		changes in the estimation of the future size and growth rate of the markets;

	•		results of operations and financial performance; and

	•		general economic, industry and market conditions.

In addition, the stock market in general often experiences substantial volatility that is seemingly unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock, should a public market develop.

Any sale of a substantial amount of our stock could cause our stock price to drop.

Gerald Moore beneficially owns 3,133,333, or approximately 7.7% of the issued and outstanding shares of our common stock, of which 2,000,000 are subject to a Lock-Up Agreement, whereby Mr. Moore has agreed not to sell, pledge, transfer or otherwise dispose of his shares until December 31, 2008. Furthermore, as part of the terms of private placements, we registered for resale approximately 26,056,825 shares of our common stock, including 2,289,580 shares underlying warrants, with the SEC, representing approximately 69% of our outstanding common stock as of December 31, 2007. None of these shareholders are obligated to retain our shares, subject to the above-mentioned restrictions for Mr. Moore. Any sale by these or other holders of a substantial amount of common stock in any future public market, or the perception that such a sale could occur, could have an adverse effect on the market price of our common stock. Such an effect could be magnified if our stock is relatively thinly traded.

There may not be an active public market for our common stock in the near term and you may have to hold your common stock for an indefinite period of time.

Although our common stock is trading on the OTC Bulletin Board, there currently is a limited trading market for the common stock, and we cannot assure you that any market will further develop or be sustained. Because our common stock is expected to be thinly traded, you cannot expect to be able to liquidate your investment in case of an emergency or if you otherwise desire to do so. It may be difficult for you to resell a large number of your shares of common stock in a short period of time or at or above their purchase price.

Our stock may be governed by the “penny stock rules,” which impose additional requirements on broker-dealers who make transactions in our stock.

SEC rules require a broker-dealer to provide certain information to purchasers of securities traded at less than $5.00, which are not traded on a national securities exchange or quoted on The NASDAQ Stock Market. Since our common stock is not currently traded on an “exchange,” if the future trading price of our common stock is less than $5.00 per share, our common stock will be considered a “penny stock,” and trading in our common stock will be subject to the requirements of Rule 15g-9 under the Securities Exchange Act of 1934 (the “Penny Stock Rules”). The Penny Stock Rules require a broker-dealer to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also give bid and offer quotations and broker and salesperson compensation information to the prospective investor orally or in writing before or with the confirmation of the transaction. In addition, the Penny Stock Rules require a broker-dealer to make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction before a transaction in a penny stock. These requirements may severely limit the liquidity of securities in the secondary market because few broker-dealers may be likely to undertake these compliance activities. Therefore, unless an exemption is available from the Penny Stock Rules, the disclosure requirements under the Penny Stock Rules may have the effect of reducing trading activity in our common stock, which may make it more difficult for investors to sell.

Our shareholders may experience future dilution.

Our charter permits our board of directors, without shareholder approval, to authorize shares of preferred stock. The board of directors may classify or reclassify any preferred stock to set the preferences, rights and other terms of the classified or reclassified shares, including the issuance of shares of preferred stock that have preference rights over the common stock with respect to dividends, liquidation, voting and other matters or shares of common stock having special voting rights. Further, substantially all shares of common stock for which our outstanding stock options are exercisable are, once they have been purchased, eligible for immediate sale in the public market.

The issuance of additional shares of our capital stock or the exercise of stock options or warrants could be substantially dilutive to your shares and may negatively affect the market price of our common stock.

If we do not meet the listing standards established by The NASDAQ Stock Market or other similar markets, our common stock may not become listed for trading on one of those markets.

As soon as reasonably practicable, we intend to apply to list our common stock for trading on The NASDAQ Stock Market, on either the NASDAQ Global Market tier or The NASDAQ Capital Market tier. The NASDAQ Stock Market has established certain quantitative criteria and qualitative standards that companies must meet in order to become and remain listed for trading on these markets. We cannot guarantee that we will be able to meet all necessary requirements for listing; therefore, we cannot guarantee that our common stock will be listed for trading on The NASDAQ Stock Market or other similar markets.

USE OF PROCEEDS

The Selling Security Holders may sell all of the common stock offered by this Prospectus from time-to-time. We will not receive any proceeds from the sale of those shares of common stock. We will, however, receive gross proceeds of approximately $5,809,362 if all of the outstanding warrants are exercised by the Selling Security Holders for cash. Any proceeds we receive from the cash exercise of warrants will be used for working capital and general corporate matters, which may include raw materials and inventory purchases, direct and indirect labor, and related costs that we anticipate as part of our growth. The exercise of the warrants may occur over a five year period from the date six months after the warrants were issued, to December 20, 2012 as the last date. For more information on the issuance of the warrants to the Selling Security Holders, please refer to the section SELLING SECURITY HOLDERS.

MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDERS MATTERS

Our common stock began trading on the Over the Counter Bulletin Board (OTCBB) under the symbol “SOPW.OB” on September 25, 2007. The quarterly high and low bid information in U.S. dollars on the OTCBB of our common shares during the periods indicated are as follows:


Fiscal Year Ended December 31, 2007 through First Quarter Ended March 31, 2008	High Bid		Low Bid
First Quarter to March 31, 2008	$	4.44	$	0.95
Fourth Quarter to December 31, 2007	$	4.65	$	2.65
From September 25, 2007 to September 30, 2007	$	5.00	$	2.83

These Over-the-Counter Bulletin Board bid quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. On April 21, 2008, the last reported sale price for our common stock was $1.34 per share.

Our common stock is currently traded on the OTC Bulletin Board. The OTC Bulletin Board securities are not listed and traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers in stocks.

Holders

As of April 21, 2008 we had approximately 890 holders of record of our common stock.

Dividend Policy

We have paid no dividends on our common stock since our inception and may not do so in the future.

Securities Authorized for Issuance under Equity Compensation Plans

On November 15, 2006, subject to approval of the Stockholders, the Company adopted the 2006 Equity Incentive Plan reserving nine percent of the outstanding shares of common stock of the Company (“2006 Plan”). On February 7, 2007, our stockholders approved the 2006 Plan reserving nine percent of the outstanding shares of common stock of the Company pursuant to the Definitive Proxy on Schedule 14C filed with the Commission on January 22, 2007.

We have outstanding 1,767,233 service-based and 200,000 performance-based stock options to purchase shares of our common stock. The service-based and performance-based options have an exercise price from $1.00 to $3.45 and are subject to vesting schedules and terms. As of December 31, 2007, we had 2,167,233 service-based, performance-based options and restricted stock awards outstanding. The following table provides aggregate information as of December 31, 2007 with respect to all compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance.


	(a) Number of					Number of securities
	securities to be					remaining available for
	issued upon					future issuance under
	exercise of			Weighted-average		equity compensation
	of outstanding			exercise price of		plans (excluding
	options, warrants			outstanding options,		securities reflected
Plan Category	and rights			warrants and rights		in column (a))
Equity Compensation Plans approved by security holders		1,967,233		$	1.03		1,408,578	(1)
Equity Compensation Plans not approved by security holders		2,366,302	(2)	$	2.88		—
Total		4,333,535	(2)	$	2.04		1,408,578	(1)


(1)		Includes number of shares of common stock reserved under the 2006 Equity Incentive Plan (the “Equity Plan”) as of December 31, 2007, which reserves 9% of the outstanding shares of common stock of the Company.

(2)		Includes warrants to issue 2,366,302 shares of common stock exercisable from $1.00 to $3.90 per share expiring from October 4, 2011 to December 20, 2012.

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Except for statements of historical facts, this section contains forward-looking statements involving risks and uncertainties. You can identify these statements by forward-looking words including “believes,” “considers,” “intends,” “expects,” “may,” “will,” “should,” “forecast,” or “anticipates,” or the negative equivalents of those words or comparable terminology, and by discussions of strategies that involve risks and uncertainties. Forward-looking statements are not guarantees of our future performance or results, and our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors.”

The following discussion is presented on a consolidated basis, and analyzes our financial condition and results of operations for the years ended December 31, 2007 and 2006.

Unless the context indicates or suggests otherwise reference to “we”, “our”, “us” and the “Company” in this section refers to the consolidated operations of Solar Power, Inc., a California corporation, DRCI and Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) on a post-Reincorporation basis, and references to “SPI-Nevada” refers to Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) prior to the Merger and Reincorporation.

Overview

As a result of the Merger described below, our operations are now conducted through Solar Power, Inc., a California corporation, and our wholly-owned subsidiaries located in California and in China.

Management is considering the impact of the following areas as it implements the manufacturing of complete photovoltaic systems and planned business model:

•

			where pricing is adjusted quarterly to market rates. Our intent is secure ample solar cell supply to meet our growth needs and to avoid the risk of long-term contract pricings with suppliers whose products are expected to see a decline in the average selling price. Industry experts believe that additional planned expansion of silicon processing factories coming on line over the next 18 months will produce enough raw materials to create an oversupply on projected demand. To date the Company has not entered into any long-term supply agreements for solar cells. Failure to effectively manage our supply will hinder our expected growth and our component costs may have an adverse affect on the Company’s profitability; and

	•		Government subsidies: Federal and State subsidies relating directly to solar installations are an important factor in the planned growth of the solar industry. These subsidies are very important to growing the market for photovoltaic systems because they provide a significant economic incentive to all buyers. Without these incentives, industry growth would likely stall. These regulations are constantly being amended and will have a direct affect on our rollout of our planned franchise network among those states that offer superior incentives to the solar industry.

Background and Corporate History

We became the registrant through a reverse merger with Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.), on December 29, 2006, and we are considered the accounting acquirer and registrant following that merger. Welund Fund, Inc. was originally incorporated in the State of Delaware on July 16, 2002 under that name, and effective January 2006, pursuant to authorization of its stockholders, it changed its domicile from the State of Delaware to the State of Nevada through a merger with and into its then wholly-owned subsidiary which was a Nevada corporation. On October 4, 2006, it changed its name from Welund Fund, Inc. to Solar Power, Inc., and it effected a one-for-three reverse stock split. For purposes of discussion and disclosure, we refer to the predecessor as Solar Power, Inc., a Nevada Corporation (formerly Welund Fund, Inc.), to distinguish it from the registrant and accounting acquirer, Solar Power, Inc., a California corporation.

On August 23, 2006, Solar Power, Inc., a California corporation entered into an Agreement and Plan of Merger with Welund Acquisition Corp., a Nevada corporation (“Merger Sub”) a wholly-owned subsidiary of Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.). On December 29, 2006, Solar Power, Inc., a California corporation, merged with Merger Sub and Solar Power, Inc., a California corporation became a wholly-owned subsidiary of Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.). In connection with the Merger Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) issued the existing shareholders of Solar Power, Inc., a California corporation an aggregate of 14,500,000 shares of Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) restricted common stock and substituted 2,000,000 restricted stock awards and options of Solar Power, Inc., a California corporation with Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) restricted stock awards and options to purchase shares of Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) common stock. As a result of the Merger, all amounts of indebtedness owed to Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) by Solar Power, Inc., a California corporation, totaling $3,746,565, were eliminated. As a result of the Merger, we discontinued our former auto loans business and changed our focus and strategic direction and pursued operations in the solar power business. On February 15, 2007, we re-domiciled in the State of California.

In February 2005 Dale Renewables Consulting, Inc., (“DRCI”), a California corporation was formed to engage in the business of solar modules and systems installation, integration and sales. In May 2006, Solar Power, Inc., a California corporation, and Dale Stickney Construction, Inc., (“DSCI”) the parent of DRCI, agreed in principle on the acquisition of DRCI by Solar Power, Inc., a California corporation, and entered into an operating agreement with DRCI providing that Solar Power, Inc., a California corporation would effectively be responsible for all current operations, liabilities, and revenues, effective June 1, 2006, as contemplated by the proposed merger agreement.

In August 2006, Solar Power, Inc., a California corporation, and DRCI completed the Agreement and Plan of Merger (the “Merger Agreement”), including the Assignment and Interim Operating Agreement (the “Operating Agreement”) which was an exhibit to the Merger Agreement. The Operating Agreement obligated Solar Power, Inc., a California corporation, to provide all financing necessary for DRCI’s operations subsequent to June 1, 2006 until the consummation of the acquisition in exchange for all the revenues generated from its operations. The Operating Agreement also provided that Solar Power, Inc., a California corporation, was to provide all management activities of DRCI on its behalf from June 1, 2006 until the consummation of the acquisition. The Company has taken the position that DRCI was a variable interest entity based upon the accounting literature found in Financial Interpretation Number 46(R) Consolidation of Variable Interest Entities (as amended) (“FIN 46(R)”), paragraph 5. In addition, based upon FIN 46(R), paragraph 6, footnote 12, the Company had pecuniary interest in DRCI that began on June 1, 2006. Finally, FIN 46(R), paragraph 14 supports the Company’s position to consolidate as of June 1, 2006 because it absorbed DRCI’s losses and had a contractual right to expect residual returns. Solar Power, Inc., a California corporation, acquired DRCI in order to accelerate its entry into the California market for sale and installation of solar systems, including assumption of the installation and construction contracts that DRCI had at that time.

On November 15, 2006, the Company completed the acquisition of DRCI, paying $1,115,373 in cash in exchange for 100% of the outstanding shares of DRCI. The acquisition of DRCI provided Solar Power, Inc., a California corporation, with an experienced photovoltaic sales and installation team.

The Company has allocated the purchase price of $1,115,373 to estimated fair values of the acquired assets as follows:


Inventories	$	35,341
Other current assets		637,089
Plant and equipment		7,995
Goodwill		434,948

Total	$	1,115,373

The estimated fair values of the acquired assets and liabilities may change as the Company completes its valuation procedures and as all direct acquisition costs are determined. The final adjustments resulting from this process are not expected to be material.

During the fourth quarter, in conjunction with its valuation procedures related to the DRCI acquisition, the Company determined that because of a lack of continuity interest, the transition did not qualify as a reorganization for tax purposes and should be treated as purchase of assets with a liquidation target. As a result, the Company revised its purchase price allocation to eliminate the previously recorded deferred tax liability of $267,577, resulting in an offsetting increase to Goodwill.

On March 21, 2007 we, through our wholly-owned subsidiary, SPIC, Inc. (“SPIC”) entered into a General Partnership Agreement with J.R. Conkey and Associates, Inc. (“JRC”). The partnership will engage in the sales, design and installation of solar systems in government market segments for solar contracts within California. As initial capital contributions to the partnership, JRC is contributing $25,500 and SPIC is contributing $24,500. JRC is the managing partner of the partnership and will manage and conduct the day-to-day business affairs of the partnership. Additionally, JRC will be responsible for all marketing and sales efforts, establishing and maintaining customer relationships, and contract management. James R. Conkey, a principal of JRC, invested $100,000 and received 100,000 shares in the Solar Power, Inc, a Nevada corporation (formerly Welund Fund, Inc.) private placement in October 2006.) SPIC will be responsible for exclusively supplying all solar panels or other solar materials to the partnership for installation, and the design, engineering, and installation of all solar systems for customers, at contracted prices to SPIC. SPIC will control financial and accounting records. The Company believes that this partnership will be subject to consolidation based on its interpretation of Financial Interpretation Number 46(R) Consolidation of Variable Interest Entities (as amended) (“FIN 46(R)”). Specifically under FIN 46(R), paragraph 5(a)(4), the Company has additional risk with loans that will be advanced to the partnership. Through December 31, 2007, no activity has occurred in the partnership. In addition, neither JRC nor the Company has contributed initial capital or performed any of the stated responsibilities.

On April 12 and 17, 2007 the Company issued standby letters of credit totaling $800,000 to two suppliers, Sharp Electronics and Kyocera Solar. The letters of credit were issued in support of the Company’s line of credit with these suppliers. These suppliers have no interest in the Company and are not considered related parties. The term of the letters of credit are twelve months and are collateralized by $800,000 of the Company’s cash deposits. These letters of credit were released by Sharp Electronics and Kyocera Solar and cancelled in January 2008.

On May 7, 2007, the Company entered into a lease for the location of the Company’s first energy outlet. The store is located in Roseville, California and has approximately 2,000 square feet. The term of the lease is sixty three months commencing on October 20, 2007, with an initial rent of approximately $78,000 per year and has an option to renew for an additional five years. On May 7, 2007, the Company paid a security deposit and first-month’s rent of approximately $13,000.

On June 5, 2007, the Company entered into a capitalized lease agreement with California First Leasing Corporation to finance the purchase of approximately $581,000 of software and hardware. The term of the lease is thirty-six months; the Company paid an initial security deposit of approximately $9,000 and secured the lease with a letter of credit collateralized by the Company’s cash deposits.

On June 20, 2007, the Company issued a standby letter of credit to California First Leasing Corporation in the amount of $284,367 as security for a capital lease agreement. The term of the letter of credit is one year and is secured by the Company’s cash deposits. On July 31, 2007 this letter of credit was increased to $601,100 to secure an increase to principal and interest to the capital lease agreement.

On June 25, 2007, the Company entered into an agreement with China Merchants Bank for a working capital line of credit through its wholly owned subsidiary, IAS Electronics (Shenzhen) Co., Ltd. in the amount of $900,000. The term of the agreement is one year with an annual interest rate of 6.75 percent. The line is secured by a $1,000,000 standby letter of credit collateralized by the Company’s cash deposits. As of December 31, 2007, the Company had approximately $930,000 outstanding on this line of credit.

On July 6, 2007, the Company terminated its Deposit Receipt and Real Estate Purchase Contract agreement entered into on April 17, 2007 to purchase real property located at 1115 Orlando Avenue in the city of Roseville, California from GSJ Company, LLC, a California limited liability company without penalty to the Company or impact to the financial statements.

On July 25, 2007, the Company entered into an office lease for the relocation of the Company headquarters. The building is located at 1115 Orlando Avenue in the city of Roseville, California and has approximately 19,000 square feet. The term of the lease is five years commencing on August 1, 2007, with an initial rent of approximately $343,000 per year and has an option to renew for an additional five years. On July 25, 2007, the Company paid a security deposit and first-month’s rent of approximately $60,000.

On December 13, 2007, the Company and its wholly-owned subsidiary, Yes! Solar, Inc. (“YES”) entered into a Retailer Program Agreement (the “Agreement”) with GE Money Bank to provide to YES retail customers a vehicle to finance solar systems purchased from YES. The agreement provides that the Company will provide a standby letter of credit equal to the greater of $50,000 or one percent of sales under the Agreement. A standby letter of credit in the amount of $50,000 was issued on November 14, 2007 as a condition to the execution of the Agreement. The term of the letter of credit is for one year. As of December 31, 2007 there were no sales under this Agreement.

Critical Accounting Policies and Estimates

Inventories- Certain factors could impact the realizable value of our inventory, so we continually evaluate the recoverability based on assumptions about customer demand and market conditions. The evaluation may take into consideration historic usage, expected

demand, anticipated sales price, product obsolescence, customer concentrations, product merchantability and other factors. The reserve or write-down is equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, inventory reserves or write-downs may be required that could negatively impact our gross margin and operating results.

Goodwill - Goodwill resulted from our acquisition of DRCI. We perform a goodwill impairment test on an annual basis and will perform an assessment between annual tests in certain circumstances. The process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment at many points during the analysis. In estimating the fair value of our business, we make estimates and judgments about our future cash flows. Our cash flow forecasts are based on assumptions that are consistent with the plans and estimates we use to manage our business.

Revenue recognition — In our cable, wire and mechanical assembly business the Company recognizes the sales of goods when there is evidence of an arrangement, title and risk of ownership have passed (generally upon delivery), the price to the buyer is fixed or determinable and collectibility is reasonably assured. Generally there are no formal customer acceptance requirements or further obligations related to our assembly services once we ship our products. Customers do not have a general right of return on products shipped therefore we make no provisions for returns. We make a determination of our customers’ credit worthiness at the time we accept their order.

For photovoltaic systems product sales revenue is recognized when there is evidence of an arrangement, title and risk of ownership have passed (generally upon delivery), the price to the buyer is fixed or determinable and collectibility is reasonably assured. Customers do not have a general right of return on products shipped therefore we make no provisions for returns.

Revenue on photovoltaic system construction contracts is recognized using the percentage of completion method of accounting. At the end of each period, the Company measures the cost incurred on each project and compares the result against its estimated total costs at completion. The percentage derived from this comparison multiplied by the contract price determines the amount of revenue to be recognized. Payment terms are generally defined by the contract and as a result may not match the timing of the costs incurred by the Company and the related recognition of revenue. Such differences are recorded as costs and estimated earnings in excess of billings on uncompleted contracts or billings in excess of costs and estimated earnings on uncompleted contracts. The Company determines its customer’s credit worthiness at the time the order is accepted. Sudden and unexpected changes in customer’s financial condition could put recoverability at risk.

Our revenue recognition procedure is highly dependent on establishing our initial estimated total cost of completion for each project. Initial estimates are compiled using standard project templates that identify each system component and work activity required for a photovoltaic system implementation. Project managers, who have detailed knowledge of the project, finalize the estimates by incorporating pricing and design changes as well as manpower requirements. Projects with estimated costs in excess of $50,000 are subject to additional review. Our estimates to date have been reasonably accurate.

In our solar photovoltaic business contract costs include all direct material and labor costs and those indirect costs related, to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation costs. Selling and general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined

Product Warranties — In our cable, wire and mechanical assembly business our current standard product warranty for our mechanical assembly product ranges from one to five years. We offer the industry standard of 20 years for our solar modules and industry standard five (5) years on inverter and balance of system components. Due to the warranty period, we bear the risk of extensive warranty claims long after we have shipped product and recognized revenue. In our wire and mechanical assembly business, historically our warranty claims have not been material. In our solar photovoltaic business our greatest warranty exposure is in the form of product replacement. Until the third quarter, the Company purchased its solar panels from third-party suppliers and since the third-party warranties are consistent with industry standards we consider our financial exposure to warranty claims immaterial. Certain photovoltaic construction contracts entered into during the year ended December 31, 2007 included provisions under which the Company agreed to provide warranties to the buyer, and during the quarter ended September 30, 2007, the Company began installing its own manufactured solar panels. As a result, the Company recorded the provision for the estimated warranty exposure on these contracts within cost of sales. Since the Company does not have sufficient historical data to estimate its exposure, we have looked to

historical data reported by other solar system installers and manufacturers. The accrual for warranty claims consisted of the following at December 31, 2007:


	(in thousands)
Balance at December 31, 2006	$	—
Provision charged to warranty expense		103
Less: warranty claims		—

Balance at December 31, 2007	$	103

Stock based compensation — Effective January 1, 2006, the Company adopted the provisions of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment.” (SFAS No. 123(R)”) which requires the Company to measure the stock-based compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the employee requisite service period. Stock-based compensation expense for all stock-based compensation awards granted was based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). Prior to 2006 the Company had not issued stock options or other forms of stock-based compensation.

Determining the appropriate fair value model and calculating the fair value of share-based payment awards require the input of highly subjective assumptions, including the expected life of the share-based payment awards and stock price volatility. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period.

Allowance for doubtful accounts — The Company regularly monitors and assesses the risk of not collecting amounts owed to the Company by customers. This evaluation is based upon a variety of factors including: an analysis of amounts current and past due along with relevant history and facts particular to the customer. It requires the Company to make significant estimates, and changes in facts and circumstances could result in material changes in the allowance for doubtful accounts. At December 31, 2007 and 2006 the Company has an allowance of approximately $48,000.

Income taxes — We account for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Realization of deferred tax assets is dependent upon the weight of available evidence, including expected future earnings. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. Should we determine that we would be able to realize deferred tax assets in the future in excess of the net recorded amount, we would record an adjustment to the deferred tax asset valuation allowance. This adjustment would increase income in the period such determination is made.

Our operations include manufacturing activities outside of the United States. Profit from non-U.S. activities is subject to local country taxes but not subject to United States tax until repatriated to the United States. It is our intention to permanently reinvest these earnings outside the United States. The calculation of tax liabilities involves dealing with uncertainties in the application of complex global tax regulations. We recognize potential liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due. If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when we determine the liabilities are no longer necessary. If the estimate of tax liabilities proves to be less than the ultimate tax assessment, a further charge to expense would result.

Foreign currency translation — The consolidated financial statements of the Company are presented in U.S. dollars and the Company conducts substantially all of its business in U.S. dollars.

All transactions in currencies other than functional currencies during the year are translated at the exchange rates prevailing on the transaction dates. Related accounts payable or receivable existing at the balance sheet date denominated in currencies other than the functional currencies are translated at period end rates. Gains and losses resulting from the translation of foreign currency transactions and balances are included in income.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. With respect to the acquisition of DRCI by Solar Power, Inc., a California corporation, the Company estimated the fair value of contracts acquired based on certain assumptions to be approximately $637,000. The Company estimated the value of each contract opportunity acquired by estimating the percentage of contracts that would be signed and by applying a comparable acquisition cost to each contract based on the Company’s current sales subcontractor commission rates.

Segment Information

The Company has two reportable segments: (1) cable, wire mechanical assemblies and processing sales (“Cable, wire and mechanical assemblies”) and (2) photovoltaic installation, integration and solar panel sales (“Photovoltaic installation, integration and sales”). The Company’s reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Recent Accounting Pronouncements

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109,” Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006, with earlier adoption permitted. The adoption of this pronouncement did not have a material impact our financial position, results of operations or cash flows.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements” (SAB 108), which provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The guidance is applicable in the first fiscal year ending after November 15, 2006. The adoption of SAB 108, effective December 31, 2006, did not have a material impact on the Company’s results of operations, financial position or cash flows.

In September 2006, the FASB issued Statement of Financial Accounting Standards (“FAS”) No. 157, “Fair Value Measurements.” SFAS No. 157 establishes a common definition for fair value to be applied to accounting principles generally accepted in the United States of America guidance requiring use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. FAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008 FASB issued Staff Position No. 157-2 that defers the effective date of FAS 157 for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed a fair value in financial statements on a recurring basis, for fiscal years beginning after November 15, 2008. In addition, FASB also agreed to exclude from scope of FAS 157 fair value measurements made for purposes of applying FAS No. 13 “Accounting for Leases” and related interpretive accounting pronouncements. The Company does not expect FAS No. 157 to have any impact on the consolidated financial statements.

In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities —Including an amendment of FASB Statement No. 115", (“FAS 159”) which permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. A business entity is required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. This statement is expected to expand the use of fair value measurement. FAS 159 is effective for financial statements issued for fiscal years beginning after July 1, 2008, and interim periods within those fiscal years, and is applicable beginning in the first quarter of 2008. The Company is currently evaluating the impact that FAS 159 will have on its consolidated financial statements.

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

In December 2007, the FASB issued FAS No. 160, “Non-Controlling Interests in Consolidated Financial Statements (as amended)” (“FAS 160”) which improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report non-controlling (minority) interests in subsidiaries in the same way as equity consolidated financial statements. Moreover, FAS 160 eliminates the diversity that currently exists in accounting from transactions between an entity and non-controlling interests by requiring they be treated as equity transactions. FAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008; earlier adoption is prohibited. The Company is currently evaluating the impact that FAS 160 will have on its consolidated financial statements.

Recent Events

On January 3, 2007, the Company repaid loans and notes payable to Stephen C. Kircher, the Company’s CEO and Chairman of $327,562 which included principal of $320,000 and accrued interest of $7,562.

In January 2007, the Company repaid loans payable to Hannex Investment Ltd. of $270,829 which included principal of $245,000 and accrued interest of $25,829.

In January 2007, the Company paid $175,000 in cash due under the terms of its agreement to acquire commission rights. In February 2007, the Company issued 31,435 shares of its common stock to the sellers of the contracts shareholders in partial satisfaction of the contingent payment terms of its acquisition of contracts.

On February 7, 2007, the stockholders approved the Company’s 2006 Equity Incentive Plan which permits the Company to grant stock options to directors, officers or employees of the Company or others to purchase shares of common stock of the Company through awards of Incentive and Nonqualified Stock Options (“Options”), Stock (“Restricted Stock” or “Unrestricted Stock”) and Stock Appreciation Rights (“SARs”). The Plan was approved by the Stockholders subsequent to year-end.

On February 15, 2007, we completed our re-domicile into the State of California. The re-domicile was duly approved by both our respective Board of Directors and a majority of our stockholders at our annual meeting of shareholders held on February 7, 2007. The re-domicile was completed by means of a merger of Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) and its wholly owned subsidiary, Solar Power, Inc. a California corporation, with Solar Power, Inc., a California corporation, being the surviving corporation.

As of February 15, 2007, each outstanding share of Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.), common stock, par value $.0001, was automatically converted into one share, par value $.0001, of Solar Power, Inc., a California corporation’s common stock, all of Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.)’s property, rights, privileges, and powers vested in Solar Power, Inc., a California corporation, and all of Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.)’s debts, liabilities and duties became the debts, liabilities and duties of Solar Power, Inc. a California corporation. Additionally, the Amended and Restated Articles of Incorporation of Solar Power, Inc., a California corporation and the Bylaws of Solar Power, Inc. a California corporation, became our governing documents. The directors and officers of Solar Power, Inc. a California corporation, immediately prior to the effective date of the re-domicile, continue to be our directors and officers. The re-domicile resulted in no change in our management because all of our directors and officers were also directors and officers of Solar Power, Inc. a California corporation, prior to the re-domicile.

On March 21, 2007 we, through our wholly-owned subsidiary, Solar Power Integrators, Commercial, Inc. (“SPIC”) entered into a General Partnership Agreement with J.R. Conkey and Associates, Inc. (“JRC”). The partnership will engage in the sales, design and installation of solar systems in certain market segments for solar contracts within California. As initial capital contributions to the partnership, JRC is contributing $25,500 and SPIC is contributing $24,500. JRC is the managing partner of the partnership and will

manage and conduct the day-to-day business affairs of the partnership. Additionally, JRC will be responsible for all marketing and sales efforts, establishing and maintaining customer relationships, and contract management. James R. Conkey, a principal of JRC, invested $100,000 and received 100,000 shares in Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) private placement in October 2006. SPIC will be responsible for exclusively supplying all solar panels or other solar materials to the partnership for installation, and the design, engineering, and installation of all solar systems for customers, at contracted prices to SPIC. SPIC will control financial and accounting records. The Company has determined that this partnership will be subject to consolidation based on its interpretation of FIN 46(R) Consolidation of Variable Interest Entities (as amended). Specifically under FIN 46(R), paragraph 5(a)(4), the Company has additional risk with loans that will be advanced to the partnership. Currently, no activity has occurred in the partnership. Neither JRC nor the Company has contributed initial capital or performed any of the stated responsibilities.

On April 9, 2007, we entered into our standard Securities Purchase Agreement with E-Ton Solar Tech, Co., Ltd., (E-Ton) a foreign accredited investor as part of a private placement to raise $500,000 (the “Financing”). In connection with the Financing, we sold an aggregate of 500,000 shares of restricted common stock par value $0.0001 per share, at a purchase price of $1.00 per share (the per share value of our most recent private placement) for an aggregate sale price of $500,000 to E-Ton. E-Ton is a supplier but not a related party to the Company. These shares are not included in the shares being registered in our registration statement with the Securities and Exchange Commission.

On April 12 and 17, 2007 the Company issued standby letters of credit totaling $800,000 to two suppliers, Sharp Electronics and Kyocera Solar. The letters of credit were issued in support of the Company’s line of credit with these suppliers. These suppliers have no interest in the Company and are not considered related parties. The term of the letters of credit are twelve months and are collateralized by $800,000 of the Company’s cash. In January 2008 these letters of credit were released by the suppliers and cancelled.

On June 20, 2007, the Company issued a standby letter of credit to California First Leasing Corporation in the amount of $284,367 as security for a capital lease agreement. The term of the letter of credit is one year and is secured by the Company’s cash deposits. On July 31, 2007 the letter of credit was increased to $601,000 to secure an increase to principal and interest to the capital lease agreement.

On July 25, 2007, the Company entered into an office lease for the relocation of the Company headquarters. The building is located in Roseville, California and has approximately 19,000 square feet. The term of the lease is five years commencing on August 1, 2007 with an initial rent of approximately $343,000 per year and has an option to renew for an additional five years. On July 25, 2007, the Company paid a security deposit and first-months rent of approximately $60,000.

On December 13, 2007, the Company and its wholly-owned subsidiary, Yes! Solar, Inc. (“YES”) entered into a Retailer Program Agreement (the “Agreement”) with GE Money Bank to provide to YES retail customers a vehicle to finance solar systems purchased from YES. The agreement provides that the Company will provide a standby letter of credit equal to the greater of $50,000 or one percent of sales under the Agreement. A standby letter of credit in the amount of $50,000 was issued on November 14, 2007 as a condition to the execution of the Agreement. The term of the letter of credit is for one year. As of December 31, 2007 there were no sales under this Agreement.

Results of Operations

Comparison of the year ended December 31, 2007 to the year ended December 31, 2006

Net sales — Net sales for the year ended December 31, 2007 increased 314.2% to approximately $18,144,000 from approximately $4,381,000 for the year ended December 31, 2006. Net sales in the cable, wire and mechanical assembly segment increased 17.7% to approximately $3,400,000 from approximately $2,888,000 for the year earlier comparative period primarily from increased sales to one customer. Net sales in the photovoltaic installation, integration and product sales segment increased 887.5% to approximately $14,744,000 from approximately $1,493,000 for the year earlier comparative period. The Company entered this segment in the second quarter of 2006 and continued developing its business plan in this segment during 2007, accounting for the increase in this segment’s sales.

Cost of goods sold — Cost of goods sold were approximately $16,030,000 (88.3% of net sales) and approximately $2,894,000 (66.1% of net sales) for the years ended December 31, 2007 and 2006, respectively.

Cost of goods sold in the cable, wire and mechanical assembly segment were approximately $1,940,000 (57.1% of net sales) for the year ended December 31, 2007 compared to approximately $1,590,000 (55.1% of net sales) for the year ended December 31, 2006. The increase is attributable to product mix, increased shipping costs due to fuel surcharges and increased material costs due to the increase in copper wire pricing, a key component in the cable wire segment.

Cost of goods sold in the photovoltaic installation, integration and product sales segment was approximately $14,090,000 (95.6% of sales) for the year ended December 31, 2007 compared to approximately $1,304,000 (87.3% of net sales) for the year ended December 31, 2006. The overall growth in sales for this segment and higher than anticipated sub-contract costs and construction costs attributed to the increase in cost of goods sold in our photovoltaic segment.

General and administrative expenses — General and administrative expenses were approximately $6,982,000 for the year ended December 31, 2007 and approximately $2,307,000 for the year ended December 31, 2006 an increase of 202.6%. As a percentage of net sales, general and administrative expenses were 38.5% and 52.7%, for the years ended December 31, 2007 and 2006 respectively. The increase in actual cost is primarily due to the increase in employee related expense, infrastructure costs and professional fees associated with the continued development of our photovoltaic solar business; start up of our franchise operations and stock compensation expense. As a percentage of sales we expect that the percentage of general and administrative expenses will continue to decline. Significant elements of general and administrative expenses for the year ended December 31, 2007 include employee related expense of approximately $3,187,000, information technology costs of approximately $143,000, insurance costs of approximately $237,000, professional and consulting fees of approximately $1,403,000, rent of approximately $370,000, travel and lodging costs of $197,000, stock compensation expense of $490,000 and bad debt expense of $118,000. The bad debt expense pertains to one new home builder who terminated the solar installation on his project because of market conditions. In the fourth quarter we recovered the solar panels on this project and recognized a net writeoff of $118,000 in our allowance for doubtful accounts receivable.

Sales, marketing and customer service expense — Sales, marketing and customer service expenses were approximately $2,254,000 for the year ended December 31, 2007 and $1,179,000 for the year ended December 31, 2006. As a percentage of net sales, sales, marketing and customer service expenses were 12.4% and 26.9%, respectively. The increase in cost is primarily due to increases in payroll, marketing costs and business development costs associated with the continued development of our photovoltaic solar business. Significant elements of sales, marketing and customer service expense for the year ended December 31, 2007 were payroll related expenses of approximately $1,028,000, business development costs of approximately $684,000 (consisting of approximately $184,000 of acquired expenses resulting from the acquisition of DRCI and approximately $500,000 related to the Contract Revenue Agreement with Sundance Power, LLC), advertising of approximately $177,000, stock-based compensation costs of approximately $51,000 and travel and lodging costs of approximately $60,000.

Product development expense — Product development expenses were approximately $199,000 for the year ended December 31, 2007. There was no such product development activity in fiscal 2006, hence there were no product development expenses for the year ended December 31, 2006. As a percentage of sales, product development expenses were 1.1%. Significant elements of product development expense were payroll and related expenses of approximately $39,000 and product certification and testing of approximately $160,000. The Company expects these expenses to continue in 2008 as the Company expands its activity.

Interest income / expense — Interest income, net was approximately $180,000 for the year ended December 31, 2007. Interest expense was approximately $90,000 for the year ended December 31, 2006. As a percentage of net sales, interest income, net was 1.0% for the year ended December 31, 2007. Interest expense was 2.1% of sales for the year ended December 31, 2006. Interest income, net consisted of interest income of approximately $286,000 from earnings on the Company’s idle cash offset by interest expense of approximately $106,000 on the Company’s short term borrowings in 2007.

Other income — Other income for the year ended December 31, 2007 and 2006 was approximately $8,000 and $16,000, respectively. Other income consisted primarily of proceeds from the sale of scrap material.

Net loss — The net loss was approximately $7,194,000 and $2,129,000 for the years ended December 31, 2007 and 2006, respectively. The significant costs incurred to continue development of our photovoltaic solar business was the driver of the increased operating loss in 2007.

Liquidity and Capital Resources

A summary of the sources and uses of cash and cash equivalents is as follows:


	Year ended			Year ended
	December 31,			December 31,
(in thousands)	2007			2006

Net cash used in operating activities	$	(13,064	)	$	(3,003	)
Net cash used in investing activities		(1,034	)		13,588
Net cash provided by financing activities		9,544			745

Net increase (decrease) in cash and cash equivalents	$	(4,554	)	$	11,330

From our inception until the closing of our private placement on October 4, 2006, we financed our operations primarily through short-term borrowings. We received net proceeds of approximately $14,500,000 from the private placement made by Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) when we completed our reverse merger with them in December 2006.

In December 2007 we completed a private placement of 4,513,911 shares of our comment stock with proceeds approximately $10,185,000, net of expenses of approximately $1,551,000,

As of December 31, 2007 we had approximately $6,840,000 in cash and cash equivalents.

Net cash used in operating activities of approximately $13,064,000 for the year ended December 31, 2007 was primarily a result of a net loss of approximately $7,194,000, less non-cash items included in net income, including depreciation of approximately $330,000 related to property and equipment, amortization of intangibles of approximately $684,000, stock-based compensation expense of approximately $541,000, bad debt expense of approximately $118,000, stock issued for services of approximately $50,000, warrants issued for services of approximately $12,000 and income tax expense of approximately $61,000. Also contributing to cash used in operating activities were an increase in our accounts receivable of approximately $4,157,000 as a result of increased sales in our solar photovoltaic business segment, an increase in costs and estimated earnings in excess of billings on uncompleted contracts of approximately $2,088,000, an increase in our inventories of approximately $4,659,000 primarily related to our solar photovoltaic business and increases in prepaid expenses and other current assets of approximately $410,000, a decrease in income taxes payable of approximately $6,000, a decrease in billings in excess of costs and estimated earnings on uncompleted contracts of approximately $123,000 offset by an increase in our accounts payable of approximately $2,839,000 related to our increased inventory, and an increase in accrued liabilities of approximately $938,000 resulting primarily from increased sales tax liability of approximately $557,000, accrued job costs of approximately $212,000 and accrued warranty costs of approximately $103,000.

Net cash used in operating activities of approximately $3,003,000 for the year ended December 31, 2006 was primarily a result of a net loss of approximately $2,129,000, less non-cash items included in net income, including depreciation of approximately $19,000 related to property and equipment, amortization of intangibles related to our acquisitions of approximately $453,000, stock-based compensation expense of approximately $338,000, bad debt expense of approximately $48,000, reversal of the deferred tax asset recorded in 2005 of approximately $21,000 and loss on disposal of fixed assets of $3,000. Also contributing to cash used in operating activities were an increase in our accounts receivable of approximately $1,307,000 as a result of increased sales in our cable, wire and mechanical assemblies segment and sales in our new solar photovoltaic business segment, an increase in costs and estimated earnings in excess of billings on uncompleted contracts of approximately $120,000, an increase in our inventories of approximately $2,171,000 primarily related to our solar photovoltaic business and increases in prepaid expenses and other current assets of approximately $344,000 offset by an increase in our accounts payable of approximately $1,273,000 related to our increased inventory, an increase in income tax liability of approximately $35,000, an increase in billings in excess of costs and costs in excess of billings, of approximately $126,000 and an increase in accrued liabilities of approximately $752,000 resulting primarily from increased customer deposits of approximately $348,000.

Net cash used in investing activities of approximately $1,034,000 for the year ended December 31, 2007 primarily relates to acquisition of property, plant and equipment.

Net cash generated from investing activities of approximately $13,588,000 for the year ended December 31, 2006 primarily relates to our merger and acquisitions. We received approximately $14,998,000 from our merger with Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.). We used approximately $1,115,000 of cash to acquire Dale Renewables Consulting, Inc., approximately $75,000 for the acquisition of certain contractual rights from a third party for the design and installation of photovoltaic systems and $220,000 to acquire property, plant and equipment.

Net cash generated from financing activities was approximately $9,544,000 for the year ended December 31, 2007 and is comprised of approximately $11,517,000 of net proceeds from the issuance of common stock and warrants, net of issuance costs, and $931,000 from proceeds of our PRC line of credit, offset by approximately $389,000 of principal payments on notes and capital leases and approximately $320,000 of principal payments on loans from related parties restricted cash collateralizing letters of credit of approximately $2,195,000.

Net cash generated from financing activities was approximately $745,000 for the year ended December 31, 2006 and is comprised of approximately $425,000 of net proceeds from the issuance of common stock and approximately $320,000 from working capital loans. These loans were repaid in full in January 2007 from cash we received from our merger with Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.).

In the short-term we do not expect any material change in the mix or relative cost of our capital resources. As of December 31, 2007, we had approximately $6,840,000 in cash and cash equivalents and approximately $2,195,000 of restricted cash collateralizing standby letters of credit we issued to support our bank line of credit, capital lease and credit extended to us by vendors. Our plan and focus will be to continue the development of our solar panel manufacturing facility, manufacturing our branded solar system products, generating new customers, and organizing a distribution model through the development of a franchise network. With our current level of cash on hand and collection on accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts, we believe we have sufficient working capital to satisfy our working capital requirements to fund operations at their current levels. We may be required to raise capital to fund our anticipated future growth. Future cash forecasts are based on assumptions regarding operational performance, and assumptions regarding working capital needs associated with increasing customer orders.

Contractual Obligations

Operating leases — The Company leases premises under various operating leases. Rental expense under operating leases included in the statement of operations was approximately $502,000 and $101,000 for the years ended December 31, 2007 and 2006, respectively.

The Company was obligated under operating leases requiring minimum rentals as follows:


Years ending December 31,
2008	$	739,582
2009		626,344
2010		454,011
2011		459,061
Beyond		309,285

Total minimum payments	$	2,588,283

The Company was obligated under notes payable requiring minimum payments as follows:


Years ending December 31,
2008	$	49,440
2009		50,589
2010		51,753
2011		44,460
2012		8,472

		204,714
Less current portion		(49,427	)

Long-term portion	$	155,287

The notes payable are collateralized by trucks used in the Company’s solar photovoltaic business, bear interest rates between 1.9% and 2.9% and are payable over sixty months.

During the year ended December 31, 2007 the Company acquired certain equipment under capital leases. The leases expire from January to October 2010. The Company was obligated for the following minimum payments:


Years ending December 31,
2008	$	355,885
2009		326,773
2010		216,357

		899,015
Less amounts representing interest		(106,642	)

Present value of net minimum lease payments		792,373
Less current portion		(292,331	)

Long-term portion	$	500,042

Off-Balance Sheet Arrangements

At December 31, 2007, we did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

DESCRIPTION OF BUSINESS

Overview

We, through Solar Power, Inc. a California corporation and our wholly owned subsidiaries, International Assembly Solutions, Limited (Hong Kong), IAS Electronics (Shenzhen) Co., Ltd, SPIC, Inc., Yes! Solar, Inc. and Yes! Construction Services, Inc., currently manufacture and sell cable, wire and mechanical assemblies and produce and install solar power systems for use in residential, commercial and industrial applications. We develop, manufacture and market photovoltaic panels for the production of environmentally clean electric power primarily in the United States. Photovoltaic cells generate direct current electricity when exposed to sunlight. We believe that we have distribution and installation advantages by having our manufacturing facilities in China that will result in lower operational cost versus other competing United States-based solar power companies and technologies who do not currently have operations in China. Solar companies that do have operations in China are viewed as competitors only to the extent that they supply solar modules to US integrators that compete with us for solar design and installation work.

Through 2006 revenues have been primarily derived from the sale of cable, wire and mechanical assemblies. These products are sold directly to telecommunications, transportation and manufacturing companies for use in commercial and industrial applications.

While we intend to continue our existing cable, wire and mechanical assembly business, we have expanded our operations to focus on the design, development, manufacturing and marketing of a variety of solar modules, which are assemblies of photovoltaic cells that have been electrically interconnected and laminated in a physically durable and weather-tight package. These products are for use in residential, commercial and industrial applications. We intend to distribute primarily through our company- owned stores (the first of which opened in October 2007) and our franchisee network. In March 2008 the Company entered into its first franchise sale agreement. Our solar modules and balance of system products add value by incorporating system design features enabling more efficient installation and resulting in significant labor costs savings. Through 2007, our revenues increased significantly as we implemented our solar module production, sales and installation business.

In addition, we have arranged a secondary distribution through a General Partnership Agreement with J.R. Conkey and Associates, Inc. (“JRC”). The partnership will engage in the sales, design and installation of solar systems in government market segments for solar contracts within California.

JRC is the managing partner of the partnership and will manage and conduct the day-to-day business affairs of the partnership. Additionally, JRC will be responsible for all marketing and sales efforts, establishing and maintaining customer relationships, and contract management. JRC is owned by James R. Conkey. Mr. Conkey invested $100,000 into Solar Power, Inc.’s (formerly Welund Fund, Inc.) private placement in October 2006. He acquired 100,000 shares in that transaction. These 100,000 shares were the only Company shares owned by Mr. Conkey prior to the Partnership Agreement being executed with SPIC. Mr. Conkey has not acquired any other shares since the Weland Fund, Inc. private placement and is not considered a related party. SPIC will be responsible for exclusively supplying all solar panels or other solar materials at current published rates to the partnership for installation, and the design, engineering, and installation of all solar systems for customers, at contracted prices to SPIC. SPIC will control financial and accounting records. Currently, no activity has occurred in the partnership. Neither JRC or the Company has contributed initial capital or performed any of the stated responsibilities.

Applications for solar products include on-grid generation, in which supplemental electricity is provided to an electric utility grid, and off-grid generation for markets where access to conventional electric power is not economical or physically feasible. Our solar products are currently sold primarily in the United States, primarily in California.

Business Development

On May 10, 2005, International Assembly Solutions, Limited (a company formed under the laws of Hong Kong S.A.R. (“IAS HK”) formed the limited liability company IAS Electronics (Shenzhen) Co., Ltd. (IAS Shenzhen), in accordance with the PRC’s laws, a Wholly Foreign-Owned Enterprises (collectively known as the “WFOE Law”) and commenced operations the same month. Mr. Kircher, our CEO, was named a director of IAS HK and held disposition and voting control over 8,100,000 shares or approximately 58% of the outstanding shares. Messrs. Kircher, Gerald Moore and Sam Lau were directors of IAS Shenzhen from inception until July 15, 2006, at which time our CFO, replaced Mr. Moore as a director. Mr. Kircher made business decisions for IAS Shenzhen, and it did not have formal officers.

In August 2006, Solar Power, Inc., a California corporation, entered into a share exchange agreement with all the shareholders of IAS HK, which was incorporated in Hong Kong on January 18, 2005 with limited liability. Solar Power, Inc., a California corporation, was originally incorporated in the State of California on May 22, 2006 to facilitate creation of a U.S. holding company for IAS HK operations and to engage in sales, installation and integration of photovoltaic systems in the U.S. Pursuant to the share exchange agreements, the equity owners of IAS HK transferred all their equity interest in IAS HK in exchange for a total of 14,000,000 shares of Solar Power, Inc., a California corporation. As a result, IAS HK became a wholly owned subsidiary of Solar Power, Inc., a California corporation. There were a total of sixteen shareholders in IAS HK including the controlling shareholders Stephen Kircher, Gerald Moore and Bradley Ferrell. Mr. Kircher, Chairman of the Board of IAS HK, held dispositive and voting control of 8,100,000

shares or approximately 58% of the outstanding shares. Mr. Kircher remains Chairman of the Board for IAS HK. Mr. Moore and Mr. Ferrell owned 4,100,000 (29%) and 1,500,000 (11%) shares, respectively. Neither Mr. Moore nor Mr. Ferrell were directors of IAS HK. IAS HK does not have company officers and management and business decisions were made by Mr. Kircher. Being a group reorganization entered into among entities under common control, the Company combined the historical financial statements of IAS HK and its wholly owned subsidiary, IAS Shenzhen.

DRCI Acquisition

In February 2005, Dale Renewables Consulting, Inc., (“DRCI”), a California corporation was formed to engage in the business of solar modules and systems installation, integration and sales. In May 2006, Solar Power, Inc., a California corporation, and Dale Stickney Construction, Inc., (“DSCI”) the parent of DRCI, agreed in principle on the acquisition of DRCI by Solar Power, Inc., a California corporation, and entered into an operating agreement with DRCI providing that Solar Power, Inc., a California corporation would effectively be responsible for all current operations, liabilities, and revenues, effective June 1, 2006, as contemplated by the proposed merger agreement.

In August 2006, Solar Power, Inc., a California corporation, and DRCI completed the Agreement and Plan of Merger (the “Merger Agreement”), including the Assignment and Interim Operating Agreement (the “Operating Agreement”) which was an exhibit to the Merger Agreement,. The Operating Agreement obligated Solar Power, Inc., a California corporation, to provide all financing necessary for DRCI’s operations subsequent to June 1, 2006 until the consummation of the acquisition in exchange for all the revenues generated from its operations. The Operating Agreement also provided that Solar Power, Inc. was to provide all management activities of DRCI on its behalf from June 1, 2006 until the consummation of the acquisition. The Company has taken the position that DRCI became a Variable Interest Entity on June 1, 2006 based upon the accounting literature found in Financial Interpretation Number 46(R) (“FIN 46(R)”), paragraph 5. In addition, based upon FIN 46(R), paragraph 6, footnote 12, the Company had pecuniary interest in DRCI that began on June 1, 2006. Finally, FIN 46 (R), paragraph 14 supports the Company’s position to consolidate as of June 1, 2006 because it absorbed DRCI’s losses and had a contractual right to expect residual returns. Solar Power, Inc., a California corporation, acquired DRCI in order to accelerate its entry into the California market for sale and installation of solar systems, including assumption of the installation and construction contracts that DRCI had at that time.

On November 15, 2006, the Solar Power, Inc., a California corporation, completed the acquisition of DRCI, paying $1,115,373 in cash in exchange for 100% of the outstanding shares of DRCI. The acquisition of DRCI provided Solar Power, Inc., a California corporation, with an experienced photovoltaic sales and installation team.

Neither DRCI or its affiliates had any prior affiliation with Solar Power, Inc., a California corporation, or any of its officers, directors or major shareholders. Mr. James Underwood was the former CEO for DRCI and remains the current CEO for DSCI. There are no continuing relationships or arrangements between us and DSCI.

Welund Merger

On August 23, 2006, Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) formed Welund Acquisition Corp., a Nevada corporation and entered into an Agreement and Plan of Merger with Solar Power, Inc, a California corporation and Welund Acquisition Corp. (“Merger Sub”). The parties entered into the agreement to facilitate Welund Fund, Inc. acquiring an operating business and completing a proposed financing to provide working capital for such operations. The shareholders of Solar Power, Inc., a California corporation, received 14,500,000 shares of the Solar Power, Inc. a Nevada corporation’s common stock and the Solar Power, Inc., a Nevada corporation, substituted 2,000,000 restricted stock awards and options of Solar Power, Inc., a California corporation, with the its restricted stock awards and options on the same terms. There was no common control or related party relationships. However, Mr. Kircher was appointed to the board of directors of Welund Fund, Inc. after the merger agreement was entered into and as a condition to the financing. Mr. Kircher received no compensation in connection with his service as a director of Welund Fund, Inc. Pending consummation of the merger, a special committee was formed by the Welund Fund, Inc. board members for purposes of any and all matters related to the merger, which committee excluded Mr. Kircher due to his interest in Solar Power, Inc., a California corporation. Incident to the financing, Welund Fund, Inc. also changed its name to Solar Power, Inc., a Nevada corporation.

On December 29, 2006, Merger Sub merged with Solar Power, Inc., a California corporation, pursuant to which Solar Power, Inc., a California corporation, was the surviving entity. As a result of the merger, Solar Power, Inc., a California corporation, became our wholly-owned subsidiary and we discontinued our former operations and business of purchasing sub-prime auto loans. In addition,

Solar Power, Inc., a California corporation, received the net proceeds of the private placement made by Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.). In addition, 14,500,000 shares of common stock were issued to Solar Power, Inc., a California corporation, shareholders and 2,000,000 restricted stock awards and options of Solar Power, Inc., a California corporation, were substituted for Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) stock awards and option plan. As a condition and incident to the merger, Messrs. Strasser, Smith and Landa resigned all positions as officers and directors of Solar Power, Inc. a Nevada corporation (formerly Welund Fund, Inc.). At that time, the officers and directors of Solar Power, Inc., a California corporation, became our officers and directors. The merger was structured as a reverse merger, and we became the registrant and the accounting acquirer as a result of the merger.

In addition, on February 15, 2007, Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) completed a redomicile into the State of California by merging with and into our wholly-owned subsidiary, Solar Power, Inc., a California corporation, which survived.

Our Subsidiaries

Our business is conducted through our wholly-owned subsidiaries, SPIC, Inc. (“SPIC”), Yes! Solar, Inc. (“YES”), Yes! Construction Services, Inc. (“YCS”), International Assembly Solutions Limited (a Hong Kong company) (“IASHK”) and IAS Electronics (Shenzhen) Co., Ltd. (“IAS Shenzhen”).

SPIC and YES are engaged in the business of design, sales and installation of photovoltaic (“PV”) solar systems for commercial, industrial and residential markets, respectively.

YES is engaged in the sale and administration of our franchise operations. In March 2008, the Company entered into its first franchise sale agreement.

IASHK is engaged in sales of our cable, wire and mechanical assemblies business and will act as a distributor of our company manufactured solar products.

IAS Shenzhen is engaged in manufacturing our solar modules, will manufacture our balance of products and continues to be engaged in our cable, wire and mechanical assembly business.

Strategic Opportunity Partnership

On March 21, 2007 the Company, through our wholly-owned subsidiary, SPIC entered into a General Partnership Agreement with J.R. Conkey and Associates, Inc. (“JRC”). The partnership will engage in the sales, design and installation of solar systems in government market segments for solar contracts within California. As initial capital contributions to the partnership, JRC is contributing $25,500 and SPIC is contributing $24,500. JRC is the managing partner of the partnership and will manage and conduct the day-to-day business affairs of the partnership. Additionally, JRC will be responsible for all marketing and sales efforts, establishing and maintaining customer relationships, and contract management. SPIC will be responsible for exclusively supplying all solar panels or other solar materials to the partnership for installation, and the design, engineering, and installation of all solar systems for customers, at contracted prices to SPIC. SPIC will control financial and accounting records. The purpose of this partnership is to expand our distribution through JRC’s contacts and relationships in the government market segment. There is no affiliation between JRC and any of SPI’s officers, directors or major shareholders. James R. Conkey, a principal of JRC, invested $100,000 and received 100,000 shares in the Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) private placement in October 2006. Mr. Conkey did not own any of our shares prior to this investment. Currently, no activity has occurred in the partnership. Neither JRC nor the Company has contributed initial capital or performed any of the stated responsibilities.

Industry Overview

According to industry studies, net electricity consumption is expected to more than double between 2003 and 2030, growing from 14.8 trillion kilowatt hours to 30.1 trillion kilowatt hours. During this time frame, the report projects that natural gas and renewable energy sources are the only fuels expected to see an increase in the share of the total world electricity generation. We have not commissioned any independent industry studies and rely on existing reports currently.

Currently, the electric power industry is one of the world’s largest industries with annual global revenues reaching approximately $1 trillion per year. Higher fossil fuel prices, particularly for natural gas, have raised the cost of producing electricity. As a result of these higher production costs, renewable energy sources such as solar are better able to compete economically.

In 2003, nearly 60 percent of the total net electricity consumption in the Organization for Economic Co-operation and Development (OECD) economies was in the residential and commercial building sectors. The industrial sectors accounts for 39%.

Economic growth is among the most important factors to be considered in projecting changes in the world’s energy consumption. Over the 2003 to 2030 period, the projected world real Gross Domestic Product (GDP) is expected to average 3.8% annually. Despite higher energy prices over the last 2 years, the U.S. economy is projected to grow an average of 3.0% between 2006 and 2015 and then slow to 2.9%. Canada’s growth is expected to mirror the United States while Mexico should see growth closer to 4.1%.

Between 2003 and 2030, much of the world’s economic growth is expected to occur among the nations of non-OECD Asia. China for example, is expected to have demand grow by an average 5.5% per year. By 2020, China is expected to have the world’s largest economy, based on share of Gross Domestic Product (GDP). Another country experiencing similar demand growth is India, where the average annual GDP is projected to be 5.4% over the same timeframe.

According to an industry report, to meet the world’s electricity demand, an extensive expansion of installed generating capacity will be required. How each country or region adds the additional capacity depends on the availability of local resources, energy security and market competition among fuel choices. The fuel mix used to generate electricity over the past thirty years has changed significantly. Coal has remained the dominant fuel but the use of nuclear power increased during the 1970s and natural gas rapidly grew during the 1980s and 1990s. This fuel mix change was encouraged by the rise in oil prices.

In 2003, the fuel mix for electricity generation included coal with 40%, natural gas with 19%, oil with 10%, nuclear power with 8% and renewable sources, such as solar, hydroelectric and wind power with 23%. Solar accounted for less than one percent. Electric power producers face several challenges in meeting anticipated growth in electricity demand:

	•		Environmental regulations. Environmental regulations addressing global climate change and air quality seek to limit emissions by existing fossil fuel-fired generation plants and new generating facilities. Countries that are parties to international treaties such as the Kyoto Protocol have voluntarily submitted to reducing emissions of greenhouse gases. National and regional air pollution regulations also restrict the release of carbon dioxide and other gases by power generation facilities.

	•		Infrastructure reliability. Investment in electricity transmission and distribution infrastructure has not kept pace with increased demand, resulting in major service disruptions in the United States, such as the Northeast blackout in August 2003. Increasing capacity of the aging infrastructure to meet capacity constraints will be capital intensive, time consuming and may be restricted by environmental concerns.

	•		Fossil fuel supply constraints and cost pressures. The supply of fossil fuels is finite. While an adequate supply of coal, natural gas and oil exists for the foreseeable future, depletion of the fossil fuels over this century may impact prices and infrastructure requirements. For example, the U.S. domestic supply of liquefied natural gas, or LNG, is not expected to meet consumption requirements by 2025, requiring significant investment in LNG shipping terminal infrastructure to support imported fuel. Political instability, labor unrest, war and the threat of terrorism in oil producing regions has disrupted oil production, increased the volatility of fuel prices and raised concerns over foreign dependency in consumer nations.

	•		Weather. Regional weather impacts, such as higher temperatures or drought frequencies and duration, may affect the demand for electricity consumption or the ability to produce additional electrical supplies, as in the case of hydro production.

We believe that economic, environmental and national security pressures and technological innovations are creating significant opportunities for new entrants within the electric power industry. The demand for additional electricity resources will bring changes to the market place and create opportunities for those companies that anticipate, plan and execute appropriately.

Distributed Generation and Renewable Energy

Distributed generation and renewable energy are two promising areas for growth in the global electric power industry. Distributed generation is defined as point-of-use electricity generation that either supplements or bypasses the electric utility grid. Distributive generation employs technologies such as solar power, micro turbines and fuel cells. The move to distributed power will come from

capacity constraints, increased demand for reliable power reliability and the economic challenges of building new centralized generation and transmission facilities.

Renewable energy is defined as energy supplies that derive from non-depleting sources such as solar, wind and certain types of biomass. Renewable energy reduces dependence on imported and increasingly expensive oil and natural gas. In addition, growing environmental pressures, increasing economic hurdles of large power generation facilities and U.S. National Security interests are favorable drivers for renewable energy. Renewable energy, including solar and wind power, is the fastest growing segment of the energy industry worldwide.

Solar power is both distributed and renewable. Solar power is an environmentally benign, locally sourced renewable energy source that can play an immediate and significant role in assisting global economic development, forging sustainable global environmental and energy policies, and protecting national security interests.

Solar Power

Solar power generation uses interconnected photovoltaic cells to generate electricity from sunlight. The photovoltaic process (PV) captures packets of light (photons) and converts that energy into electricity (volts). Most photovoltaic cells are constructed using specially processed silicon. When sunlight is absorbed by a semiconductor, the photon knocks the electrons loose from the atoms, allowing the electrons to flow through the material to produce electricity. This generated electricity is direct current (DC).

Light can be separated into different wavelengths with a wide range of energies. These photons may be reflected, absorbed or passed right through the PV cell. Solar cell technology only has the ability to capture the energy of photons within a specific range. Lower wavelength photons create heat, resulting in higher solar cell temperatures and lower conversion rate to energy. Higher wavelength photons have lower levels of energy and thus do not generate electricity. A typical commercial cell has an efficiency of only 15%.

Many interconnected cells are packaged into solar modules, which protect the cells and collect the electricity generated. Solar power systems are comprised of multiple solar modules along with related power electronics. Solar power technology, first used in the space program in the late 1950s, has experienced growing worldwide commercial use for over 25 years in both on-grid and off-grid applications.

	•		On-grid. On-grid applications provide supplemental electricity to customers that are served by an electric utility grid, but choose to generate a portion of their electricity needs on-site. The On-grid segment is typically the most difficult to compete in since electricity generated from coal, nuclear, natural gas, hydro and wind is generally at much lower rates. Despite the unfavorable cost comparisons, On-grid applications have been the fastest growing part of the solar power market. This growth is primarily driven by the worldwide trend toward deregulation and privatization of the electric power industry, as well as by government initiatives, including incentive programs to subsidize and promote solar power systems in several countries, including Japan, Germany and the United States. On-grid applications include residential and commercial rooftops, as well as ground-mounted mini-power plants.

	•		Off-grid. Off-grid applications serve markets where access to conventional electric power is not economical or physically feasible. Solar power products can provide a cost-competitive, reliable alternative for such power applications as highway call boxes, microwave stations, portable highway road signs, remote street or billboard lights, vacation homes, rural homes in developed and developing countries, water pumps and battery chargers for recreational vehicles and other consumer applications.

Solar power has emerged as one of the primary distributed generation technologies seeking to capitalize on the opportunities resulting from trends affecting the electric power industry. Relative to other distributed generation technologies, solar power benefits include:

•

Modularity and scalability. From tiny solar cells powering a hand-held calculator to an array of roof modules powering an entire home to acres of modules on a commercial building roof or field, solar power products can be deployed in many sizes and configurations and can be installed almost anywhere in the world. Solar is among the best technologies for power generation in urban areas, environmentally sensitive areas and geographically remote areas in both developing and developed countries.

	•		Reliability. With no moving parts and no fuel supply required, solar power systems reliably power some of the world’s most demanding applications, from space satellites to maritime applications to remote microwave stations. Solar modules typically carry warranties as long as 25 years.

	•		Dual use. Solar modules are expected to increasingly serve as both a power generator and the skin of the building. Like architectural glass, solar modules can be installed on the roofs or facades of residential and commercial buildings.

	•		Environmentally cleaner. Subsequent to their installation solar power systems consume no fuel and produce no air, water or noise emissions.

Germany, Japan and the United States presently comprise the majority of world market sales for solar power systems. Government policies in these countries, in the form of both regulation and incentives, have accelerated the adoption of solar technologies by businesses and consumers. For example, in the United States, the 2005 energy bill enacted a 30% investment tax credit for solar, and in January 2006 California approved the largest solar program in the country’s history, a $3.2 billion, 11-year California Solar Initiative. The California Solar Initiative is a recently adopted state policy expiring in 2017 that provides for long term subsidies in the form of rebates to encourage all Californians to use solar energy where possible. This Initiative is of particular importance to us because our Company’s headquarters are in Sacramento, California, and we anticipate that our first franchise sales will be in California. These three countries together accounted for 83% of the solar global market in 2005. Internationally, Spain, Portugal and Italy have recently developed new solar support programs.

As a result of the benefits and government support of solar power, the solar power market has seen sustained and rapid growth. Global PV installations have increased from 345 megawatts (MW) in 2001 to 1,460 MW in 2005. Unit shipments have increased over 20% per year on average for the past 20 years, and have never seen a year with negative growth.

Despite the benefits of solar power, there are also certain risks and challenges faced by solar power. Solar power is heavily dependent on government subsidies to promote rapid introduction and acceptance by mass markets. Solar is an inert process that makes it difficult to compare against other non-inert technologies when comparing costs as current solar modules are generally warranted for a 25 year life. When the costs of producing solar are compared to other energy sources, solar power is more expensive than grid-based energy, nuclear, wind, etc. Different solar technologies carry different efficiencies. Traditional PV solar cells carry efficiencies ranging from 13% to 22% per cell. Solar thin film technologies are less expensive to manufacture than PV solar cell but generally carry efficiencies ranging from 5% to 9%.

Our Challenges

Although solar power can provide a cost-effective alternative for off-grid applications, we believe the principal challenge to widespread adoption of solar power for on-grid applications is reducing manufacturing and installation costs without impairing product reliability. We believe the following advancements in solar power technology are necessary to meet this challenge:

	•		Efficient material use. Reduce raw materials waste, particularly the waste associated with sawing silicon by conventional crystalline silicon technology. Efficient use of silicon is imperative for the growth of the industry due to the limited supply and increasing cost of silicon raw material expected for the near future.

	•		Simplified and continuous processing. Reduce reliance on expensive, multi-step manufacturing processes.

	•		Reduced manufacturing capital costs. Decrease the costs and risks associated with new plant investments as a result of lower capital costs per unit of production.

	•		Improved product design and performance. Increase product conversion efficiency, longevity and ease of use. Conversion efficiency refers to the fraction of the sun’s energy converted to electricity.

	•		Simplified installation process. Reduce the time and effort required to install a solar system. Eliminate non-value added functions.

Our Solution

We offer a broad range of our solar modules, balance-of-system components, and integration services, including system design and installation. We source components that are capital intensive to produce, such as solar cells, and rely on our manufacturing and assembly process to efficiently and economically complete our final products. We utilize our in-house expertise to design and customize systems and components to meet each customer’s requirements. Finally, we modify our system components so our installation process time is reduced.

Our solutions enable our operations to improve the quality and yield of our manufactured products, to improve the delivery of and shorten our time-to-market, thereby improving both product and service profitability. We believe that our solutions provide the following key benefits to our customers:

	•		cost-effective solar modules and balance of system products;

	•		high quality components and supply chain management expertise;

	•		custom design and manufacturing expertise; and

	•		superior customer service and post-sales support.

Our Strategy

Our business strategy is to develop, manufacture and market solar panels and system component products to industrial, commercial and residential facilities primarily in the United States. We presently are focused on the following steps to implement our business strategy:

	•		Outsource completed solar cells. We believe that we have the resources and relationships to acquire solar cells. We have entered into discussion with several manufacturers who possess the production capacity to deliver the required number of complete solar cells but have not entered into binding agreements with them. The manufacturing process to convert metallurgical grade silicon into either solar wafers or solar cells requires high capital investments and long lead times. We firmly believe that our firm’s resources are better applied to manufacturing the solar module and balance of system products.

	•		Accelerate our manufacturing cost reduction and capacity expansion. We intend to quicken the expansion pace, secure critical supply chain and leverage our technology and manufacturing capabilities through strategic partnerships with other participants in the solar power industry. We have extensive experience manufacturing cable wire and mechanical assemblies in our existing facility in China. We apply our expertise and know-how, which requires the same skill sets, into assembling solar modules and balance of system components. Our existing manufacturing team is well versed in bringing components into China, applying value-added services, exporting our finished products through the Chinese regulatory environment and delivering the final product to our customers’ doorsteps. In July 2006, we secured a new 123,784 square foot manufacturing facility providing us with the potential capacity to produce over 50 MW of solar panels annually. During fiscal 2007 we produced approximately 1.6 MW of solar panels.

	•		Accelerate our installation cost reductions. We are implementing a made-to-order system for each customer order. We first utilize our engineering expertise during the initial sales process. This initial review will modify the system proposal resulting in significant savings in materials, labor, re-work and installation time. Completed orders will be bundled and packed in a custom shipping container for delivery to the customer’s address. This ordering, design review and component bundling process will greatly reduce the time needed to complete our installation process.

	•		Diversify and differentiate our product lines. We intend to design a full complement of inverters and balance of systems components to complement a wide array of solar system designs and power generating capacities.

Customers

We currently build and sell cable and harness assemblies to Siemens, assemblies to Flextronics and wire harness assemblies to certain U.S. telecom companies. Customers in this segment who accounted for at least ten percent of our 2007 revenues include Flextronics 25% and Siemens Transportation Systems 63%. Total 2007 revenues in the cable, wire and mechanical assemblies segment increased by $512,000 or by 17.7% over the prior year. Increased revenue from Siemens Transportation Systems offset by decreased revenues from Flextronics International accounted for the entire segment increase.

Additionally, we sell photovoltaic systems to a variety of customers including private residential owners, production home builders and commercial facilities. For the period ended December 31, 2007 the Company recorded revenues of approximately $14,744,000 for sales and installation of its photovoltaic systems. One major customer accounted for 10% or more of our photovoltaic revenue, Solar Power Partners, Inc with 41% of total revenue. All contracts are either standard construction or bifurcated construction contracts and are specific to the job site.

Products and Services

Solar power products in general are built-up through 4 stages of production:

	•		Wafers. A crystalline silicon wafer is a flat piece of crystalline silicon that can be processed into a solar cell. Wafers are usually square or square with rounded corners. A typical size is 152 millimeters by 152 millimeters.

	•		Cells. A solar cell is a device made from a wafer that converts sunlight into electricity by means of a process known as the photovoltaic effect. Solar cells produce approximately 3.5 watts of power each.

	•		Modules. A solar module is an assembly of solar cells that have been electrically interconnected and laminated in a physically durable and weather-tight package. A typical solar module can produce from 20 to 300 watts of power and range in size from 2 to 25 square feet. Our typical commercial module will range from 180 to 220 watts.

	•		Systems. A solar system is an assembly of one or more solar modules that have been physically mounted and electrically interconnected by cables, meters and inverters to produce electricity. Typical residential on-grid systems produce 2,000 to 6,000 watts of power.

We intend to make solar modules and systems our primary products. We believe our modules will be competitive with other products in the marketplace and will be certified to international standards of safety, reliability and quality. If our development programs are successful, we expect to continue to increase the conversion efficiency and power of our solar modules as we expand our manufacturing capacity and increase our efficiencies through ongoing process improvement.

Intellectual Property

We rely and will continue to rely on trade secrets, know-how and other unpatented proprietary information in our business. We have filed applications to register the following trademarks: Yes! Solar Solutions, Yes! Energy Series and Yes! Independence Series (the “Marks”) for use with our franchise operations and solar product brands. In addition, we have 2 provisional patents pending for certain proprietary technologies.

Competition

The solar power market is intensely competitive and rapidly evolving. Our competitors have established a market position more prominent than ours, and if we fail to secure our supply chain, attract and retain customers and establish a successful distribution network for our solar power products, we may be unable to increase our sales and market share. We compete with major international and domestic companies. Our major systems integration competitors include Sun Power Corporation, SPG Solar, Akeena Solar, Sun Edison plus numerous regional players, and other similar companies primarily located in California and New Jersey. Manufacturing competitors include multinational corporations such as BP Solar, Kyocera Corporation, Mitsubishi, Solar World AG, Sharp Corporation, Sun Power Corporation and Sanyo Corporation. We also expect that future competition will include new entrants to the solar power market offering new technological solutions. Further, many of our competitors are developing and are currently producing products based on new solar power technologies, including other crystalline silicon ribbon and sheet technologies, that we believe will ultimately have costs similar to, or lower than, our projected costs.

Moreover, we believe that our direct competitors are solar companies that have operations in China or other low cost manufacturing locations to the extent that they supply solar modules to US integrators and compete with us for solar system design and integration work. Under this view, we believe Sun Power Corporation would be considered a competitor even though their manufacturing facilities are in the Philippines and not China.

We believe that the cost and performance of our technologies, products and services will have advantages compared to competitive technologies, products and services. Our products offer the reliability, efficiency and market acceptance of other crystalline silicon products. We believe our technological process provides lower manufacturing costs resulting from significantly more efficient material usage and fewer processing steps, particularly in module fabrication.

The entire solar industry also faces competition from other power generation sources, both conventional sources as well as other emerging technologies. Solar power has certain advantages and disadvantages when compared to other power generating technologies. The advantages include the ability to deploy products in many sizes and configurations, to install products almost anywhere in the world, to provide reliable power for many applications, to serve as both a power generator and the skin of a building and to eliminate air, water and noise emissions. Whereas solar generally is cost effective for off-grid applications, the high up-front cost of solar relative to most other solutions is the primary market barrier for on-grid applications. Furthermore, unlike most conventional power

generators, which can produce power on demand, solar power cannot generate power where sunlight is not available, although it is sometimes matched with battery storage to provide highly reliable power solutions.

Manufacturing and Assembly Capabilities

Prior to our focus in the solar industry we previously did not manufacture solar panels. We believe that our experience in manufacturing and assembly operations in China will give us a competitive advantage in the production of solar module and balance of system products. Our senior management has broad experience in the manufacturing of liquid crystal displays and electronic module assemblies. The manufacturing and assembly process of these products is not unlike the manufacturing and assembly of solar modules and balance of system products.

Due to the various costs associated with both silicon and subsequent wafer processing, the high cost of solar products has rendered them unmarketable in some geographic areas. The stated goal for some time in the photovoltaic industry has been to reduce manufacturing costs to allow prices to drop to a point where rebates and subsidies are no longer a necessity. We feel our vertically integrated China-based model takes a major step towards the lessening of the rebate dependency.

We are producing our solar modules and intend to produce balance of system products in fiscal 2008. It is our intent to strive to reduce costs in the overall solar system cost to the end customer with the ultimate goal to make the actual installed cost of solar equivalent to the comparable cost of grid based energy without rebate. These overall reductions in cost will delivered by reducing labor installation costs through better system design and kit packaging and reductions in module and balance of system costs by focusing on driving prices down on these commodity types of products.

Our principal manufacturing objective is to provide for large-scale manufacturing and assembly of our solar power products at low costs that will enable us to penetrate price-sensitive solar power markets. Our 123,784 square foot campus in NanYue, Shenzhen, Peoples Republic of China (PRC) includes approximately 101,104 square feet of manufacturing space. The Shenzhen facility includes a complete line of equipment to manufacture cable harnesses and mechanical assemblies and a complete line to manufacture solar modules. Additional equipment will test and verify product functionality and performance standards. Currently our solar products manufacturing and assembly business utilizes approximately thirty-two percent (32%) of our manufacturing space and our cable, wire and assembly business utilizes approximately eighteen percent (18%) of our manufacturing space. The unused capacity will be utilized for production of our solar products as our solar business increases. We expect this facility to have a total capacity of approximately 50 megawatts per year if operated at full capacity.

Suppliers

A substantial portion of our product costs will stem from the purchase of components and raw materials. Raw materials are principally comprised of glass, aluminum frames, sheet metal, EVA bonding materials, copper tabs, and wiring. Components include solar cells, printed circuit boards, electrical connectors, junction boxes, molded plastic parts and packaging materials. These are purchased from a variety of suppliers. We will be dependent on certain key suppliers for sole source supplies of customer specified items. We intend to base component orders on received purchase orders in an effort to minimize our inventory risk by ordering components and products only to the extent necessary. However, in certain circumstances due to priorities of lead times, we may occasionally purchase components and/or a raw material based on rolling forecasts or anticipated orders following a risk assessment.

Certain components may be subject to limited allocation by certain of our suppliers. In our industry, supply shortages and delays in deliveries of particular components have resulted in curtailed production, or delays in production of assemblies using scarce components or higher component costs. These supply shortages may contribute to an increase in our inventory levels and/or a reduction in our margins. We expect that shortages and delays in deliveries of some components will continue to impact our industry, and we are striving to develop multiple sources of supply where possible.

We currently purchase solar modules from two major suppliers. Although we intend to manufacture our own solar modules we will also keep purchasing a portion of our solar module requirements from one or both of these suppliers to insure the availability of a second source and to supplement the anticipated output generated by our own production facility.

Sales and Marketing

We intend to bring our solar power products to market by utilizing strategic company-owned store operations and establishing a national franchise network. We opened our first retail showroom in October 2007 in Northern California in close proximity to our corporate operations, and sold our first franchise in March 2008. Our initial plan is to sell franchises in California to provide reasonable proximity to our corporate operations.

Company-owned store operations work directly with all regional and national commercial and residential land use companies. We intend to provide national account representatives who will establish long-term relationships with these prime customers. Our company-owned store team is designed to provide reliable product sourcing, PV system designs and reviews, permit and rebate assistance, media and public relations recognition and co-marketing opportunities. In essence, we to strive to provide a one-stop shopping experience for these large volume customers. We intend to establish additional stores in California and then expand to several other geographic locations in the United States.

Franchising

Outside of Company-owned store operations, we intend to work with franchisee partners who will have exclusive geographical territories that include specific application focus. Regional Company-owned stores intend to provide consistent and reliable product supply, expertise on PV system designs and reviews, assistance with all permits and rebate programs, and extensive marketing and sales support. We believe that by franchising we will be able to accomplish the following:

	•		Build a national brand

	•		Leverage the brand quickly

	•		Leverage sales and marketing both regionally and nationally

	•		Develop consistency in installation, training and service

	•		Access national accounts through corporate programs rather than regional programs

	•		Provide consistent marketing schemes, materials, and programs with national sales teams

Other Mediums

We intend to market our products through trade shows, on-going customer communications, promotional material, our web site, direct mail and advertising. Our staff will provide customer service and applications engineering support to our distribution partners while also gathering information on current product performance and future product requirements.

Employees

As of December 31, 2007, we had approximately 170 full-time employees, including approximately 9 engaged in engineering activities and approximately 94 engaged in manufacturing, the majority of which are employed through our subsidiary in China. None of our employees is represented by a labor union nor are we organized under a collective bargaining agreement. We have never experienced a work stoppage and believe that our relations with our employees are good.

DESCRIPTION OF PROPERTY

Our manufacturing facilities consist of 123,784 square feet, including 101,104 square feet of factories and 23,680 square feet of dorms, situated in an industrial suburb of Shenzhen, Southern China known as Long Gang. Only the state may own land in China. Therefore, we lease the land under our facilities, and our lease agreement gives us the right to use the land until July 31, 2009 at an annual rent of $193,350. We have an option to renew this lease for 3 additional years on the same terms.

Our corporate headquarters are located in Roseville, California in a space of approximately 19,000 square feet. The five year lease commenced on August 1, 2007 and expires in July 2012. The rent is currently $342,972 per year for the first year, $351,540 for the second year, $360,336 for the third year, $369,336 for the fourth year and $378,576 for the remainder of the lease. The Company has an option to renew for an additional five years.

LEGAL PROCEEDINGS

We are not a party to any pending legal proceeding. In the normal course of operations, we may have disagreements or disputes with employees, vendors or customers. These disputes are seen by our management as a normal part of business especially in the construction industry, and there are no pending actions currently or no threatened actions that management believes would have a significant material impact on our financial position, results of operations or cash flows.

DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS

Directors, Executive Officers and Significant Employees

The following table sets forth the names and ages of our current directors, executive officers, significant employees, the principal offices and positions with us held by each person and the date such person became our director, executive officer or significant employee. Our executive officers are appointed by our Board of Directors. Our directors serve until the earlier occurrence of the appointment of his or her successor at the next meeting of stockholders, death, resignation or removal by the Board of Directors. There are no family relationships among our directors, executive officers, director nominees or significant employees. All of our directors, except for Mr. Kircher, are independent as determined by the NYSE listing standards.


Person	Age		Position
Stephen C. Kircher		54	Chairman of the Board of Directors, Chief Executive Officer
Larry D. Kelley		62	Director, Member of Audit Committee and Compensation Committee
Timothy B. Nyman		56	Director, Member of Compensation Committee and Governance & Nominating Committee
Ronald A. Cohan		66	Director, Chairman of Compensation Committee and Governance & Nominating Committee, Member of Audit Committee
D. Paul Regan		61	Director, Chairman of Audit Committee
Jeffrey G. Winzeler		47	Chief Financial Officer
Bradley J. Ferrell		30	Chief Operating Officer
Alan M. Lefko		60	Vice President of Finance and Secretary
Todd Lindstrom		41	President of wholly-owned subsidiary
Eric Hafter		50	President of wholly-owned subsidiary

Our Directors and Executive Officers

Stephen C. Kircher has served as the Chairman of our Board of Directors since September 2006. Mr. Kircher has served as our Chief Executive Officer and President since December 29, 2006. Mr. Kircher served as the Chief Executive Officer and Chairman of the Board of Directors since May 2006. Prior to that, Mr. Kircher served as a consultant to International DisplayWorks, Inc. from December 2004 through April 2006. Mr. Kircher also served as the Chairman and Chief Executive Officer of International DisplayWorks, Inc. from July 2001 until December 2004. Mr. Kircher has a Bachelor of Arts degree from the University of California, San Diego. He is currently serving as a director for JM Dutton & Associates.

Larry D. Kelley has served as our director since August 2006. Mr. Kelley has been and is President and partner of McClellan Business Park, LLC since 1999, where he acts as Chief Operating Officer and Managing Member.. Mr. Kelley

has been and is the President and Chief Executive Officer of Stanford Ranch I, LLC, a 3,500-acre master planned community in Rocklin, California. Mr. Kelley has served as the President and CEO of Stanford Ranch, LLC since 1996, and in this capacity oversees the daily operations. Mr. Kelley has been involved in real estate for twenty-nine years. Previously he spent ten years (from 1978 to 1988) with US Home Corporation, one of the nation’s largest homebuilders. He served in various positions including Vice President Operations of US Home Corporation and President of Community Development, a division of US Home Corporation, where he was responsible for the acquisition, development and marketing of numerous master-planned communities in ten states. Mr. Kelley received a Bachelors of Science in Industrial Engineering from Texas A&M. In addition, he received a Masters of Business Administration from Harvard Business School.

D. Paul Regan has served as our director since December 29, 2006. Mr. Regan currently serves as President and Chairman of Hemming Morse, Inc., CPAs, Litigation and Forensic Consultants. This 95 person CPA firm is headquartered in San Francisco. He has been with Hemming Morse since 1975. Mr. Regan’s focus at Hemming Morse is to provide forensic consulting services primarily in civil litigation. He has testified as an accounting expert for the U.S. Securities & Exchange Commission, various State Attorney Generals, other government agencies and various public companies. He has served on the Board of Directors of the California Society of Certified Public Accountants and was the Chair of this 29,000-member organization in 2004 and 2005. He is a current member of the American Institute of Certified Public Accountant’s governing Council. Mr. Regan has been a Certified Public Accountant since 1970. He holds both a BS and MS degrees in accounting.

Timothy B. Nyman has served as our director since December 29, 2006. Mr. Nyman has served as a consultant to GTECH Corporation since August 2006. Previously, Mr. Nyman was the Senior Vice President of Global Services at GTECH Corporation, the world’s leading operator of online lottery transaction processing systems. Mr. Nyman joined GTECH Corporation in 1981 and formerly served as its Vice President of Client Services. In 1979, Mr. Nyman went to work with the predecessor company of GTECH Corporation, which was the gaming division of Datatrol, Inc. In his twenty-seven years with GTECH and its predecessors, Mr. Nyman has held various positions in operations and marketing. He has directed a full range of corporate marketing activities and participated in the planning and installation of new online lottery systems domestically and internationally. Mr. Nyman received a Bachelor of Science degree in Marketing, Accounting and Finance from Michigan State University.

Ronald A. Cohan has served as our director since December 29, 2006. Mr. Cohan has served as consulting counsel to GTECH Corporation since 2002. From 1995, Mr. Cohan has served as a consultant to High Integrity Systems, Inc., a subsidiary of Equifax Inc. Prior to that, Mr. Cohan joined the San Francisco law firm of Pettit & Martin as an Associate in 1968 and was admitted as a Partner in 1972. He opened the Los Angeles office of Pettit & Martin in October of 1972 and was partner in charge until March of 1983. Mr. Cohan left Pettit & Martin in February of 1992 and became principal of his own law firm. Mr. Cohan has specialized in government procurement matters for various institutional clients such as Honeywell, 3M, Mitsui, Centex, Equifax and GTECH. Mr. Cohan received a Bachelor of Arts degree from Occidental College in 1963 and a Juris Doctor degree in 1966 from the School of Law (Boalt Hall), University of California, Berkeley.

Jeffrey G. Winzeler has served as our Chief Financial Officer since December 31, 2007. Previously he served as the President of our wholly owned subsidiary Yes! Solar, Inc. since June 2007. He joined Solar Power, Inc. in January 2007 to form our franchise subsidiary and operations. Previously Mr. Winzeler served as International DisplayWorks, Inc.’s Chief Operating Officer and Chief Financial Officer from January 2005 until January 2007. For 17 years prior to

International DisplayWorks, Inc., he served as Group Controller for Intel Corporation in Folsom, California, where he was responsible for all fiscal aspects of the $2 billion Flash memory division, the Controller for the Penang, Malaysia-based Worldwide Assembly division, where he served as manufacturing controller, as controller at Intel’s largest eight-inch wafer manufacturing facility and as operations controller for facilities in Jerusalem and Haifa, Israel. Mr. Winzeler is a graduate of the University of Idaho where he majored in Finance. Mr. Winzeler is not a director of the Company, and does not serve on the Board of Directors of any other company.

Bradley J. Ferrell has served as our Chief Operating Officer and Senior Vice President, Marketing and Sales since August 2006 and is one of the original founders of International Assembly Solutions, Limited (“IAS HK”). Since 2003, Mr. Ferrell was the Vice President of Sales and Marketing for International DisplayWorks, Inc. (IDW). In this role, he directed worldwide sales where he grew revenue from $10 million in 2001 to over $100 million in FY 2006. Mr. Ferrell began working for IDW in 2001 as a Production Coordinator with the primary focus on Hong Kong and China operations. In 2002, he was appointed Domestic Sales Manager. Prior to joining IDW, Mr. Ferrell worked as an analyst in the technology sector of a brokerage firm. Mr. Ferrell received his Bachelor of Arts in Economics from Southern Methodist University.

Alan M. Lefko has served as our Vice President of Finance since December 2006. Mr. Lefko has served as a director of IAS HK since May 2007. From July 2004 through December 2006 Mr. Lefko served as Vice President Finance and Corporate Secretary of International DisplayWorks, Inc, a manufacturer of liquid crystal displays and display modules. From February 2000 to July 2004 Mr. Lefko was Corporate Controller of International DisplayWorks, Inc. From July 1999 to January 2000, Mr. Lefko was the Chief Financial Officer of The Original Bungee Company (“Bungee”) in Oxnard, California, a manufacturer and distributor of stretch cord and webbing products. Mr. Lefko was responsible for the reorganization of Bungee’s financing structure, establishment of an asset based lending program and implementation of cost accounting systems and controls. From 1989 to 1999, Mr. Lefko served as Chief Financial Officer and Controller of Micrologic, a manufacturer and distributor of Global Positioning Systems and Vikay America, Inc., a subsidiary of Vikay Industrial (Singapore) Limited, based in Chatsworth, California. Mr. Lefko has a BA degree in Business Administration and Accounting from California State University, Northridge, California.

Todd R. Lindstrom has served as President of our wholly owned subsidiary, Yes! Solar, Inc. since December 2007. Prior to this he served as our Vice President of Operations since November 2006. Mr. Lindstrom brings over 18 years of experience in construction and construction-related industries to Solar Power, Inc. From 2001 to 2005, Mr. Lindstrom has been directly involved in the development and financing of over $80 million of photovoltaic solar projects for commercial, residential and government clients throughout California. From 2004 to 2005, Mr. Lindstrom was the Vice President of Sun Power and Geothermal Energy. From 2001 to 2003, Mr. Lindstrom served as Vice President of the Electric and Gas Industry Association. From 1999 to 2001, Mr. Lindstrom worked nationally as Vice President of Dealer Relations for CarsDirect.com. As a founding employee, Mr. Lindstrom was directly involved in the growth of this company from four employees to 625 employees, and over $250 million in annual sales. In 1990 Mr. Lindstrom started his own construction company. To enhance his construction company, Mr. Lindstrom purchased a Floor Coverings International (FCI) franchise, which he quickly developed into the second largest volume franchise in the FCI system. Mr. Lindstrom is an alumnus of California State University, Sacramento where he focused on Marketing and Public Relations.

Eric L. Hafter has served as President of our wholly-owned subsidiary, SPIC, Inc., since December 2007. For the past two years he served as the Senior Director of a consulting business focusing on all aspects of the solar industry. Prior to that he served for over ten years on the board of directors for PowerLight Corporation, where he joined the senior management team as General Manager of European Operations in 2004 and spearheaded PowerLight’s entry into Germany and Southern Europe. Accomplishments during his tenure include the completion of the world’s first ten megawatt PV plant and the development of three major solar power plants located in Germany. In 2005, Mr. Hafter’s team managed the site development and negotiated the sale of an eleven megawatt solar power park to General Electric Energy Finance, which during 2007 became the world’s largest PV output system. Collectively, Mr. Hafter’s experience

includes over 25 years of developing large scale renewable energy and commercial property projects, including retail shopping, commercial and residential projects.

EXECUTIVE COMPENSATION

Compensation Philosophy

The Compensation Committee (the “Committee”) is charged with the evaluation of the compensation of the executive officers of Solar Power, Inc. and its affiliates (and their performance relative to their compensation) and to assure that they are compensated effectively in a manner consistent with the compensation strategy and resources of the Company, competitive practice, and the requirements of the appropriate regulatory bodies.

Our Compensation Committee, comprised of independent directors, evaluates and determines compensation philosophy and executive compensation. Our compensation philosophy has the following basic components: (1) establish competitive base salary to attract qualified talent, and (ii) evaluate performance and grant performance-based bonuses that may include equity and cash components. We try to establish executive compensation base salaries to allow us to remain competitive in our industry and to attract and retain executives of a high caliber. Similarly, we try to align a component of annual compensation to performance and achievement of Company objectives in an effort to retain highly motivated executives who are focused on performance. We review other public reports and take into account the compensation paid to executives at similarly situated companies, both within and outside of our industry, when determining and evaluating our compensation philosophy and compensation levels. Company performance, including, but not limited to, earnings, revenue growth, cash flow, and continuous improvement initiatives is a significant part of our evaluation and compensation levels.

We do not have any employment agreements, nor do we have severance terms or provisions for executive officers.

Compensation Table

The following table provides information concerning compensation earned by our former and current named executive officers on a post-merger basis, including the options and restricted stock awards substituted in connection with the Merger. A column or table has been omitted if there was no compensation awarded to, earned by or paid to any of the named executive officers or directors required to be reported in such table or column in the respective fiscal year. As of December 31, 2007, no other executive officer was paid in excess of $100,000.

Summary Compensation Table


												Non-
												Equity
												Incentive
												Plan
							Stock					Compe		All Other
			Salary		Bonus		Awards		Option Awards			nsation		Compensation
Name and Principal Position	Year		($)		($)		($)		($)			($)		($)			Total
Stephen C. Kircher (1)		2007	$	180,000	$	20,000	$	-0-	$	-0-		$	-0-	$	-0-		$	200,000
Chief Executive Officer and		2006	$	117,693	$	-0-	$	-0-	$	153,200	(2)	$	-0-	$	-0-		$	270,893
Director

Jeffrey G. Winzeler		2007	$	93,750	$	40,000	$	50,000	$	-0-		$	-0-	$	-0-		$	183,750
Chief Financial Officer and		2006	$	-0-	$	-0-	$	-0-	$	131,800	(7)	$	-0-	$	-0-		$	131,800
Former President of our																		—
wholly-owned subsidiary

Bradley J. Ferrell		2007	$	150,000	$	32,000	$	-0-	$	-0-		$	-0-	$	-0-		$	182,000
Chief Sales Officer		2006	$	46,731	$	-0-	$	-0-	$	153,200	(5)	$	-0-	$	-0-		$	199,931

Alan M. Lefko		2007	$	120,000	$	5,000	$	-0-	$	-0-		$	-0-	$	-0-		$	125,000
Vice President Finance and		2006	$	-0-	$	-0-	$	-0-	$	32,950	(8)	$	-0-	$	-0-		$	32,950
Secretary

Todd R. Lindstrom		2007	$	150,000	$	22,500	$	-0-	$	-0-		$	-0-	$	-0-		$	172,500
President of wholly-owned		2006	$	43,135	$	-0-	$	-0-	$	131,800	(9)	$	-0-	$	-0-		$	174,935
subsidiary

Glenn E. Carnahan (3)		2007	$	150,000	$	-0-	$	50,000	$	-0-		$	-0-	$	37,500	(10)	$	237,500
Former Chief Financial		2006	$	60,000	$	-0-	$	-0-	$	153,200	(4)	$	-0-	$	-0-		$	213,200
Officer


(1)		On September 5, 2006, Mr. Kircher was appointed as our Chairman. On December 29, 2006, Mr. Kircher was appointed as our Chief Executive Officer.

(2)		Reflects 100,000 service-based options granted to Mr. Kircher to purchase our common stock at an exercise price of $1.00 with a five year vesting term and 100,000 performance based options at an exercise price of $1.00 whose vesting will be determined on December 31, 2010. As of the grant date on December 28, 2007, 50% of the five-year options are vested. The options were fair-valued using the Black-Scholes valuation model.

(3)		On December 29, 2006, Mr. Carnahan was appointed as our Chief Financial Officer. Mr. Carnahan’s services as Chief Financial Officer were terminated on December 31, 2007.

(4)		Reflects 100,000 service-based options to purchase our common stock at an exercise price of $1.00 with a term of 5 years, and 100,000 performance based options at an exercise price of $1.00 which vesting will be determined on December 31, 2010. As of December 28, 2007, 50% of the five-year options are vested. The options were fair-valued using the Black-Scholes valuation model.

(5)		Reflects option grants to Mr. Ferrell of 100,000 service-based options to purchase our common stock at an exercise price of $1.00 with a term of 5 years, and 100,000 performance based options at an exercise price of $1.00 which vesting will be determined on December 31, 2010. As of December 31, 2007, 50% of the five-year options are vested. The options were fair-valued using the Black-Scholes valuation model.

(6)		Reflects a valuation based on share price of private placements made at the time the stock awards were made for restricted shares and estimated fair value of stock options using the Black-Sholes valuation method.

(7)		Reflects 200,000 service-based options granted to Mr. Winzeler to purchase our common stock at an exercise price of $1.00 with a term of 5 years, at an exercise price of $1.00. As December 31, 2007, 50% of the five-year options vested. The options were fair-valued using the Black-Scholes valuation model.

(8)		Reflects options 50,000 service-based options granted to Mr. Mr. Lefko to purchase our common stock at an exercise price of $1.00 with a term of 5 years, at an exercise price of $1.00. As of December 31, 2007, 50% of the five-year options vested. The options were fair-valued using the Black-Scholes valuation model.

(9)		Reflects 200,000 service-based options granted to Mr. Lindstrom to purchase our common stock at an exercise price of $1.00 with a term of 5 years, at an exercise price of $1.00. As of December 31, 2007, 50% of the five-year options vested. The options were fair-valued using the Black-Scholes valuation model.

(10)		Represents severance pay in conjunction with the termination of Mr. Carnahan’s services at the Company on December 31, 2007.

Grants of Plan-Based Awards for 2007

The following table provides information relating to stock options awarded during the fiscal year ended December 31, 2007:


								All Other
						All Other		Stock Awards:
						Stock Awards:		Number of		Exercise or
						Number of		Securities		Base Price of		Grant Date Value
						Shares of Stock		Underlying		Option Awards		of Stock Option
Name	Grant Date			Date of Meeting		or Units (#)		Options (#)		($/SH) (1)		Awards
Glenn E. Carnahan		2/7/2007	(2)		2/7/2007		50,000		—		—	$	50,000
Jeffrey G. Winzeler		2/7/2007	(2)		2/7/2007		50,000		—		—	$	50,000
Ronald A. Cohan		12/24/2007	(3)		11/14/2007		—		6,225	$	3.45	$	10,589
D. Paul Regan		12/24/2007	(3)		11/14/2007		—		6,225	$	3.45	$	10,589
Timothy B. Nyman		12/24/2007	(3)		11/14/2007		—		6,225	$	3.45	$	10,589
Larry D. Kelley		12/24/2007	(3)		11/14/2007		—		6,225	$	3.45	$	10,589


(1)		The exercise price of the options is equal to the closing market price of the common stock on the grant date

(2)		The restricted stock award shown vested fully at date of grant and since the Company stock was not trading publically at the time is fair-valued at the per share price of our most recent private placement.

(3)		At the November 14, 2007 meeting of the Independent Directors, the grant date of the stock option award was set as 2 business days following public disclosure of our forthcoming private equity financing, vesting fully on the date of grant.

Outstanding Equity Awards at Fiscal Year End

The following table summarizes the options awards granted to each of the named executive officer identified above in the summary compensation table above pursuant to our Equity Incentive Plan. No stock options were exercised in the last fiscal year.

Outstanding Equity Awards at Fiscal Year-End


																	Awards		Equity
																	Equity		Incentive
															Stock		Incentive		Plan
															Market		Plan		Awards:
						Equity							Number		Value		Awards:		Market or
						Incentive							of		of		Number of		Payout
				All Other Stock		Plan							Shares		Shares		Unearned		Value of
	Option			Awards		Awards:							or Units		or Units		Shares,		Unearned
	Number of			Number of		Number of							of Stock		of Stock		Units or		Shares,
	Securities			Securities		Securities							That		That		Other		Units or
	underlying			underlying		Underlying							Have		Have		Rights		Other
	Unexercised			Unexercised		Unexercised			Option		Option		Not		Not		That Have		Rights
	Options (#)			Options (#)		Unearned			Exercise		Expiration		Vested		Vested		Not Vested		That Have
Name	Exercisable			Unexercisable		Options			Price ($)		Date		(#)		($)		(#)		Not Vested

Stephen C. Kircher		33,333	(1)		-0-		116,667	(1)	$	1.00		12/28/2011		-0-		-0-		-0-		-0-
Glenn E. Carnahan		50,000	(1)		-0-		-0-		$	1.00		03/31/2008		-0-		-0-		-0-		-0-
Bradley Ferrell		50,000	(1)		-0-		150,000	(1)	$	1.00		12/28/2011		-0-		-0-		-0-		-0-
Jeffrey G. Winzeler		100,000	(1)		-0-		100,000	(1)	$	1.00		12/28/2011		-0-		-0-		-0-		-0-
Alan M. Lefko		25,000	(1)		-0-		25,000	(1)	$	1.00		12/28/2011		-0-		-0-		-0-		-0-
Todd R. Lindstrom		100,000	(1)		-0-		100,000	(1)	$	1.00		12/28/2011		-0-		-0-		-0-		-0-


(1)		Reflects options granted to Messrs. Kircher, Carnahan, Winzeler, Lefko, Lindstrom and Ferrell 100,000 serviced based five-year options, with the exception of Mr. Lefko who was granted 50,000 service based options, to purchase our common stock at an exercise price of $1.00. As of December 31, 2007, 50% of the options vested. Additionally, Messrs. Kircher, and Ferrell were each granted 100,000 performance-based options to purchase common stock at an exercise price of $1.00 per share, which options shall vest at either 0% or 100% on December 31, 2010, depending on whether certain cumulative revenue goals were met over the four year period.

Long-Term Incentive Plans-Awards in Last Fiscal Year

We do not currently have any long-term incentive plans.

Compensation of Directors

All our non-employee directors earned director compensation in 2007 in the form of quarterly retainers and committee chairman retainers as set forth in the following table:


Quarterly retainer	$	3,000
Annual Audit Committee Chairman	$	5,000
Annual Audit Committee Vice Chairman	$	2,500
Compensation Committee Chairman	$	3,000
Governance & Nominating Committee Chairman	$	3,000

In addition, we reimburse our directors for their reasonable expenses incurred in attending meetings of the Board and its committees.

Additionally, each of our independent Directors received 25,000 restricted shares of our common stock when they joined the Board that vest 25% over four years beginning on December 28, 2006. In December 2006, each independent Director received 6,225 options to purchase shares of our common stock at $3.45 per share, the closing price of our common stock on NASDAQ OTCBB on December 24, 2006, date of grant.

Director Compensation

The following table sets forth the compensation received by each of the Company’s non-employee Directors. Each non-employee director is considered independent under NASD listing standards. Stephen C. Kircher, the Chief Executive Officer of the Company is the Chairman of the Board of Directors and received no additional compensation for serving on the Board. His compensation is described in the Summary Compensation Table above.


	Fees Earned or						Non-Equity		Nonqualified
	Paid						Incentive Plan		Deferred		All Other
Name	in Cash ($)		Stock Awards ($)		Option Awards ($)		Compensation ($)		Compensation ($)		Compensation ($)		Total ($)

Timothy B. Nyman		16,761		-0-		10,589		-0-		-0-		-0-		27,350
Ronald Cohan		28,633		-0-		10,589		-0-		-0-		-0-		39,222
D. Paul Regan		23,745		-0-		10,589		-0-		-0-		-0-		34,334
Larry D. Kelley		16,761		-0-		10,589		-0-		-0-		-0-		27,350

Employment Agreements

We do not currently have any employment agreements with our executive officers. We do not anticipate having employment contracts with executive officers and key personnel in the future.

SECURITY OWNERSHIP OF

CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of March 31, 2008, certain information relating to the ownership of our common stock by (i) each person known by us to be the beneficial owner of more than 5% of the outstanding shares of the class of equity security, (ii) each of our Directors, (iii) each of our executive officers, (iv) certain executive officers of our subsidiary, and (v) all of our executive officers and directors as a group. Except as may be indicated in the footnotes to the table and subject to applicable community property laws, each of such persons has the sole voting and investment power with respect to the shares owned.


	Shares Beneficially			Percentage Beneficially
Name and Address of Beneficial Owner (1)	Owned			Owned
Stephen C. Kircher; Chief Executive Officer and Director 1115 Orlando Avenue Roseville, CA 95661		8,215,000	(2)		20.14	%

Jeffrey G. Winzeler, Chief Financial Officer 1115 Orlando Avenue Roseville, CA 95661		125,000	(3)		*

Larry D. Kelley, Director 1115 Orlando Avenue Roseville, CA 95661		533,833	(4)		1.31	%

D. Paul Regan, Director 1115 Orlando Avenue Roseville, CA 95661		134,920	(13)		*

Timothy B. Nyman, Director 8 Surf Drive Bristol, RI 02809		483,833	(15)		1.19	%

Ron Cohan, Director 1115 Orlando Avenue Roseville, CA 95661		135,681	(5)		*

Bradley J. Ferrell (6) 1115 Orlando Avenue Roseville, CA, 95661		1,550,000	(7)		3.80	%

Alan M. Lefko (8) 1115 Orlando Avenue Roseville, CA 95661		40,000	(9)		*

Todd Lindstrom (10) 1115 Orlando Avenue Roseville, CA 95661		155,000	(11)		*

Eric L. Hafter 1115 Orlando Avenue Roseville, CA 95661		10,000			*

All Executive Officers and Directors as a Group		11,383,267			27.91	%

Gerald R. Moore 1115 Orlando Avenue Roseville, CA 95661		3,118,695			7.65	%

Reid S. Walker, G. Stacy Smith and Patrick P. Walker(15) c/o Walker Smith Capital 300 Crescent Court, Suite 1111 Dallas, TX 75201		2,623,050			6.43	%


*		Less than 1%

(1)		Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Pursuant to the rules of the SEC, shares of Common Stock which an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or

		group, but are not deemed to be beneficially owned and outstanding for the purpose of computing the percentage ownership of any other person shown in the table.

(2)		Includes 2,065,000 shares issued in the names of trusts established for the benefit of Mr. Kircher’s two sons and 100,000 shares issued to the Kircher Family Foundation, Inc., to each of which Mr. Kircher is the trustee. Also includes 50,000 shares underlying options, to the extent exercisable within 60 days.

(3)		Includes 100,000 shares underlying options, to the extent exercisable within 60 days.

(4)		Includes 500,000 shares issued in the name of trust, to which Mr. Kelley is the trustee. Also includes 6,225 fully vested shares underlying options exercisable at $1.00 per share and 25,000 shares of common stock granted as restricted stock awards, of which 12,500 have vested and 12,500 are subject to vesting and forfeiture conditions.

(5)		Includes 100,000 shares issued in the name of trust, to which Mr. Cohan is a trustee. Also includes 6,225 fully vested shares underlying options exercisable at $1.00 per share and 25,000 shares of common stock granted as restricted stock awards, of which 12,500 have vested and 12,500 are subject to vesting and forfeiture conditions.

(6)		Mr. Ferrell is our Chief Operating Officer.

(7)		Includes 50,000 shares underlying options, to the extent exercisable within 60 days.

(8)		Mr. Lefko is our Vice President of Finance.

(9)		Includes 15,000 shares issued in the name of trust, to which Mr. Lefko is a trustee. Also Includes 25,000 shares underlying options, to the extent exercisable within 60 days.

(10)		Mr. Lindstrom is the President of our wholly owned subsidiary, Yes! Solar, Inc.

(11)		Includes 100,000 shares underlying options, to the extent exercisable within 60 days.

(12)		Includes 100,000 shares underlying options, to the extent exercisable within 60 days.

(13)		Consists of 562,720 shares issued in the name of WS Opportunity Fund International, Ltd.; 542,358 shares issued in the name of Walker Smith International Fund, Ltd.; 442,406 shares issued in the name of WS Opportunity Fund, L.P.; 413,105 shares issued in the name of WS Opportunity Fund (QP), L.P.; 387,856 shares issued in the name of Walker Smith Capital (QP), L.P.; 214,054 shares issued in the name of HHMI Investments, L.P.; and 60,551 shares issued in the name of Walker Smith Capital, L.P. WS Capital, LLC (“WS Capital”) is the general partner of WS Capital Management, L.P. (“WSC Management”), which is the general partner of Walker Smith Capital, L.P and Walker Smith Capital (QP) L.P., the investment manager and agent and attorney-in-fact for Walker Smith International Fund, Ltd., and the investment manager for HHMI Investments, L.P. WSV Management, LLC (“WSV”) is the general partner of WS Ventures Management, L.P. (“WSVM”), which is the general partner of Walker Smith Opportunity Fund, L.P. and WS Opportunity Fund (QP) L.P. and the investment manager and agent and attorney-in-fact for WWS Opportunity Fund International, Ltd. Reid S. Walker and G. Stacy Smith are principals of WS Capital and WSV, and Patrick P. Walker is a principal of WSV.

(14)		Consists of 750,000 shares issued in the name of Asia Pacific Genesis Venture Capital Funds Ltd.; 500,000 shares issued in the name of Sekai Capital Ltd.; 222,260 shares issued in the name of Global Vision Venture Capital Co., Ltd; 135,343 shares issued in the name of Asia Pacific Century Venture Capital Ltd.; 95,732 shares issued in the name of China Power Venture Capital Co., Ltd; 70,893 shares issued in the name of C&D Capital Corp.; 53,165 shares issued in the name of Nien Hsing International (Bermuda) Ltd.; 48,394 shares issued in the name of Asia Group Worldwide Limited; 39,922 shares issued in the name of STAR Pacific Worldwide Limited; 31,931 shares issued in the name of A&D Capital Corp.; 28,948 shares issued in the name of J&D Capital Corp.; and 23,412 shares issued in the name of CAM-CID Asia Pacific Investment Corp. Mr. Chang is President of the foregoing entities and is deemed to control all of their respective shares holdings.

(15)		Includes 6,225 fully vested shares underlying options exercisable at $1.00 per share and 25,000 shares of common stock granted as restricted stock awards, of which 12,500 have vested and 12,500 are subject to vesting and forfeiture conditions.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTION

On March 30, 2005, we purchased a pool of sub-prime auto loans with a pay-off balance of $126,302 from Village Auto, LLC, an affiliate of the Mr. Freiheit, our former President, Director and Chief Executive Officer, for $107,357. The purchase price was 85% of the loan pool’s pay-off balance. The seller of the pool is required to repurchase loans that become 90 days delinquent. The average loan had a principal balance of approximately $4,708 with an average annual percentage interest rate of approximately 21.54%. The remaining terms of the loans range from 6 to 46 months. We have contracted with Accredited Adjusters, LLC, to service and administer the loans for a monthly fee equal to ¹/2% of the outstanding principal balance. Accredited Adjusters is an affiliate of Mr. Freiheit. In connection with the servicing of the auto loans, we have paid Accredited Adjusters, LLC $4,000, and have a liability of $909 for services rendered during 2005. The fee for the six months ended June 30, 2006 for servicing the loans was $1,455. The fee for the period from March 30, 2005 through December 31, 2005 for servicing the loans was $4,909. At June 30, 2006, we owed Accredited Adjusters, LLC $365 for services rendered. Additionally, Accredited Adjusters, LLC owes us $215 for loan proceeds collected, but not remitted to us by June 30, 2006. During the three months and the nine months ended September 30, 2006, we incurred consulting fees with Village Auto, LLC, a related party, in the amount of $6,800 and $10,000, respectively. At September 30, 2006, we also had a receivable from Village Auto, in the amount of $515, in connection with the repurchase of a delinquent loan. On December 29, 2006 we sold the auto loans to Village Auto, LLC for a total purchase price of $12,693.50, which represented 50% of the loan pools payoff balance as of September 30, 2006. The purchase price was paid in cash. In addition, we terminated all arrangements with Village Auto, LLC and its affiliates, relating to servicing or administration of auto loans.

From March to September 2005, we paid rent in the amount of $1,800 per month to Liberty Associates Holdings, LLC, our former principal stockholder and an affiliate of Mr. Freiheit, our former director, President and Chief Executive Officer for the use of certain office space. From October to December 2005, we paid an increased amount of $2,300 per month. Total rental expense for the year ended December 31, 2005 and the nine months period ended September 30, 2006 was $19,500, and $12,600 respectively.

On July 28, 2005, we loaned $100,000 to Paxton Energy, Inc. (Paxton), a related party through common ownership and common management. The note bore interest at 12% per annum, was payable on demand, and was secured along with other lenders by all of the assets of Paxton. In November 2005, our former president purchased the loan and accrued interest of $3,288 from us and in turn we assigned the demand note to him.

In 2005, Mr. Landa, our former Director and Secretary and Mr. Smith, our former Director, Vice President and Treasurer, each received 16,667 shares of our common stock valued at $12,500 for consulting services rendered to us. In addition in 2005, Pamplona, Inc. of which Mr. Landa is President and Director and Mr. Smith, is also Vice-President and Director, received 33,333 shares of our common stock valued at $25,000 for services rendered in 2005.

On August 9, 2006, Mr. Strasser, our former President and Director, purchased 156,214 shares of our common stock for $50,000; Tats, LLC, a family-controlled entity of Mr. Smith, our former Vice-President, Treasurer and Director, purchased 62,485 shares of our common stock for $20,000; and Mr. Landa, our former Director and Secretary, purchased 62,485 shares of our common stock for $20,000.

Mr. Smith, our former Director, Vice-President and Treasurer, has provided us with legal services prior to and after his appointment as our former Director, Vice President and Treasurer. Legal costs paid to Mr. Smith were $23,700 during the year ended December 31, 2005 and $62,375 during 2006. In January 2007 Mr. Smith received $5,200 for legal services rendered in December 2006.

On August 23, 2006, we entered into an Agreement and Plan of Merger, as amended by that First Amendment to the Agreement and Plan of Merger dated October 4, 2006, the Second Amendment to the Agreement and Plan of Merger dated December 1, 2006 and the Third Amendment to the Agreement and Plan of Merger dated December 21, 2006 (the “Merger Agreement”) with SPI, Welund Acquisition Corp., a Nevada corporation and our wholly-owned subsidiary. The Merger was consummated on December 29, 2006, pursuant to which SPI became our wholly owned subsidiary. In connection with the Merger we issued an aggregate of 14,500,000 shares of our restricted common stock to the existing shareholders of SPI. Each share of common stock of SPI was cancelled and exchanged for one share of our common stock. As a result, Mr. Kircher, our Chief Executive Officer and Director who was also the Director and Chief Executive Officer of SPI, became the beneficial owner of 8,125,000 shares of our common stock, including 2,000,000 shares issued to trusts held for benefit of his sons, and shares issuable upon the exercise of vested options; and Mr. Moore, the Vice President of Manufacturing of SPI, became the beneficial owner of 4,125,000 shares of our common

stock, excluding unvested options to purchase 150,000 shares of our common stock. In addition, 2,000,000 of SPI options were substituted by awards of restricted stock and options to purchase shares of our common stock at $1.00 per share with the options having a term of five years and the restricted stock awards vesting over a period of three years. As a result of the substitution, Messrs. Kircher, Carnahan, Moore and Ferrell have each been granted the option to purchase one hundred thousand (100,000) shares of our common stock. The options are exercisable at $1.00 per share, will vest over a period of three (3) years and have a term of five (5) years. In addition, Messrs. Kircher, Carnahan, Moore and Ferrell were each also granted performance-based options to purchase stock. Messrs. Kircher, Carnahan, Moore and Ferrell each received the option to purchase one hundred thousand (100,000) shares of our common stock, which options will vest at either zero percent (0%) or one hundred percent (100%), such vesting to be determined on December 31, 2010 (the “Determination Time”). The vesting determination will be based on certain annual revenue performance goals of the Company. The performance goals will be determined on a cumulative basis at the Determination Time, to account for any year-to-year discrepancies in meeting each annual performance goal. In addition, Mr. Lefko was granted options to purchase fifty thousand (50,000) shares of our common stock, at an exercise price of $1.00 per share, which options vest over a period of three (3) years and have a five (5) year term. In addition, as a result of the substitution, Messrs. Cohan, Mr. Regan, Mr. Kelley, Mr. Nyman were each granted restricted stock awards of 25,000 shares of our common stock, of which awards, 6,250 shares have vested.

In July, August and September 2006, our wholly owned subsidiary SPI, issued five demand promissory notes for an aggregate principal amount of $320,000 bearing an interest rate of eight percent (8%) per annum, to Mr. Kircher, our Director and Chief Executive Officer who was also the Director and Chief Executive Officer of SPI at such time. The promissory notes were issued in connection with advances provided by Mr. Kircher to SPI to be used for working capital.

In August and September 2006, we loaned SPI an aggregate amount of $200,000 (“Unsecured Loans”). The notes were due on demand and bear interest at 8% per annum. As a result of the Merger, the amount of indebtedness owed to us by SPI has been eliminated through consolidation. In connection with the Unsecured Loans, we required that Mr. Kircher, our director and Chief Executive Officer, enter into a Subordination Agreement dated August 31, 2006 with us, as amended by that certain Addendum to the Subordination Agreement dated September 6, 2006, pursuant to which Mr. Kircher agreed to subordinate any outstanding indebtedness owed to him by SPI to the indebtedness owed to us by SPI as represented by the Unsecured Loans.

On September 5, 2006, Mr. Kircher was appointed as our Chairman. At the time of Mr. Kircher’s appointment he was the Chairman of the Board of Directors and Chief Executive Officer of SPI. In connection with the merger with SPI, we had appointed a Special Merger Committee consisting of Mr. Strasser, Mr. Smith, and Mr. Landa, which has the power to deal with all merger matters with SPI without the participation or vote of Mr. Kircher.

On September 19, 2006, we entered into a Credit Facility Agreement and a Security Agreement (the “Loan Documents”) with SPI, pursuant to which we agreed to grant SPI a revolving credit line of up to Two Million Dollars ($2,000,000) (the “Credit Facility”). Under the terms of Loan Documents, with the exception of certain permitted liens, we were granted a first priority security interest in all of SPI’s assets owned now or in the future. Any advances under the Credit Facility bear an interest rate equal to eight percent (8%) simple interest per annum. Unless otherwise extended under the Loan Documents, the maturity date for any and all advances is March 31, 2007 and the Credit Facility is available until February 28, 2007. On November 3, 2006, we entered into a First Amendment to the Credit Facility pursuant to which we agreed to increase the existing revolving credit line from $2,000,000 to $2,500,000. As of November 30, 2006, we have loaned SPI an aggregate amount of $2,500,000 under the Credit Facility. As a result of the Merger, the amount of indebtedness owed to us by SPI has been eliminated through consolidation.

Prior to the Merger, SPI entered into an Agreement and Plan of Merger with Dale Renewables Consulting, Inc., a California corporation (“DRCI”), and its related parties, pursuant to which it was contemplated that SPI would merge with and into DRCI and become the surviving corporation integrating DRCI’s photo-voltaic marketing, sales and installation business in Northern California into SPI’s business (the “DRCI Merger”). In connection SPI’s merger with DRCI on November 15, 2006, we made a separate loan to SPI for $1,446,565 to fund the purchase of DRCI. The note is payable on demand and provides for interest at the rate of 8% per annum. As a result of the Merger, the amount of indebtedness owed to us by SPI has been eliminated through consolidation.

In September and October 2006, the following directors, director nominees, and executive officers, and family members of such individuals participated as investors in our private placement for up to 16,000,000 shares of our common stock at $1.00 per share: Mr. Strasser, our former director and president, purchased 225,000 shares of common stock for $225,000; Mr. Smith, our former director, Vice President and Treasurer, purchased 100,000 shares for $100,000; Mr. Landa, our former director and Secretary, purchased 75,000 shares of common stock for $75,000; Mr. Nyman, our director, purchased 450,000 shares of our common stock for $450,000; a trust controlled by Terry and Marty Nyman, relatives of Mr. Nyman, our director, purchased 50,000 shares of common

stock for $50,000; a trust controlled by Mr. Kelley, our director, purchased 500,000 shares of common stock for $500,000; Mr. Regan, our director, purchased 100,000 shares of common stock for $100,000; a trust controlled by Mr. Cohan, our director, purchased 100,000 shares of common stock for $100,000; Mr. Carnahan, our Chief Financial Officer purchased 50,000 shares of common stock for $50,000; entities controlled by Reid Walker, G. Stacy Smith and Patrick P. Walker purchased an aggregate of 2,500,000 shares of our common stock for $2,500,000; and entities controlled by Steven CY Chang purchased an aggregate of 2,000,000 shares of our common stock for $2,000,000.

Service fees

During the year ended December 31, 2006 and January 18, 2005 (date of inception) to December 31, 2005 IAS HK paid service fees to IAS, Inc. of $419,605 and $889,878, respectively. Darrell Harley, an IAS HK employee as of December 31, 2005, and as of December 31, 2006, held 100% interests in IAS, Inc. There were no amounts due to or from IAS HK to IAS, Inc. at December 31, 2006 and 2005. This structure was utilized to provide payroll, shipping, sales and logistics support for IAS HK operations. IAS HK no longer conducts business with this related party.

Subsequent to termination of the arrangement with IAS, Inc., IAS HK entered into a similar arrangement with Granite Bay Technologies. During the year ended December 31, 2006 and January 18, 2005 (date of inception) to December 31, 2005, IAS HK paid service fees to Granite Bay Technologies, Inc. (“Granite Bay”) amounting to $181,000 and $0, respectively. Mr. Kircher and Mr. Moore, prior to the exchange of shares between Solar Power, Inc., a California corporation, and IAS HK, were majority owners of IAS HK with approximately 58% and 29% ownership, respectively, had beneficial ownership in Granite Bay. There were no amounts due to or from IAS HK to Granite Bay at December 31, 2006 and 2005. This structure was utilized to provide payroll, shipping, sales and logistics support for IAS operations prior to the formation of our U.S. holding company. IAS HK no longer conducts business with this related party.

Subsequent Events

In January 2008, letters of credit amounting to $800,000 issued to Sharp Electronics and Kyocera Solar were no longer required by the suppliers and were returned to our bank for cancellation. The restricted cash collateralizing these letters of credit was released to the Company.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

On August 16, 2004, Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) engaged the accounting firm of Hansen, Barnett & Maxwell (“Hansen”) as its independent accountants to audit its financial statements for the fiscal year ending December 31, 2004 and December 31, 2005. The appointment of new independent accountants was approved by its Board of Directors.

On December 29, 2006, Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.)’s Board of Directors dismissed Hansen as its independent accountant following Hansen’s review for the quarter ended September 30, 2006. Hansen’s report on Welund Funds, Inc.’s balance sheet as of December 31, 2005, and the related statements of operations, shareholders’ equity (deficit) and cash flows for the years ended December 31, 2005 and 2004 and for the period from July 16, 2002 (date of inception) through December 31, 2005, did not contain an adverse opinion or a disclaimer of opinion, was not modified as to uncertainty, audit scope or accounting principles, and contained an explanatory paragraph stating that there was substantial doubt about the Company’s ability to continue as a going concern.

During the period from July 16, 2002 (inception) through fiscal year ended December 31, 2005 and further through December 29, 2006 there have been no disagreements with Hansen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of Hansen, would have caused them to make reference to the subject matter of the disagreement(s) in connection with their report.

During the period from July 16, 2002 (inception) through fiscal year end December 31, 2005 and further through December 31, 2006, Hansen did not advise Solar Power, Inc., a Nevada corporation (formerly Welund, Inc.) on any matter set forth in Item 304(a)(1)(iv)(B) of Regulation S-B. Hansen has furnished us with a letter addressed to the SEC stating whether or not it agrees with the above statements.

On January 2, 2007, the Board of Directors of Solar Power, Inc., a California corporation dismissed BDO McCabe Lo Limited as its independent accountant following BDO McCabe Lo Limited’s audit of its financial statements (formerly International Assembly Solutions, Limited) for the fiscal year ended December 31, 2005. During the period ended December 31, 2005, the audit report of BDO McCabe Lo Limited on Solar Power, Inc., a California Corporation did not contain an adverse opinion or disclaimer of opinion with respect to the Company’s balance sheet as of December 31, 2005, and the related statements of operations, shareholders’ equity (deficit) and cash flows, and was not modified as to uncertainty, audit scope or accounting principles, and contained an explanatory paragraph stating there was substantial doubt about the Company’s ability to continue as a going concern. There have been no disagreements with BDO McCabe Lo Limited on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of BDO McCabe Lo Limited, would have caused them to make reference to the subject matter of the disagreement(s) in connection with their report. On January 2, 2007, Solar Power, Inc., a Nevada corporation, engaged Macias Gini & O’Connell LLP to audit its financial statements, and upon the merger and re-domicile of Solar Power, Inc. a Nevada corporation with its wholly owned subsidiary Solar Power, Inc., a California corporation, Macias Gini & O’Connell LLP became the auditors for Solar Power, Inc., a California corporation, thus effectively replacing BDO McCabe Lo Limited as of that date.

On January 2, 2007, Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) engaged Macias Gini & O’Connell LLP (“Macias”) to audit its financial statements for the fiscal year ended December 31, 2006, and to serve as its independent registered public accounting firm for its 2007 fiscal year. During the period from July 16, 2002 (inception) through fiscal year end December 31, 2005, and further through the subsequent interim periods ended March 31, 2006, June 30, 2006 and September 30, 2006, Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) did not consult with Macias regarding (i) the application of accounting principles to a specific transaction, either completed or contemplated, or the type of audit opinion that might be rendered on our financial statements, and no written report or oral advice was provided to us that was an important factor to be considered by us in reaching a decision as to an accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as that term is defined in Item 304(a)(1)(iv)(A) of Regulation S-B or an event, as that term is defined in Item 304(a)(1)(iv)(B) of Regulation S-B.

Macias was previously engaged by Dale Renewables Consulting, Inc. (“DRCI”) and Solar Power Inc. (SPI), a California corporation and now our wholly owned subsidiary, to audit DRCI’s financial statements for the period from July 26, 2005 (date of inception) to December 31, 2005, in connection with an Agreement and Plan of Merger entered into between Solar Power, Inc., a California corporation, and DRCI (the “DRCI Merger”). The DRCI Merger was consummated on November 15, 2006. At the request of the independent auditors of Solar Power, Inc., a California corporation, Macias performed certain limited interim review procedures on the operations of DRCI for the nine months ended September 30, 2006 in conjunction with their review of the interim financial information of Solar Power, Inc., a California corporation for the period then ended.

RECENT AND HISTORICAL FINANCING TRANSACTIONS

On December 20, 2007, we completed a private placement of 4,513,911 shares of restricted common stock at a purchase price of $2.60 per share to 46 accredited investors. The accredited investors also received 1,354,163 shares underlying warrants to purchase our common stock at an exercise price of $3.90 per share expiring on December 20, 2012. Our placement agent, Needham & Company, LLC additionally received 135,417 shares underlying warrants to purchase our common stock at an exercise price of $3.90 per share expiring on December 20, 2012. The shares were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales under state securities laws.

On April 9, 2007, we completed a private placement of 500,000 shares of common stock at a purchase price of $ 1.00 per share to a foreign accredited investor. We issued the shares in reliance on Regulation S of the Securities Act.

In December 2006, Solar Power, Inc., a Nevada Corporation (formerly Welund Fund, Inc.) issued 500,000 shares of our common stock in exchange for $425,000 in cash and the settlement of an obligation totaling $75,000. The shares of common stock were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws.

shares of common stock were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws.

On October 4, 2006, Solar Power, Inc., a Nevada Corporation (formerly Welund Fund, Inc.) completed a private placement of 16,000,000 shares of restricted common stock at a purchase price of $1.00 per share to 68 accredited investors. The shares of common stock were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws.

In connection with the October 4, 2006 private placement, Solar Power, Inc., a Nevada Corporation (formerly Welund Fund, Inc.) issued to Roth Capital Partners, a warrant to purchase 800,000 shares of our common stock at $1.15 per share for services rendered in assisting with the private placement. The warrant and underlying shares were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws.

On August 9, 2006, Solar Power, Inc., a Nevada Corporation (formerly Welund Fund, Inc.) completed a private placement of 520,000 shares of restricted common stock at a purchase price of $0.32 per share to 5 accredited investors. The shares of common stock were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws.

In March 2005, Solar Power, Inc., a Nevada Corporation (formerly Welund Fund, Inc.) completed a private placement of 1,000,000 shares of restricted common stock at a purchase price of $0.25 per share to 9 investors. The shares of common stock were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws.

All the above offers, issuances and sales were made to accredited investors as defined in Rule 501(a) under the Securities Act, no general solicitation was made by the Company or any person acting on our behalf; the securities sold were subject to transfer restrictions, and the certificates for those shares contained an appropriate legend stating they had not been registered under the Securities Act, and may not be offered or sold absent registration or pursuant to an exemption therefrom. Investors provided certification of accredited status.

SELLING SECURITY HOLDERS

The following table identifies the Selling Stockholders, as of March 31, 2008, and indicates certain information known to us with respect to (i) the number of common shares beneficially owned by the Selling Stockholder, (ii) the number of common shares that may be offered for the Selling Stockholder’s account, and (iii) the number of common shares and percentage of outstanding common shares to be beneficially owned by the Selling Stockholders assuming the sale of all of the common shares covered hereby by the Selling Stockholders. The term “beneficially owned” means common shares owned or that may be acquired within 60 days. As of December 31, 2007, 40,813,840 shares of common stock were beneficially owned. Shares of common stock that are issuable upon the exercise of outstanding options, warrants, convertible securities or other purchase rights, to the extent exercisable within 60 days of the date of this Prospectus, are treated as outstanding for purposes of computing each Selling Stockholder’s percentage ownership of outstanding shares. The Selling Stockholders may sell some, all, or none of our common shares. The number and percentages set forth below under “Shares Beneficially Owned After Offering” assumes that all offered shares are sold.


	Shares Beneficially Owned								Number of		Shares Beneficially
Name of Selling	Prior to Offering								Shares to be		Owned After Offering
Stockholder	Number		Note			Percentage			Offered		Number		Percentage
Emerson Partners (1)		97,500		(16	)		*			97,500		0		0.00	%
Emerson Family Foundation (1)		97,500		(17	)		*			97,500		0		0.00	%
Bear Stearns Securities Corp., FBO J. Steven Emerson Roth IRA (1)		390,000		(18	)		*			390,000		0		0.00	%
Essex Performance Fund (2)		116,480		(19	)		*			116,480		0		0.00	%
Winchester Frontier, LTD (2)		17,940		(20	)		*			17,940		0		0.00	%
David C. Croll		12,090		(21	)		*			12,090		0		0.00	%
The New Discovery Fund Limited (2)		8,060		(22	)		*			8,060		0		0.00	%
Essex Alpha Fund, LLC (2)		7,930		(23	)		*			7,930		0		0.00	%
Lake Street Fund, L.P. (3)		565,500		(24	)		1.39	%		565,500		0		0.00	%
Fred L. Astman/Wedbush Securities Inc Cust IRA R/O Holding 10/13/92		168,499		(25	)		*			168,499		0		0.00	%
David Moy		50,050		(26	)		*			50,050		0		0.00	%
Bai Ye Feng		124,999		(27	)		*			124,999		0		0.00	%
William Caton III & Catherine Ann Caton TTEES UTD 09/18/98 FBO Caton Family Rev Trust		13,000		(28	)		*			13,000		0		0.00	%


	Shares Beneficially Owned								Number of		Shares Beneficially
Name of Selling	Prior to Offering								Shares to be		Owned After Offering
Stockholder	Number		Note			Percentage			Offered		Number		Percentage
George Loxsom/Wedbush Securities Inc Cust IRA SEP 12/16/92		39,000		(29	)		*			39,000		0		0.00	%
John Peter Selda/Wedbush Securities Inc Cont 08/27/96		52,000		(30	)		*			52,000		0		0.00	%
Gregory Cook/Wedbush Morgan Sec inc CTDN IRA Contributory 1/16/02		12,499		(31	)		*			12,499		0		0.00	%
Granite Point Capital, LP (4)		338,474		(32	)		*			338,474		0		0.00	%
Granite Point Capital Offshore, LTD (4)		36,524		(33	)		*			36,524		0		0.00	%
Lagunitas Partners LP (5)		375,000		(34	)		*			375,000		0		0.00	%
Jon D & Linda W Gruber Trust (5)		109,999		(35	)		*			109,999		0		0.00	%
J Patterson McBaine		15,000		(36	)		*			15,000		0		0.00	%
Heidtke 401(k) Profit Sharing Plan and Trust (6)		12,499		(37	)		*			12,499		0		0.00	%
Lyman O. Heidtke		49,999		(38	)		*			49,999		0		0.00	%
Midsouth Investor Fund LP (6)		137,499		(39	)		*			137,499		0		0.00	%
Jayhawk Private Equity Fund, LP (7)		1,175,959		(40	)		2.88	%		1,175,959		0		0.00	%
Jayhawk Private Equity Co-Invest Fund, LP (7)		74,041		(41	)		*			74,041		0		0.00	%
Straus Partners LP (8)		179,999		(42	)		*			179,999		0		0.00	%
Straus-GEPT Partners (8)		120,000		(43	)		*			120,000		0		0.00	%
WS Opportunity Fund, L.P. (9)		93,506		(44	)		*			93,506		0		0.00	%
WS Opportunity Fund (QP), L.P. (9)		87,505		(45	)		*			87,505		0		0.00	%
WS Opportunity Fund International, Ltd. (9)		119,007		(46	)		*			119,007		0		0.00	%
Walker Smith Capital (QP), L.P. (10)		97,056		(47	)		*			97,056		0		0.00	%
Walker Smith Capital, L.P.(10)		14,751		(48	)		*			14,751		0		0.00	%
Walker Smith International Fund, Ltd. (10)		151,158		(49	)		*			151,158		0		0.00	%
HHMI Investments, L.P. (10)		62,054		(50	)		*			62,054		0		0.00	%
Hannibal International Limited (11)		999,999		(51	)		2.45	%		999,999		0		0.00	%
Kircher Family Irrevocable Trust FBO Douglas S. Kircher (12)		26,000		(52	)		*			26,000		0		0.00	%
Kircher Family Irrevocable Trust FBO Scott W. Kircher (12)		51,000		(53	)		*			51,000		0		0.00	%
P. H. Morton		24,999		(54	)		*			24,999		0		0.00	%
Sally D. Anderson		24,999		(55	)		*			24,999		0		0.00	%
Benjamin J Scotti		32,500		(56	)		*			32,500		0		0.00	%
Anthony J Scotti		32,500		(57	)		*			32,500		0		0.00	%
William H. Weygandt & Kathleen L. Weygandt		52,000		(58	)		*			52,000		0		0.00	%
Phillips Family Trust (13)		26,000		(59	)		*			26,000		0		0.00	%
Hallador Alternative Assets Fund, LLC (14)		600,000		(60	)		1.47	%		600,000		0		0.00	%
Needham & Company, LLC		135,417		(61	)		*			135,417		0		0.00	%
Bradley Ferrell (15)		275,000					*			275,000		0		0.00	%

Total		7,303,491					17.89	%		7,303,491


*		Less than 1%

(1)		J. Steven Emerson has disposition and voting control for Emerson Partners, Emerson Family Foundation, and Bear Stearns Security Corp. FBO J. Steven Emerson IRA R/O II.

(2)		Christopher P. McConell has disposition and voting control for Essex Performance Fund, Winchester Frontier, LTD, The New Discovery Fund Limited and Essex Alpha Fund, LLC.

(3)		Scott W. Hood has disposition and voting control for Lake Street Fund, L.P.

(4)		Jeffrey Barnett has disposition and voting control for Granite Point Capital, L.P. and Granite Point Capital Offshore, LTD.

(5)		Jon D. Gruber has disposition and voting control for Lagunitas Partners LP and the Jon D. & Linda W Gruber Trust.

(6)		Lyman O. Heidtke has disposition and voting control for the Heidtke 401(k) Profit Sharing Plan and Trust and Midsouth Investor Fund LP.

(7)		Kent C. McCarthy has disposition and voting control Jayhawk Private Equity Fund, LP and Jayhawk Private Equity Co-Invest Fund, LP.

(8)		Craig Connors has disposition and voting control for Straus Partners LP and Straus-GEPT Partners.

(9)		Patrick P. Walker, Reid S. Walker and G. Stacy Smith have disposition and voting control for WS Opportunity Fund, Ltd., WS Opportunity Fund, L.P., and WS Opportunity Fund (QP), L.P.

(10)		Reid S. Walker and G. Stacy Smith have disposition and voting control for Walker Smith International Fund, Ltd., Walker Smith Capital (QP), L.P., HHMI Investments, L.P., and Walker Smith Capital, L.P.

(11)		Shian-Jung Chao has disposition and voting control for Hannibal International Limited.


(12)		Stephen C. Kircher, our Chief Executive Officer and director, is the trustee of the trust and is deemed to be the indirect beneficial owner of such shares by reason of voting and disposition control over the shares.

(13)		Corley Phillips has disposition and voting control for The Phillips Family Trust.

(14)		David Hardie has disposition and voting control for Hallador Alternative Assets Fund, LLC.

(15)		Bradley Ferrell is our Chief Operating Officer.

(16)		Includes 75,000 shares of our common stock and 22,500 shares underlying warrants to purchase our common stock.

(17)		Includes 75,000 shares of our common stock and 22,500 shares underlying warrants to purchase our common stock.

(18)		Includes 300,000 shares of our common stock and 90,000 shares underlying warrants to purchase our common stock.

(19)		Includes 89,600 shares of our common stock and 26,880 shares underlying warrants to purchase our common stock.

(20)		Includes 13,800 shares of our common stock and 4,140 shares underlying warrants to purchase our common stock.

(21)		Includes 9,300 shares of our common stock and 2,790 shares underlying warrants to purchase our common stock.

(22)		Includes 6,200 shares of our common stock and 1,860 shares underlying warrants to purchase our common stock.

(23)		Includes 6,100 shares of our common stock and 1,830 shares underlying warrants to purchase our common stock.

(24)		Includes 435,000 shares of our common stock and 130,500 shares underlying warrants to purchase our common stock.

(25)		Includes 129,615 shares of our common stock and 38,884 shares underlying warrants to purchase our common stock.

(26)		Includes 38,500 shares of our common stock and 11,550 shares underlying warrants to purchase our common stock.

(27)		Includes 96,153 shares of our common stock and 28,846 shares underlying warrants to purchase our common stock.

(28)		Includes 10,000 shares of our common stock and 3,000 shares underlying warrants to purchase our common stock.

(29)		Includes 30,000 shares of our common stock and 9,000 shares underlying warrants to purchase our common stock.

(30)		Includes 40,000 shares of our common stock and 12,000 shares underlying warrants to purchase our common stock.

(31)		Includes 9,615 shares of our common stock and 2,884 shares underlying warrants to purchase our common stock.

(32)		Includes 260,365 shares of our common stock and 78,109 shares underlying warrants to purchase our common stock.

(33)		Includes 28,096 shares of our common stock and 8,428 shares underlying warrants to purchase our common stock.

(34)		Includes 288,462 shares of our common stock and 86,538 shares underlying warrants to purchase our common stock.

(35)		Includes 84,615 shares of our common stock and 25,384 shares underlying warrants to purchase our common stock.

(36)		Includes 11,539 shares of our common stock and 3,461 shares underlying warrants to purchase our common stock.

(37)		Includes 9,615 shares of our common stock and 2,884 shares underlying warrants to purchase our common stock.

(38)		Includes 38,461 shares of our common stock and 11,538 shares underlying warrants to purchase our common stock.


(39)		Includes 105,769 shares of our common stock and 31,730 shares underlying warrants to purchase our common stock.

(40)		Includes 180,917 shares of our common stock purchased December 20, 2007 and 54,275 shares underlying warrants to purchase our common stock and 940,767 shares of our common stock purchased in a private transaction in July 2007.

(41)		Includes 11,391 shares of our common stock purchased December 20, 2007 and 3,417 shares underlying warrants to purchase our common stock and 59,233 shares of our common stock purchased in a private transaction in July 2007.

(42)		Includes 138,461 shares of our common stock and 41,538 shares underlying warrants to purchase our common stock.

(43)		Includes 92,308 shares of our common stock and 27,692 shares underlying warrants to purchase our common stock.

(44)		Includes 71,928 shares of our common stock and 21,578 shares underlying warrants to purchase our common stock.

(45)		Includes 67,312 shares of our common stock and 20,193 shares underlying warrants to purchase our common stock.

(46)		Includes 91,544 shares of our common stock and 27,463 shares underlying warrants to purchase our common stock.

(47)		Includes 74,659 shares of our common stock and 22,397 shares underlying warrants to purchase our common stock.

(48)		Includes 11,347 shares of our common stock and 3,404 shares underlying warrants to purchase our common stock.

(49)		Includes 116,276 shares of our common stock and 34,882 shares underlying warrants to purchase our common stock.

(50)		Includes 47,734 shares of our common stock and 14,320 shares underlying warrants to purchase our common stock.

(51)		Includes 769,230 shares of our common stock and 230,769 shares underlying warrants to purchase our common stock.

(52)		Includes 20,000 shares of our common stock and 6,000 shares underlying warrants to purchase our common stock.

(53)		Includes 20,000 shares of our common stock purchased December 20, 2007, 6,000 shares underlying warrants to purchase our common stock and 25,000 shares of our common stock purchased in a private transaction on December 31, 2007.

(54)		Includes 19,230 shares of our common stock and 5,769 shares underlying warrants to purchase our common stock.

(55)		Includes 19,230 shares of our common stock and 5,769 shares underlying warrants to purchase our common stock.

(56)		Includes 25,000 shares of our common stock and 7,500 shares underlying warrants to purchase our common stock.

(57)		Includes 25,000 shares of our common stock and 7,500 shares underlying warrants to purchase our common stock.

(58)		Includes 40,000 shares of our common stock and 12,000 shares underlying warrants to purchase our common stock.

(59)		Includes 20,000 shares of our common stock and 6,000 shares underlying warrants to purchase our common stock.

(60)		Includes 461,539 shares of our common stock and 138,461 shares underlying warrants to purchase our common stock.

(61)		Includes 135,417 shares underlying warrants to purchase our common stock.

PLAN OF DISTRIBUTION

The Selling Security Holders and any of our pledgees, donees, transferees, assignees and successors-in-interest may, from time to time, sell any or all of our shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Security Holders may offer and sell shares

registered using this prospectus at prevailing market prices on the OTCBB or privately negotiated prices as determined by the selling Security holder. The Selling Security Holders may use any one or more of the following methods when selling shares:

	•		ordinary brokerage transactions and transactions in which the broker-dealer solicits investors;

	•		block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

	•		purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

	•		at prevailing market prices or privately negotiated prices after the shares are quoted on the OTC Bulletin Board or other applicable exchange;

	•		privately negotiated transactions;

	•		to cover short sales made after the date that the registration statement of which this Prospectus is a part of is declared effective by the Commission;

	•		broker-dealers may agree with the Selling Security Holders to sell a specified number of such shares at a stipulated price per share;

	•		a combination of any such methods of sale; and

	•		any other method permitted pursuant to applicable law.

The Selling Security Holders may also sell shares under Rule 144 under the Securities Act of 1933, as amended (“Securities Act”), if available, rather than under this prospectus.

Broker-dealers engaged by the Selling Security Holders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Security Holders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The Selling Security Holders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.

The Selling Security Holders may from time-to-time pledge or grant a security interest in some or all of the Shares owned by them and, if the Selling Security Holders default in the performance of their secured obligations, the pledgees or secured parties may offer and sell shares of common stock from time to time under this Prospectus, or under an amendment to this Prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of selling Security Holders to include the pledgee, transferee or other successors in interest as selling Security Holders under this prospectus.

Upon us being notified in writing by a Selling Security Holder that any material arrangement has been entered into with a broker-dealer for the sale of common stock through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such Selling Security Holder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such the shares of common stock were sold, (iv)the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus, and (vi) other facts material to the transaction. In addition, upon us being notified in writing by a Selling Security Holder that a donee or pledgee intends to sell more than 500 shares of common stock, a supplement to this prospectus will be filed if then required in accordance with applicable securities law.

The Selling Security Holders also may transfer the shares of our common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

Not withstanding anything in this “Plan of Distribution” to the contrary, under the values of the National Association of Securities Dealers, Inc., Needham & Company, LLC is not permitted to sell the 135,417 shares of our common stock pursuant the exercise of

warrants issued to them, in each case as registered on the Registration Statement, for a period of 180 days immediately following the date of effectiveness of the Registration Statement or commencement of sales there under.

The Selling Security Holders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of the securities will be paid by the Selling Security Holder and/or the purchasers. Each Selling Security Holder has represented and warranted to us that it acquired the securities subject to this registration statement in the ordinary course of such Selling Security Holder’s business and, at the time of its purchase of such securities such Selling Security Holder had no agreements or understandings, directly or indirectly, with any person to distribute any such securities.

We have advised each Selling Security Holder that it may not use shares registered on the registration statement to cover short sales of common stock made prior to the date on which the registration statement shall have been declared effective by the Commission. If a Selling Security Holder uses this prospectus for any sale of the common stock, it will be subject to the prospectus delivery requirements of the Securities Act. The Selling Security Holders will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and the rules and regulations there under promulgated, including, without limitation, Regulation M, as applicable to such Selling Security Holders in connection with re-sales of our respective shares under this Registration Statement.

We are required to pay all fees and expenses incident to the registration of the shares, but we will not receive any proceeds from the sale of the common stock except upon exercise of certain warrants. We have agreed to indemnify the Selling Security Holders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

DESCRIPTION OF SECURITIES

Common Stock

We are authorized by our Amended and Restated Articles of Incorporation to issue 100,000,000 shares of common stock, $0.0001 par value. As of April 21, 2008 there were 37,655,325 shares of common stock outstanding and no shares of preferred stock outstanding Holders of shares of common stock have full voting rights, one vote for each share held of record. Stockholders are entitled to receive dividends as may be declared by the Board out of funds legally available therefore and share pro rata in any distributions to stockholders upon liquidation. Stockholders have no conversion, preemptive or subscription rights. All outstanding shares of common stock are fully paid and non-assessable, and all the shares of common stock issued by us upon the exercise of outstanding warrants will, when issued, be fully paid and non-assessable.

On October 5, 2006, we effected a one-for-three reverse stock split. In connection therewith, we did not issue any fractional shares of our common stock or scrip.

Preferred Stock

Under our Amended and Restated Articles of Incorporation we may issue up to 20,000,000 shares of preferred stock, $.0001 par value. No shares of preferred stock are currently outstanding. Our board of directors has the authority to determine the designation of each series of preferred stock and the authorized number of shares of each series. The board of directors also has the authority to determine and alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of shares of preferred stock and to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series subsequent to the issuance of shares of that series. Any or all rights of the preferred stock may be greater than the rights of the common stock. The issuance of preferred stock with voting and/or conversion rights may also adversely affect the voting power of the holders of common stock.

Results of Reincorporation

In connection with our redomicile to the State of California on February 15, 2007, each outstanding share of our common stock, par value $.0001 prior to the redomicile, was automatically converted into one share, par value $.0001, of SPI as the surviving corporation, (b) each issued and outstanding option, warrant, convertible security or other right to purchase shares of our common stock prior to the redomicile were automatically then converted into an option, warrant, convertible security or other right to purchase shares of common stock of SPI as the surviving corporation upon the same terms and subject to the same conditions as set forth in the original agreements, documents, certificates or other instruments issued previously by us, and(c) all of our obligations under our 2006 Equity Incentive Plan were assumed by SPI as the surviving corporation.

As a result of the re-domicile, holders of our shares of common stock prior to the re-domicile are now holders of SPI, the surviving corporation, and their rights as holders are now governed by the General Corporation Law of the State of California, Amended and Restated Articles of Incorporation of SPI, and Bylaws of SPI.

DISCLOSURE OF COMMISSION POSITION OF
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Section 317 of the California Corporations Code authorizes a court to award, or a corporation’s board of directors to grant indemnity to directors and officers in terms sufficiently broad to permit indemnification, including reimbursement of expenses incurred, under certain circumstances for liabilities arising under the Securities Act of 1933, as amended. The registrant’s Amended and Restated Articles of Incorporation eliminate the liability of the directors of the registrant for monetary damages to the fullest extent permissible under California law. In addition, the registrant’s Amended and Restated Articles of Incorporation and Bylaws provide that the registrant has the authority to indemnify the registrant’s directors and officers and may indemnify the registrant’s employees and agents (other than officers and directors) against liabilities to the fullest extent permitted by California law. The registrant is also empowered under the registrant’s Bylaws to purchase insurance on behalf of any person whom the registrant is required or permitted to indemnify.

In connection with our engagement of Needham & Company, LLC and Roth Capital as our exclusive agent for the offering of up to $25,000,000, we have agreed to indemnify Roth Capital against various liabilities, including liabilities under the Securities Act of 1933, as amended.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

LEGAL MATTERS

The validity of the shares of common stock offered by the Selling Security Holders has been passed on by the law firm of Weintraub Genshlea Chediak, a professional corporation, Sacramento, California.

EXPERTS

The consolidated financial statements for Solar Power, Inc., a California corporation (formerly International Assembly Solutions Ltd.) for the year ended December 31, 2007 and 2006 have been audited by Macias Gini & O’Connell LLP. The consolidated financial statements for International Assembly Solutions Ltd. for the period January 18, 2005 (date of inception) to December 31, 2005 have been audited by BDO McCabe Lo Limited. We have included our financial statements in the Prospectus and elsewhere in the registration statement in reliance on the reports of BDO McCabe Lo Limited and Macias Gini & O’Connell LLP given on their authority as experts in accounting and auditing.

The financial statements for Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.), (a development stage company) as of December 31, 2005 and for the years ended December 31, 2005 and 2004 and for the period from July 16, 2002 (date of inception) through December 31, 2005 have been included in the Prospectus and elsewhere in the registration statement in reliance on the report of Hansen, Barnett, & Maxwell, P.C., an independent registered public accounting firm, given on authority of that firm as experts in accounting and auditing.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is Computershare Trust Co., Inc., located at 350 Indiana, Suite 800, Golden, CO, 80401, with the same mailing address and telephone number (303) 262-0600.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form SB-2, together with all amendments and exhibits, with the SEC. This Prospectus, which forms a part of that registration statement, does not contain all information included in the registration statement. Certain information is omitted and you should refer to the registration statement and its exhibits. With respect to references made in this Prospectus to any of our contracts or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contracts or documents. You may read and copy any document that we file at the Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our filings and the registration statement can also be reviewed by accessing the SEC’s website at http://www.sec.gov.

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Solar Power, Inc.
Roseville, California

We have audited the accompanying consolidated balance sheet of Solar Power, Inc. (formerly International Assembly Solutions, Limited) (the “Company”) as of December 31, 2007 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2007 and 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of International Assembly Solutions, Limited, a wholly-owned subsidiary, which statements reflect revenues of $2,888,335 for the year ended December 31, 2006. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for such subsidiary, is based solely on the report of other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Solar Power, Inc. (formerly International Assembly Solutions, Limited) at December 31, 2007, and the results of its operations and its cash flows for the years ended December 31, 2007 and 2006 in conformity with accounting principles generally accepted in the United States of America.

/s/ Macias Gini & O’Connell LLP

Sacramento, California

March 25, 2008

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of
International Assembly Solutions, Limited

We have audited the consolidated balance sheet of International Assembly Solutions, Limited and subsidiary (the “Company”) as of December 31, 2006, and the related consolidated statements of operations, stockholders’ equity and cash flows for the year ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of International Assembly Solutions, Limited and subsidiary as of December 31, 2006 and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO McCabe Lo Limited

Hong Kong, 30 March, 2007

SOLAR POWER, INC.
(FORMERLY INTERNATIONAL ASSEMBLY SOLUTIONS, LIMITED)

CONSOLIDATED BALANCE SHEET
As of December 31, 2007
(in thousands, except for share data)


ASSETS
Current assets:
Cash and cash equivalents	$	6,840
Accounts receivable, net of allowance for doubtful accounts of $48		5,353
Costs and estimated earnings in excess of billings on uncompleted contracts		2,208
Inventories, net		6,945
Prepaid expenses and other current assets		967
Restricted cash		800

Total current assets		23,113

Other non-current assets
Goodwill		435
Restricted cash		1,395
Property, plant and equipment, net		2,066

Total assets	$	27,009

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,957
Accrued liabilities		2,063
Line of credit		931
Income taxes payable		88
Billings in excess of costs and estimated earnings on uncompleted contracts		3
Loans payable and capital lease obligations, current portion		342

Total current liabilities		8,384
Loans payable and capital lease obligations, net of current portion		655

Total liabilities		9,039

Commitments and contingencies (Note 13)		—
Stockholders’ equity
Preferred stock, par $0.0001, 20,000,000 shares authorized, none issued and outstanding at December 31, 2007		—
Common stock, par $0.0001, 100,000,000 shares authorized 37,573,263 shares issued and outstanding at December 31, 2007		4
Additional paid in capital		27,404
Accumulated deficit		(9,438	)

Total stockholders’ equity		17,970

Total liabilities and stockholders’ equity	$	27,009

The accompanying notes are an integral part of these financial statements

SOLAR POWER, INC.
(FORMERLY INTERNATIONAL ASSEMBLY SOLUTIONS, LIMITED)

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2007 and 2006
(in thousands)


	2007			2006

Cash flows from operating activities:
Net loss	$	(7,194	)	$	(2,129	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities net of business combinations:
Depreciation		330			19
Stock issued for services		50			—
Warrants issued for services		12			—
Stock-based compensation expense		541			338
Bad debt expense		118			48
Amortization		684			453
Deferred tax asset		—			21
Loss on disposal of fixed assets		—			3
Income tax expense		61			—
Changes in operating assets and liabilities, net of business combination
Accounts receivable		(4,157	)		(1,307	)
Costs and estimated earnings in excess of billings on uncompleted contracts		(2,088	)		(120	)
Inventories, net		(4,659	)		(2,171	)
Prepaid expenses and other current assets		(410	)		(344	)
Accounts payable		2,839			1,273
Income taxes payable		(6	)		35
Billings in excess of costs and estimated earnings on uncompleted contracts		(123	)		126
Accrued liabilities		938			752

Net cash used in operating activities		(13,064	)		(3,003	)

Cash flows from investing activities:
Acquisitions of property, plant and equipment		(1,034	)		(220	)
Cash received from merger with Solar Power, Inc. (formerly Welund Fund, Inc.)		—			14,998
Cash paid for acquisitions		—			(1,190	)

Net cash (used in) provided by investing activities		(1,034	)		13,588
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants		12,282			425
Costs paid relating to registration of common stock		(765	)		—
Restricted cash collateralizing letters of credit		(2,195	)		—
Principal payments on notes and capital leases payable		(389	)		—
Proceeds from line of credit		931			—
Proceeds on loans from related parties		—			320
Principal payments on loans from related parties		(320	)		—

Net cash provided by financing activities		9,544			745

(Decrease) increase in cash and cash equivalents		(4,554	)		11,330
Cash and cash equivalents at beginning of period		11,394			64

Cash and cash equivalents at end of period	$	6,840		$	11,394

The accompanying notes are an integral part of these financial statements

SOLAR POWER, INC.
(FORMERLY INTERNATIONAL ASSEMBLY SOLUTIONS, LIMITED)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Years Ended December 31, 2007 and 2006
(in thousands, except for share data)


	Common Stock					Additional			Accumulated
	Shares		Amount			Paid-In Capital			Deficit			Total

Balance December 31, 2005		14,000,000	$	14		$	(14	)	$	(115	)	$	(115	)
Net loss										(2,129	)		(2,129	)
Shares issued in conjunction with the merger		17,666,667		(11	)		14,587						14,576
Issuance of warrants							422						422
Stock-based compensation expense							338						338
Restricted stock issued		100,000		—			—						—
Issuance of stock		500,000		—			500						500

Balance December 31, 2006		32,266,667		3			15,833			(2,244	)		13,592
Net loss										(7,194	)		(7,194	)
Costs related to share registration							(628	)					(628	)
Issuance of warrants related to private placement							283						283
Issuance of warrants for settlement of an obligation							56						56
Issuance of warrants for services							36						36
Stock-based compensation expense		—					441						441
Issuance of restricted stock		100,000		—			100						100
Issuance of stock for option and warrant exercises		68,750		—			69						69
Issuance of stock for services		50,000		—			50						50
Issuance of stock for settlement of an obligation		73,935		—			74						74
Issuance of stock, net of costs		4,963,911		1			11,090						11,090

Balance December 31, 2007		37,523,263	$	4		$	27,404		$	(9,438	)	$	17,970

The accompanying notes are an integral part of these financial statements

SOLAR POWER, INC.
(FORMERLY INTERNATIONAL ASSEMBLY SOLUTIONS, LIMITED)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Basis of Financial Statement Presentation

Solar Power, Inc. and its subsidiaries, (collectively the “Company”) engage in sales, installation and integration of photovoltaic systems and manufactures and sells cable, wire and mechanical assemblies.

Solar Power, Inc. was incorporated in the State of California in 2006. In August 2006, the Company entered into a merger agreement with International Assembly Solutions, Limited (“IAS HK”) which was incorporated in Hong Kong in January 2005. Effective November 2006, the equity owners of IAS HK transferred all their equity interests to Solar Power, Inc. in exchange for a total of 14,000,000 shares of its common stock at a par value of $0.0001 each. There were a total of sixteen shareholders in IAS HK including the controlling shareholders Stephen Kircher, Gerald Moore and Bradley Farrell. This transaction was structured to create a U.S. holding company and there were not any new or different shareholders involved. As such, the commonality among shareholders was 100%. There was no other consideration paid to any shareholder in connection with the formation of the holding company. Because the merger was entered into among entities under common control, the accompanying consolidated financial statements presents the results of operations of the combined companies for the year ended December 31, 2006.

In August 2006, the Company, Dale Renewable Consulting Inc. (DRCI) and Dale Stickney Construction, Inc., (DSCI) formalized an acquisition agreement (the Merger Agreement) and entered into an Assignment and Interim Operating Agreement (the “Operating Agreement”). The Operating Agreement obligated the Company to do the following from June 1, 2006:

1. Combine DRCI’s operations with the Company’s, including labor force,

2. Provide all financing necessary for DRCI’s operations,

3. Absorb 100% of the results of DRCI’s operations and,

4. Provide all management services to DRCI until the consummation of the acquisition.

As a result of the above, the Company became the primary beneficiary of DRCI on June 1, 2006 and DRCI was a variable interest entity as of June 1, 2006 in accordance with paragraphs 5.a and 5.b of FIN 46 (R), “Consolidation of Variable Interest Entities”. The Company had a contractual agreement to absorb 100% of DRCI’s operations as of June 1, 2006. In addition, the Company did not reallocate any of DRCI’s expected losses or residual returns. Consequently the Company became the primary beneficiary of DRCI’s operations and consolidated the results of operations as of that date. Also as required under paragraphs 18 and 21 of FIN 46 (R), the assets and liabilities of DRCI were measured at their estimated fair values at the date the Company became the primary beneficiary as if the initial consolidation had resulted from a business combination.

In November 2006, Solar Power, Inc. completed the acquisition of DRCI, acquiring 100% of the outstanding shares of DRCI. By virtue of the rights and obligations assumed by the Company under the Operating Agreement, the acquisition of DRCI became effective on June 1, 2006. As a result, the financial statements of the Company include the results of operations of DRCI subsequent to June 1, 2006 and the purchase price was allocated to the acquired assets as of June 1, 2006.

The Company allocated the purchase price of $1,115,373 in cash to the estimated fair values of the acquired assets as follows:


Inventories	$	35,341
Other current assets		637,089
Plant and equipment		7,995
Goodwill		434,948

Total	$	1,115,373

During the fourth quarter of 2006, in conjunction with its valuation procedures related to the DRCI acquisition, the Company determined that because of a lack of continuity interest, the transition did not qualify as a reorganization for tax purposes and should be treated as a purchase of assets with a liquidation target. As a result, the Company revised its purchase price allocation to eliminate the previously recorded deferred tax liability of $267,577, resulting in an offsetting decrease in goodwill.

In September 2006, Sundance Power, LLC and Solar Power, Inc., a California corporation, agreed to initial terms on sharing revenue on joint contract customers. In December 2006, the Company modified the arrangement entered into on September 5, 2006 under which it agreed to pay specified percentages of certain contracts developed by Sundance and installed by the Company in exchange for Sundance providing certain goods and services to the Company and the joint contract customers. Under the revised arrangement the Company agreed to retain revenues that would otherwise be paid to Sundance under the previous agreement the Company assumed with the DRCI acquisition and acquire the service mark of Sundance in exchange for cash and stock payments to Sundance. The Company initially paid $75,000 in cash and issued 75,000 shares of common stock with a fair value of $75,000. The Company was obligated for additional cash payments of $175,000 upon the earlier of (a) the Completion of the Joint Contracts or (b) December 31, 2006. The Company made the required cash payment on January 3, 2007. Subject to the performance of the underlying contracts the Company is conditionally obligated to issue its common stock worth $175,000 at market value upon completion of the Joint Contracts. “Completion” of the Joint Contracts occurs when the Company has received final payment under the terms of the contract.

In February 2007, the Company issued 31,435 shares of its common stock as an additional payment under the agreement with Sundance Power, LLC. The shares were fair-valued at $1.00 per share.

On August 30, 2007, the Company entered into Amendment #1 to the agreement settling its obligation to Sundance Power, LLC, issuing 42,500 shares of the Company’s common stock fair-valued at $1.00 per share and warrants to purchase 76,722 shares of our common stock at $1.00 per share with a fair-value of $55,777, offsetting expenses of $36,228 leaving a balance due to Sundance at December 31, 2007 of $9,060. At December 31, 2006 the Company determined that it was probable that the conditional payments would be made and recorded the estimated obligation in prepaid expenses and other current assets at $500,000 and recorded an accrued liability of $350,000. The asset was expensed to sales, marketing and customer service expenses during 2007 as the related revenue was recognized or as it was determined that the contracts were no longer viable. The life of the contract is based upon the underlying construction contracts. In exchange for these payments from the Company, Sundance relinquished its right to obtain any future payment constituting a share of the revenues of any Joint Contract or other Solar Power Contracts, relinquished its right to obtain any future payment from the sale or installation of solar electric power system goods and services, and transfers to the Company all of its rights to the service mark of Sundance. The Company has not and does not plan to use the service mark for any service branding. As a result, the Company has not allocated any value to Sundance’s service mark. The amounts paid under this agreement have been classified as sales, marketing and customer service because Sundance was only in a position to provide sales and marketing support and customer service support with utility interconnection, rebate processing and training for owner education. Sundance did not have the working capital to purchase hardware, specifically photovoltaic panels and inverters, needed for the four specified projects or any other projects that the Company secured.

In December 2006, Solar Power, Inc. became a public company through its reverse merger with Solar Power, Inc. (formerly Welund Fund, Inc.). The accompanying consolidated financial statements reflect the results of the operations of Solar Power, Inc., its predecessor, International Assembly Solutions, Limited and their subsidiaries.

2. Summary of Significant Accounting Policies

Basis of Presentation — The consolidated financial statements include the accounts of the Solar Power, Inc., its predecessor and their subsidiaries. Intercompany balances, transactions and cash flows are eliminated on consolidation.

Cash and cash equivalents — Cash and cash equivalents include cash on hand, cash accounts and interest bearing savings accounts. At times, cash balances may be in excess of FDIC insurance limits. The Company has not experienced any losses with respect to bank balances in excess of government provided insurance. At December 31, 2007, the Company held approximately $8,901,000 in bank balances in excess of the insurance limits.

Inventories — Inventories are stated at the lower of cost, determined by the weighted average cost method, or market. Work-in-progress and finished goods inventories consist of raw materials, direct labor and overhead associated with the manufacturing process. Provisions are made for obsolete or slow-moving inventory based on management estimates. Inventories are written down based on

the difference between the cost of inventories and the net realizable value based upon estimates about future demand from customers and specific customer requirements on certain projects.

Anti-dilutive Shares — SFAS No. 128, “Earnings Per Share,” provides for the calculation of basic and diluted earnings per share. Basic earnings per share includes no dilution and is computed by dividing income attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities by adding other common stock equivalents, including common stock options, warrants, and restricted common stock, in the weighted average number of common shares outstanding for a period, if dilutive. Potentially dilutive securities are excluded from the computation if their effect is antidilutive. For the years ended December 31, 2007 and 2006 2,843,965 and 1,900,000 shares of common stock equivalents, respectively were excluded from the computation of diluted earnings per share since their effect would be anti-dilutive.

Plant and equipment — Property, plant and equipment is stated at cost including the cost of improvements. Maintenance and repairs are charged to expense as incurred. Depreciation and amortization are provided on the straight line method based on the estimated useful lives of the assets as follows:


Plant and machinery		5 years
Furniture, fixtures and equipment		5 years
Computers and software		3 – 5 years
Equipment acquired under capital leases		3 – 5 years
Automobiles		3 years
Leasehold improvements		the initial lease term

Goodwill — Goodwill is the excess of purchase price over the fair value of net assets acquired. The Company applies Statement of Financial Accounting Standards No. 142 “Goodwill and other Intangible Assets”, which requires the carrying value of goodwill to be evaluated for impairment on an annual basis, using a fair-value-based approach. No impairment of goodwill has been identified during any of the periods presented.

Revenue recognition — The Company’s two primary business segments include cable and wire mechanical assemblies and photovoltaic systems installation, integration and solar panel sales.

In our cable, wire and mechanical assemblies business the Company recognizes the sales of goods when there is evidence of an arrangement, title and risk of ownership have passed (generally upon delivery), the price to the buyer is fixed or determinable and collectibility is reasonably assured. Generally there are no formal customer acceptance requirements or further obligations related to our assembly services once we ship our products. Customers do not have a general right of return on products shipped therefore we make no provisions for returns. We make determination of our customer’s credit worthiness at the time we accept their order.

In our photovoltaic systems installation, integration and product sales segment, revenue on product sales is recognized when there is evidence of an arrangement, title and risk of ownership have passed (generally upon delivery), the price to the buyer is fixed or determinable and collectibility is reasonably assured. Customers do not have a general right of return on products shipped therefore we make no provisions for returns.

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

In our solar photovoltaic business, contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation costs. Selling and general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from

contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Profit incentives are included in revenues when their realization is reasonably assured.

The assets, “Costs and estimated earnings in excess of billings on uncompleted contracts” represents revenues recognized in excess of amounts billed. The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of revenues recognized.

Allowance for doubtful accounts — The Company regularly monitors and assesses the risk of not collecting amounts owed to the Company by customers. This evaluation is based upon a variety of factors including: an analysis of amounts current and past due along with relevant history and facts particular to the customer. It requires the Company to make significant estimates, and changes in facts and circumstances could result in material changes in the allowance for doubtful accounts. At December 31, 2007 the Company has recorded an allowance of $47,624.

Stock-based compensation — Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment.” (SFAS No. 123(R)”) which requires the Company to measure the stock-based compensation costs of share-based compensation arrangements based on the grant-date fair value and generally recognizes the costs in the financial statements over the employee requisite service period. Stock-based compensation expense for all stock-based compensation awards granted was based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). Prior to 2006 the Company had not issued stock options or other forms of stock-based compensation.

Shipping and handling cost — Shipping and handling costs related to the delivery of finished goods are included in cost of goods sold. During the years ended December 31, 2007 and 2006, shipping and handling costs expensed to cost of goods sold were $349,840 and $171,745, respectively.

Advertising costs — Costs for newspaper, television, radio, other media and design are expensed as incurred. The Company expenses the production costs of advertising the first time the advertising takes place. The costs for this type of advertising were approximately $337,000 in 2007 and $12,000 in 2006.

Product Warranties — In our cable and wire assembly business our current standard product warranty for our mechanical assembly product ranges from one to five years. We offer the industry standard of 20 years for our solar modules and industry standard five (5) years on inverter and balance of system components. Due to the warranty period, we bear the risk of extensive warranty claims long after we have shipped product and recognized revenue. In our cable and wire assembly business, historically our warranty claims have not been material. In our solar photovoltaic business our greatest warranty exposure is in the form of product replacement. Until the third quarter, the Company purchased its solar panels from third-party suppliers and since the third-party warranties are consistent with industry standards we consider our financial exposure to warranty claims immaterial. Certain photovoltaic construction contracts entered into during the year ended December 31, 2007 included provisions under which the Company agreed to provide warranties to the buyer, and during the quarter ended September 30, 2007, the Company began installing its own manufactured solar panels. As a result, the Company recorded the provision for the estimated warranty exposure on these contracts within cost of sales. Since the Company does not have sufficient historical data to estimate its exposure, we have looked to historical data reported by other solar system installers and manufacturers. Therefore we have not provided any warranty reserves in our financial statements for the period ended December 31, 2006, but have provided a warranty reserve of $102,698 for the year ended December 31, 2007.

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

Foreign currency translation — The consolidated financial statements of the Company are presented in U.S. dollars and the Company conducts substantially all of their business in U.S. dollars.

functional currencies are translated at period end rates. Gains and losses resulting from the translation of foreign currency transactions and balances are included in income.

Aggregate net foreign currency transaction income included in the income statement was $213,750 for the year ended December 31, 2007. Aggregate net foreign currency expenses included in the income statement was $24,273 for the year ended December 31, 2006.

Comprehensive income (loss) — Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income,” establishes standards for reporting comprehensive income and its components in a financial statement that is displayed with the same prominence as other financial statements. Comprehensive income, as defined, includes all changes in equity during the period from non-owner sources. Examples of items to be included in comprehensive income, which are excluded from net income, include foreign currency translation adjustments and unrealized (loss) of available-for-sale securities. For the years ended December 31, 2007 and 2006, there were no material components of comprehensive income or loss, therefore, comprehensive loss was the same as net loss.

Post-retirement and post-employment benefits — The Company’s subsidiaries which are located in the People’s Republic of China contribute to a state pension scheme on behalf of its employees. The Company recorded $43,952 and $13,834 in expense related to its pension contributions for the years ended December 31, 2007 and 2006, respectively. Neither the Company nor its subsidiaries provide any other post-retirement or post-employment benefits.

Use of estimates — The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. With respect to the acquisition of DRCI by Solar Power, Inc. a California corporation, the Company estimated the fair value of contracts acquired based on certain assumptions to be approximately $637,000. The Company estimated the value of each contract opportunity acquired by estimating the percentage of contracts that would be signed and by applying a comparable acquisition cost to each contract based on the Company’s current sales subcontractor commission rates.

3. Recently Issued Accounting Pronouncements

In September 2005, the Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) reached a final consensus on Issue 04-13 “Accounting for Purchase and Sales of Inventory with the Same Counterparty”. EITF 04-13 requires that two or more legally separate exchange transactions with the same counterparty be combined and considered a single arrangement for purpose of applying APB Opinion No. 29, “Accounting for Non-monetary Transactions”, when the transactions are entered into in contemplation of one another. EITF 04-13 is effective for new arrangements entered into, or modifications or renewals of existing arrangements, in interim or annual periods beginning after March 15, 2006. The Company has evaluated the effect of the adoption of EITF 04-13 and it is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006, with earlier adoption permitted. The Company adopted the provisions of FIN 48, on January 1, 2007. This interpretation, among other things, creates a two-step approach for evaluating uncertain tax positions. Recognition occurs when an enterprise concludes that a tax position, based on its technical merits, is more-likely-than-not to be sustained upon examination. Measurement determines the amount of benefit that more-likely-than-not will be realized upon ultimate settlement. De-recognition of a tax position that was previously recognized would occur when a company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained. FIN 48 specifically prohibits the use of a valuation allowance as a substitute for de-recognition of tax positions, and it has expanded disclosure requirements.

As of December 31, 2007, we do not have any unrecognized tax benefits. It is reasonably possible that certain unrecognized tax benefits may be identified within the next twelve months. We currently do not anticipate any significant changes to our position over the next 12 months.

We file a federal income tax return in the U.S., as well as income tax returns in California and Colorado, and certain other foreign jurisdictions. We are currently not the subject of any income tax examinations.

In September 2006, the FASB issued Statement of Financial Accounting Standards (“FAS”) No. 157, “Fair Value Measurements.” FAS No. 157 establishes a common definition for fair value to be applied to accounting principles generally accepted in the United States of America guidance requiring use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. FAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008 FASB issued Staff Position No. 157-2 that defers the effective date of FAS 157 for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed a fair value in financial statements on a recurring basis, for fiscal years beginning after November 15, 2008. In addition, FASB also agreed to exclude from scope of FASB 157 fair value measurements made for purposes of applying FAS No. 13 “Accounting for Leases” and related interpretive accounting pronouncements. The Company does not expect FAS No. 157 to have any impact on the consolidated financial statements.

In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115”, (“FAS 159”) which permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. A business entity is required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. This statement is expected to expand the use of fair value measurement. FAS 159 is effective for financial statements issued for fiscal years beginning after July 1, 2008. The Company is currently evaluating the impact that FAS 159 will have on its consolidated financial statements.

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

In December 2007, the FASB issued FAS No. 160, “Non-controlling Interests in Consolidated Financial Statements (as amended)” (“FAS 160”) which improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report non-controlling (minority) interests in subsidiaries in the same way as equity consolidated financial statements. Moreover, FAS 160 eliminates the diversity that currently exists in accounting for transactions between an entity and non-controlling interests by requiring they be treated as equity transactions. FAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008; earlier adoption is prohibited. The Company is currently evaluating the impact that FAS 160 will have on its consolidated financial statements.

4. Inventories

Inventories consisted of the following at December 31 (in thousands):


	2007
Raw material	$	2,036
Finished goods		4,927
Provision for obsolete stock		(18	)

Total	$	6,945

5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets at December 31 were (in thousands):


	2007
Deferred costs	$	125
Rental, equipment and utility deposits		339
Deposits		118
Insurance		135
Advertising		166
Other		84

Total	$	967

6. Property, Plant and Equipment

Property, plant and equipment at December 31 were (in thousands):


	2007
Plant and machinery	$	787
Furniture, fixtures and equipment		215
Computers and software		261
Equipment acquired under capital leases		709
Automobiles		246
Leasehold improvements		198

Total cost		2,416
Less: accumulated depreciation and amortization		(350	)

	$	2,066

7. Other Accrued Liabilities

Other accrued liabilities at December 31(in thousands):


	2007
Accrued payroll	$	490
Sales tax payable		557
Warranty reserve		103
Customer deposits		399
Insurance premium financing		87
Accrued construction costs		212
Accrued interest payable		15
Other		200

	$	2,063

8. Stockholders’ Equity

Issuance of common stock

In December 2007, we completed a private placement of 4,513,911 shares of restricted common stock at a purchase price of $2.60 per share to 46 accredited investors. The accredited investors also received warrants to purchase 1,354,163 shares of common stock at an exercise price of $3.90 per share expiring on December 20, 2012. Additionally, our placement agent, Needham & Company, LLC additionally received warrants to purchase 135,417 shares to purchase our common stock at an exercise price of $3.90 per share expiring on December 20, 2012. The shares were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales under state securities laws.

In November 2007, we issued 50,000 shares of our common stock pursuant to the exercise of a warrant issued for consulting services at an exercise price of $1.00 per share.

In September 2007, we issued 50,000 shares of our common stock pursuant to the terms of a consulting agreement. The shares were fair-valued at $1.00 per share, the price of our most recent private placement since our shares were not trading publically at the time. The Company expensed $50,000 during the fiscal year ended December 31, 2007.

In August 2007, we issued 42,500 shares of our common stock in settlement of an obligation. The shares were fair-valued at $1.00 per share.

In April 2007, we entered into our standard Securities Purchase Agreement with E-Ton Solar Tech, Co., Ltd. (E-Ton) a foreign accredited investor as part of a private placement to raise $500,000 (the “Financing”). In connection with the Financing, we sold an aggregate of 500,000 shares of restricted common stock at a purchase price of $1.00 per share (the per share price of our most recent private placement) for an aggregate sale price of $500,000 to E-Ton.

In February 2007, we issued 31,435 shares of our common stock in settlement of an obligation. The shares were fair-valued at $1.00.

In December 2006, the Company issued 500,000 shares of its common stock in exchange for $425,000 in cash and the settlement of an obligation totaling $75,000.

In December 2006, the Company effected a reverse merger with Solar Power, Inc., a Nevada Corporation (formerly Welund Fund, Inc.). The Company was determined to be the accounting acquirer for purposes of recording the transaction. Prior to the reverse merger the Company’s and Solar Power, Inc., a Nevada Corporation (formerly Welund Fund, Inc.) outstanding shares of common stock totaled 14,500,000 and 17,666,667, respectively. Subsequent to the reverse merger the Company issued 100,000 shares of restricted common stock. Accordingly, the outstanding shares of the Company at December 31, 2006 consist of the sum of the shares of the Company, Solar Power, Inc., a Nevada Corporation (formerly Welund Fund, Inc.) and the shares of restricted common stock. In conjunction with the reverse merger, the Company recorded the net assets of Solar Power, Inc., a Nevada Corporation (formerly Welund Fund, Inc.), less direct transaction costs, as an increase to its additional paid in capital. The assets and liabilities of Solar Power, Inc., a Nevada Corporation (formerly Welund Fund, Inc.) consisted primarily of cash and cash equivalents of $11,214,007 and was recorded at their historical values.

Issuance of warrants to purchase common stock

In December 2007, in conjunction with our private placement, we issued warrants to purchase 1,354,163 shares of our common stock to participants of the private placement at an exercise price of $3.90 per share. In addition we issued a warrant to purchase 135,417 shares of our common stock at an exercise price of $3.90 as compensation for services to our placement agent, Needham & Company LLC. These warrants were fair-valued at $2.09 per share using the Black-Scholes model. The warrants expire on December 20, 2012.

In September 2007, pursuant to a consulting agreement, we issued a warrant to purchase 50,000 shares of our common stock at an exercise price of $1.00 per share expiring on August 30, 2012. The warrant was fair-valued at $0.72 per share using the Black-Scholes model.

In August 2007, we issued warrants to purchase 76,722 shares of our common stock in settlement of an obligation at an exercise price of $1.00 per share. These warrants were fair-valued at $0.73 per share using the Black-Scholes model.

Prior to the reverse merger, in conjunction with a private placement, concluded on October 4, 2006, 800,000 warrants to purchase the Company’s common stock with an exercise price of $1.15 per share were issued to Roth Capital Partners for acting as the private placement agent. The terms of the warrants are five years, expiring on October 4, 2011. The warrants are transferable and are exercisable by the Holder at any time after the original date of issuance until and including the expiration date. The terms of the warrants provide for adjustment to the exercise price for common stock dividends, capital stock distributions, and stock splits. There is no performance requirements associated with these warrants. The Company treated the estimated fair value of these warrants as part of the cost of the private placement.

Assumptions used in the determination of the fair value of warrants issued using the Black-Scholes model were as follows (in thousands):


									Risk-
							Expected		free
			Exercise				Term in		interest						Dividend
	Date Issued		Price		Fair-Value		years		rate			Volatility			Yield
In conjunction with private placement		10/4/2006	$	1.15	$	422,400		5.00		4.69	%		92	%		0	%
In settlement of an obligation		8/30/2007	$	1.00	$	55,777		5.00		4.21	%		92	%		0	%
For services rendered		9/1/2007	$	1.00	$	36,400		5.00		4.33	%		92	%		0	%
In conjunction with private placement		12/20/2007	$	3.90	$	3,113,207		5.00		3.39	%		83	%		0	%

9. Income Taxes

Income before provision for income taxes is attributable to the following geographic locations for the periods ended December 31 (in thousands):


	Years Ended
	December 31, 2007			December 31, 2006
United States	$	(7,941	)	$	(2,451	)
Foreign		808			378

	$	(7,133	)	$	(2,073	)

The provision for income taxes consists of the following (in thousands):


	Year Ended
	December 31, 2007		December 31, 2006
Current:
Federal	$	—	$	8
State		3		3
Foreign		58		24

		61		35

Deferred:
Federal		—		—
State		—		—
Foreign		—		21
		—		21

Total provision for income taxes	$	61	$	56

The reconciliation between the actual income tax expense and income tax computed by applying the statutory U.S. Federal income tax rate to earnings before provision for income taxes for the years ended December 31, 2007 and 2006 are as follows (in thousands):


	2007			2006
Provision for income tax at US Federal statutory rate	$	(2,496	)	$	(726	)
State taxes, net of federal benefit		1			(141	)
Foreign taxes at different rate		(225	)		(108	)
Non-deductible expenses		10			32
Valuation allowance		2,776			1,083
Other		(5	)		(84	)

	$	61		$	56

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 2007 and 2006 are presented below (in thousands):


	2007			2006
Deferred income tax assets:
Net operating loss carry forwards	$	3,858		$	853
Other temporary differences		303			244

		4,161			1,098
Valuation allowance		(4,161	)		(1,098	)

Total deferred income tax assets		—			—

Net deferred tax assets	$	—		$	—

SFAS 109, Accounting for Income Taxes (as amended), provides for the recognition of deferred tax assets if it is more likely than not that those deferred tax assets will be realized. Management reviews deferred tax assets periodically for recoverability and makes estimates and judgments regarding the expected geographic sources of taxable income in assessing the need for a valuation allowance to reduce deferred tax assets to their estimated realizable value. Realization of our deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Because of our lack of earnings history, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $3.1 million during the year ended December 31, 2007. As of December 31, 2007, the Company had a net operating loss carry forward for federal income tax purposes of approximately $9.2 million, which will expire starting in year 2021. The Company had a state net operating loss carry forward of approximately $6.2 million, which will expire starting in 2016.

Utilization of the federal and state net operating loss and credit carry forwards may be subject to an annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

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

PRC Taxation — Enterprise income tax in the PRC is generally charged at 33%, of which 30% is for national tax and 3% is for local tax, of the assessable profit. The subsidiary of the Company is a wholly foreign-owned enterprise established in Shenzhen, the PRC, and is engaged in production-oriented activities; according to enterprise income tax laws for foreign enterprises, the national tax rate is reduced to 15%. Pursuant to the same income tax laws, the subsidiary is also exempted from the PRC enterprise income tax for two years starting from the first profit-making year, followed by a 50% tax exemption for the next three years. The Company has yet to start its first profit-making year.

Hong Kong Taxation — A subsidiary of the Company is incorporated in Hong Kong and is subject to Hong Kong profits tax. The Company is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising in or derived from Hong Kong. The applicable profits tax rate for all periods is 17.5%. A provision of $58,227 and $45,039 for profits tax was recorded for the years ended December 31, 2007 and 2006, respectively.

10. Stock-based Compensation

Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123(R)”) which requires the Company to measure the stock-based compensation costs of share-based compensation arrangements based on the grant-date fair value and recognizes the costs in the financial statements over the employee requisite service period. Stock-based compensation expense for all stock-based compensation awards granted was based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). Prior to 2006 the Company had not issued stock options or other forms of stock-based compensation.

The following table summarizes the consolidated stock-based compensation expense, by type of awards (in thousands):


	Years Ended
	2007		2006
Employee stock options	$	416	$	313
Restricted stock		125		25

Total stock-based compensation expense	$	541	$	338

The following table summarizes the consolidated stock-based compensation by line items (in thousands):


	Years Ended
	2007			2006
General and administrative	$	490		$	338
Sales, marketing and customer service		51			—

Engineering, design and product development		—			—
Total stock-based compensation expense		541			338
Tax effect on stock-based compensation expense		—			—

Total stock-based compensation expense after income taxes	$	541		$	338

Effect on net loss per share:
Basic and diluted	$	(0.016	)	$	(0.018	)

As stock-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures in accordance with SFAS No. 123(R). SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Determining Fair Value

Valuation and Amortization Method — The Company estimates the fair value of service-based and performance-based stock options granted using the Black-Scholes option-pricing formula. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. In the case of performance-based stock options, amortization does not begin until it is determined that meeting the performance criteria is probable. Service-based and performance-based options typically have a five year life from date of grant and vesting periods of three to four years. For the year ended December 31, 2006 and for the period from January 1, 2007 to September 23, 2007 the fair value of share awards granted was determined by the last private placement price of our common stock since our shares were not trading during that time. Compensation expense is recognized on a straight-line basis over the respective vesting period.

Expected Term — The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding. For awards granted subject only to service vesting requirements, the Company utilizes the simplified method under the provisions of Staff Accounting Bulletin No. 107 (“SAB No. 107”) for estimating the expected term of the stock-based award, instead of historical exercise data. Prior to 2006 the Company did not issue share-based payment awards and as a result there is no historical data on option exercises. For its performance-based awards, the Company has determined the expected term life to be 5 years based on contractual life, the seniority of the recipient and absence of historical data on the exercise of such options.

Expected Volatility — Because there is no history of stock price returns, the Company does not have historical volatility data for its equity awards. Accordingly, the Company has chosen to use the historical volatility rates for a publicly-traded U.S.-based direct competitor to calculate the volatility for its granted options.

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

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

Assumptions used in the determination of the fair value of share-based payment awards using the Black-Scholes model were as follows:


	2007					2006
	Service-based			Performance-based		Service-based			Performance-based
Expected term		2.5 - 3.75			N/A		3.75			5.0
Risk-free interest rate		3.59% - 4.92	%		N/A		4.69	%		4.69	%
Volatility		83% - 92	%		N/A		92	%		92	%
Dividend yield		0	%		N/A		0	%		0	%

Equity Incentive Plan

On November 15, 2006, subject to approval of the stockholders, the Company adopted the 2006 Equity Incentive Plan (the “Plan”) which permits the Company to grant stock options to directors, officers or employees of the Company or others to purchase shares of common stock of the Company through awards of incentive and nonqualified stock options (“Options”), stock (“Restricted Stock” or “Unrestricted Stock”) and stock appreciation rights (“SARs”). The Plan was approved by the stockholders on February 7, 2007.

The Company currently has service-based and performance-based options and restricted stock grants outstanding. The service-based options vest in 25% increments and expire five years from the date of grant. Performance-based options vest upon satisfaction of the performance criteria as determined by the Compensation Committee of the Board of Directors and expire five years from the date of grant. The restriction period on restricted shares shall expire at a rate of 25% per year over four years.

Total number of shares reserved and available for grant and issuance pursuant to this Plan is equal to nine percent (9%) of the number of outstanding shares of the Company. Not more than two million (2,000,000) shares of stock shall be granted in the form of incentive stock options.

Shares issued under the Plan will be drawn from authorized and un-issued shares or shares now held or subsequently acquired by the Company.

Outstanding shares of the Company shall, for purposes of such calculation, include the number of shares of stock into which other securities or instruments issued by the Company are currently convertible (e.g. convertible preferred stock, convertible debentures, or warrants for common stock), but not outstanding options to acquire stock.

At December 31, 2007 there were approximately 3,594,561 shares available to be issued under the plan (9% of the outstanding shares of 37,573,263 plus outstanding warrants of 2,366,302). There were 2,167,233 options and restricted shares issued under the plan and 1,427,328 shares available to be issued.

The exercise price of any Option will be determined by the Company when the Option is granted and may not be less than 100% of the fair market value of the shares on the date of grant, and the exercise price of any incentive stock option granted to a Stockholder with a 10% or greater shareholding will not be less than 110% of the fair market value of the shares on the date of grant. The exercise price per share of a SAR will be determined by the Company at the time of grant, but will in no event be less than the fair market value of a share of Company’s stock on the date of grant.

The following table summarizes the Company’s stock option activities:


				Weighted-		Weighted-
				Average		Average
				Exercise		Remaining		Aggregate
				Price Per		Contractual		Intrinsic
	Shares			Share		Term		Value ($000)
Outstanding as of January 1, 2006		—		$	—		—	$	—
Granted		1,900,000			1.00		3.99		5,320
Exercised		—			—		—		—
Forfeited		—			—		—		—

Outstanding as of December 31, 2006		1,900,000			1.00		3.99		5,320
Granted		583,900			1.10		4.70		1,577
Exercised		(18,750	)		1.00		—		—
Forfeited		(497,917	)		1.00		—		—

Outstanding December 31, 2007		1,967,233		$	1.03		4.12	$	5,449

Exercisable December 31, 2007		807,608		$	1.08		3.99	$	2,197

The weighted-average grant-date fair value of options granted during 2007 was $0.72. The total intrinsic value of options exercised during 2007 was $52,500.

The following table summarizes the Company’s restricted stock activities:


	Shares
Outstanding January 1, 2006		—
Granted		100,000
Exercised		—
Forfeited		—

Outstanding as of December 31, 2006		100,000
Granted		100,000
Exercised		—
Forfeited		—

Outstanding as of December 31, 2007		200,000

Vested as of December 31, 2007		150,000

Changes in the Company’s non-vested stock options are summarized as follows:


	Service-based Options					Performance-based Options					Restricted Stock
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
				Grant Date					Grant Date					Grant Date
				Fair Value					Fair Value					Fair Value
	Shares			Per Share		Shares			Per Share		Shares			Per Share
Non-vested as of January 1, 2006		—		$	—		—		$	—		—		$	—
Granted		1,500,000			0.66		400,000			0.73		100,000			1.00
Vested		(375,000	)		0.66		(100,000	)		0.73		(25,000	)		1.00
Forfeited		—			—		—			—		—

Non-vested as of December 31, 2006		1,125,000			0.66		300,000			0.73		75,000			1.00
Granted		583,900			0.72		—			—		100,000			1.00
Vested		(370,108	)		0.66		(50,000	)		0.73		(125,000	)		1.00
Forfeited		(279,167	)		0.66		(150,000	)		0.73		—			—

Non-vested as of December 31, 2007		1,059,625		$	0.67		100,000		$	0.73		50,000		$	1.00

As of December 31, 2007, there was approximately $715,000, $66,000 and $50,000 of unrecognized compensation cost related to non-vested service-based options, performance-based options and restricted stock grants, respectively. The cost is expected to be recognized over a weighted-average of 3.0 years for service-based options and restricted stock grants and 4.0 years for performance-based options. The total fair value of shares vested during the year ended December 31, 2007 was approximately $244,000, $37,000 and $125,000 for service-based options, performance-based options and restricted stock grants, respectively. During the year ended December 31, 2007 there were no changes to the contractual life of any fully vested options.

11. Line of Credit

On June 25, 2007, the Company entered into an agreement with China Merchants Bank for a working capital line of credit through its wholly owned subsidiary, IAS Electronics (Shenzhen) Co., Ltd. in the amount of 6,800,000 RMB (approximately $930,000 U.S. Dollars). The term of the agreement is one year with an annual interest rate of 6.75 percent. The line is secured by a $1,000,000 standby letter of credit collateralized by the Company’s cash deposits. As of December 31, 2007, the Company had approximately $930,000 outstanding on this line of credit.

12. Related Party Transactions

Service fees

During the year ended December 31, 2006 the Company paid service fees to IAS, Inc. of $419,605. Darrell Harley, an employee of IAS HK held 100% interest in IAS Inc. There were no amounts due to or from the Company to IAS, Inc. at December 31, 2007 and 2006. This structure was utilized to provide payroll, shipping, sales and logistics support for our operations. We no longer conduct business with this related party.

Subsequent to termination of the arrangement with IAS, Inc., we entered into a similar arrangement with Granite Bay Technologies, Inc. During the year ended December 31, 2006, the Company paid service fees to Granite Bay Technologies, Inc. (“Granite Bay”) amounting to $181,000. Stephen C. Kircher and Gerald R. Moore, prior to the exchange of shares between SPI and IAS HK, were majority owners of IAS HK with approximately 58% and 29% ownership, respectively and had beneficial ownership in Granite Bay. There were no amounts due to or from the Company to Granite Bay at December 31, 2006. This structure was utilized to provide payroll, shipping, and sales and logistics support for IAS operations prior to formation of our U.S. holding company. We no longer conduct business with this related party.

Note payable

On January 3, 2007 the Company repaid loans and notes payable to Stephen C. Kircher, the Company’s CEO and Chairman of $327,562 which included principal of $320,000 and accrued interest of $7,562.

13. Commitments and Contingencies

Letters of Credit — At December 31, 2007, the Company had outstanding standby letters of credit of approximately $2,451,000 as collateral for its bank line of credit and capital leases. The standby letters of credit are issued for a term of one year, mature beginning in June 2008 and the Company paid one percent of the face value as an origination fee.

Guarantee of Performance — On August 14, 2007, Solar Power, Inc. entered into a guarantee of the financial performance for its wholly owned subsidiary, Yes! Solar, Inc. in conjunction with the submission of Yes! Solar, Inc’s. Uniform Franchise Offering Circular to the California Department of Corporations.

Operating leases — The Company leases premises under various operating leases. Rental expenses under operating leases included in the statement of operations were approximately $502,000 and $101,000 for the years ended December 31, 2007 and 2006, respectively.

The Company was obligated under operating leases requiring minimum rentals as follows:


Years ending December 31,
2008	$	739,582
2009		626,344
2010		454,011
2011		459,061
2012		309,285

Total minimum payments	$	2,588,283

The Company was obligated under notes payable requiring minimum payments as follows:


Years ending December 31,
2008	$	49,440
2009		50,589
2010		51,753
2011		44,460
2012		8,472

		204,714
Less current portion		(49,427	)

Long-term portion	$	155,287

The notes payable are collateralized by trucks used in the Company’s solar photovoltaic business, bear interest rates between 1.9% and 2.9% and are payable over sixty months.

The Company leases certain equipment under capital leases. The leases expire from January to October 2010. The Company was obligated for the following minimum payments:


Years ending December 31,
2008	$	355,885
2009		326,773
2010		216,357

		899,015
Less amounts representing interest		(106,642	)

Present value of net minimum lease payments		792,373
Less current portion		(292,331	)

Long-term portion	$	500,042

14. Operating Risk

Concentrations of Credit Risk and Major Customers — A substantial percentage of the Company’s net revenue comes from sales made to a small number of customers and are typically sold on an open account basis. Details of customers accounting for 10% or more of total net sales for the years ended December 31, 2007 and 2006 are as follows:


Customer	2007		2006

Solar Power Partners, Inc.	$	6,102,139	$	—
Siemens Transportation Systems		2,155,789		—
Flextronics International		—		1,681,326
Sun Country Builders				524,357
Surge Technologies		—		514,113
Occam Networks				490,477

Total	$	8,257,928	$	3,210,273

Details of the amounts receivable, including costs and estimates in excess of billings on uncompleted contracts and billings in excess of costs and estimated earnings on uncompleted contracts, from the five customers with the largest receivable balances (including all customers with accounts receivable balances of 10% or more of accounts receivable) at December 31, 2007 and 2006, respectively are:


Customer	2007		2,006

Solar Power Partners, Inc.	$	3,680,239	$	—
Angels Camp RV Park		563,425		—
Sun Country Builders		—		363,000
Harbaugh Electric		—		291,360
Flextronics International		—		237,367
Wildlands, Inc.		—		87,531
Siemens Transportation Systems		—		112,267
Cox Enterprises		490,765		—
Deer Creek Monastery		553,520		—
Central Park Apartments		204,238		—

Total	$	5,492,187	$	1,091,525

Product Warranties In our cable and wire assembly business our current standard product warranty for our mechanical assembly product ranges from one to five years. We offer the industry standard of 20 years for our solar modules and industry standard five (5) years on inverter and balance of system components. Due to the warranty period, we bear the risk of extensive warranty claims long after we have shipped product and recognized revenue. In our cable and wire assembly business, historically our warranty claims have not been material. In our solar photovoltaic business our greatest warranty exposure is in the form of product replacement. Until the third quarter, the Company purchased its solar panels from third-party suppliers and since the third-party warranties are consistent with industry standards we considered our financial exposure to warranty claims immaterial. Certain photovoltaic construction contracts entered into during the year ended December 31, 2007 included provisions under which the Company agreed to provide warranties to the buyer, and during the quarter ended September 30, 2007, the Company began installing its own manufactured solar panels. As a result, the Company recorded a provision for the estimated warranty exposure on these contracts within cost of sales. Since the Company does not have sufficient historical data to estimate its exposure, we have looked to historical data reported by other solar system installers and manufacturers. The accrual for warranty claims consisted of the following at December 31, 2007:


	(in thousands)
Balance at December 31, 2006	$	—
Provision charged to warranty expense		103
Less: warranty claims		—

Balance at December 31, 2007	$	103

15. Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents and accounts receivable, notes receivable, prepayments, notes payable, accounts payable, accrued liabilities, accrued payroll and other payables approximate their respective fair values at each balance sheet date due to the short-term maturity of these financial instruments.

16. Geographical Information

The Company has two reportable segments: (1) cable, wire and mechanical assemblies and processing sales (“Cable, wire and mechanical assemblies”) and (2) photovoltaic installation, integration and solar panel sales (“Photovoltaic installation, integration and sales”). The Company’s reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies. Most of the businesses were acquired as a unit and the management at the time of acquisition was retained.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Contributions of the major activities, profitability information and asset information of the Company’s reportable segments for the periods ended December 31, 2007 and 2006 are as follows:


	Year ended December 31, 2007							Year ended December 31, 2006
			Inter-segment							Inter-segment
Segment (in thousands)	Net sales		sales		Income (loss)			Net sales		sales		Income (loss)

Cable, wire and mechanical assemblies	$	3,400	$	—	$	985		$	2,888	$	—	$	378
Photovoltaic installation, integration and sales		14,744		—		(8,118	)		1,493		.		(2,451	)

Segment total		18,144		—		(7,133	)		4,381		—		(2,073	)
Reconciliation to consolidated totals:
Sales eliminations		—		—		—			—		—		—

Consolidated totals

Net sales	$	18,144	$	—				$	4,381	$	—

Income before taxes					$	(7,133	)					$	(2,073	)


	Year ended December 31, 2007					Year ended December 31, 2006
	Interest		Interest			Interest		Interest
Segment (in thousands)	income		expense			income		expense
Cable, wire and mechanical assemblies	$	—	$	—		$	—	$	(20	)
Photovoltaic installation, integration and sales		287		(106	)		3		(73	)

Consolidated total	$	287	$	(106	)	$	3	$	(93	)


	Year ended December 31, 2007						Year ended December 31, 2006
					Depreciation						Depreciation
	Identifiable		Capital		and		Identifiable		Capital		and
Segment (in thousands)	assets		expenditure		amortization		assets		expenditure		amortization

Cable, wire and mechanical assemblies	$	1,506	$	—	$	3	$	1,734	$	121	$	8
Photovoltaic installation, integration and sales		25,503		1,034		327		15,138		103		11

Consolidated total	$	27,009	$	1,034	$	330	$	16,872	$	224	$	19

Sales by geographic location are as follows:


	Year ended December 31, 2007						Year ended December 31, 2006
			Photovoltaic				Cable, wire		Photovoltaic
	Cable, wire and		installation,				and		installation,
	mechanical		integration				mechanical		integration
Segment (in thousands)	assemblies		and sales		Total		assemblies		and sales		Total

United States	$	2,548	$	14,744	$	17,292	$	1,457	$	1,493	$	2,950
Mexico		852		—		852		1,431		—		1,431

Total	$	3,400	$	14,744	$	18,144	$	2,888	$	1,493	$	4,381

The location of the Company’s identifiable assets is as follows:


	December		December
Segment (in thousands)	31, 2007		31, 2006
China (including Hong Kong)	$	4,266	$	1,734
United States		22,743		15,138

Total	$	27,009	$	16,872

Income tax expense by geographic location is as follows:


	Year ended		Year ended
	December		December
Segment (in thousands)	31, 2007		31, 2006
China (including Hong Kong)	$	58	$	45
United States		3		11

Total	$	61	$	56

17. Subsequent Events

In January 2008, letters of credit amounting to $800,000 issued to Sharp Electronics and Kyocera Solar, were no longer required by the suppliers and were returned to our bank for cancellation. The restricted cash collateralizing these letters of credit was released to the Company.

PART II INFORMATION NOT REQUIRED IN PROSPECTUS

INDEMNIFICATION OF DIRECTORS AND OFFICERS

In connection with our engagement of Roth Capital as our exclusive agent for the offering of up to $16,000,000, we have agreed to indemnify Roth Capital against various liabilities, including liabilities under the Securities Act of 1933, as amended.

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses payable by us in connection with the issuance and distribution of the securities being registered hereunder. No expenses will be borne by the Selling Security Holders. All of the amounts shown are estimates, except for the SEC registration fee.


SEC registration fee	$	943
Accounting fees and expenses	$	50,000
Legal fees and expenses	$	100,000

Total	$	150,943

RECENT SALES OF UNREGISTERED SECURITIES

On December 20, 2007, in connection with our private placement of 4,513,911 shares of our common stock, we issued to the participants in the private placement warrants to purchase 1,354,163 shares of our common stock at $3.90 per share until December 20, 2012 and for services provided by Needham & Company, LLC we issued a warrant to purchase 135,417 shares of our common stock at $3.90 per share until December 20, 2012.

On September 1, 2007, in connection with consulting services provided to the Company we issued a warrant to purchase 50,000 shares of our common stock at $1.00 until September 1, 2012.

On August 30, 2007, in settlement of an obligation, we issued warrants to purchase 76,722 shares of our common stock at $1.00 until August 30, 2012.

On April 9, 2007, we completed a private placement of 500,000 shares of common stock at a purchase price of $1.00 per share to a foreign accredited investor.

our common stock at an exercise price of $3.90 per share expiring on December 20, 2012. Our placement agent, Needham & Company, LLC additionally received 135,417 shares underlying warrants to purchase our common stock at an exercise price of $3.90 per share expiring on December 20, 2012. The shares were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales under state securities laws.

On September 27, 2007, we issued 50,000 shares of our common stock in exchange for $50,000 in cash pursuant to an exercise of 50,000 warrants. The shares of common stock were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws.

On September 27, 2007, pursuant to approval of the Board of Directors, Solar Power, Inc., a California corporation issued 42,500 shares of common stock for consulting services rendered to the Company. The shares of common stock were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws.

On September 14, 2007, we issued 6,250 shares of our common stock in exchange for $12,500 in cash pursuant to an exercise of 12,500 service-based stock options. The shares were issued from the Solar Power, Inc. 2006 Equity Incentive Plan.

On September 1, 2007, pursuant to approval of the Board of Directors, Solar Power, Inc. issued warrants to purchase 50,000 shares of our common stock, exercisable at $1.00 per share for consulting services to the Company. The shares of common stock were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under stale securities laws.

On August 30, 2007, pursuant to approval of the Board of Directors, Solar Power, Inc., a California corporation issued 42,500 shares of common stock in settlement of an obligation of $42,500.

On August 30, 2007, pursuant to approval of the Board of Directors, Solar Power, Inc., a California corporation issued 76,722 warrants, exercisable at $1.00 per share, in settlement of an obligation of $55,777. The shares of common stock were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under stale securities laws.

On August 29, 2007, pursuant to approval of the Board of Directors, Solar Power, Inc., a California corporation issued 147,500 service-based stock options. The options were issued for employee retention purposes. The service-based options vest 25% annually beginning one year from the date of grant. All options have an exercise price of $1.00, market value as of date of grant and a five year life. The option grants were issued by in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws.

On July 18, 2007, we issued 12,500 shares of our common stock in exchange for $12,500 in cash pursuant to an exercise of 12,500 service-based stock options. The shares were issued from the Solar Power, Inc. 2006 Equity Incentive Plan.

On June 29, 2007, pursuant to approval of the Board of Directors, Solar Power, Inc., a California corporation issued 100,000 service-based stock options. The options were issued for employee retention purposes. The service-based options vest 25% annually beginning one year from the date of grant. All options have an exercise price of $1.00, market value as of date of grant and a five year life. The option grants were issued by in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws.

On May 9, 2007, pursuant to approval of the Board of Directors, Solar Power, Inc., a California corporation issued 184,000 service-based stock options. The options were issued for employee retention purposes. The service-based options vest 25% annually beginning one year from the date of grant. All options have an exercise price of $1.00, market value as of date of grant and a five year life. The option grants were issued by in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws.

On April 9, 2007, we completed a private placement of 500,000 shares of common stock at a purchase price of $1.00 per share to a foreign accredited investor. We issued the shares in reliance on Regulation S of the Securities Act.

On February 8, 2007, pursuant to approval of the Board of Directors, Solar Power, Inc., a California corporation issued 27,500 service-based stock options and 100,000 restricted shares. The options were issued for employee retention purposes. The service-based options vest 25% annually beginning one year from the date of grant and the restricted stock was fully vested. All options have an exercise price of $1.00, market value as of date of grant and a five year life. The option and restricted stock grants were issued by in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws.

In December 2006, we issued 500,000 shares of our common stock in exchange for $425,000 in cash and the settlement of an obligation totaling $75,000. The shares of common stock were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws.

On December 29, 2006, Solar Power, Inc., a Nevada Corporation (formerly Welund Fund, Inc.) issued in the aggregate 14,500,000 shares of our common stock to 31 shareholders of Solar Power, Inc., a California corporation (“SPI California”) for all the issued and outstanding shares of SPI California pursuant to the terms of an Agreement and Plan of Merger between SPI California and us. The shares of common stock were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws.

On December 28, 2006, pursuant to approval of the Board of Directors, Solar Power, Inc., a California corporation issued 1,500,000 service-based stock options, 400,000 performance-based stock options and 100,000 restricted stock grants. The options were issued for employee retention purposes and the restricted stock grants were issued as compensation to the Board of Directors. The service-based options and the restricted stock grants vested 25% at the date of grant and 25% annually thereafter. The performance-based options vest upon satisfaction of certain criteria established by the Compensation Committee of the Board of Directors. All options have an exercise price of $1.00, market value as of date of grant and a five year life. The option grants and restricted stock shares were issued by in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under state securities laws.

In March 2005, Solar Power, Inc., a Nevada Corporation (formerly Welund Fund, Inc.) completed “a private placement of 1,000,000 shares of restricted common stock at a purchase price of $0.25 per share to 9 investors. The shares of common stock were offered and sold by us in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to “accredited” investors under slate securities laws.

All the above offers, issuances and sales were made to accredited investors as defined in Rule 501(a) under the Securities Act, no general solicitation was made by the Company or any person acting on our behalf; the securities sold were subject to transfer restrictions, and the certificates for those shares contained an appropriate legend stating they had not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom.

EXHIBIT INDEX


Exhibit No.		Description
2.1		Agreement and Plan of Merger dated as of January 25, 2006 between Welund Fund, Inc. (Delaware) and Welund Fund, Inc. (Nevada) (1)

2.2		Agreement and Plan of Merger by and among Solar Power, Inc., a California corporation, Welund Acquisition, Inc., a Nevada corporation, and Welund Fund, Inc. a Nevada corporation dated as of August 23, 2006(2)

2.3		First Amendment to Agreement and Plan of Merger dated October 4, 2006(3)

2.4		Second Amendment to Agreement and Plan of Merger dated December 1, 2006(4)

2.5		Third Amendment to Agreement and Plan of Merger dated December 21, 2006(5)

2.6		Agreement of Merger by and between Solar Power, Inc., a California corporation, Dale Renewables Consulting, Inc., a California corporation, and James M. Underwood, Ronald H. Stickney and Todd Lindstrom dated November 15, 2006(17)

2.7		Agreement and Plan of Merger by and between Solar Power, Inc., a California corporation and Dale Renewables Consulting, Inc., a California corporation, and James M. Underwood, Ronald H. Stickney and Todd Lindstrom, dated as of August 20, 2006, as amended by the First Amendment to Agreement and Plan of Merger dated October 31, 2006, and further amended by the Second Amendment to Agreement and Plan of Merger dated November 15, 2006(17)

2.8		Agreement of Merger by and between Solar Power, Inc., a California corporation, Solar Power, Inc., a Nevada corporation and Welund Acquisition Corp., a Nevada corporation dated December 29, 2006(17)

2.9		Agreement of Merger by and between Solar Power, Inc., a Nevada corporation and Solar Power, Inc., a California corporation, dated February 14, 2007 (6)

3.1		Amended and Restated Articles of Incorporation(6)

3.2		Bylaws (6)

3.3		Specimen (17)

4.1		Form of Subscription Agreement(7)

4.2		Form of Registration Rights Agreement(7)

4.3		Form of Warrant(21)

5.1		Opinion by Weintraub Genshlea Chediak P.C.**

10.1		Share Purchase Agreement for the Purchase of Common Stock dated as of April 1, 2004, by and between Kevin G. Elmore and Mr. T. Chong Weng(8)

10.2		Share Purchase Agreement for the Purchase of Common Stock dated as of June 9, 2004, by and between Kevin G. Elmore and Liberty Associates Holdings, LLC(9)

10.3		Purchase and Servicing Agreement between Welund Fund, Inc. and Village Auto, LLC, dated March 30, 2005(10)

10.4		Demand Promissory Note issued by Paxton Energy Corp. (11)

10.5		Engagement Letter with Roth Capital Partners, dated August 29, 2006(12)

10.6		Credit Facility Agreement by and between the Company and Solar Power, Inc., a California corporation effective September 19, 2006(12)

10.7		Security Agreement by and between the Company and Solar Power, Inc., a California corporation effective September 19, 2006(12)

10.8		Secured Promissory Note issued by Solar Power, Inc., a California corporation in favor of the Company(12)

10.9		First Amendment to the Credit Facility Agreement dated November 3, 2006(13)

10.10		Securities Purchase Agreement dated September 19, 2006 (12)

10.11		Registration Rights Agreement dated September 19, 2006(12)

10.12		Securities Purchase Agreement dated October 4, 2006 (14)

10.13		Registration Rights Agreement dated October 4, 2006(14)

10.14		Roth Capital Warrant(14)

10.15		Subordination Agreement by and between Steve Kircher, the Company and Solar Power, Inc., a California corporation dated August 31, 2006(14)

10.16		Addendum to Subordination Agreement dated September 6, 2006(14)

10.17		Unsecured Promissory Note for $150,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated August 31, 2006(14)


Exhibit No.		Description
10.18		Unsecured Promissory Note for $50,000 issued by Solar Power, Inc., a California corporation dated September 6, 2006(14)

10.19		Secured Promissory Note for $975,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated September 19, 2006(14)

10.20		Secured Promissory Note for $100,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated September 25, 2006(14)

10.21		Secured Promissory Note for $130,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated September 27, 2006(14)

10.22		Secured Promissory Note for $75,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated October 6, 2006(14)

10.23		Secured Promissory Note for $340,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated October 16, 2006(14)

10.24		Secured Promissory Note for $235,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated October 30, 2006(14)

10.25		Secured Promissory Note $445,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated November 7, 2006 (14)

10.26		Demand Note $1,446,565 issued by Solar Power, Inc., a California corporation in favor of the Company dated November 15, 2006 (14)

10.27		2006 Equity Incentive Plan(17)

10.28		Form of Nonqualified Stock Option Agreement(17)

10.29		Form of Restricted Stock Award Agreement(17)

10.30		Assignment and Interim Operating Agreement by and between Solar Power, Inc., a California corporation, Dale Stickney Construction, Inc., a California corporation, and Dale Renewables Consulting, Inc., a California corporation dated August 20, 2006(17)

10.31		Restrictive Covenant Agreement by and between Solar Power, Inc., a California corporation, Todd Lindstrom, James M. Underwood and Ronald H. Stickney dated November 15, 2006(17)

10.32		Receivables and Servicing Rights Purchase and Sale Agreement by and between the Company and Village Auto, LLC a California limited liability company dated December 29, 2006(15)

10.33		Contract Revenues Agreement by and between Sundance Power, LLC, a Colorado limited liability company and Solar Power, Inc., a California corporation, dated September 5, 2006(18)

10.34		Solar Power Integrators General Partnership Agreement, by and between J.R. Conkey & Associates, Inc. and Solar Power Integrators Commercial, Inc. dated March 21, 2007(19)

10.35		Securities Purchase Agreement dated April 9, 2007(20)

10.36		Securities Purchase Agreement dated December 20, 2007(21)

10.37		Employment Severance Agreement with Mr. Carnahan, dated December 26, 2007(22)

16.1		Letter of Hansen Barnett & Maxwell(16)

21.1		List of Subsidiaries(18)

23.1		Consent of BDO McCabe Lo Limited *

23.2		Consent of BDO McCabe Lo Limited *

23.3		Consent of Macias Gini & O’Connell LLP *

23.4		Consent of Weintraub Genshlea Chediak P.C.(see 5.1)


*		Filed herewith

**		Previously filed

(1)		Incorporated by reference to Form 8-K filed with the SEC on February 3, 2006.

(2)		Incorporated by reference to Form 8-K filed with the SEC on August 29, 2006.

(3)		Incorporated by reference to Form 8-K filed with the SEC on October 6, 2006.

(4)		Incorporated by reference to Form 8-K filed with the SEC on December 6, 2006.

100


(5)		Incorporated by reference to Form 8-K filed with the SEC on December 22, 2006.

(6)		Incorporated by reference to Form 8-K filed with the SEC on February 20, 2007.

(7)		Incorporated by reference to Form 10-QSB filed with the SEC on August 14, 2006.

(8)		Incorporated by reference to Form 8-K filed with the SEC on April 2, 2004.

(9)		Incorporated by reference to Form 8-K filed with the SEC on June 18, 2004.

(10)		Incorporated by reference to Form 10-QSB filed with the SEC on May 24, 2005.

(11)		Incorporated by reference to Form 10-QSB filed with the SEC on November 14, 2005.

(12)		Incorporated by reference to Form 8-K filed with the SEC on September 25, 2006

(13)		Incorporated by reference to Form 8-K filed with the SEC on November 7, 2006.

(14)		Incorporated by reference to Form 10-QSB filed with the SEC on November 20, 2006.

(15)		Incorporated by reference to Form 8-K filed with the SEC on January 8, 2007.

(16)		Incorporated by reference to Form 8-K filed with the SEC on January 8, 2007 (disclosing change in auditors).

(17)		Incorporated by reference to the Form SB-2 filed with the SEC on January 17, 2007.

(18)		Incorporated by reference to Form 8-K filed with the SEC on March 27, 2007.

(19)		Incorporated by reference to Form 8-K filed with the SEC on April 11, 2007.

(20)		Incorporated by reference to Form 8-K filed with the SEC on April 11, 2007.

(21)		Incorporated by reference to Form 8-K filed with the SEC on December 26, 2007.

(22)		Incorporated by reference to Form 8-K filed with the SEC on December 31, 2007.

UNDERTAKINGS

The undersigned registrant hereby undertakes to:

(a) Rule 415 Offering:

(1) File, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective Registration Statement; and

(iii) Include any additional or changed material information with respect to the plan of distribution.

101

(2) For determining liability under the Securities Act of 1933, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

(3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

(4) For determining liability of the undersigned small business issuer under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned small business issuer undertakes that in a primary offering of securities of the undersigned small business issuer pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned small business will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned small business issuer relating to the offering required to be filed pursuant to Rule 424;

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned small business issuer or used or referred to by the undersigned small business issuer;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned small business issuer or its securities, provided by or on behalf of the undersigned small business issuer; and

(iv) Any other communication that is an offer in the offering made by the undersigned small business issuer to the purchaser.

(b) Request for Acceleration of Effective Date. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(c) Reliance on Rule 430C. Each prospectus filed pursuant to Rule 424(b) of the Securities Act of 1933 as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

102

EXHIBIT INDEX


Exhibit No.		Description
2.1		Agreement and Plan of Merger dated as of January 25, 2006 between Welund Fund, Inc. (Delaware) and Welund Fund, Inc. (Nevada) (1)

2.2		Agreement and Plan of Merger by and among Solar Power, Inc., a California corporation, Welund Acquisition, Inc., a Nevada corporation, and Welund Fund, Inc. a Nevada corporation dated as of August 23, 2006(2)

2.3		First Amendment to Agreement and Plan of Merger dated October 4, 2006(3)

2.4		Second Amendment to Agreement and Plan of Merger dated December 1, 2006(4)

2.5		Third Amendment to Agreement and Plan of Merger dated December 21, 2006(5)

2.6		Agreement of Merger by and between Solar Power, Inc., a California corporation, Dale Renewables Consulting, Inc., a California corporation, and James M. Underwood, Ronald H. Stickney and Todd Lindstrom dated November 15, 2006(17)

2.7		Agreement and Plan of Merger by and between Solar Power, Inc., a California corporation and Dale Renewables Consulting, Inc., a California corporation, and James M. Underwood, Ronald H. Stickney and Todd Lindstrom, dated as of August 20, 2006, as amended by the First Amendment to Agreement and Plan of Merger dated October 31, 2006, and further amended by the Second Amendment to Agreement and Plan of Merger dated November 15, 2006(17)

2.8		Agreement of Merger by and between Solar Power, Inc., a California corporation, Solar Power, Inc., a Nevada corporation and Welund Acquisition Corp., a Nevada corporation dated December 29, 2006(17)

2.9		Agreement of Merger by and between Solar Power, Inc., a Nevada corporation and Solar Power, Inc., a California corporation, dated February 14, 2007 (6)

3.1		Amended and Restated Articles of Incorporation(6)

3.2		Bylaws (6)

3.3		Specimen (17)

4.1		Form of Subscription Agreement(7)

4.2		Form of Registration Rights Agreement(7)

4.3		Form of Warrant(21)

5.1		Opinion by Weintraub Genshlea Chediak P.C.**

10.1		Share Purchase Agreement for the Purchase of Common Stock dated as of April 1, 2004, by and between Kevin G. Elmore and Mr. T. Chong Weng(8)

10.2		Share Purchase Agreement for the Purchase of Common Stock dated as of June 9, 2004, by and between Kevin G. Elmore and Liberty Associates Holdings, LLC(9)

10.3		Purchase and Servicing Agreement between Welund Fund, Inc. and Village Auto, LLC, dated March 30, 2005(10)

10.4		Demand Promissory Note issued by Paxton Energy Corp. (11)

10.5		Engagement Letter with Roth Capital Partners, dated August 29, 2006(12)

10.6		Credit Facility Agreement by and between the Company and Solar Power, Inc., a California corporation effective September 19, 2006(12)

10.7		Security Agreement by and between the Company and Solar Power, Inc., a California corporation effective September 19, 2006(12)

10.8		Secured Promissory Note issued by Solar Power, Inc., a California corporation in favor of the Company(12)

10.9		First Amendment to the Credit Facility Agreement dated November 3, 2006(13)

10.10		Securities Purchase Agreement dated September 19, 2006 (12)

10.11		Registration Rights Agreement dated September 19, 2006(12)

10.12		Securities Purchase Agreement dated October 4, 2006 (14)

10.13		Registration Rights Agreement dated October 4, 2006(14)

10.14		Roth Capital Warrant(14)

10.15		Subordination Agreement by and between Steve Kircher, the Company and Solar Power, Inc., a California corporation dated August 31, 2006(14)

10.16		Addendum to Subordination Agreement dated September 6, 2006(14)

10.17		Unsecured Promissory Note for $150,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated August 31, 2006(14)


Exhibit No.		Description
10.18		Unsecured Promissory Note for $50,000 issued by Solar Power, Inc., a California corporation dated September 6, 2006(14)

10.19		Secured Promissory Note for $975,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated September 19, 2006(14)

10.20		Secured Promissory Note for $100,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated September 25, 2006(14)

10.21		Secured Promissory Note for $130,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated September 27, 2006(14)

10.22		Secured Promissory Note for $75,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated October 6, 2006(14)

10.23		Secured Promissory Note for $340,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated October 16, 2006(14)

10.24		Secured Promissory Note for $235,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated October 30, 2006(14)

10.25		Secured Promissory Note $445,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated November 7, 2006 (14)

10.26		Demand Note $1,446,565 issued by Solar Power, Inc., a California corporation in favor of the Company dated November 15, 2006 (14)

10.27		2006 Equity Incentive Plan(17)

10.28		Form of Nonqualified Stock Option Agreement(17)

10.29		Form of Restricted Stock Award Agreement(17)

10.30		Assignment and Interim Operating Agreement by and between Solar Power, Inc., a California corporation, Dale Stickney Construction, Inc., a California corporation, and Dale Renewables Consulting, Inc., a California corporation dated August 20, 2006(17)

10.31		Restrictive Covenant Agreement by and between Solar Power, Inc., a California corporation, Todd Lindstrom, James M. Underwood and Ronald H. Stickney dated November 15, 2006(17)

10.32		Receivables and Servicing Rights Purchase and Sale Agreement by and between the Company and Village Auto, LLC a California limited liability company dated December 29, 2006(15)

10.33		Contract Revenues Agreement by and between Sundance Power, LLC, a Colorado limited liability company and Solar Power, Inc., a California corporation, dated September 5, 2006(18)

10.34		Solar Power Integrators General Partnership Agreement, by and between J.R. Conkey & Associates, Inc. and Solar Power Integrators Commercial, Inc. dated March 21, 2007(19)

10.35		Securities Purchase Agreement dated April 9, 2007(20)

10.36		Securities Purchase Agreement dated December 20, 2007(21)

10.37		Employment Severance Agreement with Mr. Carnahan, dated December 26, 2007(22)

16.1		Letter of Hansen Barnett & Maxwell(16)

21.1		List of Subsidiaries(18)

23.1		Consent of BDO McCabe Lo Limited *

23.2		Consent of BDO McCabe Lo Limited *

23.3		Consent of Macias Gini & O’Connell LLP *

23.4		Consent of Weintraub Genshlea Chediak P.C.(see 5.1)


*		Filed herewith

**		Previously filed

(1)		Incorporated by reference to Form 8-K filed with the SEC on February 3, 2006.

(2)		Incorporated by reference to Form 8-K filed with the SEC on August 29, 2006.

(3)		Incorporated by reference to Form 8-K filed with the SEC on October 6, 2006.

(4)		Incorporated by reference to Form 8-K filed with the SEC on December 6, 2006.


(5)		Incorporated by reference to Form 8-K filed with the SEC on December 22, 2006.

(6)		Incorporated by reference to Form 8-K filed with the SEC on February 20, 2007.

(7)		Incorporated by reference to Form 10-QSB filed with the SEC on August 14, 2006.

(8)		Incorporated by reference to Form 8-K filed with the SEC on April 2, 2004.

(9)		Incorporated by reference to Form 8-K filed with the SEC on June 18, 2004.

(10)		Incorporated by reference to Form 10-QSB filed with the SEC on May 24, 2005.

(11)		Incorporated by reference to Form 10-QSB filed with the SEC on November 14, 2005.

(12)		Incorporated by reference to Form 8-K filed with the SEC on September 25, 2006

(13)		Incorporated by reference to Form 8-K filed with the SEC on November 7, 2006.

(14)		Incorporated by reference to Form 10-QSB filed with the SEC on November 20, 2006.

(15)		Incorporated by reference to Form 8-K filed with the SEC on January 8, 2007.

(16)		Incorporated by reference to Form 8-K filed with the SEC on January 8, 2007 (disclosing change in auditors).

(17)		Incorporated by reference to the Form SB-2 filed with the SEC on January 17, 2007.

(18)		Incorporated by reference to Form 8-K filed with the SEC on March 27, 2007.

(19)		Incorporated by reference to Form 8-K filed with the SEC on April 11, 2007.

(20)		Incorporated by reference to Form 8-K filed with the SEC on April 11, 2007.

(21)		Incorporated by reference to Form 8-K filed with the SEC on December 26, 2007.

(22)		Incorporated by reference to Form 8-K filed with the SEC on December 31, 2007.


	Page
PROSPECTUS SUMMARY		1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS		6
RISK FACTORS		7
Risks Related To Our Business		7
Risks Related To International Operations		20
Risks Related To Our Common Stock		22
USE OF PROCEEDS		24
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS		24
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION		26
RESULTS OF OPERATION		35
LIQUIDITY AND CAPITAL RESOURCES		36
DESCRIPTION OF BUSINESS		38
DESCRIPTION OF PROPERTY		48
LEGAL PROCEEDINGS		49
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS		49
EXECUTIVE COMPENSATION		52
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT		56
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		58
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		60
RECENT AND HISTORICAL FINANCING TRANSACTIONS		61
SELLING SECURITY HOLDERS		62
PLAN OF DISTRIBUTION		66
DESCRIPTION OF SECURITIES		68
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES		69
LEGAL MATTERS		69
EXPERTS		69
TRANSFER AGENT AND REGISTRAR		70
WHERE YOU CAN FIND MORE INFORMATION		70
FINANCIAL STATEMENTS		71
PART II INFORMATION NOT REQUIRED IN PROSPECTUS		96
Indemnification of Directors and Officers		96
Other Expenses of Issuance and Distribution		96
Recent Sales of Unregistered Securities		96
Exhibit Index		99
Undertakings		101
Signatures		103
EXHIBIT 23.1
EXHIBIT 23.2
EXHIBIT 23.3


	Page
A. Financial Statements of Solar Power, Inc., a California corporation
Report of Macias Gini & O’Connell LLP, an Independent Registered Public Accounting Firm		72
Report of BDO McCabe Lo Limited, an Independent Registered Public Accounting Firm		73
Consolidated Balance Sheet of Solar Power, Inc.(formerly International Assembly Solutions, Limited), as of December 31, 2007		74
Consolidated Statements of Operations of Solar Power, Inc.(formerly International Assembly Solutions, Limited), for the years ended December 31, 2007 and 2006		75
Consolidated Statements of Cash Flows of Solar Power, Inc. (formerly International Assembly Solutions, Limited), the years ended December 31, 2007 and 2006		76
Consolidated Statements of Stockholders’ Equity of Solar Power, Inc. (formerly International Assembly Solutions, Limited), for the years ended December 31, 2007 and 2006		78
Notes to Consolidated Financial Statements		79


	2007			2006

Net sales	$	18,144		$	4,381
Cost of goods sold		16,030			2,894

Gross profit		2,114			1,487
Operating expenses:
General and administrative		6,982			2,307
Sales, marketing and customer service		2,254			1,179
Product development		199			—

Total operating expenses		9,435			3,486

Operating loss		(7,321	)		(1,999	)
Other income:
Interest expense		(106	)		(90	)
Interest income		286			—
Other income		8			16

Total other income (expense)		188			(74	)

Loss before income taxes		(7,133	)		(2,073	)
Income tax expense		61			56

Net loss	$	(7,194	)	$	(2,129	)

Net loss per common share:
Basic and diluted	$	(0.22	)	$	(0.11	)

Weighted average number of shares, basic and diluted		32,930,129			19,213,667


	2007		2006

Supplemental disclosure of cash flow information:
Cash paid for interest	$	91	$	52

Cash paid for income taxes	$	9	$	—

Supplemental disclosure of non-cash investing and financing activities:
Equipment acquired through notes payable and capital leases	$	1,141	$	—
Stock and warrants issued in settlement of an obligation		130		—
Stock issued for services		50		—
Warrants issued in conjunction with a private placement of common stock		283		422
Warrants issued for services		36		—

	$	1,640	$	422

In connection with the acquisition of Dale
Renewables Consulting, Inc. (“DRCI”), the Company paid $1,115,000 in cash and acquiried the following fair-valued assets:
Current Assets
Inventory			$	35
Other current assets				637

Total current assets				672

Non-current assets
Property, plant and equipment				8
Goodwill				435

Total non-current assets				443

Total cash paid for the acquisition			$	1,115


	Solar Power, Inc., a California corporation
Dated: April 28, 2008	/s/ Stephen C. Kircher
	By: Stephen C. Kircher
	Its: Chief Executive Officer (Principal Executive Officer) and Director


Dated: April 28, 2008	/s/ Jeffrey G. Winzeler
	By: Jeffrey G. Winzeler
	Its: Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)


Dated: April 28, 2008	/s/ Stephen C. Kircher
	Stephen C. Kircher,
	Chief Executive Officer and Director

Dated: April 28, 2008	/s/ Larry D. Kelley *
	Larry D. Kelley, Director

Dated: April 28, 2008	/s/ Ronald A. Cohan *
	Ronald A. Cohan,
	Director

Dated: April 28, 2008	/s/ Timothy B. Nyman *
	Timothy B. Nyman,
	Director

Dated: April 28, 2008	/s/ D. Paul Regan *
	D. Paul Regan, Director


* By:		/s/ Stephen C. Kircher Stephen C. Kircher,
		Attorney-in-fact