10-Q

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended March 31, 2012

OR

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

Commission File Number 001-34044

REAL GOODS SOLAR, INC.

(Exact name of registrant as specified in its charter)

COLORADO	26-1851813
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

833 W. SOUTH BOULDER ROAD

LOUISVILLE, COLORADO 80027-2452

(Address of principal executive offices)

(303) 222-8400

(Registrant’s telephone number, including area code)

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

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

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Outstanding at May 9, 2012
Class A Common Stock ($.0001 par value)	26,669,950

REAL GOODS SOLAR, INC.

FORM 10-Q

INDEX

PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (Unaudited):	3
	Condensed consolidated balance sheets at March 31, 2012 and December 31, 2011	4
	Condensed consolidated statements of operations For the Three Months Ended March 31, 2012 and 2011	5
	Condensed consolidated statements of cash flows For the Three Months Ended March 31, 2012 and 2011	6
	Notes to interim condensed consolidated financial statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 4.	Controls and Procedures	14
PART II. OTHER INFORMATION		14
Item 1.	Legal Proceedings	14
Item 1A.	Risk Factors	14
Item 5.	Other Information	14
Item 6.	Exhibits	15
	SIGNATURES	16

2

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report may contain forward-looking statements that involve risks and uncertainties. The words “anticipate,” “believe,” “plan,” “estimate,” “expect,” “strive,” “future,” “intend” and similar expressions as they relate to us are intended to identify such forward-looking statements. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of certain factors set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures about Market Risk”, “Risk Factors” and elsewhere in this report. Risks and uncertainties that could cause actual results to differ include, without limitation, the level of government subsidies and economic incentives for solar energy, general economic conditions, adoption of solar energy technologies, consumer trends, customer interest in our products, pricing of energy from solar energy systems and conventional energy sources, risks associated with revenue recognition, the effect of government regulation, changing energy technologies, our geographic concentration, our business plan and strategy, new initiatives we undertake, our inability to make successful acquisitions and integrate acquired businesses into our operations, the availability of capital, our debt service, interest rate fluctuation, our compliance with restrictive covenants imposed by our indebtedness, loss of management and key personnel, our inability to hire additional personnel, brand reputation, litigation, our dependence on suppliers, global supply of and demand for silicon, merchandise and solar panel supply problems, unfair trade practice duties on imports used in our industry, delays in completing solar energy system installations on time, competition, product liabilities, warranty claims, the availability of consumer financing of solar energy systems, our inability to comply with NASDAQ continued listing standards, our dependence on Gaiam, Inc. for certain services, conflicts of interest with Gaiam and Renewable Energy Investment LLC (“Riverside”), security and information systems, legal liability for website content, failure of third parties to provide adequate service, and other risks and uncertainties included in our filings with the Securities and Exchange Commission. We caution you that no forward-looking statement is a guarantee of future performance, and you should not place undue reliance on these forward-looking statements which reflect our view only as of the date of this report. We undertake no obligation to update any forward-looking information.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Unaudited Interim Condensed Consolidated Financial Statements

We have prepared our unaudited interim condensed consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to these rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In our opinion, the unaudited interim condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly, in all material respects, our consolidated financial position as of March 31, 2012, the interim results of operations for the three months ended March 31, 2012 and 2011, and cash flows for the three months ended March 31, 2012 and 2011. These interim statements have not been audited. The balance sheet as of December 31, 2011 was derived from our audited consolidated financial statements included in our annual report on Form 10-K. The interim condensed consolidated financial statements contained herein should be read in conjunction with our audited financial statements, including the notes thereto, for the year ended December 31, 2011.

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REAL GOODS SOLAR, INC.

Condensed consolidated balance sheets

(in thousands, except share and per share data)	March 31, 2012			December 31, 2011
	(Unaudited)
ASSETS
Current assets:
Cash	$	7,688		$	11,813
Restricted cash		—			172
Accounts receivable, net		15,374			21,539
Costs in excess of billings on uncompleted contracts		5,260			5,411
Inventory, net		11,839			12,264
Deferred costs on uncompleted contracts		1,761			1,313
Receivable and deferred tax assets		2,454			3,333
Other current assets		1,508			1,014
Total current assets		45,884			56,859
Property and equipment, net		6,929			6,930
Deferred tax assets		7,646			5,444
Goodwill		19,746			19,885
Other intangibles, net		290			390
Other assets		55			41
Total assets	$	80,550		$	89,549
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	6,500		$	—
Accounts payable		15,146			27,785
Accrued liabilities		2,770			3,292
Billings in excess of costs on uncompleted contracts		1,449			2,144
Debt		196			197
Capital lease obligations		144			126
Payable to Gaiam		3,080			2,176
Deferred revenue and other current liabilities		1,525			2,388
Total current liabilities		30,810			38,108
Debt, net of current portion		153			202
Capital lease obligations, net of current portion		492			433
Total liabilities		31,455			38,743
Commitments and contingencies
Shareholders’ equity:
Class A common stock, $.0001 par value, 150,000,000 shares authorized, 26,669,950 and 26,660,640 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively		3			3
Additional paid-in capital		82,005			81,860
Accumulated deficit		(32,913	)		(31,057	)
Total shareholders’ equity		49,095			50,806
Total liabilities and shareholders’ equity	$	80,550		$	89,549

See accompanying notes to the interim condensed consolidated financial statements.

4

REAL GOODS SOLAR, INC.

Condensed consolidated statements of operations

	For the Three Months Ended March 31,
(in thousands, except per share data)	2012			2011
	(unaudited)
Net revenue	$	18,256		$	17,425
Cost of goods sold		11,829			12,396
Gross profit		6,427			5,029
Expenses:
Selling and operating		7,915			4,272
General and administrative		1,515			691
Total expenses		9,430			4,963
Income (loss) from operations		(3,003	)		66
Interest income (expense), net		(49	)		2
Income (loss) before income taxes		(3,052	)		68
Income tax expense (benefit)		(1,196	)		31
Net income (loss)	$	(1,856	)	$	37
Net income (loss) per share:
Basic	$	(0.07	)	$	0.00
Diluted	$	(0.07	)	$	0.00
Weighted-average shares outstanding:
Basic		26,661			18,310
Diluted		26,661			18,310

See accompanying notes to the interim condensed consolidated financial statements.

5

REAL GOODS SOLAR, INC.

Condensed consolidated statements of cash flows

	For the Three Months Ended March 31,
(in thousands)	2012			2011
	(unaudited)
Operating activities
Net income (loss)	$	(1,856	)	$	37
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		260			140
Amortization		100			—
Share-based compensation expense		153			82
Deferred income tax benefit		(1,223	)		(34	)
Changes in operating assets and liabilities:
Accounts receivable, net		6,165			3,634
Costs in excess of billings on uncompleted contracts		150			—
Inventory, net		426			585
Deferred costs on uncompleted contracts and advertising		(448	)		65
Other current assets		(475	)		2
Accounts payable		(12,640	)		(1,749	)
Accrued liabilities		(522	)		(321	)
Billings in excess of costs on uncompleted contracts		(696	)		—
Deferred revenue and other current liabilities		(862	)		(358	)
Payable to Gaiam		904			235
Net cash provided by (used in) operating activities		(10,564	)		2,318
Investing activities
Change in restricted cash		172			—
Purchase of property and equipment		(148	)		(86	)
Net cash provided by (used in) investing activities		24			(86	)
Financing activities
Principal borrowings on revolving line of credit, net		6,500			—
Principal payments on debt and capital lease obligations		(85	)		—
Net cash provided by financing activities		6,415			—
Net change in cash		(4,125	)		2,232
Cash at beginning of period		11,813			11,123
Cash at end of period	$	7,688		$	13,355
Supplemental cash flow information
Income taxes paid	$	12		$	6
Interest paid	$	34		$	—

See accompanying notes to the interim condensed consolidated financial statements

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Notes to interim condensed consolidated financial statements

1. Organization, Nature of Operations, and Principles of Consolidation

We are a leading residential and commercial solar energy integrator. We were incorporated in Colorado on January 29, 2008 under the name Real Goods Solar, Inc. (“Real Goods Solar”, “we”, “us”, or “our”). Our initial public offering of common stock occurred on May 7, 2008.

We have prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States, or GAAP, and they include our accounts and those of our subsidiaries. Intercompany transactions and balances have been eliminated.

The unaudited condensed consolidated financial position, results of operations and cash flows for the interim periods disclosed in this report are not necessarily indicative of future financial results.

2. Significant Accounting Policies

No changes were made to our significant accounting policies during the three months ended March 31, 2012, except for the adoption of the Financial Accounting Standards Board’s accounting standard update that simplified how we test goodwill for impairment and permitted us to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit was less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. We do not expect the guidance to have a material impact on our consolidated financial statements.

Use of Estimates and Reclassifications

The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the accompanying financial statements and disclosures. Although we base these estimates on our best knowledge of current events and actions that we may undertake in the future, actual results may be different from the estimates. We have made certain reclassifications to prior period amounts to conform to the current period presentations.

3. Mergers and Acquisitions

We obtained financial control, through an Agreement and Plan of Merger (the “Merger Agreement”), of 100% of the voting equity interests of Earth Friendly Energy Group Holdings, LLC d/b/a Alteris Renewables, Inc. (“Alteris”) on June 21, 2011 (the “acquisition date”). Alteris sells, designs, installs, and supports renewable energy systems, primarily solar, for both residential and commercial customers. Alteris has more than a dozen offices across seven states. The acquisition closed on December 19, 2011.

The following is supplemental unaudited interim pro forma information for the Alteris acquisition as if we had issued 8.7 million shares of our Class A common stock to acquire this business on January 1, 2010. The pro forma net revenue and cost of goods sold were decreased by $0.6 million and $0.5 million, respectively, for the three months ended March 31, 2011 to reflect Alteris’ adoption of our method, cost to cost, of measuring progress towards completion for jobs accounted for under the percentage of completion method. Additionally, pro forma net loss was adjusted by $0.1 million for the three months ended March 31, 2011, to include amortization of intangible assets and share-based compensation expense related to replacement stock options, both resulting from the acquisition of Alteris. All pro forma adjustments are based on currently available information and upon assumptions that we believe are reasonable in order to reflect, on a supplemental pro forma basis, the impact of this acquisition on our historical financial information.

7

(in thousands, except per share data)	Three Months Ended March 31, 2011
Net revenue	$	22,743
Net loss	$	(1,545	)
Net loss per share – basic	$	(0.06	)
Net loss per share – diluted	$	(0.06	)

4. Revolving Line of Credit

We have a revolving line of credit which provides for advances not to exceed $7.0 million based upon the collateral value of our accounts receivable. All borrowings are collateralized by a security interest in substantially all of our assets other than our interests in Alteris Project Financing Company LLC, and bear interest at (i) the greater of the bank’s prime rate or 4.00%, plus (ii) 1.75% (or 5.75% during an event of default) unless we maintain certain liquidity benchmarks. The line of credit facility will mature on August 31, 2012. The line of credit has a facility fee of 0.5% per year of the average daily unused portion of the available line of credit during the applicable calendar quarter. We may reserve up to $500,000 for stand-by letters of credit under the line of credit. The Loan and Security Agreement establishing the line of credit contains various covenants, including a covenant requiring compliance with a liquidity ratio. At March 31, 2012, we had $6.5 million of outstanding borrowings under this facility.

5. Debt

Most of our debt consists of a $1.7 million loan from Gaiam that must be repaid by December 31, 2012 and is reported in Payable to Gaiam on our condensed consolidated balance sheets at March 31, 2012 and December 31, 2011.

The remainder of our debt, all of which relates to Alteris, consisted of the following at March 31, 2012:

(in thousands, except installment amounts and interest rates)	March 31, 2012
Notes payable to finance companies for the purchase of vehicles and equipment in 36 to 60 monthly installments totaling $18,828, including interest ranging from 2.9% to 10.35%. The notes are secured by Alteris’ vehicles and equipment	$	349
Less – current portion of debt		196
Debt, net of current portion	$	153

Maturities of debt at March 31, 2012 are as follows:

(in thousands)
Year ending December 31,
2012	$	147
2013		133
2014		67
2015		2
	$	349

The notes are subject to both positive and negative restrictions and covenants, which include maintaining certain debt service and adjusted leverage ratios.

6. Capital Lease Obligations

We have vehicles financed under capital leases. The cost of the capitalized leased assets included in property and equipment was $0.8 million and $0.6 million at March 31, 2012 and December 31, 2011, respectively. Accumulated amortization of capitalized leased assets was $0.1 million and $0.1 million at March 31, 2012 and December 31, 2011, respectively. Amortization expense for capitalized leased assets was $38 thousand and none for the three months ended March 31, 2012 and 2011, respectively.

8

Our future minimum lease payments and capital lease obligations at March 31, 2012 are as follows:

(in thousands)
Year ending December 31,
2012	$	135
2013		229
2014		186
2015		137
2016		17
Total future minimum lease payments		704
Less – amounts representing interest		68
Total capital lease obligations		636
Less – current portion of capital lease obligations		144
Capital lease obligations, net of current portion	$	492

7. Shareholders’ Equity

During the first quarter of 2012, we issued 9,310 shares of our Class A common stock to our independent directors, in lieu of cash compensation, for services rendered during 2012.

8. Share-Based Payments

During the first quarter of 2012, we granted 187,500 new stock options and cancelled 164,230 stock options under our 2008 Long-Term Incentive Plan. The new stock options vest at 2% per month for the 50 months beginning in the eleventh month after date of grant.

Total share-based compensation expense recognized was $0.2 million and $0.1 million for the three months ended March 31, 2012 and 2011, respectively, and is shown in general and administrative expenses on our condensed consolidated statements of operations.

9. Net Income (Loss) Per Share

Basic net income (loss) per share excludes any dilutive effects of options. We compute basic net income (loss) per share using the weighted average number of common shares outstanding during the period. We compute diluted net income (loss) per share using the weighted average number of common stock and common stock equivalents outstanding during the period. We excluded common stock equivalents of 2,019,000 and 943,000 from the computation of diluted net income (loss) per share for the three months ended March 31, 2012 and 2011, respectively, because their effect was antidilutive.

The following table sets forth the computation of basic and diluted net income (loss) per share:

	Three Months Ended March  31,
(in thousands, except per share data)	2012			2011
Numerator for basic and diluted net income (loss) per share	$	(1,856	)	$	37
Denominator:
Weighted average share for basic net income (loss) per share		26,661			18,310
Effect of dilutive securities:
Weighted average of warrants and stock options		—			—
Denominator for diluted net income (loss) per share		26,661			18,310
Net income (loss) per share – basic	$	(0.07	)	$	0.00
Net income (loss) per share – diluted	$	(0.07	)	$	0.00

10. Related Party Transactions

Upon the closing of the Alteris transaction on December 19, 2011, we received a commitment from Riverside to make us a single loan of up to $3.15 million. On April 30, 2012, we called $3.0 million of Riverside’s loan commitment, which was funded by Riverside on May 4, 2012. We also have a $1.7 million loan from Gaiam that must be repaid by December 31, 2012.

9

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

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this document. This section is designed to provide information that will assist in understanding our condensed consolidated financial statements, changes in certain items in those statements from period to period, the primary factors that caused those changes and how certain accounting principles, policies and estimates affect the condensed consolidated financial statements.

Overview

We are a leading provider of turnkey commercial and residential solar energy solutions, with more than 13,000 solar systems in place. We also have more than 33 years of experience in solar energy, beginning with the sale in 1978 of the first solar photovoltaic panels in the United States. With 16 offices across the West and the Northeast, we are one of the largest solar energy installers in the U.S.

Our revenues primarily result from the installation of solar energy systems. We also derive a portion of our revenues from the retail sale of renewable energy products. Our expenses primarily consist of labor costs incurred in connection with solar installations, product costs for solar photovoltaic modules and other products sold, and related office and warehouse costs.

During the first quarter of 2012, we made significant progress toward the integration of Alteris and centralization of key operating functions to Colorado, and expect to complete the majority of such work into the second quarter of 2012. We have significantly invested in operating expenses and working capital toward such efforts. This will result in an efficient and scalable infrastructure that can leverage expanded geographical diversity and pursue a new mix of significant residential and commercial customers. While the solar manufacturing industry has struggled based on oversupply and global pricing competition, downstream distributed solar power integrators, including the Company, have benefited from reduced costs. Financing companies have entered the market to enable compelling financing terms for homeowners and businesses, including no money down leasing. We continue to expect strong demand for both residential and commercial solar installations, despite the overall economic weakness in the United States. As one of the few national solar EPC providers, we expect to capitalize on our expanded footprint and the evolving U.S. solar industry.

Results of Operations

The following table sets forth certain financial data as a percentage of revenue for the periods indicated:

	Three Months Ended March  31,
	2012			2011
Net revenue		100.0	%		100.0	%
Cost of goods sold		64.8	%		71.1	%
Gross profit		35.2	%		28.9	%
Expenses:
Selling and operating		43.4	%		24.5	%
General and administrative		8.3	%		4.0	%
Total expenses		51.7	%		28.5	%
Income (loss) from operations		-16.5	%		0.4	%
Interest income (expense), net		-0.3	%		0.0	%
Income tax expense (benefit)		-6.6	%		0.2	%
Net income (loss)		-10.2	%		0.2	%

Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011

Net revenue. Net revenue increased $0.8 million, or 4.8%, to $18.3 million during the first quarter of 2012 from $17.4 million during the first quarter of 2011. The revenue growth was primarily attributable to the acquisition of Alteris, partially offset by reduced revenues due to the direct supplying to customers by financing companies of certain components used on residential projects in order for the financiers to take advantage of expiring tax benefits. This unusual sourcing activity during the first quarter of 2012 reduced net revenues, but had no material impact on our gross profit.

Gross profit. Gross profit increased $1.4 million, or 27.8%, to $6.4 million during the first quarter of 2012 from $5.0 million during the first quarter of 2011. As a percentage of net revenue, gross profit increased to 35.2% during the first quarter of 2012 from 28.9% during the first quarter of 2011. The 630 basis point increase in gross profit percentage primarily reflects the impact of the unusual equipment sourcing event mentioned above, as well as improvements with project cost controls and project sales price matrixes over the same period last year.

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Selling and operating expenses. Selling and operating expenses increased $3.6 million, or 85.3%, to $7.9 million during the first quarter of 2012 from $4.3 million during the first quarter of 2011. As a percentage of net revenue, selling and operating expenses increased to 43.4% during the first quarter of 2012 from 24.5% during the first quarter of 2011. The increase in operating expenses is attributable to the consolidation of Alteris. We will complete the integration of the Alteris infrastructure during 2012.

General and administrative expenses. General and administrative expenses increased $0.8 million, or 119.3%, to $1.5 million during the first quarter of 2012 from $0.7 million during the first quarters of 2012. The increase in general and administrative expenses is due to investments in the new corporate headquarters in Colorado, as well as investments in executive and shared service personnel subsequent to the Alteris merger. The new headquarters represented approximately 12% of the increase in general and administrative expense, while investments in accounting personnel, information technology and the executive team represented approximately 33%, 17% and 34% of the increase, respectively

Net income (loss). As a result of the above factors, net loss for the first quarter of 2012 was $1.9 million, or $0.07 per share, as compared to net income of $37 thousand, or $0.00 per share, for the same period last year. The non-GAAP pro forma (including Alteris) net loss for the first quarter of 2011 was $1.5 million, or $0.06 loss per share. Refer to Non-GAAP Pro Forma Financial Measures below.

Non-GAAP Pro Forma Financial Measures

We have utilized the non-GAAP information set forth below as additional devices to aid in understanding and analyzing our financial results for the three months ended March 31, 2012. We believe that these non-GAAP measures will allow for a better evaluation of the operating performance of our business and facilitate meaningful comparison of the results in the current period to those in prior periods and future periods. Reference to these non-GAAP measures should not be considered a substitute for results that are presented in a manner consistent with GAAP.

Reconciliations of the our three months ended March 31, 2011 GAAP net income and net income per share to our Non-GAAP pro forma amounts are set forth below (unaudited, in millions):

A reconciliation of GAAP net income to the non-GAAP net loss is set forth below (unaudited, in millions):

	For the Quarter Ended March 31, 2011
Net income.	$	0.1
Inclusion of Alteris’ historical net loss (net of taxes of $1.0 million) (a)		(1.4	)
Pro forma adjustments for the inclusion of Alteris (net of taxes of $0.1 million) (a) (b)		(0.2	)
Non-GAAP net loss.	$	(1.5	)

A reconciliation of GAAP net income per share to the non-GAAP net loss per share is set forth below (unaudited):

	For the Quarter Ended March 31, 2011
Net income per share – diluted	$	0.00
Inclusion of Alteris’ historical net loss (net of taxes of $1.0 million) (a)		(0.05	)
Pro forma adjustments for the inclusion of Alteris (net of taxes of $0.1 million) (a) (b)		(0.01	)
Non-GAAP net loss per share – diluted	$	(0.06	)
Weighted average shares used in net income per share calculations – diluted		18,310,000
Weighted average shares attributable to the acquisition of Alteris – diluted		8,700,000
Weighted average shares used in non-GAAP net loss per share calculations – diluted		27,010,000

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(a) Income taxes were computed at an effective tax rate of approximately 40%.

(b) Pro forma adjustments include ($0.2) million due to a change in estimate for contracts recorded under the percentage of completion accounting method and ($0.1) million for amortization of intangibles and share based compensation expense, net of $0.1 million income tax benefit.

Seasonality

Our quarterly net revenue and operating results for solar energy system installations are difficult to predict and have in the past and may in the future fluctuate from quarter to quarter as a result of changes in state, federal, or private utility company subsidies, as well as weather, economic trends and other factors. We have historically experienced seasonality in our solar installation business, with the first quarter representing our slowest installation quarter of the year. Much of the seasonality in our business in past years has been offset by the timing of government activities as well as strong organic growth. With the addition of Alteris, we expect increased seasonal fluctuations due to the severity of winters in the northeast.

Liquidity and Capital Resources

Our capital needs arise from capital related to acquisitions of new businesses, working capital required to fund our purchases of solar photo voltaic modules and inverters, replacements, expansions and improvements to our infrastructure, and future growth. These capital requirements depend on numerous factors, including business acquisitions, the ability to attract new solar energy system installation customers, market acceptance of our product offerings, the cost of ongoing upgrades to our product offerings, the level of expenditures for sales and marketing, the level of investment in support systems and facilities and other factors. The timing and amount of these capital requirements are variable and may fluctuate from time to time and cannot accurately be predicted.

In 2011, we acquired Alteris, a large solar integrator, and we anticipate some additional capital requirements as a result of the acquisition. To the extent we have or can arrange available capital, we plan to continue to pursue acquisitions and other opportunities to expand our sales territories, technologies, and products and increase our sales and marketing programs as needed.

We did not have any material commitments for capital expenditures as of March 31, 2012, and we do not presently have any plans for future material capital expenditures.

On July 22, 2011, Alteris entered into a new financing arrangement with a bank to fund commercial solar installations. Under a master lease agreement between a project finance subsidiary of Alteris and the bank, the project finance subsidiary may form new subsidiaries that will enter into sale leaseback arrangements with solar installation customers to finance specifically designated solar installations. The project finance entities will grant a security interest in substantially all their assets, and the project finance subsidiary’s equity will be pledged by Alteris on a non-recourse basis to the bank. Alteris will provide limited unsecured guarantees of payment and performance of the obligations of the project finance entities, including operating, maintenance and indemnity obligations and payment of certain fees and expenses. This financing arrangement would not generate capital for use in our business, but instead would offer a financing alternative to our commercial installation customers. As of March 31, 2012, there were no commercial solar installations funded under this financing arrangement.

We have a revolving line of credit which provides for advances not to exceed $7.0 million based upon the collateral value of our accounts receivable. All borrowings are collateralized by a security interest in substantially all of our assets other than our interests in Alteris Project Financing Company LLC, and bear interest at (i) the greater of the bank’s prime rate or 4.00%, plus (ii) 1.75% (or 5.75% during an event of default) unless we maintain certain liquidity benchmarks. The line of credit facility will mature on August 31, 2012. The line of credit has a facility fee of 0.5% per year of the average daily unused portion of the available line of credit during the applicable calendar quarter. We may reserve up to $500,000 for stand-by letters of credit under the line of credit. The Loan and Security Agreement establishing the line of credit contains various covenants, including a covenant requiring compliance with a liquidity ratio. At March 31, 2012, we had $6.5 million of outstanding borrowings under this facility. We are currently in negotiations for a line of credit with a larger borrowing capacity to replace our existing line of credit. The new line of credit is expected to be in place within the next couple of months.

Upon the closing of the Alteris transaction on December 19, 2011, we received commitments from Riverside to make us a single loan of up to $3.15 million and from Gaiam to loan us up to $1.7 million. Gaiam funded its loan commitment on December 30, 2011 and it is reported as part of our payable to Gaiam on our consolidated balance sheets at both December 31, 2011 and March 31, 2012 as we intend to repay the loan within one year. We called $3.0 million of Riverside’s loan commitment on April 30, 2012 and Riverside funded its commitment to us on May 4, 2012. The loans are for a period of 12 months, and bear interest at a rate of 10%; if a loan is repaid on or prior to the first anniversary of the date on which the loan was made, the accrued interest is waived. We have not yet made any payments of principal or interest to Gaiam on their $1.7 million loan. The loans are subordinate to all indebtedness for borrowed money owed by us to any lenders unaffiliated with us. Payment

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of the unpaid principal and all accrued but unpaid interest under a loan is accelerated and become immediately due and payable upon the occurrence of certain events related to proceedings under bankruptcy, insolvency, receivership or similar laws, the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for our company or a substantial part of our assets, and our making a general assignment for the benefit of creditors.

Cash Flows

The following table summarizes our primary sources (uses) of cash during the periods presented:

	Three Months Ended March  31,
(in thousands)	2012			2011
Net cash provided by (used in):
Operating activities	$	(10,564	)	$	2,318
Investing activities		24			(86	)
Financing activities		6,415			—
Net change in cash	$	(4,125	)	$	2,232

Operating activities. Our operating activities used net cash of $10.6 million and provided net cash of $2.3 million during the first quarters of 2012 and 2011, respectively. Our net cash used by operating activities during the first quarter of 2012 was primarily attributable to decreased accounts payable and accrued liabilities of $13.2 million, our net loss of $1.9 million, decreased deferred revenue and billings in excess of costs on uncompleted contracts $0.9 million and $0.7 million, respectively, and noncash adjustments to our net loss of $0.7 million, partially offset by decreased accounts receivable of $6.2 million and increased payable to Gaiam of $0.9 million. Our net cash provided by operating activities during the first quarter of 2011 was primarily attributable to decreased accounts receivable and inventory of $3.6 million and $0.6 million, respectively, and increased payable to Gaiam of $0.2 million and noncash adjustments to net income of $0.2 million, partially offset by decreased accounts payable, accrued liabilities and deferred revenue of $1.7 million, $0.3 million and $0.4 million, respectively.

Investing activities. Our investing activities provided net cash of $24 thousand and used net cash of $0.1 million during the first quarters of 2012 and 2011, respectively. Our net cash provided by investing activities during the first quarter of 2012 was the result of a decrease in restricted cash of $172 thousand, partially offset by the use of cash to acquire property and equipment of $148 thousand. Our net cash used in investing activities during the first quarter of 2011 was used to acquire property and equipment.

Financing activities. Our financing activities provided net cash of $6.4 million during the first quarter of 2012 primarily from borrowings on our line of credit of $6.5 million, partially offset by payments on debt and capital lease obligations of $0.1 million.

We believe our available cash balance of $7.7 million at March 31, 2012, the cash recently loaned by Riverside, the remaining funds available under the bank line of credit described above and cash expected to be generated from operations should be sufficient to fund our normal business operations for the foreseeable future. Our projected cash needs may change as a result of operational difficulties, possible acquisitions, or other factors. If required by our liquidity needs, we believe that we could obtain debt financing (in addition to or as a substitute for the line of credit discussed above) that would assist us in meeting our cash requirements.

In the normal course of our business, we investigate, evaluate and discuss acquisition, joint venture, noncontrolling investment, strategic relationship and other business combination opportunities in the solar energy markets. For any future investment, acquisition, or joint venture opportunities, we may consider using then-available liquidity, issuing equity securities, or incurring additional indebtedness.

Off-Balance Sheet Arrangements

We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as special purpose entities or variable interest entities, which have been established for the purpose of facilitating off-balance sheet arrangements or other limited purposes.

Risk Factors

We wish to caution you that there are risks and uncertainties that could cause our actual results to be materially different from those indicated by forward looking statements that we make from time to time in filings with the Securities and Exchange Commission, news releases, reports, proxy statements, registration statements and other written communications as well as oral forward looking statements made from time to time by our representatives. These risks and uncertainties include, but are not limited to, those risks listed in our Annual Report on Form 10-K for the year ended December 31, 2011. Except for the historical information contained

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herein, the matters discussed in this analysis are forward-looking statements that involve risk and uncertainties, including, but not limited to, general economic and business conditions, competition, pricing, brand reputation, consumer trends, and other factors which are often beyond our control. We do not undertake any obligation to update forward-looking statements except as required by law.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) at the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, at the end of such period, our disclosure controls and procedures were effective in alerting them, on a timely basis, to material information required to be disclosed in the reports that we file or furnish under the Exchange Act.

Changes in Internal Control over Financial Reporting

No changes in our internal control over financial reporting occurred during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in legal proceedings that we consider to be in the normal course of business. We do not believe that any of these proceedings will have a material adverse effect on our business.

Item 1A. Risk Factors

No material changes.

Item 5. Other Information

Erik Zech, our former Chief Financial Officer, resigned from the Company effective March 31, 2012. On March 31, 2012, we entered into a Confidential Separation Agreement and Release of Claims with him pursuant to which we will pay Mr. Zech cash severance in the form of salary continuance for five weeks, in an aggregate amount of $19,231. Additionally, in connection with Mr. Zech’s resignation, we entered into a Consulting Agreement with him pursuant to which he agreed to serve as a consultant to us from and after May 5, 2012 through October 4, 2012 for which he will receive approximately $16,666 per month. The Company has attached hereto as Exhibits 10.1 and 10.2, respectively, copies of the Confidential Separation Agreement and Release of Claims and the Consulting Agreement. The foregoing summaries are qualified in their entirety by the contents of the Confidential Separation Agreement and Release of Claims and the Consulting Agreement.

We appointed John Coletta, age 46, to replace Mr. Zech as our Chief Financial Officer. Mr. Coletta began his employment with us on March 19, 2012 and became our Chief Financial Officer on April 1, 2012. Mr. Coletta earns an annual base salary of $250,000 and is entitled to receive an annual bonus of up to 50%, with a guaranteed amount of 25%, of his annual base salary for 2012. Upon his appointment, we granted Mr. Coletta stock options exercisable into 115,000 shares of our Class A common under our Incentive Plan. The stock options have an exercise price of $1.38 per share and vest over five years, 2% each month commencing on February 1, 2013.

From October 2008 to January 2012, Mr. Coletta was the Global Chief Financial Officer and President of Cartridge World, the world’s largest dedicated specialty retailer of ink and toner printer cartridges with manufacturing and retail operations in more than 60 countries. Mr. Coletta managed the global accounting and finance teams, and developed an integrated financial organization on the heels of their acquisition roll up of numerous country operations, and in managing corporate national accounts, Mr. Coletta co-developed many joint venture arrangements. From May 1998 to April 2008, Mr. Coletta was the Chief Executive Officer, Executive Vice President and corporate secretary at Rock Bottom Restaurants, a now public then private company with operations in 30 states across three major brands of restaurant chains including franchising operations. Mr. Coletta managed the accounting, finance, tax, purchasing, IT, human resources, strategy management, legal, licensing, and tax functions for Rock Bottom Restaurants. From May 1989 until May 1998, Mr. Coletta was an employee of Arthur Andersen LLP, an accounting firm, serving numerous public and private

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companies in the Audit & Business Advisory Division, including utility, construction, private equity and retail clients. Mr. Coletta brings extensive experience in mergers and acquisitions, finance, joint ventures, strategy management and a level of expertise in “nuts and bolts” administrative systems and support which will be instrumental to the growth plans for Real Goods Solar, during rapid organic and acquisition growth. Mr. Coletta is an active licensed CPA in Colorado.

On May 8, 2012, Nasdaq staff informed us that when Gaiam converted 100% of our Class B common shares to Class A common shares, we became subject to the Nasdaq Stock Market Rule 5605(b)(1) regarding board composition, and also that Nasdaq Stock Market Rule 5615(c)(3) would allow us twelve months from the date Real Goods Solar ceased to be a “controlled company” to phase-in compliance with the rule’s requirement. We are currently researching whether the Gaiam and Riverside shareholders’ agreement, which represents approximately 68% of our voting rights (as filed with the SEC), has an impact on our “controlled company” status.

Item 6. Exhibits

a) Exhibits.

Exhibit No.	Description
10.1*	Confidential Separation Agreement and Release of Claims, dated March 31, 2012, by and between Real Goods Solar, Inc. and Erik Zech
10.2*	Consulting Agreement, dated March 31, 2012, by and between Real Goods Solar, Inc. and Erik Zech
31.1*	Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2*	Certification of the Principal Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1**	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS***	XBRL Instance Document.
101.SCH***	XBRL Taxonomy Extension Schema.
101.CAL***	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF***	XBRL Taxonomy Extension Definition Linkbase.
101.LAB***	XBRL Taxonomy Extension Label Linkbase.
101.PRE***	XBRL Taxonomy Extension Presentation Linkbase.

* Filed herewith

** Furnished herewith

*** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.

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SIGNATURES

In accordance with the requirements of the Securities and Exchange Act, the registrant caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.

	Real Goods Solar, Inc.
	(Registrant)
Date: May 14, 2012	By:	/s/ William S. Yearsley
		William S. Yearsley
		Chief Executive Officer (authorized officer)
Date: May 14, 2012	By:	/s/ John Coletta
		John Coletta
		Chief Financial Officer
		(principal financial and accounting officer)

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EXHIBIT INDEX

Exhibit No.	Description
10.1*	Confidential Separation Agreement and Release of Claims, dated March 31, 2012, by and between Real Goods Solar, Inc. and Erik Zech
10.2*	Consulting Agreement, dated March 31, 2012, by and between Real Goods Solar, Inc. and Erik Zech
31.1*	Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2*	Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1**	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS***	XBRL Instance Document.
101.SCH***	XBRL Taxonomy Extension Schema.
101.CAL***	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF***	XBRL Taxonomy Extension Definition Linkbase.
101.LAB***	XBRL Taxonomy Extension Label Linkbase.
101.PRE***	XBRL Taxonomy Extension Presentation Linkbase.

* Filed herewith

** Furnished herewith

*** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.

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EX-10.1

Exhibit 10.1

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE OF CLAIMS

This Confidential Separation Agreement and Release of Claims (this “Agreement”) is entered into as of the date last written below by and between Real Goods Solar, Inc. (the “Company”) and Erik Zech (“Executive”). The Company and Executive are sometimes hereinafter referred to, collectively, as the “Parties” and each, individually, as a “Party.” The Parties hereby agree as follows:

1. Separation from Employment; Benefits. Executive’s employment with the Company is terminating effective March 31, 2012 (the “Separation Date”). Executive will be paid for all base salary earned through the Separation Date, together with all accrued but unused paid time off as of the Separation Date. For the period subsequent to the Separation Date, Executive may be eligible to elect continued group health and dental insurance coverage pursuant to the federal law known as COBRA. Notification of Executive’s COBRA rights will be sent under separate cover. Effective on the Separation Date, Executive’s entitlement to or participation in any and all other Company benefits, benefit plans, policies or programs shall cease, except as expressly set forth herein.

2. Severance Payment. If Executive signs and does not revoke this Agreement, the Company will continue to pay Executive for a period of five (5) weeks at his current annual base salary rate, less applicable tax deductions and withholdings (“Salary Continuation”). The Salary Continuation will be paid in accordance with the Company’s customary payroll practices, commencing on the first regular payroll date following expiration of the Revocation Period described in Paragraph 11 below. Executive acknowledges and agrees that the Salary Continuation is being provided in exchange for his assent to the terms of this Agreement and is not an amount to which he is otherwise entitled.

3. Release of Claims. Executive, on behalf of himself and his spouse, heirs, children, successors, current and former agents, representatives, executors, beneficiaries, administrators, trustees, attorneys and assigns, voluntarily releases and discharges the Company and each of its predecessors, successors, subsidiaries, investors and current and former assigns, agents, officers, partners, members, directors, shareholders, employees, investors, consultants, representatives, insurers, attorneys, affiliates, and any other related entities, and all persons acting by, through, under, or in concert with any of them (any and all of which are referred to as “Releasees”), from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, causes of action, damages, losses, expenses, and debts of any nature whatsoever, known or unknown (“Claims”), which Executive has, claims to have, ever had, or ever claimed to have had in his role as an employee against Releasees through the date last written below. This general release of Claims includes, without implication of limitation, all Claims relating to Executive’s employment and separation from employment with the Company; all Claims relating to Executive’s positions and duties with the Company; all Claims of discrimination, harassment and retaliation prohibited by any federal, state, or local statute, regulation, or ordinance, including without implication of limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans With Disabilities Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act and any similar applicable federal, state or local laws; all Claims for breach of contract or wrongful terminations and all other statutory or common law employment related Claims. Executive also waives any

Claim for reinstatement, attorneys’ fees, interest, or costs, and all Claims for wages, bonuses, severance, equity or other compensation, provided that this Agreement shall not be construed to impair Executive’s rights under this Agreement. Additionally, nothing in this Agreement shall be interpreted to prohibit Executive from filing a discrimination claim with any anti-discrimination agency, or from participating in a discrimination investigation or proceeding conducted by any such agency. However, by signing this Agreement, Executive acknowledges that he is waiving any and all rights to money damages and any other relief that might otherwise be available should he or any other entity pursue claims against the Releasees.

4. Non-Filing of Complaint or Charges. Executive represents that he has not filed any complaint or charge against any of the Releasees with any local, state or federal agency or court, or assigned any of the released Claims to any third party.

5. Return of Information and Property. Executive represents and warrants that he has either returned or will return to the Company on or before the Separation Date any and all Company property requested by the Company and Company documents. Executive further agrees that on and after the Separation Date, he will not for any purpose attempt to access or use any the Company computer or computer network or system, including its servers and electronic mail system, unless at the done at the Company’s request. Executive also represents that he has left intact all of the Company’s electronic files, including those that he developed or helped develop during his employment with the Company.

6. Confidentiality. Executive agrees to keep the existence, terms, and amount of this Agreement completely confidential, and not to disclose any such matters to anyone, in words or in substance, except as set forth in this paragraph. Notwithstanding the foregoing, Executive may disclose such matters (a) to immediate family members, attorneys and/or accountants, provided, that he shall first obtain any such person’s agreement to keep any such matters completely confidential and not to disclose any such matters to anyone; and (b) to the extent required by law or to the extent necessary to enforce his rights under this Agreement.

7. Cooperation. Executive agrees that upon request by the Company (and only upon such request), he shall provide, at mutually agreeable times and in reasonable amounts, assistance to and cooperation with the Company in order to ensure a smooth transition of his duties and responsibilities. Executive further agrees to cooperate fully with the Company in the defense or prosecution of any threatened or actual claims or actions which may be brought by, against or on behalf of the Company or its predecessors, subsidiaries, affiliates or any of their current or former partners, investors, agents, employees, officers, or directors and which relate to events or occurrences that transpired or are alleged to have transpired during his employment or affiliation with the Company or its predecessors. Such cooperation shall include, without implication of limitation, being available to meet at mutually agreeable times with the Company’s counsel to prepare for discovery or trial and to testify truthfully as a witness when reasonably requested by the Company.

8. Non-Disparagement. Executive agrees not to make any statement, written or oral, which disparages the Company or any of its services, subsidiaries, affiliates, shareholders, investors, partners, members, directors, officers, employees, or agents. Executive further agrees not to make any statement or take any action which has the intended or foreseeable effect of harming the Company. For their part, the officers and directors of the Company likewise agree not to make any statement, written or oral, to any third party which disparages Executive.

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Nothing in this Section or in Sections 6 or 7 herein shall prohibit or bar the Parties from providing truthful testimony in any legal proceeding, communicating with any governmental agency or representative, or from making any truthful disclosure required by law; provided, that in the event of such a disclosure, the Parties agree to provide advance written notice to the other Party of his/its intent to make such disclosures and provided that best efforts will be used by all Parties to ensure that this Section and Sections 6 and 7 are complied with to the maximum extent possible. Moreover, nothing herein shall prevent Executive from participating in any proceeding before any federal or state administrative agency to the fullest extent permitted by applicable law, provided that he will be prohibited to the fullest extent authorized by law from obtaining monetary damages and any other relief in any agency proceeding in which he does so participate.

9. Further Assurances. The Parties agree to execute, acknowledge (if necessary), and deliver such documents, certificates or other instruments and take such other actions as may be reasonably required from time to time to carry out the intents and purposes of this Agreement.

10. Remedy for Breach. Executive understands and agrees that a breach of Sections 4, 5, 6, 7 and/or 8 herein would result in irreparable harm to the Company, that money damages would not provide an adequate remedy, and, therefore, that in addition to any other rights that the Company may have, it shall have the right to specific performance and injunctive relief in the event of a breach any of those Sections of this Agreement. In addition, in the event of a violation of this Agreement, the Company shall be entitled to recover its attorney’s fees and costs incurred in connection with any efforts to enforce its rights under this Agreement.

11. Voluntary Waiver and Acknowledgement. Executive acknowledges that he has had the opportunity to consult with the attorney of his choice in connection with executing this Agreement, and that he has been given the opportunity, if so desired, to consider this Release for forty-five (45) days before executing it. If Executive does not sign this Agreement and return it to Melinda Hall, Human Resources Consultant, Real Goods Solar, Inc., 833 W. South Boulder Road, Louisville, Colorado 80027, so that it is received within forty-five (45) days of the Separation Date, it will not be valid. Any violation of this Agreement during the 45-day period shall also invalidate this offer. In the event that Executive executes this Release within less than 45 days, he acknowledges that such decision was entirely voluntary and that he had the opportunity to consider this Release for the entire 45-day period. Any change to this Agreement, whether material or otherwise, will not re-start this 45-day period.

The Parties acknowledge that, for a period of seven (7) days from the date that Executive signs this Agreement (the “Revocation Period”), he will retain the right to revoke this Agreement by written notice to Melinda Hall, Human Resources Consultant, Real Goods Solar, Inc., 833 W. South Boulder Road, Louisville, Colorado 80027, received before the end of the Revocation Period, and that this Agreement will not become effective or enforceable until the expiration of the Revocation Period.

Executive agrees that he has carefully read and understands all of the provisions of this Agreement, and that he is voluntarily entering into this Agreement. Executive further represents

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and acknowledges that in executing this Agreement, he is not relying and has not relied upon any representation or statement made by any of the Releasees with regard to the subject matter, basis or effect of this Agreement.

12. Entire Agreement. This Agreement constitutes the entire understanding and agreement of the Parties regarding the matters set forth herein and supersedes any prior communications, agreements and understandings, written or oral, with respect to the matters set forth herein.

13. Other Terms. This Agreement may be modified only by a written agreement signed by Executive and an authorized officer of the Company. The waiver by any Party of a breach of this Agreement shall not operate or be construed as a waiver of any subsequent breach. This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which together shall constitute the same instrument. This Agreement shall be governed by and construed in accordance with the laws of the state of Colorado without regard for the conflict of laws principles thereof. The language of all parts of this Agreement shall in all cases be construed as a whole, according to its fair meaning, and not strictly for or against any of the Parties. This Agreement is not, and shall not be construed to be, an admission of any violation of any federal, state or local statute or regulation, or of any duty owed by Executive or any of the Releasees. If any provision of this Agreement is deemed invalid, the remaining provisions shall not be affected and shall be enforced to the maximum extent permitted by law. This Agreement shall be binding upon and inure to the benefit of the Parties’ successors and assigns, except that Executive’s obligations herein are personal and may not be assigned.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date last written below.

/s/ Erik Zech		March 31, 2012
Erik Zech		DATE
REAL GOODS SOLAR, INC.
By:	/s/ John Jackson	March 31, 2012
	John Jackson, VP	DATE

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EX-10.2

Exhibit 10.2

CONSULTING AGREEMENT

CONSULTING AGREEMENT (this “Agreement”) dated as of March 31, 2012 between Real Goods Solar, Inc., a Colorado corporation (the “Company”), and Erik Zech, an individual (the “Consultant”).

WHEREAS Consultant and the Company wish to enter into this Agreement whereby Consultant will provide certain consulting services to the Company.

NOW, THEREFORE, in consideration of the mutual undertakings contained herein, the parties agree as follows:

ARTICLE 1 ENGAGEMENT OF CONSULTANT

1.1 Engagement.

(a) From and after May 5, 2012 (the “Effective Date”), the Company hereby engages Consultant to, and Consultant hereby agrees to render at the request of the Company, from time to time, independent advisory and consulting services related to the services he provided the Company as an employee and officer (the “Services”).

(b) The officers of the Company will provide Consultant with the necessary direction and information to complete the Services and Consultant hereby agrees to perform the Services pursuant to such direction.

(c) Consultant further agrees to render the Services conscientiously and to devote Consultant’s reasonable efforts and abilities thereto, at such time during the term hereof and in such reasonable manner as the Company and Consultant shall mutually agree, it being acknowledged that the Services shall be on a non-exclusive basis and that Consultant shall devote approximately 5 hours a week to the Services throughout the Term of this Agreement.

1.2 Compensation. In consideration for the Services to be provided hereunder, the Company shall pay Consultant the same wage that he received at the time his employment with the Company was terminated, to be paid in accordance with the Company’s customary payroll practices. In addition, during the Term the Consultant will receive the same employee benefits that he received as an employee of the Company at the same cost as he was charged when he was an employee.

1.3 Expenses. It is not expected that Consultant shall be incurring any expenses as a result of the delivery of the Services as the Consultant and Company agree that most of the Services shall be delivered by phone, fax or email. The Company will pay any pre-approved out-of-pocket expenses incurred by Consultant.

1.4 Term; Termination. The term (the “Term”) of this Agreement shall commence effective as of the Effective Date and expire on the fifth month anniversary of such date; provided, however, that the Company may terminate this Agreement upon written notice to Consultant for “Cause” (as hereinafter defined), in which case the Company will immediately cease payment of the Consulting Fee and Consultant will only be entitled to receive the benefits recited above for the remainder of the original term. “Cause” shall mean Consultant substantially refusing to cooperate with the Company in the delivery of the Services.

1.5 Independent Contractor. It is expressly agreed that Consultant is an independent contractor and not an employee, agent, joint venturer or partner of the Company with respect to the performance of the Services. All of Consultant’s activities will be at his own risk and liability, and Consultant shall not be entitled to worker’s compensation or professional liability insurance protection from the Company. Consultant shall have no right or authority to assume or create any obligations of any kind or to make representations or warranties on behalf of the Company, whether express or implied, or to bind Company in any respect whatsoever. The Company shall not be required to maintain an office for Consultant in the Company’s offices.

1.6 Non-Exclusive Relationship. During the Term of this Agreement, the parties specifically acknowledge and agree that Consultant is not required to devote his full time and energies to rendering the Services, but shall devote such efforts to the Company as Consultant reasonably deems necessary to render the Services consistent with Section 1.1. Consultant may represent, perform services for, or be employed by any additional clients, persons or companies or invest in any business of any type or description. The Company hereby acknowledges and agrees that it shall have no interest in the product of any endeavor that is not undertaken by Consultant pursuant to this Agreement.

ARTICLE 2 GENERAL PROVISIONS

2.1 Notices. All notices or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally, one business day following when sent via a nationally recognized overnight courier, or when sent via facsimile confirmed in writing to the recipient. Such notices and other communications will be sent to the addresses indicated below:

To the Company:

Real Goods Solar, Inc.

833 W. South Boulder Road

Louisville, CO 80027

Attn: John Jackson

To Consultant:

at the address set forth on the Company’s records

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.

2.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

2.3 Entire Agreement. This Agreement embodies the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

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2.4 Nonassignability. This Agreement and all rights, liabilities and obligations hereunder shall be binding upon and inure to the benefit of each party’s successors, but Consultant shall not assign, transfer or subcontract this Agreement or any of its obligations hereunder without express, prior written consent of the Company, which consent may be given or withheld in the Company’s sole discretion.

2.5 Amendments and Waivers. Any provision of this Agreement may be amended or waived only with the prior written consent of the Company and Consultant.

2.6 Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Colorado, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Colorado or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Colorado.

2.7 Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument.

2.8 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement or of any term or provision hereof.

2.9 Attorneys’ Fees and Costs. If any litigation or arbitration shall occur between Consultant and the Company, which litigation arises out of or as a result of this Agreement or the acts of the parties hereto pursuant to this Agreement, or which seeks an interpretation or enforcement of this Agreement, the prevailing party shall be entitled to recover all costs and expenses of such litigation, including reasonable attorneys’ fees and costs.

[Remainder of Page Intentionally Left Blank]

3

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth above.

REAL GOODS SOLAR, INC.
By:	/s/ John Jackson
Name: John Jackson
Title: VP
/s/ Erik Zech
Erik Zech

4

EX-31.1

Exhibit 31.1

CERTIFICATION

I, William S. Yearsley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Real Goods Solar, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 14, 2012

/s/ William S. Yearsley

William S. Yearsley

Chief Executive Officer

(principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, John Coletta, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Real Goods Solar, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 14, 2012

/s/ John Coletta

John Coletta

Chief Financial Officer

(principal financial officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Real Goods Solar, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2012, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, William S. Yearsley, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 14, 2012

/s/ William S. Yearsley

William S. Yearsley

Chief Executive Officer

(principal executive officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Real Goods Solar, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2012, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, John Coletta, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 14, 2012

/s/ John Coletta

John Coletta

Chief Financial Officer

(principal financial officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Revolving Line Of Credit

3 Months Ended

Mar. 31, 2012

Revolving Line Of Credit [Abstract]

Revolving Line Of Credit

4. Revolving Line of Credit

We have a revolving line of credit which provides for advances not to exceed $7.0 million based upon the collateral value of our accounts receivable. All borrowings are collateralized by a security interest in substantially all of our assets other than our interests in Alteris Project Financing Company LLC, and bear interest at (i) the greater of the bank's prime rate or 4.00%, plus (ii) 1.75% (or 5.75% during an event of default) unless we maintain certain liquidity benchmarks. The line of credit facility will mature on August 31, 2012. The line of credit has a facility fee of 0.5% per year of the average daily unused portion of the available line of credit during the applicable calendar quarter. We may reserve up to $500,000 for stand-by letters of credit under the line of credit. The Loan and Security Agreement establishing the line of credit contains various covenants, including a covenant requiring compliance with a liquidity ratio. At March 31, 2012, we had $6.5 million of outstanding borrowings under this facility.

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Mergers And Acquisitions

3 Months Ended

Mar. 31, 2012

Mergers And Acquisitions [Abstract]

Mergers And Acquisitions

3. Mergers and Acquisitions

We obtained financial control, through an Agreement and Plan of Merger (the "Merger Agreement"), of 100% of the voting equity interests of Earth Friendly Energy Group Holdings, LLC d/b/a Alteris Renewables, Inc. ("Alteris") on June 21, 2011 (the "acquisition date"). Alteris sells, designs, installs, and supports renewable energy systems, primarily solar, for both residential and commercial customers. Alteris has more than a dozen offices across seven states. The acquisition closed on December 19, 2011.

The following is supplemental unaudited interim pro forma information for the Alteris acquisition as if we had issued 8.7 million shares of our Class A common stock to acquire this business on January 1, 2010. The pro forma net revenue and cost of goods sold were decreased by $0.6 million and $0.5 million, respectively, for the three months ended March 31, 2011 to reflect Alteris' adoption of our method, cost to cost, of measuring progress towards completion for jobs accounted for under the percentage of completion method. Additionally, pro forma net loss was adjusted by $0.1 million for the three months ended March 31, 2011, to include amortization of intangible assets and share-based compensation expense related to replacement stock options, both resulting from the acquisition of Alteris. All pro forma adjustments are based on currently available information and upon assumptions that we believe are reasonable in order to reflect, on a supplemental pro forma basis, the impact of this acquisition on our historical financial information.

(in thousands, except per share data)	Three Months Ended March 31, 2011
Net revenue	$	22,743
Net loss	$	(1,545	)
Net loss per share – basic	$	(0.06	)
Net loss per share – diluted	$	(0.06	)

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
ASSETS
Cash	$ 7,688	$ 11,813
Restricted cash		172
Accounts receivable, net	15,374	21,539
Costs in excess of billings on uncompleted contracts	5,260	5,411
Inventory, net	11,839	12,264
Deferred costs on uncompleted contracts	1,761	1,313
Receivable and deferred tax assets	2,454	3,333
Other current assets	1,508	1,014
Total current assets	45,884	56,859
Property and equipment, net	6,929	6,930
Deferred tax assets	7,646	5,444
Goodwill	19,746	19,885
Other intangibles, net	290	390
Other assets	55	41
Total assets	80,550	89,549
LIABILITIES AND SHAREHOLDERS' EQUITY
Line of credit	6,500
Accounts payable	15,146	27,785
Accrued liabilities	2,770	3,292
Billings in excess of costs on uncompleted contracts	1,449	2,144
Debt	196	197
Capital lease obligations	144	126
Payable to Gaiam	3,080	2,176
Deferred revenue and other current liabilities	1,525	2,388
Total current liabilities	30,810	38,108
Debt, net of current portion	153	202
Capital lease obligations, net of current portion	492	433
Total liabilities	31,455	38,743
Commitments and contingencies
Shareholders' equity:
Class A common stock, $.0001 par value, 150,000,000 shares authorized, 26,669,950 and 26,660,640 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively	3	3
Additional paid-in capital	82,005	81,860
Accumulated deficit	(32,913)	(31,057)
Total shareholders' equity	49,095	50,806
Total liabilities and shareholders' equity	$ 80,550	$ 89,549

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Organization, Nature Of Operations, And Principles Of Consolidation

3 Months Ended

Mar. 31, 2012

Organization, Nature Of Operations, And Principles Of Consolidation [Abstract]

Organization, Nature Of Operations, And Principles Of Consolidation

1. Organization, Nature of Operations, and Principles of Consolidation

We are a leading residential and commercial solar energy integrator. We were incorporated in Colorado on January 29, 2008 under the name Real Goods Solar, Inc. ("Real Goods Solar", "we", "us", or "our"). Our initial public offering of common stock occurred on May 7, 2008.

We have prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States, or GAAP, and they include our accounts and those of our subsidiaries. Intercompany transactions and balances have been eliminated.

The unaudited condensed consolidated financial position, results of operations and cash flows for the interim periods disclosed in this report are not necessarily indicative of future financial results.

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Significant Accounting Policies

3 Months Ended

Mar. 31, 2012

Significant Accounting Policies [Abstract]

Significant Accounting Policies

2. Significant Accounting Policies

No changes were made to our significant accounting policies during the three months ended March 31, 2012, except for the adoption of the Financial Accounting Standards Board's accounting standard update that simplified how we test goodwill for impairment and permitted us to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit was less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. We do not expect the guidance to have a material impact on our consolidated financial statements.

Use of Estimates and Reclassifications

The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the accompanying financial statements and disclosures. Although we base these estimates on our best knowledge of current events and actions that we may undertake in the future, actual results may be different from the estimates. We have made certain reclassifications to prior period amounts to conform to the current period presentations.

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Condensed Consolidated Balance Sheets (Parenthetical) (Common Class A [Member], USD $)	Mar. 31, 2012	Dec. 31, 2011
Common Class A [Member]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	26,669,950	26,660,640
Common stock, shares outstanding	26,669,950	26,660,640

XML

Document And Entity Information	3 Months Ended
	Mar. 31, 2012	May 09, 2012
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1
Entity Registrant Name	Real Goods Solar, Inc.
Entity Central Index Key	0001425565
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		26,669,950

XML

Condensed Consolidated Statements Of Operations (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Condensed Consolidated Statements Of Operations [Abstract]
Net revenue	$ 18,256	$ 17,425
Cost of goods sold	11,829	12,396
Gross profit	6,427	5,029
Expenses:
Selling and operating	7,915	4,272
General and administrative	1,515	691
Total expenses	9,430	4,963
Income (loss) from operations	(3,003)	66
Interest income (expense), net	(49)	2
Income (loss) before income taxes	(3,052)	68
Income tax expense (benefit)	(1,196)	31
Net income (loss)	$ (1,856)	$ 37
Net income (loss) per share:
Basic	$ (0.07)	$ 0.00
Diluted	$ (0.07)	$ 0.00
Weighted-average shares outstanding:
Basic	26,661	18,310
Diluted	26,661	18,310

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Shareholders' Equity

3 Months Ended

Mar. 31, 2012

Shareholders' Equity [Abstract]

Shareholders' Equity

7. Shareholders' Equity

During the first quarter of 2012, we issued 9,310 shares of our Class A common stock to our independent directors, in lieu of cash compensation, for services rendered during 2012.

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Capital Lease Obligations

3 Months Ended

Mar. 31, 2012

Capital Lease Obligations [Abstract]

Capital Lease Obligations

6. Capital Lease Obligations

We have vehicles financed under capital leases. The cost of the capitalized leased assets included in property and equipment was $0.8 million and $0.6 million at March 31, 2012 and December 31, 2011, respectively. Accumulated amortization of capitalized leased assets was $0.1 million and $0.1 million at March 31, 2012 and December 31, 2011, respectively. Amortization expense for capitalized leased assets was $38 thousand and none for the three months ended March 31, 2012 and 2011, respectively.

Our future minimum lease payments and capital lease obligations at March 31, 2012 are as follows:

(in thousands)
Year ending December 31,
2012	$	135
2013		229
2014		186
2015		137
2016		17
Total future minimum lease payments		704
Less – amounts representing interest		68
Total capital lease obligations		636
Less – current portion of capital lease obligations		144
Capital lease obligations, net of current portion	$	492

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Related Party Transactions

3 Months Ended

Mar. 31, 2012

Related Party Transactions [Abstract]

Related Party Transactions

10. Related Party Transactions

Upon the closing of the Alteris transaction on December 19, 2011, we received a commitment from Riverside to make us a single loan of up to $3.15 million. On April 30, 2012, we called $3.0 million of Riverside's loan commitment, which was funded by Riverside on May 4, 2012. We also have a $1.7 million loan from Gaiam that must be repaid by December 31, 2012.

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Share-Based Payments

3 Months Ended

Mar. 31, 2012

Share-Based Payments [Abstract]

Share-Based Payments

8. Share-Based Payments

During the first quarter of 2012, we granted 187,500 new stock options and cancelled 164,230 stock options under our 2008 Long-Term Incentive Plan. The new stock options vest at 2% per month for the 50 months beginning in the eleventh month after date of grant.

Total share-based compensation expense recognized was $0.2 million and $0.1 million for the three months ended March 31, 2012 and 2011, respectively, and is shown in general and administrative expenses on our condensed consolidated statements of operations.

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Net Income (Loss) Per Share

3 Months Ended

Mar. 31, 2012

Net Income (Loss) Per Share [Abstract]

Net Income (Loss) Per Share

9. Net Income (Loss) Per Share

Basic net income (loss) per share excludes any dilutive effects of options. We compute basic net income (loss) per share using the weighted average number of common shares outstanding during the period. We compute diluted net income (loss) per share using the weighted average number of common stock and common stock equivalents outstanding during the period. We excluded common stock equivalents of 2,019,000 and 943,000 from the computation of diluted net income (loss) per share for the three months ended March 31, 2012 and 2011, respectively, because their effect was antidilutive.

The following table sets forth the computation of basic and diluted net income (loss) per share:

	Three Months Ended March  31,
(in thousands, except per share data)	2012			2011
Numerator for basic and diluted net income (loss) per share	$	(1,856	)	$	37
Denominator:
Weighted average share for basic net income (loss) per share		26,661			18,310
Effect of dilutive securities:
Weighted average of warrants and stock options		—			—
Denominator for diluted net income (loss) per share		26,661			18,310
Net income (loss) per share – basic	$	(0.07	)	$	0.00
Net income (loss) per share – diluted	$	(0.07	)	$	0.00

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Condensed Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Operating activities
Net income (loss)	$ (1,856)	$ 37
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation	260	140
Amortization	100
Share-based compensation expense	153	82
Deferred income tax benefit	(1,223)	(34)
Changes in operating assets and liabilities:
Accounts receivable, net	6,165	3,634
Costs in excess of billings on uncompleted contracts	150
Inventory, net	426	585
Deferred costs on uncompleted contracts and advertising	(448)	65
Other current assets	(475)	2
Accounts payable	(12,640)	(1,749)
Accrued liabilities	(522)	(321)
Billings in excess of costs on uncompleted contracts	(696)
Deferred revenue and other current liabilities	(862)	(358)
Payable to Gaiam	904	235
Net cash provided by (used in) operating activities	(10,564)	2,318
Investing activities
Change in restricted cash	172
Purchase of property and equipment	(148)	(86)
Net cash provided by (used in) investing activities	24	(86)
Financing activities
Principal borrowings on revolving line of credit, net	6,500
Principal payments on debt and capital lease obligations	(85)
Net cash provided by financing activities	6,415
Net change in cash	(4,125)	2,232
Cash at beginning of period	11,813	11,123
Cash at end of period	7,688	13,355
Supplemental cash flow information
Income taxes paid	12	6
Interest paid	$ 34

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Debt

3 Months Ended

Mar. 31, 2012

Debt [Abstract]

Debt

5. Debt

Most of our debt consists of a $1.7 million loan from Gaiam that must be repaid by December 31, 2012 and is reported in Payable to Gaiam on our condensed consolidated balance sheets at March 31, 2012 and December 31, 2011.

The remainder of our debt, all of which relates to Alteris, consisted of the following at March 31, 2012:

(in thousands, except installment amounts and interest rates)	March 31, 2012
Notes payable to finance companies for the purchase of vehicles and equipment in 36 to 60 monthly installments totaling $18,828, including interest ranging from 2.9% to 10.35%. The notes are secured by Alteris' vehicles and equipment	$	349
Less – current portion of debt		196
Debt, net of current portion	$	153

Maturities of debt at March 31, 2012 are as follows:

(in thousands)
Year ending December 31,
2012	$	147
2013		133
2014		67
2015		2
	$	349

The notes are subject to both positive and negative restrictions and covenants, which include maintaining certain debt service and adjusted leverage ratios.