SB-2

As filed with the Securities and Exchange Commission on January 16. 2007

Registration No. ___________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

SOLAR POWER, INC.

(Name of small business issuer in its charter)

Nevada	3674	20-1470649
(State or jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

4080 Cavitt Stallman Road, Suite 100

Granite Bay, California 95746

(916) 789-0833

(Address and telephone number of principal executive offices)

__________________________

4080 Cavitt Stallman Road, Suite 100

Granite Bay, California 95746

(916) 789-0833

(Address of principal place of business)

__________________________

Stephen C. Kircher

Chief Executive Officer

4080 Cavitt Stallman Road, Suite 100

Granite Bay, California 95746

(916) 789-0833

(Name, address and telephone number of agent for service)

__________________________

Copies to:

David C. Adams, Esq.

Deborah K. Seo, Esq.

Bullivant Houser Bailey PC

1415 L. Street, Suite 1000

Sacramento, California 95814

Telephone: (916) 930-2500

Approximate date of proposed sale to the public:

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

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

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

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

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

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

box. o

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Amount of shares to be Registered	Proposed maximum offering price per share	Proposed maximum aggregate offering price	Amount of registration fee
Common Stock	18,033,334	$1.00(1)	$ 18,033,334	$ 1,930.00
Common Stock underlying warrants	800,000(2)	$1.15(3)	$      920,000	$      99.00
Total	18,833,334		$ 18,953,334	$ 2,029.00

(1) There is no current public market for the securities. Management, based on previous offerings made by the Company, has estimated the offering price per share in order to calculate the registration fee.

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

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

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

SUBJECT TO COMPLETION, DATED ____________, 2007

PROSPECTUS

18,833,334 Shares

SOLAR POWER, INC.

Common Stock

__________________________

This Prospectus relates to the sale of 18,833,334 shares of common stock, $.0001 par value, by the Selling Security Holders listed under “Selling Security Holders” on page 47. This Prospectus also covers the sale of 800,000 shares of our common stock by a certain Selling Security Holder upon the exercise of outstanding warrants. We will not receive any proceeds from the resale of any common stock by the Selling Security Holders sold pursuant to this Prospectus. We will receive gross proceeds of $920,000 if all of the warrants are exercised for cash by the Selling Security Holder.

Our common stock is not traded on any exchange and there is currently no established public trading market for our common stock.

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

____________________

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE “RISK FACTORS” BEGINNING ON PAGE 3 OF THIS PROSPECTUS.

____________________

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

____________________

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

The date of this Prospectus is _____________, 2007.

TABLE OF CONTENTS

	Page
PROSPECTUS SUMMARY	1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS	3
RISK FACTORS	3
Risks Relating To Our Business	3
Risks Relating To International Operations	10
Risks Relating To Our Common Stock	13
USE OF PROCEEDS	15
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS	15
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS	17
RESULTS OF OPERATION	22
LIQUIDITY AND CAPITAL RESOURCES	23
DESCRIPTION OF BUSINESS	25
DESCRIPTION OF PROPERTY	34
LEGAL PROCEEDINGS	34
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS	35
EXECUTIVE COMPENSATION	37
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	41
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	44
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	46
SELLING SECURITY HOLDERS	47
PLAN OF DISTRIBUTION	51
DESCRIPTION OF SECURITIES	52
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES	53
LEGAL MATTERS	53
EXPERTS	54
TRANSFER AGENT AND REGISTRAR	54
WHERE YOU CAN FIND MORE INFORMATION	54
FINANCIAL STATEMENTS	F-1
PRO-FORMA FINANCIAL STATEMENTS	F-26
PART II INFORMATION NOT REQUIRED IN PROSPECTUS	II-1
INDEMNIFICATION OF DIRECTORS AND OFFICERS	II-1
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION	II-1
RECENT SALES OF UNREGISTERED SECURITIES	II-1
UNDERTAKINGS	II-5

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

PROSPECTUS SUMMARY

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

Our Business

Corporate History and Recent Events

We were originally incorporated in the State of Delaware on July 16, 2002 under the name “Welund Fund, Inc.” Effective January 2006, pursuant to the authorization of our stockholders, we merged with our wholly-owned subsidiary, a Nevada corporation, and reincorporated in the State of Nevada. As a result of the merger, we changed our legal domicile from the State of Delaware to the State of Nevada. On October 4, 2006, we changed our name from “Welund Fund, Inc.” to “Solar Power, Inc.” In addition, we effected a one-for-three reverse stock split in October 2006.

On August 23, 2006, we entered into an Agreement and Plan of Merger with Solar Power, Inc., a California corporation (“SPI”) and Welund Acquisition Corp., a Nevada corporation, and our wholly-owned subsidiary (“Merger Sub”). On December 29, 2006, our Merger Sub merged with SPI and SPI became our wholly-owned subsidiary (the “Merger”). In connection with the Merger, (a) we sold our pool of finance receivables, (b) we issued 14,500,000 shares of our common stock to the shareholders of SPI, (c) we substituted 2,000,000 restricted stock awards and options of SPI with our restricted stock awards and options to purchase shares of our common stock on the same terms and conditions of the SPI options and restricted stock awards, and (d) our directors and officers were replaced with the officers and directors of SPI who assumed control of the combined companies. As a result of the Merger, we discontinued our former auto loans business and changed our focus and strategic direction and pursued operations in the solar power business.

Prior to the Merger, we conducted a private placement for $16,000,000 in September and October 2006 (the “Offering”) to finance the interim operations of SPI and to provide working capital for our operations upon completion of the Merger. We received gross proceeds of $16,000,000 in connection with the Offering and issued a total of 16,000,000 shares of our restricted common stock. In connection with the Offering, we entered into a Registration Rights Agreement with certain investors to cover the resale of the securities issued in the Offering.

Overview

Prior to June 2006, we only manufactured cable, wire and mechanical assemblies. In June 2006 we commenced operations to produce and install solar power systems. Our operations are conducted through our wholly owned subsidiary SPI and its wholly-owned subsidiaries that commenced their operations in May 2005: International Assembly Solutions, Limited (Hong Kong) (“IAS HK”), and IAS Electronics (Shenzhen) Co., Ltd (“IAS Shenzhen”). Our primary design, fabrication and assembly operations are in China. We believe our China-based manufacturing facility provides us with several competitive advantages, including a highly trained, economical workforce, availability of cost effective land and factory space, and lower raw material costs.

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We intend to design, develop, manufacture and market a variety of photovoltaic (“PV”) modules, which convert sunlight into electricity. We intend to manufacture solar modules, utilizing both Monocrystalline and Multicrystalline silicone, and the balance of system components used in a finished photovoltaic system. These products are intended for use in residential, commercial and industrial applications, for both on-grid electricity generation and off-grid generation. We intend to continue purchasing solar modules from a primary manufacturer to supplement the anticipated output generated by our own production facility. We intend to distribute our products primarily in the United States, including design, installation and maintenance services for completed installations. As such, we, through a merger with our subsidiary, SPI, have acquired Dale Renewables Consulting, Inc. (“DRCI”), an experienced photovoltaic installation company in the greater Northern California region. We are in the process of integrating DRCI’s business into our business. We intend to principally distribute our products directly to industrial, commercial and residential customers.

Our Strategy and Products

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

Our principal products will include the following:

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

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

We intend to make solar modules and systems our primary products. We believe our modules will be competitive with other products in the marketplace and will be certified to international standards of safety, reliability and quality.

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

Principal Offices

Our principal executive offices are located at 4080 Cavitt Stallman Road, Suite 100, Granite Bay, California 95746 which is also our mailing address. Our telephone number is (916) 789-0833.

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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus contains statements that constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. The words “expect,” “estimate,” “anticipate,” “predict,” “believe,” and similar expressions and variations thereof are intended to identify forward-looking statements. Such statements appear in a number of places in this Prospectus and include statements regarding our intent, belief or current expectations regarding our strategies, plans and objectives, our product release schedules, our ability to design, develop, manufacture and market products, our intentions with respect to strategic acquisitions, the ability of our products to achieve or maintain commercial acceptance and our ability to obtain financing for our obligations. Any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those projected in this Prospectus, for the reasons, among others, described within the various sections of this Prospectus, specifically the section entitled “Risk Factors” beginning on page 3. You should read this Prospectus carefully, and should not place undue reliance on any forward-looking statements, which speak only as of the date of this Prospectus. We undertake no obligation to release publicly any updated information about forward-looking statements to reflect events or circumstances occurring after the date of this Prospectus or to reflect the occurrence of unanticipated events.

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

RISK FACTORS

Risks Related to Our Business

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

We commenced solar power-related operations in June 2006. As a result we have limited experience manufacturing solar systems on a commercial basis.Our IAS Shenzhen subsidiary completed its first mechanical assembly manufacturing line in May 2005 and began commercial shipment of its cable, wire and mechanical products in June 2005. Although we are continuing to develop our manufacturing capabilities and processes, we do not know whether the processes we have developed will be capable of supporting large-scale manufacturing, or whether we will be able to develop the other processes necessary for large-scale manufacturing of solar systems that meet the requirements for cost, schedule, quality, engineering, design, production standards and volume requirements. If we fail to develop or obtain the necessary manufacturing capabilities it will significantly alter our business plans and potentially have a material adverse effect on prospects, results of operations and financial condition. Moreover, due to our limited operating history, our historical operating results may not provide a meaningful basis for evaluating our business, financial performance and prospects.

Our operating results may fluctuate significantly from period to period.

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

· the timing of orders;

· the volume of orders relative to our capacity;

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

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

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

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

· effectiveness in managing manufacturing processes;

· changes in cost and availability of labor and components;

· product mix;

· pricing and availability of competitive products and services;

· changes in government regulations;

· changes or anticipated changes in economic conditions;

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

· political uncertainties in China;

· changes in tax-based incentive programs; and

· changes in currency translation rates affecting margins and pricing levels.

Our business strategy depends on the widespread adoption of solar power technology.

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

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

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

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

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

· continued deregulation of the electric power industry and broader energy industry; and

· availability of government subsidies and incentives.

We must obtain sufficient supply of solar cells to conduct our business.

Silicon is an essential raw material in the production of photovoltaic, or solar cells. A shortage of silicon may result in significant price increases and affect our supply of solar cells. In addition, there are a limited number of solar cell suppliers. Our estimate regarding our supply needs may not be correct and our purchase orders may be cancelled by our suppliers. If our suppliers cancel our purchase orders or change the volume or pricing associated with these purchase orders, we may be unable to meet existing and future customer demand for our products, which could cause us to lose customers, market share and revenue.

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

Potential strategic acquisitions may not achieve our objectives.

In November 2006, our wholly-owned subsidiary, SPI, acquired Dale Renewables Consulting, Inc., a California corporation (“DRCI”). We are in the process of integrating DRCI’s business into our business. There is no assurance that the acquisition will result in a successful integration. In addition, we are currently exploring additional strategic alliances designed to enhance or complement our technology or to work in conjunction with our technology, increase our manufacturing capacity, provide additional know-how, components or supplies and develop, introduce and distribute products and services utilizing our technology and know-how. Any strategic alliances entered into may not achieve our strategic objectives, and parties to our strategic alliances may not perform as contemplated.

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

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

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

We have one manufacturing facility in China. We strive to fully utilize the manufacturing capacity of our facility but may not do so on a consistent basis. Our factory utilization will be dependent on predicting volatility, timing volume sales to our customers, balancing our productive resources with product mix, and planning manufacturing services for new or other products that we intend to produce. Demand for manufacturing of these products may not be as high as we expect, and we may fail to realize the expected benefit from our investment in our manufacturing facilities. Our profitability and operating results are also dependent upon a variety of other factors, including: utilization rates of our manufacturing lines, downtime due to product changeover, impurities in raw materials causing shutdowns, maintenance of operations and availability of power, water and labor resources.

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

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

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

We operate in a competitive environment that is characterized by price inflation, due to supply shortages, and technological change. We compete with major international and domestic companies. Our major system integrator competitors include SunPower/Powerlight, SPG Solar, Akeena Solar, Sun Edison, Global Solar plus numerous other regional players, and other similar companies primarily located in California and New Jersey. Manufacturing competitors include multinational corporations such as BP Solar, Kyocera Corporation, Mitsubishi, Solar World AG, Sharp Corporation, SunPower/Powerlight and Sanyo Corporation. Our competitors may have greater market recognition and substantially greater financial, technical, marketing, distribution, purchasing, manufacturing, personnel and other resources than we do. Furthermore, some of our competitors have manufacturing and sales forces that are geographically diversified, allowing them to reduce transportation expenses, tariff costs and currency fluctuations for certain customers in markets where our facilities are located. Many of our competitors are developing and are currently producing products based on new solar power technologies that may ultimately have costs similar to, or lower than, our projected costs. Many of our current and potential competitors have longer operating histories, greater name recognition, access to larger customer bases and significantly greater financial, sales and marketing, manufacturing, distribution, technical and other resources than us. As a result, they may be able to respond more quickly to changing customer demands or to devote greater resources to the development, promotion and sales of our products than we can.

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

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A few customers account for a significant portion of our sales.

For the nine months ended September 30, 2006, five customers contributed ninety-nine percent (99%) of our total sales revenue, including one customer who contributed forty-six percent (46%) to our revenue. This compares to the same period in calendar 2005 (from inception to September 30, 2005) when five customers contributed ninety-eight percent (98%) of total sales revenue, including one customer which contributed fifty-six percent (56%) of our revenue. Under present conditions, the loss of any one of these customers could have a material adverse effect on our performance, liquidity and prospects.

Decrease in construction could adversely affect our business.

During 2006, approximately fifty percent (50%) of DRCI’s solar-related revenues were generated from the design, installation and maintenance of solar power products in newly constructed and renovated buildings, plants and residences. Our ability to generate revenues from new installation services will depend on the number of new construction starts and renovations, which should correlate with the cyclical nature of the construction industry. The number of new building starts will be affected by general and local economic conditions, changes in interest rates and other factors.

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

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

The failure to increase or restructure the net metering cap could adversely affect our business. Currently all grid-tied photovoltaic systems are installed with cooperation by the local utility providers under guidelines created through statewide net metering policies. These policies, as currently written, specify that the local utility only has the obligation to allow installation up to and equal to one-half of one percent of its total generation capacity. It appears likely that as an industry, we will have the ability to reach this number within the next several years. The solar industry is currently lobbying to extend these arbitrary generation caps, and replace them with either notably higher numbers, or with a revised method of calculation that will allow the industry to continue our expansion in a manner consistent with both the industry and state and federal desires.

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

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

As our manufacturing processes generate noise, wastewater, gaseous and other industrial wastes, we are required to comply with all national and local regulations regarding protection of the environment. We believe that we have all necessary permits to conduct our business as it is presently conducted. If we fail to comply with present or future environmental regulations, however, we may be required to pay substantial fines, suspend production or cease operations.

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

The success of our business is heavily dependent on the leadership of our key management personnel, specifically Stephen C. Kircher. In addition, the company currently relies on Todd Lindstrom’s construction experience and management for the installation of solar systems. All our executive officers and key personnel are employees at-will and we do not have any employment agreements with them. If any of these people were to leave us, it would be difficult to replace them, and our business could be harmed.

The growth of our business is dependent upon sufficient capitalization.

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

· research and development activities on existing and potential product solutions;

· additional engineering and other technical personnel;

· advanced design, production and test equipment;

· manufacturing services that meet changing customer needs;

· technological changes in manufacturing processes;

· manufacturing capacity: And

· developing a franchise network.

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

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

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

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

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

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

We could become involved in intellectual property disputes.

We currently have two provisional patents pending. In addition, we rely on trade secrets, industry expertise and our customers’ sharing of intellectual property with us. We do not knowingly infringe on patents, copyrights or other intellectual property rights owned by other parties; however, in the event of an infringement claim, we may be required to spend a significant amount of money to defend a claim, develop a non-infringing alternative or to obtain licenses. We may not be successful in developing such an alternative or obtaining licenses on reasonable terms, if at all. Any litigation, even without merit, could result in substantial costs and diversion of our resources and could materially and adversely affect our business and operating results. We have limited insurance coverage and may incur losses resulting from product liability claims.

We are exposed to risks associated with product liability claims in the event that the use or installation of our products results in injury or damage.

Since our products are electricity-producing devices, it is possible that users could be injured or killed by our products, whether by product malfunctions, defects, improper installation or other causes. As a manufacturer, distributor, and installer of products that are used by consumers, we face an inherent risk of exposure to product liability claims or class action suits in the event that the use of the solar power products we sell or install results in injury or damage. Moreover, to the extent that a claim is brought against us we may not have adequate resources in the event of a successful claim against us. We rely on our general liability insurance to cover product liability claims and have not obtained separate product liability insurance. The successful assertion of product liability claims against us could result in potentially significant monetary damages and, if our insurance protection is inadequate, could require us to make significant payments.

We may be subject to unexpected warranty expense.

9

Our current standard product warranty for our mechanical assembly product ranges from one to five years, and the industry is currently trending towards a ten-year warranty, which we may also have to implement. We intend to offer the industry standard of 25 years for our solar modules and industry standard five (5) years on inverter and balance of system components. With some of these electronic components, we may also need to implement a ten-year standard warranty. We believe our warranty periods are consistent with industry practice. Due to the warranty period, we bear the risk of extensive warranty claims long after we have shipped product and recognized revenue. Any increase in the defect rate of our products would cause us to increase the amount of warranty reserves and have a corresponding negative impact on our financial statements. As of September 30, 2006 the Company has not recorded any warranty reserves.

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

The primary energy supply to our operations in China is electricity from the local power company. There is not an extensive and resilient connection to a national or regional power grid. Thus, we may be exposed to power outages and shut downs which our standby generators would only partially mitigate. Fluctuations in world oil prices and supply could affect our supply and cost of electricity.

From time-to-time, we may seek additional equity or debt financing and may not be able to secure this financing at acceptable terms.

From time-to-time, we may seek additional equity or debt financing to provide for the capital expenditures required to maintain or expand our design and production facilities and equipment and/or working capital, as well as to repay loans if our cash flow from operations is insufficient and for future acquisitions of businesses, facilities, technologies, assets and product lines. We cannot predict with certainty the timing or amount of any such capital requirements. If such financing is not available on satisfactory terms, we may be unable to expand our business or to develop new business at the rate desired, or fund our existing working capital needs which could affect our operating results and our assets may be significantly impaired.

We must effectively manage our growth.

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

· enhance our operational, financial and management systems;

· expand usage of our facilities and equipment; and

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

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

Risks Related to International Operations

We are dependent on our Chinese manufacturing operations.

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

The primary energy supply to our operations in China is electricity from the local power company. There is not an extensive and resilient connection to a national or regional power grid. Thus, we may be exposed to power outages and shut downs which our standby generators would only partially mitigate. Fluctuations in world oil prices and supply could affect our supply and cost of electricity.

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

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

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

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

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

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

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

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

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

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

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

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We face risks associated with international trade and currency exchange.

We transact business in a variety of currencies including the U.S. dollar and the Chinese Yuan Renminbi, or RMB. Although we transact business predominantly in U.S. dollars, we collect a portion of our revenue and incur approximately 22% of our operating expenses, such as payroll, land rent, electrical power and other costs associated with running our facilities in China, in RMB. Adverse movements between the selling currency and the RMB would have a material impact on our profitability. Changes in exchange rates would affect the value of deposits of currencies we hold. The RMB has been broadly stable against the U.S. dollar in the past three years, but in July 2005 the Chinese government announced that the RMB would be pegged to a basket of currencies, making it possible for the RMB to rise and fall relative to the U.S. dollar. We do not currently hedge against exposure to currencies. We cannot predict with certainty future exchange rates and thus their impact on our operating results. We do not have any long-term debt valued in RMB.

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

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

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

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

Risks Related to Our Common Stock

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

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

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

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There is no public market for our common stock.

There currently is no public market for our common stock. While we intend to develop a public market for our common stock, there are no assurances that a public market will develop or provide liquidity for investors when needed. To the extent that a limited public market develops in the future, we can give no assurance that an active trading market for our common stock will develop, or if one develops, that trading will continue. Accordingly, investors in our common stock may not have immediate liquidity at any given time.

We expect our stock price to be volatile.

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

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

· developments generally affecting the energy industry;

· investor perceptions of the business;

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

· actions by institutional or other large stockholders;

· terrorist acts;

· actual or anticipated fluctuations in results of operations;

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

· introduction of new products by us or our competitors;

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

· changes in market valuation or earnings of our competitors;

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

· results of operations and financial performance; and

· general economic, industry and market conditions.

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

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

There are several individuals and entities that will hold significant positions in our common stock. These holders are not obligated to retain our shares. Any sale by these or other holders of a substantial amount of common stock in any future public market, or the perception that such a sale could occur, could have an adverse effect on the market price of our common stock. Such an effect could be magnified if our stock is relatively thinly traded.

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

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SEC rules require a broker-dealer to provide certain information to purchasers of securities traded at less than $5.00, which are not traded on a national securities exchange or quoted on the NASDAQ Stock Market. Since our common stock is not currently traded on an “exchange,” if the future trading price of our common stock is less than $5.00 per share, our common stock will be considered a “penny stock,” and trading in our common stock will be subject to the requirements of Rules 15g-9015g-9 under the Securities Exchange Act of 1934 (the “Penny Stock Rules”). The Penny Stock Rules require a broker-dealer to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also give bid and offer quotations and broker and salesperson compensation information to the prospective investor orally or in writing before or with the confirmation of the transaction. In addition, the Penny Stock Rules require a broker-dealer to make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction before a transaction in a penny stock. These requirements may severely limit the liquidity of securities in the secondary market because few broker-dealers may be likely to undertake these compliance activities. Therefore, unless an exemption is available from the Penny Stock Rules, the disclosure requirements under the Penny Stock Rules may have the effect of reducing trading activity in our common stock, which may make it more difficult for investors to sell.

USE OF PROCEEDS

The Selling Security Holders will sell all of the common stock offered by this Prospectus. We will not receive any proceeds from the sale of common stock by the Selling Security Holders. We will receive gross proceeds of approximately $920,000 if all of the outstanding warrants are exercised by the Selling Security Holder for cash. Any proceeds we receive from the cash exercise of warrants will be used for working capital and general corporate matters.

MARKET FOR COMMON EQUITY AND RELATED

STOCKHOLDERS MATTERS

Our common stock is not traded on any exchange and there is currently no established public trading market for our common stock.

We have agreed to register 18,833,334 shares of our common stock under the Securities Act of 1933, as amended for sale to certain stockholders who also hold certain registration rights, including 800,000 shares of our common stock that are issuable upon the exercise of an outstanding warrant.

We intend to apply for listing of the securities on the OTC Bulletin Board, but there can be no assurance that we will be able to obtain this listing. The OTC Bulletin Board securities are not listed and traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers in stocks. In order to be listed on the OTC Bulletin Board, we must obtain a market maker who will sponsor our securities. If we are unable to obtain a market maker for our securities, we will be unable to develop a trading market for our common stock. In addition, even if we do locate a market maker, there is no assurance that our securities will be able to meet the requirements for a quotation or that the securities will be accepted for listing on the OTC Bulletin Board, or that an active trading market will develop for our common stock.

Holders

As of January 13, 2007 we have approximately 138 holders of record of our common stock.

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Dividend Policy

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

Securities Authorized for Issuance under Equity Compensation Plans

As of December 31, 2005, we had no equity compensation plan approved by our stockholders. On December 29, 2006, our Board of Directors approved our 2006 Equity Incentive Plan reserving nine percent of the outstanding shares of common stock of the Company (“2006 Plan”). Pursuant to the Preliminary Proxy Statement to be filed with the Securities and Exchange Commission for the upcoming annual meeting, our stockholders will be voting on the approval of the 2006 Equity Incentive Plan at our next annual meeting of stockholders.

On October 4, 2006, in connection with services provided by Roth Capital Partners, LLC (“Roth Capital”) in our private placement of up to 16,000,000 shares of our common stock, we issued Roth Capital a warrant to purchase 800,000 shares of our common stock at $1.15 per share until October 4, 2011. We have not otherwise issued options and warrants to individuals pursuant to individual compensation plans not approved by our stockholders.

In connection with the merger with SPI, we substituted 2,000,000 outstanding restricted stock awards and options of SPI with our restricted stock awards and options to purchase shares of our common stock. The options have an exercise price of $1.00 and are subject to vesting schedules and terms. Accordingly, as of December 31, 2006, we have 2,000,000 restricted stock awards and options outstanding. The following table provides aggregate information as of December 31, 2006 with respect to all compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance.

Plan Category	(a) Number of securities to be issued upon exercise of of outstanding options, warrants and right	Weighted-average exercise price of outstanding options warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity Compensation Plans approved by security holders	0	0	0
Equity Compensation Plans not approved by security holders	2,800,000	$1.04	104,000 (1)
Total	2,800,000	$1.04	104,000 (1)

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

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

The following discussion regarding our financial statements should be read in conjunction with the financial statements included in this Prospectus.

The following discussion regarding SPI and DRCI financial statements should be read in conjunction with the financial statements of SPI and DRCI included this Prospectus. Reference to “we”, “our”, or “us” in this section refers historically to the operations of SPI and DRCI, and references to Solar Power Inc., a Nevada corporation (formerly known as Welund Fund, Inc.) are referred to as Solar Power Inc., a Nevada corporation (formerly known as Welund Fund, Inc.).

Overview

We are currently engaged in manufacturing cable, wire and mechanical assemblies and in designing, distributing and installing complete photovoltaic systems for industrial, commercial and residential facilities located primarily in the United States. We intend to begin manufacturing complete photovoltaic systems in our China factory by the end of the first half the 2007 calendar year. Our operations are conducted through our wholly owned subsidiary, SPI, and its wholly-owned subsidiaries located in California and in China. We are in the process of expanding our distribution by developing a franchise operation to design and install solar power systems.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition presented in this section are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles generally accepted in the United States of America (“U.S. GAAP”). During the preparation of our financial statements we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to sales returns, pricing concessions, bad debts, inventories, investments, fixed assets, intangible assets, income taxes and other contingencies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under current conditions. Actual results may differ from these estimates under different assumptions or conditions.

Business Combinations

We account for business combinations in accordance with Financial Accounting Standards Board (“FASB”) Statement (“SFAS”) No. 141, Business Combinations. On December 29, 2006, we completed the merger contemplated by the certain Agreement and Plan of Merger dated August 23, 2006, as amended by that certain First Amendment to the Agreement and Plan of Merger dated October 4, 2006, Second Amendment to the Agreement and Plan of Merger dated December 1, 2006, and Third Amendment to the Agreement and Plan of Merger dated December 21, 2006 (collectively, the “Agreement”), by and among us, Solar Power, Inc., a California corporation (“SPI”), and our wholly-owned subsidiary, Welund Acquisition Corp., a Nevada corporation (“Merger Sub”) as previously reported on Current Reports on Form 8-K filed with the SEC on August 29, 2006, October 26, 2006, December 6, 2006, and December 22, 2006, pursuant to which our Merger Sub merged with and into SPI with SPI surviving as our wholly owned subsidiary (the “Merger”).

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Goodwill

Goodwill and Other Intangibles assets—Costs in excess of the fair value of tangible and other intangible assets acquired and liabilities assumed in a purchase business combination are recorded as goodwill. SFAS No. 142, “ Goodwill and Other Intangible Assets,” requires that companies no longer amortize goodwill, but instead test for impairment at least annually using a two-step approach. We evaluate goodwill, at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit.. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss

As a result of its acquisition of DRCI the Company recorded goodwill in the amount of $701,493 on its balance sheet.

On November 15, 2006, the Company completed the acquisition of DRCI, paying US$1,446,565 in cash in exchange for 100% of the outstanding shares of DRCI. Funds for the acquisition payment were provided on behalf of the Company by Solar Power, Inc. (Nevada), formerly known as Welund Fund Inc., (“SPI Nevada”). The Company and SPI Nevada have agreed to merge in a reverse acquisition.

By virtue of control, funding, operation and obligation,, the acquisition of DRCI became effective on June 1, 2006. As a result, the interim financials of the Company include the results of operations of DRCI subsequent to June 1, 2006 and the purchase price was allocated to the acquired assets and liabilities as of June 1, 2006.

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

Revenue Recognition

SPI recognizes revenue from product sales in accordance with Staff Accounting Bulletin (SAB) No. 104 “Revenue Recognition in FinancialStatements.” SAB No. 104 requires that revenue be recognized when all of the following conditions are met:

• Persuasive evidence of an arrangement exists,

• Delivery has occurred or services have been rendered,

• Price to the customer is fixed or determinable, and

• Collectability is reasonably assured.

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Revenue related to our assemblies of cables, wires and mechanicals is recognized when title of goods sold has passed to the purchaser. Timing of title passing to the purchaser is determined by the purchase order or contract. Customers do not have a general right of return on products shipped. . Revenue relating to photovoltaic installation and integration is recognized on the percentage of completion method when major system components have been delivered and installed.

Inventories

We plan inventory procurement and production based on orders received, forecasted demand and supplier requirements. Inventories are stated at the lower of cost or market. Cost is determined on an actual cost basis. Costs included in the valuation of inventory are labor, materials (including freight and duty) and manufacturing overhead. Provisions are made for obsolete or slow moving inventory based on management estimates. We write down inventories for estimated obsolescence based on the difference between the cost of inventories and the net realizable value based upon estimates about future demand from customers and specific customer requirements on certain projects.

Income Taxes

Pursuant to SFAS No. 109, “Accounting for Income Taxes,” income taxes are recorded based on current year amounts payable or refundable, as well as the consequences of events that give rise to deferred tax assets and liabilities. We base our estimate of current and deferred taxes on the tax laws and rates that are currently in effect in the appropriate jurisdiction. Changes in laws or rates may affect the current amounts payable or refundable as well as the amount of deferred tax assets or liabilities. At September 30, 2006, the Company had net operating loss carry forward of US$31,193 which will expire between 2011 and 2012 and of $303,571 which will expire in 2027.

Geographical Information

The Company has two reportable segments: (i) cable, wire and mechanical assemblies sales and processing “cable, wire and mechanical assemblies”), and (ii) photovoltaic installation, integration and sales and solar panel sales (“Photovoltaic installation, integration and sales”. The Company's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies. Most of the businesses were acquired as a unit, and the management at the time of the acquisition was retained.

Contributions of the major activities, profitability information and asset information of the Company's reportable segments for the periods ended December 31, 2005, September 30, 2005 and September 30, 2006 are as follows:

	9 months ended							8 months ended
	September 30, 2006							September 30, 2005
	Net sales		Intersegment Sales		Profit (loss)			Net sales		Intersegment Sales		Profit (loss)
Segment:
Cable, wire and mechanical assemblies		2,706,666		-		988,621			1,163,273		-		155,479
Photovoltaic installation, integration and sales		598,224		-		(877,480	)		-		-		-
Segment total		3,304,890		-		111,141			1,163,273		-		155,479
Reconciliation to consolidated totals:
Sales eliminations		-		-		-			-		-		-
Consolidated totals:
Net sales		3,304,890		-					1,163,273		-
Income before income taxes						111,141							155,479

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	9 months ended					8 months ended
	September 30, 2006					September 30, 2005
	Interest income		Interest expenses			Interest income		Interest expenses
Segment:
Cable, wire and mechanical assemblies		85		-			14		(6,444	)
Photovoltaic installation, integration and sales		-		-			-		-
Unallocated		-		(21,553	)		-		-
Consolidated total		85		(21,553	)		14		(6,444	)

	9 months ended							8 months ended
	September 30, 2006							September 30, 2005
	Identifiable assets		Capital expenditure		Depreciation and amortization			Identifiable assets		Capital expenditure		Depreciation and amortization
Segment:
Cable, wire and mechanical assemblies		2,707,714		75,259		(3,371	)		467,752		17,100		(847	)
Photovoltaic installation, integration and sales		1,935,142		45,104		(2,328	)		-		-		-
Consolidated total		4,642,856		120,363		(5,699	)		467,752		17,100		(847	)

Since all the revenue of the Company was generated to the United States, no analysis of sales by geographical location is presented.

The locations of the Company's identifiable assets are as follows:

	September		September
	30, 2006		30, 2005
	(Unaudited)		(Unaudited)
	US$		US$
Hong Kong		1,016,249		391,007
China		1,691,465		76,745
US		1,935,142		-
		4,642,856		467,752

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Recent Accounting Pronouncement

In December 2004, the Financial Accounting Statements Board (FASB) issued SFAS No. 123 (revised 2004), "Share-Based Payment", which is a revision of SFAS No. 123, "Accounting for Stock-Based Compensation", SFAS No. 123(R) supersedes APB Opinion No.25, “Accounting for Stock Issued to Employees and amends SFAS No.95, “Statement of Cash Flows”. Generally, the approach in SFAS No.123(R) is similar to the approach described in SFAS No. 123. However, SFAS No.123 (R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. SFAS No. 123 (R) was to be effective from the beginning of the first interim or annual reporting period after June 15, 2005. In April 2005, the Securities and Exchange Commission delayed the implementation of SFAS 123(R). As a result, SFAS 123(R) will be effective from the beginning of the first annual reporting period after June 15, 2005, which is the period ending December 31, 2006 for the Company. In November 2006, the Company adopted an equity incentive plan and intends to grant options to purchase up to 2,000,000 shares of its common stock.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29”. SFAS No. 153 addresses the measurement of exchanges of non-monetary assets and redefines the scope of transactions that should be measured based on the fair value of the assets exchanged. SFAS No. 153 is effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005, which is the fiscal year ending December 31, 2006. The adoption of SFAS No. 153 does not have a material effect on the Company’s consolidated financial position or results of operations.

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

In March 2005, FASB issued FASB Interpretation (“FIN”) No. 47, “Accounting for Conditional Asset Retirement Obligations.” FIN 47 clarifies that the term “Conditional Asset Retirement Obligation” as used in FASB Statement No. 143, “Accounting for Asset Retirement Obligation,” refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. Accordingly, an entity is required to recognize a liability for the fair value of a Conditional Asset Retirement Obligation if the fair value of the liability can be reasonably estimated. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The adoption of FIN 47 does not have a material affect on the Company’s financial position, results of operations or cash flows.

In May 2005, the Financial Accounting Standards Board (“FASB”) SFAS No. 154, Accounting Changes and Error Corrections (“SFAS No. 154”), which replaces Accounting Principles Board Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the requirements for the accounting for and reporting of a change in accounting principles. It requires retrospective application to prior periods’ financial statements of changes in accounting principles, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 does not have a material effect on the Company’s consolidated financial position or results of operations.

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In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006, with earlier adoption permitted. The Company is currently evaluating the provisions of FIN 48.

On September 13, 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements” (SAB 108”), which provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The guidance is applicable of the fiscal 2008. The Company does not expect SAB 108 to have any impact on the consolidated financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements. SFAS No. 157 establishes a common definition for fair value to be applied to US GAAP guidance requiring use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The Company does not expect SFAS No. 157 to have any impact on the consolidated financial statements.

Recent Events

On December 28, 2006, prior to the Merger, SPI acquired several contracts and a list of prospects from Sundance Power, LLC. SPI paid an up front deposit of $75,000 in cash and issued 75,000 shares of restricted common stock of SPI. An additional $175,000 in cash and $175,000 in stock can be earned by the Sundance Power, LLC shareholders based upon the successful performance of the contracts acquired.

On December 29, 2006, the Merger with SPI was completed and as a result SPI became our wholly owned subsidiary. The Merger resulted in a change of control in our management. Our directors now consist of Mr. Kircher, Mr. Kelley, Mr. Cohan, Mr. Nyman, and Mr. Regan and our executive officers consist of Mr. Kircher and Mr. Carnahan. In connection with the Merger, we issued the existing shareholders of SPI an aggregate of 14,500,000 shares of our restricted common stock and substituted 2,000,000 restricted stock awards and options of SPI with our restricted stock awards and options to purchase shares of our common stock.

As a result of the Merger, all amounts of indebtedness owed to us by SPI, totaling $3,746,565, have been eliminated through consolidation.

RESULTS OF OPERATION

SPI Results of Operation

For the Period from January 18, 2005 (date of inception) through September 30, 2006

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Net revenue - For the period from January 18, 2005 through September 30, 2005, SPI has recognized revenues of $1,163,273, principally from manufacturing cable, wire and mechanical assemblies. For the nine-month period from January 1, 2006 to September 30, 2006, SPI has recognized revenues of $3,304,890 principally from manufacturing cable, wire and mechanical assemblies as well as from distributing and installing complete photovoltaic systems. This 184% year-over-year growth was attributed to both increased sales opportunities for the manufacturing segment and by new sales opportunities generated by our DRCI acquisition. By virtue of controlling, operating, funding and assuming all obligations, we have included the revenues from our DRCI acquisition for the four months from June 1, 2006, through September 30, 2006.

Cost of revenue - Cost of revenue for the period from January 18, 2005 through September 30, 2005 totaled $325,558 compared to $1,876,281 for the nine-months ended September 30, 2006. Total cost of revenue was 28.0% and 56.8%, respectively for the comparable periods. The increase reflects a change in our manufacturing product line mix related to photovoltaic systems.

Selling, general and administrative expenses - During the period from January 18, 2005 through September 2005, SPI has incurred selling, general and administrative expenses totaling $676,432, principally consisting of employee compensation, travel, insurance, consulting fees, and rent expense. In comparison, for the period from January 1, 2006 to September 30, 2006, SPI has incurred $1,338,217, reflecting a 97.8% increase from the prior year. The increase can be attributed to increased sales and acquiring additional resources to focus on building the distribution and installation of our photovoltaic systems.

Net income - Our net income for the eight-month period from January 18, 2005 through September 30, 2005, was $121,052. In comparison, for the period from January 1, 2006 to September 30, 2006, SPI recorded $223,960 in net income. This was an 85.0% increase over the prior period with more volume covering our fixed overhead.

Results of Solar Power, Inc. (a Nevada corporation) (formerly Welund Fund, Inc.)

For the period from July 16, 2002 through September 30, 2006, we have recognized revenues of $32,054, principally from finance income and the amortization of discount related to the purchased auto loans. On August 23, 2006, we decided to sell our current business of finance receivables in order to comply with the conditions set forth in the Merger Agreement. Management has completed the sale of its current pool of finance receivables to a shareholder for 85% of the loan pool’s payoff balance for cash, which approximates the carrying value of the receivables. Accordingly, we have reclassified our operations related to finance receivables to discontinued operations and have characterized the loan pool and the related party receivable as held for sale in the accompanying financial statements.

During the same period from July 16, 2002 through September, 2006, we have incurred general and administrative expenses totaling $233,565, principally consisting of stock-based compensation; legal, audit, and consulting fees; and rent expense.

LIQUIDITY AND CAPITAL RESOURCES

We generated net income of $223,960 for the nine months ended September 30, 2006 and $121,052 for the period from January 18, 2005 through September 30, 2005. We also have accumulated earnings of $109,376 as of September 30, 2006.

During the nine months ended September 30, 2006 we experienced a decrease in cash and cash equivalents of $18,359. The components of the decrease were cash used in operating activities of $1,640,944, cash used in investing activities of $120,363 offset by cash from financing activities of $ 1,742,948. The major component of cash used in operating activities was an increase in accounts receivable of $1,518,260. Cash used in investing activities was $120,363 for the purchase of plant and equipment. The $1,742,948 generated from financing activities consisted of $1,725,000 from affiliate loans and $17,948 from capital contributions.

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Cash used in operations was influenced primarily by revenue growth through the increase in accounts receivable, inventory and accounts payable.

Accounts receivable, net

Our accounts receivable, net of allowances, were $1,572,943 and $54,683 for the periods ended September 30, 2006 and 2005 respectively. In this comparative period the contributing factor to increased accounts receivable was increased sales.

Inventories

Our inventories were $1,102,975 and $80,327 for the periods ended September 30, 2006 and 2005, respectively, an increase of $1,022,648. We attribute this increase to purchases of material to ramp our solar business unit.

Accounts payable

Our accounts payable was $491,198 and $82,187 for the periods ended September 30, 2006 and 2005, respectively an increase of $409,011. We attribute this increase to our increased inventory levels associated with the ramping of our solar business unit.

In connection with the Offering, we issued 16,000,000 shares of our Common Stock at $1.00 for gross proceeds of $16,000,000 during September and October 2006. At September 30, 2006, we had assets totaling $11,088,187, including $9,650,779 of cash and various receivables totaling $1,437,408. Our assets are principally the result of the issuance of 10,809,979 shares of our Common Stock during September 2006 at $1.00 per share. At September 30, 2006, we also had total liabilities of $698,484, principally consisting of a payable to Roth Capital and estimated registration costs in connection with the Offering. Through November 15, 2006, we used $3,746,565 of the proceeds raised from the Offering to make loans to SPI.

Since inception, we have financed our operations primarily through the private placement of our equity securities. Our plan and focus for the next 12 months will be setting up our solar panel manufacturing facility, building our products, generating new customers, and organizing our distribution model through the development of a franchise network. We believe we will need approximately $2,900,000 to continue operations for the next 12 months. The Company has successfully completed two private placements of the Company’s stock with gross proceeds of $16,000,000. With the proceeds from the private placements, we believe we have sufficient working capital to satisfy our working capital requirements to fund operations at their anticipated levels for the foreseeable future. As of December 31, 2006, we had approximately $11,479,000 in cash and cash equivalents.

Currently, the supply of solar panels has been constrained. As a result, it has been necessary to be proactive in obtaining enough short-term supply of solar panels to meet several near-term contract installation dates. All panel purchases have been prepaid prior to the manufacturer shipping the product. On numerous occasions, we have ordered our projected supply several months in advance. This inventory build-up has an adverse affect on cash flow and carries a pricing risk if the available supply of solar panel prices decreases significantly.

We have successfully completed a private placement , raising gross proceeds of $16,000,000. Prior to the Merger, we loaned SPI funds to meet SPI’s working capital requirements. Following the Merger, we expect to use proceeds from our recent offering to expand our China manufacturing facility, ramp our sales, marketing and integration resources. We expect to obtain additional capital resources by selling territorial franchise rights and by obtaining debt or receivable financing. In the short term we do not expect any material change in the mix or relative cost of our capital resources.

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We are using our working capital to ramp up our manufacturing capacity to build photovoltaic (PV) products and to expand our distribution and installation of solar systems. This growth process requires a significant allocation of working capital to fulfill our goals. We intend to work with third-party financing sources to fund the purchases of our customers’ photovoltaic systems.

Capital Expenditures

The following table outlines payments due under our significant contractual obligations over the periods shown, exclusive of interest:

Contract Obligations at December 31, 2006	Total	Less than 1 year	1-3 years	3-5 years	More than 5 years
Long term debt
Loan payable	245,000	245,000	-	-	-
Loan payable - related party	335,000	335,000	-	-	-
	580,000	580,000	-	-	-
Lease obligations
Shenzhen factory	493,200	164,400	328,800	-	-
Granite Bay corporate office	252,460	81,816	170,644	-	-
Shenzhen housing	54,216	17,136	37,080	-	-
	799,876	263,352	536,524	-	-
Capital expenditures
Shenzhen factory renovations	113,268	113,268	-	-	-
Total contractual obligations	1,493,144	956,620	536,524	-	-

The above table outlines our obligations as of December 29, 2006 and does not reflect any changes in our obligations that have occurred after that date.

Off-Balance Sheet Arrangements

At January 13, 2006, we did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

DESCRIPTION OF BUSINESS

Overview

We, through our wholly owned subsidiaries, SPI, International Assembly Solutions, Limited (Hong Kong) and IAS Electronics (Shenzhen) Co., Ltd, currently manufacture cable, wire and mechanical assemblies and are expanding operations to produce and install solar power systems for use in residential, commercial and industrial applications. We intend to develop, manufacture and market photovoltaic panels and system components for the production of environmentally clean electric power primarily in the United States. Photovoltaic cells generate direct current electricity when exposed to sunlight. We believe that we have distribution and installation advantages by having our manufacturing facilities in China that will result in lower operational cost versus other competing solar power companies and technologies.

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Our revenues have been primarily derived from the sale of cable, wire and mechanical assemblies. These products are sold directly to telecommunications, transportation and manufacturing companies for use in commercial and industrial applications. We intend to design, develop, manufacture and market a variety of solar modules, which are assemblies of photovoltaic cells that have been electrically interconnected and laminated in a physically durable and weather-tight package. These products are intended for use in residential, commercial and industrial applications. We intend to distribute primarily through our company-owned stores and our proposed franchisee network, currently in the early stages of development. Our solar modules and balance of system products add value by incorporating system design features enabling more efficient installation and resulting in significant labor costs savings.

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

Business Development

We were originally incorporated in the State of Delaware on July 16, 2002 under the name “Welund Fund, Inc.” Effective January 26, 2006, pursuant to the authorization of our stockholders, we merged with our wholly-owned subsidiary, a Nevada corporation, and reincorporated in the State of Nevada. As a result of the merger, we changed our legal domicile from the State of Delaware to the State of Nevada. On October 4, 2006, we changed our name from “Welund Fund, Inc.” to “Solar Power, Inc.”

On August 23, 2006, we entered into an Agreement and Plan of Merger with SPI and Welund Acquisition Corp., a Nevada corporation, and our wholly-owned subsidiary (“Merger Sub”).

On December 29, 2006, our Merger Sub merged with SPI, pursuant to which SPI was the surviving entity. As a result of the merger, SPI became our wholly-owned subsidiary and we discontinued our former operations and business of purchasing sub-prime auto loans. We changed our focus and strategic direction and pursued operations as a development stage company in the solar power business.

Industry Overview

According to the International Energy Outlook 2006 (IEO2006), net electricity consumption is expected to more than double between 2003 and 2030, growing from 14.8 trillion kilowatt hours to 30.1 trillion kilowatt hours. During this time frame, the report projects that natural gas and renewable energy sources are the only fuels expected to see an increase in the share of the total world electricity generation.

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

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

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

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

According to the IEO2006 report, to meet the world’s electricity demand, an extensive expansion of installed generating capacity will be required. How each country or region adds the additional capacity depends on the availability of local resources, energy security and market competition among fuel choices. The fuel mix used to generate electricity over the past thirty years has changed significantly. Coal has remained the dominant fuel but the use of nuclear power increased during the 1970s and natural gas rapidly grew during the 1980s and 1990s. This fuel mix change was encouraged by the rise in oil prices.

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

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

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

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

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

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

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Distributed Generation and Renewable Energy

Distributed generation and renewable energy are two promising areas for growth in the global electric power industry. Distributed generation is defined as point-of-use electricity generation that either supplements or bypasses the electric utility grid. Distributive generation employs technologies such as solar power, micro turbines and fuel cells. The move to distributed power will come from capacity constraints, increased demand for reliable power reliability and the economic challenges of building new centralized generation and transmission facilities.

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

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

Solar Power

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

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

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

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

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

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

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

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

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

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

Germany, Japan and the United States presently comprise the majority of world market sales for solar power systems. Government policies in these countries, in the form of both regulation and incentives, have accelerated the adoption of solar technologies by businesses and consumers. For example, in the United States, the 2005 energy bill enacted a 30% investment tax credit for solar, and in January 2006 California approved the largest solar program in the country’s history, a $3.2 billion, 11-year California Solar Initiative. These three countries together accounted for 83% of the solar global market in 2005. Internationally, Spain, Portugal and Italy have recently developed new solar support programs.

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

Our Challenges

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

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

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

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

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

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

Our Solution

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

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

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

· high quality components and supply chain management expertise;

· custom design and manufacturing expertise; and

· superior customer service and post-sales support.

Our Strategy

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

· Outsource completed solar cells. We believe that we have the resources and relationships to acquire solar cells. We have entered into discussion with several manufacturers who possess the production capacity to deliver the required number of complete solar cells. The manufacturing process to convert metallurgical grade silicon into either solar wafers or solar cells requires high capital investments and long lead times. We firmly believe that our firm’s resources are better applied to manufacturing the solar module and balance of system products.

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

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

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

Customers

We currently build cable and harness assemblies for Siemens and wire harness assemblies for certain U.S. telecom companies. Additionally, we have acquired a group of contracts and prospects through DRCI. DRCI signed a number of contracts to provide photovoltaic integration services. Current customers include Centex Homes, where solar is being offered as both a standard and upgrade feature, and Sun Country Builders, who are installing the highest power to usage systems of any multi-family projects in the nation. We acquired the contracts and customers when SPI acquired DRCI.

Products and Services

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

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

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

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

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

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

Intellectual Property

We rely and will continue to rely on trade secrets, know-how and other unpatented proprietary information in our business. We are in the process of registering the following trademarks: Solar Power, Inc, the Solar Power, Inc. logo, International Assembly Solutions, Ltd. and IAS, Ltd. (the “Marks”) for use with our solar power products. In addition, we have 2 provisional patents pending for certain proprietary technologies.

Competition

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

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

The entire solar industry also faces competition from other power generation sources, both conventional sources as well as other emerging technologies. Solar power has certain advantages and disadvantages when compared to other power generating technologies. The advantages include the ability to deploy products in many sizes and configurations, to install products almost anywhere in the world, to provide reliable power for many applications, to serve as both a power generator and the skin of a building and to eliminate air, water and noise emissions. Whereas solar generally is cost effective for off-grid applications, the high up-front cost of solar relative to most other solutions is the primary market barrier for on-grid applications. Furthermore, unlike most conventional power generators, which can produce power on demand, solar power cannot generate power where sunlight is not available, although it is sometimes matched with battery storage to provide highly reliable power solutions.

Manufacturing and Assembly Capabilities

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

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Our principal manufacturing objective is to provide for large-scale manufacturing and assembly of our solar power products at low costs that will enable us to penetrate price-sensitive solar power markets. Our 123,784 square foot campus in NanYue, Shenzhen, Peoples Republic of China (PRC) includes approximately 101,104 square feet of manufacturing space. The Shenzhen facility will include a complete line of equipment to manufacture cable harnesses and mechanical assemblies, including solar cells, modules and inverters. Additional equipment will test and verify product functionality and performance standards. We expect this facility to have a total capacity of approximately 50 megawatts per year if operated at full capacity.

Suppliers

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

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

Sales and Marketing

We intend to bring our solar power products to market by utilizing strategic company-owned store operations and establishing a national Franchise network.

Company-Owned Stores

Company-owned store operations will market, sell and install our products within a locally defined geographic area. We expect to offer superior products and services than our competitors at a value that is recognized by our customer base. We should be able to add significant value by providing a reliable product source for all modules and balance of system items, by designing complete PV systems that include all modules and associated electronics, structures and wiring systems, and by providing expertise and assistance with complex governmental permit processing and rebate program administration.

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

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Franchising

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

· Build a national brand

· Leverage the brand quickly

· Leverage sales and marketing both regionally and nationally

· Develop consistency in installation, training and service

· Access national accounts through corporate programs rather than regional programs

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

Other Mediums

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

Employees

As of December 29, 2006, we had approximately 104 full-time employees, including approximately 3 engaged in research and development and approximately 83 engaged in manufacturing, the majority of which are employed through our subsidiary in China. None of our employees is represented by a labor union nor are we organized under a collective bargaining agreement. We have never experienced a work stoppage and believe that our relations with our employees are good.

DESCRIPTION OF PROPERTY

Our manufacturing facilities consist of 123,784 square feet, including 100,104 square feet of factories and 23,680 square feet of dorms, situated in an industrial suburb of Shenzhen, Southern China known as Long Gang. Only the state may own land in China. Therefore, we lease the land under our facilities, and our lease agreement gives us the right to use the land until July 31, 2009 at an annual rent of $164,400. We have an option to renew this lease for 3 additional years on the same terms.

Our corporate headquarters are located in Granite Bay, California in a space of 3,896 square feet. The lease expires in July 2009, and the rent is currently $81,816 per year for the first year, $84,153 for the second year, and $86,491 for the remainder of the lease.

LEGAL PROCEEDINGS

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

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DIRECTORS, EXECUTIVE OFFICERS,

PROMOTERS AND CONTROL PERSONS

Directors, Executive Officers and Significant Employees

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

Person	Age	Position
Stephen C. Kircher	53	Chairman of the Board of Directors, Chief Executive Officer
Larry D. Kelley	61	Director
Timothy B. Nyman	55	Director
Ronald A. Cohan	65	Director
D. Paul Regan	60	Director
Glenn E. Carnahan	43	Chief Financial Officer
Bradley J. Ferrell	30	Chief Operating Officer of SPI
Alan M. Lefko	59	Vice President, Finance of SPI
Todd Lindstrom	39	Vice President, Operations of SPI

Our Directors and Executive Officers

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

Larry D. Kelley has served as our director since December 29, 2006. Mr. Kelley has served as a director of SPI since August 2006. Mr. Kelley is President and partner of McClellan Business Park, LLC. Mr. Kelley has been and is the President and Chief Executive Officer of Stanford Ranch I, LLC, a 3,500-acre master planned community in Rocklin, California. Mr. Kelley has been involved in real estate for twenty-nine years. Previously he spent ten years with US Home Corporation, one of the nation’s largest homebuilders. In his capacity as President of Community Development, he was responsible for the acquisition, development and marketing of numerous master-planned communities in ten states. Mr. Kelley has a Bachelors of Science in Industrial Engineering at Texas A&M. In addition, he has a Masters of Business Administration at Harvard Business School.

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

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

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

Glenn E. Carnahan has served as our Chief Financial Officer since December 29, 2006. Mr. Carnahan has served as the Chief Financial Officer of SPI since May 2006. Previously, Mr. Carnahan served as the Chief Financial Officer of Moller International, a research and development firm that produces the Skycar, a personal vertical take-off and landing vehicle. In 2001, Mr. Carnahan founded IBC Onsite Solutions, Inc. (IBC), a software development firm specializing business management for the construction services industry. While at IBC, he held a variety of financial and operational roles. Mr. Carnahan also served as Chief Financial Officer for Signet Testing Labs, Inc., a construction services and engineering company, from 1997 to 2000. His significant contributions enabled the company to double its revenues during his tenure. Mr. Carnahan worked for the Coca Cola Enterprises (CCE) from 1994 to 1997. While at CCE, he conducted numerous financial studies including a complex activity-based cost study for Safeway’s Strategic Category Optimization Plan. Finally, Mr. Carnahan held different financial roles for the Robert Mondavi Corporation from 1992 to 1994. Mr. Carnahan earned his Master in Business Administration from the University of Notre Dame and his Bachelor of Arts in Economics from the University of California, Davis.

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

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

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

EXECUTIVE COMPENSATION

Summary Compensation

For the fiscal year ended December 31, 2005, Mr. Robert Freiheit was our sole director and Chief Executive Officer. Until Mr. Freiheit’s resignation on August 22, 2006, Mr. Freiheit had been our sole director and Chief Executive Officer since June 9, 2004. None of our former directors and officers has received any compensation for their services rendered as officers and directors, and have not accrued any compensation pursuant to any agreement with us. No options or warrants were granted to officers and directors in fiscal years ended December 31, 2004 and 2005.

In connection with the Merger with SPI, we substituted 2,000,000 shares of SPI restricted stock awards and options for options to purchase shares of our common stock at $1.00 per share subject to certain vesting conditions and terms, which included options held by our directors and executive officers. As a result of the substitution of options in the Merger, as of fiscal year ended December 31, 2006, certain directors and executive officers were issued our restricted stock awards and options to purchase shares of our common stock.

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The following table provides information concerning compensation earned by our former and current named executive officers on a post-merger basis, including the options and restricted stock awards substituted in connection with the Merger. A column or table has been omitted if there was no compensation awarded to, earned by or paid to any of the named executive officers or directors required to be reported in such table or column in the respective fiscal year. As of December 31, 2006, no other executive officer was paid in excess of $100,000 in 2005 or 2006.

Summary Compensation Table
Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	All Other Compensation ($)	Total ($)
Robert Freiheit (1)	2006	$-0-	$-0-	$ -0-	$ -0-	$ -0-	$ -0-	$ -0-
Former Chief Executive Officer, Treasurer, Secretary and Director	2005	$-0-	$-0-	$ -0-	$ -0-	$ -0-	$ -0-	$ -0-
Steven Strasser (2)	2006	$-0-	$-0-	$ -0-	$ -0-	$ -0-	$ -0-	$ -0-
Former President and Director	2005	$-0-	$-0-	$ -0-	$ -0-	$ -0-	$ -0-	$ -0-
Terrell W. Smith (3)	2006	$-0-	$-0-	$ -0-	$ -0-	$ -0-	$ 62,375(4)	$ 62,375
Former Vice-President Treasurer, and Director	2005	$-0-	$-0-	$ 12,500(5)	$ -0-	$ -0-	$ 48,700(6)	$ 61,200
Howard Landa (7)	2006	$-0-	$-0-	$ -0-	$ -0-	$ -0-	$ -0-	$ -0-
Secretary and Director	2005	$-0-	$-0-	$12,500(5)	$ -0-	$ -0-	$ 25,000(8)	$ 37,500
Stephen C. Kircher (9)	2006	$ -0-	$ -0-	$ -0-	$ 200,000(10)	$ -0-	$ -0-	$ 200,000
Chief Executive Officer and Director	2005	$-0-	$-0-	$ -0-	$ -0-	$ -0-	$ -0-	$ -0-

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Glenn E. Carnahan (11)	2006	$ -0-	$ -0-	$ -0-	$ 200,000(12)	$ -0-	$ -0-	$ 200,000
Chief Financial Officer	2005	$-0-	$-0-	$ -0-	$ -0-	$ -0-	$ -0-	$ -0-
Robert Henrichsen(13)	2006	$-0-	$-0-	$ -0-	$ -0-	$ -0-	$ -0-	$ -0-
Former Director	2005	$-0-	$-0-	$ -0-	$ -0-	$ -0-	$ -0-	$ -0-
Bradley J. Ferrell (14)	2006	$ -0-	$ -0-	$ -0-	$ 200,000(15)	$ -0-	$ -0-	$ 200,000
Chief Operating Officer of SPI	2005	$-0-	$-0-	$ -0-	$ -0-	$ -0-	$ -0-	$ -0-

(1) Mr. Freiheit resigned all of his positions with us on August 22, 2006. Although, no compensation was paid to our former directors and officers, Mr. Freiheit, our former director and Chief Executive Officer has received certain benefits indirectly through servicing fees paid to his affiliates for administering the loan portfolio and for rental of office space. Total rental expense for the three months and nine months ended September 30, 2006 was $6,900 and $20,700, respectively. Total rental expense for the three months and nine months ended September 30, 2005 was $5,400 and $12,600, respectively. In connection with the servicing of the auto loans, the Company pays Accredited Adjusters, LLC, an affiliate of Mr. Freiheit, to service and administer the loans for a monthly fee equal to ½% of the outstanding principal balance. The fee for the three months and nine months ended September 30, 2006 for servicing the loans was $442 and $1,897, respectively. The fee for the three months ended September 30, 2005 and for the period from March 30, 2005 through September 30, 2005 for servicing the loans was $1,445 and $3,209, respectively. During the three months and the nine months ended September 30, 2006, the Company incurred consulting fees with Village Auto, an affiliate of Mr. Freiheit, in the amount of $6,800 and $10,000, respectively.

(2) On August 9, 2006, Mr. Strasser was appointed as our President and Director. Mr. Strasser resigned all of his positions with us on December 29, 2006.

(3) On August 9, 2006, Mr. Smith was appointed as our Vice-President, Treasurer and Director. Mr. Smith resigned all of his positions with us on December 29, 2006.

(4) Reflects other compensation Mr. Smith received in legal fees for legal services provided to us.

(5) Reflects issuance of 16,667 shares of our common stock to Messrs. Smith and Landa for consulting services rendered to us.

(6) Reflects other compensation Mr. Smith received in legal fees for legal services provided to us, and also 33,333 shares of common stock issued to Pamplona, Inc., for services. Pamplona, Inc. is an entity controlled by Mr. Landa and Mr. Smith.

(7) On August 22, 2006, Mr. Landa was appointed as our Director and Secretary. Mr. Landa resigned all of his positions with us on December 29, 2006.

(8) Reflects other compensation of 33,333 shares of common stock issued to Pamplona, Inc., for services. Pamplona, Inc. is an entity controlled by Mr. Landa and Mr. Smith.

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

(10) Reflects substitution options issued to Mr. Kircher for his SPI options in connection with the Merger. The options were originally granted to Mr. Kircher by SPI for his services rendered to SPI. In connection with the substitution, Mr. Kircher was granted 100,000 options to purchase our common stock at an exercise price of $1.00 with a term of 5 years, and 100,000 performance based options at an exercise price of $1.00 which vesting will be determined on December 31, 2010. As of the grant date on December 28, 2006, 25% of the five-year options vested and 25% of the options are scheduled to vest on each anniversary date.

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(11) On December 29, 2006, Mr. Carnahan was appointed as our Chief Financial Officer.

(12) Reflects substitution options issued to Mr. Carnahan for his SPI options in connection with the Merger. The options were originally granted to Mr. Carnahan by SPI for his services rendered to SPI. In connection with the substitution, Mr. Carnahan was granted 100,000 options to purchase our common stock at an exercise price of $1.00 with a term of 5 years, and 100,000 performance based options at an exercise price of $1.00 which vesting will be determined on December 31, 2010. As of the grant date on December 28, 2006, 25% of the five-year options vested and 25% of the options are scheduled to vest on each anniversary date.

(13) Mr. Henrichsen was appointed as our director on February 3, 2006. On September 5, 2006 he resigned all of his positions with us.

(14) Mr. Ferrell is an executive officer of our subsidiary SPI.

(15) Reflects substitution options issued to Mr. Ferrell for his SPI options in connection with the Merger. The options were originally granted to Mr. Ferrell by SPI for his services rendered to SPI. In connection with the substitution, Mr. Ferrell was granted 100,000 options to purchase our common stock at an exercise price of $1.00 with a term of 5 years, and 100,000 performance based options at an exercise price of $1.00 which vesting will be determined on December 31, 2010. As of the grant date on December 28, 2006, 25% of the five-year options vested and 25% of the options are scheduled to vest on each anniversary date.

Outstanding Equity Awards at Fiscal Year End

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

Outstanding Equity Awards at Fiscal Year-End

	Option	Awards					Stock	Awards
Name	Number of Securities underlying Unexercised Options (#) Exercisable	Number of Securities underlying Unexercised Options (#) Unexercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
Robert Freiheit	-0-	-0-	-0-	$ -0-	NA	-0-	-0-	-0-	-0-
Steven Strasser	-0-	-0-	-0-	$ -0-	NA	-0-	-0-	-0-	-0-
Terrell W. Smith	-0-	-0-	-0-	$ -0-	NA	-0-	-0-	-0-	-0-
Howard Landa	-0-	-0-	-0-	$ -0-	NA	-0-	-0-	-0-	-0-
Stephen C. Kircher	25,000 (1)	-0-	175,000 (1)	$ 1.00	12/28/2011	-0-	-0-	-0-	-0-
Glenn Carnahan	25,000 (1)	-0-	175,000 (1)	$ 1.00	12/28/2011	-0-	-0-	-0-	-0-
Bradley Ferrell	25,000 (1)	-0-	175,000 (1)	$ 1.00	12/28/2011	-0-	-0-	-0-	-0-

(1) Reflects substituted options issued in connection with the Merger. Options were originally issued to respective named executive officers by SPI and as a result of the Merger, the named executive officers received options to purchase shares of our common stock as a substitution for his options to purchase shares of SPI common stock. In connection with the substitution, Messrs. Kircher, Carnahan and Ferrell were each granted 100,000 five-year options to purchase our common stock at an exercise price of $1.00. As of the grant date on December 28, 2006, 25% of the options vested and 25% of the options are scheduled to vest on each anniversary date. Also in connection with the substitution, Messrs. Kircher, Carnahan and Ferrell were each granted 100,000 option to purchase common stock at an exercise price of $1.00 per share, which options shall vest at either 0% or 100% o December 31,2010, depending on whether certain cumulative revenue goals were met over the four year period.

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Employment Agreements

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

Compensation of Directors

Our Directors did not receive any cash compensation, but were entitled to reimbursement of our reasonable expenses incurred in attending directors’ meetings. However, at the discretion of our Board of Directors, we may periodically issue stock options under our stock option plan to directors.

The Directors of SPI receive a board compensation package consisting of $3,000 per quarter and initial restricted stock award grant of 25,000 shares of common stock subject to vesting and forfeiture restrictions, and annual committee fees of $5,000 for the Audit Chair, $2,500 for the Audit Vice Chair, $3,000 for the Compensation Chair and $3,000 for the Nominating Chair. Any compensation or grants made to our Chairman of the Board and Chief Executive Officer, Mr. Kircher, are disclosed above in the Summary Compensation Table. The following table sets forth compensation paid to our non-executive directors as of the fiscal year ended December 31, 2006.

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation ($)	All Other Compensation ($)	Total ($)
Timothy B. Nyman	-0-	25,000 (1)	-0-	-0-	-0-	-0-	25,000
Ronald Cohan	-0-	25,000 (1)	-0-	-0-	-0-	-0-	25,000
D. Paul Regan	-0-	25,000 (1)	-0-	-0-	-0-	-0-	25,000
Larry D. Kelley	-0-	25,000 (1)	-0-	-0-	-0-	-0-	25,000

(1) Reflects substituted awards of restricted stock issued in connection with the Merger. Total restricted stock award grants to each non-executive director equaled 25,000 shares of restricted stock. 25% vested on the grant date, December 28, 2006 and 25% vests on each anniversary thereafter. As of December 31, 2006, 6,250 shares of the restricted stock award have vested.

SECURITY OWNERSHIP OF

CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of January 9, 2007 certain information relating to the ownership of our common stock by (i) each person known by us to be the beneficial owner of more than 5% of the outstanding shares of the class of equity security, (ii) each of our Directors, (iii) each of the our executive officers, (iv) certain executive officers of our subsidiary, and (v) all of our executive officers and directors as a group. Except as may be indicated in the footnotes to the table and subject to applicable community property laws, each of such persons has the sole voting and investment power with respect to the shares owned.

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Name and Address of Beneficial Owner (1)	Shares Beneficially Owned	Percentage Beneficially Owned
Stephen C. Kircher; Chief Executive Officer, Secretary and Director 4080 Cavitt Stallman Road, Suite 100 Granite Bay, CA 95746	8,125,000(2)	25.16%
Glenn E. Carnahan, Chief Financial Officer 4080 Cavitt Stallman Road, Suite 100 Granite Bay, CA 95746	75,000(3)	*
Larry D. Kelley, Director 4080 Cavitt Stallman Road, Suite 100 Granite Bay, CA 95746	525,000(4)	1.63%
D. Paul Regan, Director 4080 Cavitt Stallman Road, Suite 100 Granite Bay, CA 95746	125,000(13)	*
Timothy B. Nyman, Director 8 Surf Drive Bristol, RI 02809	475,000(13)	1.47%
Ron Cohan, Director 4080 Cavitt Stallman Road, Suite 100 Granite Bay, CA 95746	125,000(5)	*
Bradley J. Ferrell (6) 4080 Cavitt Stallman Road, Suite 100 Granite Bay, CA 95746	1,525,000(7)	4.72%
Alan M. Lefko (8) 4080 Cavitt Stallman Road, Suite 100 Granite Bay, CA 95746	27,500(9)	*
All Executive Officers and Directors as a Group	11,002,500	33.90%
Reid S. Walker, G. Stacy Smith and Patrick P. Walker(10) c/o Walker Smith Capital 300 Crescent Court, Suite 1111 Dallas, TX 75201	2,500,000	7.75%
Steven CY Chang (11) c/o CID Group 28th Fl., 97 Tun Hwa S. Rd., Sec. 2 Taipei 106, Taiwan	2,000,000	6.20%
Gerald R. Moore (12) 4080 Cavitt Stallman Road, Suite 100 Granite Bay, CA 95746	4,125,000	12.77%

* Less than 1%

(1) Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Pursuant to the rules of the SEC, shares of Common Stock which an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be beneficially owned and outstanding for the purpose of computing the percentage ownership of any other person shown in the table.

42

(2) Includes 2,000,000 shares issued in the names of trusts established for the benefit of Mr. Kircher’s two sons, to each of which Mr. Kircher is the trustee. Also includes 25,000 shares underlying options, to the extent exercisable within 60 days.

(3) Includes 25,000 shares underlying options, to the extent exercisable within 60 days.

(4) Includes 500,000 shares issued in the name of trust, to which Mr. Kelley is the trustee. Also includes 25,000 shares of common stock granted as restricted stock awards, of which 6,250 have vested and 18,750 are subject to vesting and forfeiture conditions.

(5) Includes 100,000 shares issued in the name of trust, to which Mr. Cohan is a trustee. Also includes 25,000 shares of common stock granted as restricted stock awards, of which 6,250 have vested and 18,750 are subject to vesting and forfeiture conditions.

(6) Mr. Ferrell is the Chief Operating Officer of SPI, our wholly owned subsidiary.

(7) Includes 25,000 shares underlying options, to the extent exercisable within 60 days.

(8) Mr. Lefko is the Vice President of Finance of SPI, our wholly owned subsidiary.

(9) Includes 15,000 shares issued in the name of trust, to which Mr. Lefko is a trustee. Also Includes 12,500 shares underlying options, to the extent exercisable within 60 days.

(10) Consists of 710,000 shares issued in the name of WS Opportunity Fund International, Ltd.; 445,000 shares issued in the name of Walker Smith International Fund, Ltd.; 421,000 shares issued in the name of WS Opportunity Fund, L.P.; 369,000 shares issued in the name of WS Opportunity Fund (QP), L.P.; 330,000 shares issued in the name of Walker Smith Capital (QP), L.P.; 173,000 shares issued in the name of HHMI Investments, L.P.; and 52,000 shares issued in the name of Walker Smith Capital, L.P. WS Capital, LLC (“WS Capital”) is the general partner of WS Capital Management, L.P. (“WSC Management”), which is the general partner of Walker Smith Capital, L.P and Walker Smith Capital (QP) L.P., the investment manager and agent and attorney-in-fact for Walker Smith International Fund, Ltd., and the investment manager for HHMI Investments, L.P. WSV Management, LLC (“WSV”) is the general partner of WS Ventures Management, LP (“WSVM”), which is the general partner of Walker Smith Opportunity Fund, L.P and WS Opportunity Fund (QP) LP and the investment manager and agent and attorney-in-fact for WWS Opportunity Fund International, Ltd. Reid S. Walker and G. Stacy Smith are principals of WS Capital and WSV, and Patrick P. Walker is a principal of WSV.

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

(12) Includes 25,000 shares underlying options, to the extent exercisable within 60 days.

(13) Includes 25,000 shares of common stock granted as restricted stock awards, of which 6,250 have vested and 18,750 are subject to vesting and forfeiture conditions.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On March 30, 2005, we purchased a pool of sub-prime auto loans with a pay-off balance of $126,302 from Village Auto, LLC, an affiliate of the Mr. Freiheit, our former President, Director and Chief Executive Officer, for $107,357. The purchase price was 85% of the loan pool’s pay-off balance. The seller of the pool is required to repurchase loans that become 90 days delinquent. The average loan had a principal balance of approximately $4,708 with an average annual percentage interest rate of approximately 21.54%. The remaining terms of the loans range from 6 to 46 months. We have contracted with Accredited Adjusters, LLC, to service and administer the loans for a monthly fee equal to ½% of the outstanding principal balance. Accredited Adjusters is an affiliate of Mr. Freiheit. In connection with the servicing of the auto loans, we have paid Accredited Adjusters, LLC $4,000, and have a liability of $909 for services rendered during 2005. The fee for the six months ended June 30, 2006 for servicing the loans was $1,455. The fee for the period from March 30, 2005 through December 31, 2005 for servicing the loans was $4,909. At June 30, 2006, we owed Accredited Adjusters, LLC $365 for services rendered. Additionally, Accredited Adjusters, LLC owes us $215 for loan proceeds collected, but not remitted to us by June 30, 2006. During the three months and the nine months ended September 30, 2006, we incurred consulting fees with Village Auto, LLC, a related party, in the amount of $6,800 and $10,000, respectively. At September 30, 2006, we also had a receivable from Village Auto, in the amount of $515, in connection with the repurchase of a delinquent loan. On December 29, 2006 we sold the auto loans to Village Auto, LLC for a total purchase price of $12,693.50, which represented 50% of the loan pools payoff balance as of September 30, 2006. The purchase price was paid in cash. In addition, we terminated all arrangements with Village Auto, LLC and its affiliates, relating to servicing or administration of auto loans.

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

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

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

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

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

44

On August 23, 2006, we entered into an Agreement and Plan of Merger, as amended by that First Amendment to the Agreement and Plan of Merger dated October 4, 2006, the Second Amendment to the Agreement and Plan of Merger dated December 1, 2006 and the Third Amendment to the Agreement and Plan of Merger dated December 21, 2006 (the “Merger Agreement”) with SPI, Welund Acquisition Corp., a Nevada corporation and our wholly-owned subsidiary. The Merger was consummated on December 29, 2006, pursuant to which SPI became our wholly owned subsidiary. In connection with the Merger we issued an aggregate of 14,500,000 shares of our restricted common stock to the existing shareholders of SPI. Each share of common stock of SPI was cancelled and exchanged for one share of our common stock. As a result, Mr. Kircher, our Chief Executive Officer and Director who was also the Director and Chief Executive Officer of SPI, became the beneficial owner of 8,125,000 shares of our common stock, including 2,000,000 shares issued to trusts held for benefit of his sons, and shares issuable upon the exercise of vested options; and Mr. Moore, the Vice President of Manufacturing of SPI, became the beneficial owner 4,125,000 shares of our common stock, excluding unvested options to purchase 150,000 shares of our common stock. In addition, 2,000,000 of SPI options were substituted by awards of restricted stock and options to purchase shares of our common stock at $1.00 per share with the options having a term of five years and the restricted stock awards vesting over a period of three years. As a result of the substitution, Messrs. Kircher, Carnahan, Moore and Ferrell have each been granted the option to purchase 100,000 shares of our common stock. The options are exercisable at $1.00 per share, will vest over a period of 3 years and have a term of 5 years. In addition, Messrs. Kircher, Carnahan, Moore and Ferrell were each also granted performance-based options to purchase stock. Messrs. Kircher, Carnahan, Moore and Ferrell each received the option to purchase 100,000 shares of our common stock, which options will vest at either 0% or 100%, such vesting to be determined on December 31, 2010 (the “Determination Time”). The vesting determination will be based on certain annual revenue performance goals of the Company. The performance goals will be determined on a cumulative basis at the Determination Time, to account for any year-to-year discrepancies in meeting each annual performance goal. In addition, Mr. Lefko was granted options to purchase 50,000 shares of our common stock, at an exercise price of $1.00 per share, which options vest over a period of 3 years and have a 5-year term. In addition, as a result of the substitution, Messrs. Cohan, Mr. Regan, Mr. Kelley, Mr. Nyman were each granted restricted stock awards of 25,000 shares of our common stock, of which awards, 6,250 shares have vested.

In July, August and September 2006, our wholly owned subsidiary SPI, issued 5 demand promissory notes for an aggregate principal amount of $320,000 bearing an interest rate of eight percent (8%) per annum, to Mr. Kircher, our Director and Chief Executive Officer who was also the Director and Chief Executive Officer of SPI at such time. The promissory notes were issued in connection with advances provided by Mr. Kircher to SPI to be used for working capital.

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

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

45

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

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

In September and October 2006, the following directors, director nominees, and executive officers, and family members of such individuals participated as investors in our private placement for up to 16,000,000 shares of our common stock at $1.00 per share: Mr. Strasser, our former director and president, purchased 225,000 shares of common stock for $225,000; Mr. Smith, our former director, Vice President and Treasurer, purchased 100,000 shares for $100,000; Mr. Landa, our former director and Secretary, purchased 75,000 shares of common stock for $75,000; Mr. Nyman, our director, purchased 450,000 shares of our common stock for $450,000; a trust controlled by Terry and Marty Nyman, relatives of Mr. Nyman, our director, purchased 50,000 shares of common stock for $50,000; a trust controlled by Mr. Kelley, our director, purchased 500,000 shares of common stock for $500,000; Mr. Regan, our director, purchased 100,000 shares of common stock for $100,000; a trust controlled by Mr. Cohan, our director, purchased 100,000 shares of common stock for $100,000; Mr. Carnahan, our Chief Financial Officer purchased 50,000 shares of common stock for $50,000; entities controlled by Reid Walker, G. Stacy Smith and Patrick P. Walker purchased an aggregate of 2,500,000 shares of our common stock for $2,500,000; and entities controlled by Steven CY Chang purchased an aggregate of 2,000,000 shares of our common stock for $2,000,000.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

On August 16, 2004, we engaged the accounting firm of Hansen, Barnett & Maxwell (“Hansen”) as our independent accountants to audit our financial statements for our fiscal year ending December 31, 2004 and December 31, 2005. The appointment of new independent accountants was approved by our Board of Directors.  

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

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

46

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

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

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

SELLING SECURITY HOLDERS

The following table identifies the Selling Stockholders, as of January 9, 2007, and indicates certain information known to us with respect to (i) the number of common shares beneficially owned by the Selling Stockholder, (ii) the number of common shares that may be offered for the Selling Stockholder’s account, and (iii) the number of common shares and percentage of outstanding common shares to be beneficially owned by the Selling Stockholders assuming the sale of all of the common shares covered hereby by the Selling Stockholders. The term "beneficially owned" means common shares owned or that may be acquired within 60 days. As of January 9, 2007, 32,266,667 shares of common stock issued and outstanding.  Shares of common stock that are issuable upon the exercise of outstanding options, warrants, convertible securities or other purchase rights, to the extent exercisable within 60 days of the date of this Prospectus, are treated as outstanding for purposes of computing each Selling Stockholder's percentage ownership of outstanding shares. The Selling Stockholders may sell some, all, or none of our common shares. The number and percentages set forth below under "Shares Beneficially Owned After Offering" assumes that all offered shares are sold.

	Shares Beneficially Owned Prior to Offering		Shares to be Offered	Shares Beneficially Owned After Offering
Name of Selling Stockholder	Number	Percentage	Number	Number	Percentage
WS Opportunity Fund International, Ltd.	710,000	2.20%	710,000	0	0.00%
Walker Smith International Fund, Ltd.	445,000	1.38%	445,000	0	0.00%
WS Opportunity Fund, L.P.	421,000	1.30%	421,000	0	0.00%
WS Opportunity Fund (QP), L.P.	369,000	1.14%	369,000	0	0.00%

47

Walker Smith Capital (QP), L.P.	330,000	1.02%	330,000	0	0.00%
HHMI Investments, L.P.	173,000	*	173,000	0	0.00%
Walker Smith Capital, L.P.	52,000	*	52,000	0	0.00%
Lake Street Fund, L.P.	920,000	2.85%	920,000	0	0.00%
Scott W. Hood	40,000	*	40,000	0	0.00%
The Mitchell W. Howard Trust	20,000	*	20,000	0	0.00%
Howard Lu	20,000	*	20,000	0	0.00%
Pinnacle China Fund, L.P.	1,000,000	3.10%	1,000,000	0	0.00%
Lagunitas Partners, LP	470,000	1.46%	470,000	0	0.00%
Jon D and Linda W Gruber Trust	150,000	*	150,000	0	0.00%
Gruber & McBaine International	130,000	*	130,000	0	0.00%
MidSouth Investor Fund LP	500,000	1.55%	500,000	0	0.00%
The Kelley Revocable Trust dtd August 19, 1991 as amended (1)	525,000	1.63%	500,000	25,000	*
Timothy B. Nyman (2)	475,000	1.47%	450,000	25,000	*
Donald M. Delach	400,000	1.24%	400,000	0	0.00%
Jeffrey William Olyniec	385,000	1.19%	370,000	15,000	*
Anthony Genovese and Sharon Genovese	350,000	1.08%	350,000	0	0.00%
John Charles Patton (3)	275,000	*	250,000	25,000	*
Matthew Kircher	250,000	*	250,000	0	0.00%
Steven Strasser (4)	607,881	1.89%	607,881	0	0.00%
Gregory J. Vislocky	200,000	*	200,000	0	0.00%
Kelly M. Crider	200,000	*	200,000	0	0.00%
Alexander V. Leon	100,000	*	100,000	0	0.00%
The Kircher Family Trust Dtd 9-21-2005	100,000	*	100,000	0	0.00%
D. Paul Regan (5)	125,000	*	100,000	25,000	*
Ramer B. Holtan, Jr.	100,000	*	100,000	0	0.00%
Richard A. Bocci	100,000	*	100,000	0	0.00%
The Cohan Trust dated July 29, 2004 (6)	125,000	*	100,000	25,000	*
Steve and Georgia Hunter	100,000	*	100,000	0	0.00%
Steven Kay	281,214	*	256,214	25,000	*
Terrell W. Smith (7)	100,000	*	100,000	0	0.00%
Howard S. Landa (8)	184,153	*	184,153	0	0.00%
Edwin Chen	50,000	*	50,000	0	0.00%
Glenn Edward Carnahan (9)	75,000	*	50,000	25,000	*
Kathleen E. Reed Trust dtd May 4, 2000	50,000	*	50,000	0	0.00%
Kevin J. Peters	50,000	*	50,000	0	0.00%
The Kelsey Living Trust	50,000	*	50,000	0	0.00%
Aliabadi Trust Dated 4/16/2001	50,000	*	50,000	0	0.00%
Patrick L. Reilly	25,000	*	25,000	0	0.00%
P.H. Morton	50,000	*	50,000	0	0.00%
Philip D. Gregory	50,000	*	50,000	0	0.00%
Anderson Survivor's Trust created December 25, 1993 (dt 1/17/74)	50,000	*	50,000	0	0.00%
Steve and Talli Hunter	50,000	*	50,000	0	0.00%
Johnson & Sampson Construction Inc. DBA J&S Asphalt	30,000	*	30,000	0	0.00%
James H. Olyniec	30,000	*	30,000	0	0.00%
Raymond J. Cervantes	30,000	*	30,000	0	0.00%
Frank L. Myers	25,000	*	25,000	0	0.00%

48

Larry Denton Kelley, Jr.	20,000	*	20,000	0	0.00%
Shane Yang	20,000	*	20,000	0	0.00%
Ken Giannotti	10,000	*	10,000	0	0.00%
Asia Pacific Genesis Venture Capital Funds, Ltd	750,000	2.32%	750,000	0	0.00%
Sekai Capital Ltd.	500,000	1.55%	500,000	0	0.00%
Global Vision Venture Capital Co., Ltd.	222,260	*	222,260	0	0.00%
Asia Pacific Century Venture Capital Ltd.	135,343	*	135,343	0	0.00%
China Power Venture Capital Co., Ltd.	95,732	*	95,732	0	0.00%
C&D Capital Corp.	70,893	*	70,893	0	0.00%
Nien Hsing International (Bermuda) Ltd.	53,165	*	53,165	0	0.00%
Asiagroup Worldwide Limited	48,394	*	48,394	0	0.00%
STAR Pacific Worldwide Limited	39,922	*	39,922	0	0.00%
A&D Capital Corp.	31,931	*	31,931	0	0.00%
J&D Capital Corp.	28,948	*	28,948	0	0.00%
CAM-CID Asia Pacific Investment Corp.	23,412	*	23,412	0	0.00%
Bear Stearns Security Corp. FBO J. Steven Emerson IRA R/O II	1,000,000	3.10%	1,000,000	0	0.00%
Fred L. Astman Wedbush Securities Inc. CUST IRA R/O Holding 10/13/92	200,000	*	200,000	0	0.00%
Hannibal International Limited	750,000	2.32%	750,000	0	0.00%
Bifrost Fund LP	250,000	*	250,000	0	0.00%
Grant A. Ferrell	125,000	*	125,000	0	0.00%
Barry J.Carlson	100,000	*	100,000	0	0.00%
William Myers IRA Account Charles Schwab Custodian Care Of William Myers IRA Account	100,000	*	100,000	0	0.00%
William H. Weygandt	100,000	*	100,000	0	0.00%
Robert Bradley Frederickson	100,000	*	100,000	0	0.00%
Blue Ridge Bank & Trust Co Suc. TTE of Mound Grove Cemetary Services Trust	25,000	*	25,000	0	0.00%
Blue Ridge Bank & Trust Co Suc. TTE of Charter Umbrella Trust	50,000	*	50,000	0	0.00%
Sky Heart Limited	70,000	*	50,000	20,000	*
Anthony D. Scotti	50,000	*	50,000	0	0.00%
Brian McCormick	50,000	*	50,000	0	0.00%
Chehrazi Family Trust, Dated October 9, 1996	50,000	*	50,000	0	0.00%
James A. Bulotti, Sr.	25,000	*	25,000	0	0.00%
Thomas G. McCarthy Trust dtd 12/5/94	75,000	*	75,000	0	0.00%
Scott E. Lindberg	20,000	*	20,000	0	0.00%
Owen M. Taylor	15,000	*	15,000	0	0.00%
Gerald R. Feldhaus	10,000	*	10,000	0	0.00%
Lawrence G. Anapolsky	10,000	*	10,000	0	0.00%
Greg Hershberger	10,000	*	10,000	0	0.00%
David W. Ellis	25,000	*	25,000	0	0.00%
Vicki J. Robinson	10,000	*	10,000	0	0.00%

49

Steve and Georgia Hunter	15,000	*	15,000	0	0.00%
Richard Riess	25,000	*	25,000	0	0.00%
Liberty Associates, LLC (10)	340,000	1.05%	340,000	0	0.00%
TATS, LLC(11)	79,153	*	79,153	0	0.00%
Pamplona, Inc.(12)	33,333	*	33,333	0	0.00%
BTG Investments, LLC (13)	82,600	*	82,600	0	0.00%
Roth Capital Partners, LLC (13)(14)	800,000	2.42%	800,000	0	0.00%
Brett Rossi	170,000	*	150,000	20,000	*
Terry and Marty Nyman Living Trust	50,000	*	50,000	0	0.00%
Gerald R. Moore (15)	4,125,000	12.77%	500,000	3,625,000	11.23%
Matthew B. Cohan	50,000	*	50,000	0	0.00
Daniel A. Cohan	50,000	*	50,000	0	0.00
Marissa R. Cohan	50,000	*	50,000	0	0.00
Brandon E. Cohan	50,000	*	50,000	0	0.00
James R. Conkey	100,000	*	100,000	0	0.00
Total			18,833,334

* Less than 1%

(1) Larry D. Kelley, our director, is the trustee of the trust and is deemed to be the indirect beneficial owner of such shares by reason of voting and disposition control over the shares. Also includes 25,000 shares issued in the name of Mr. Kelley directly, of which 6,250 have vested and 18,750 shares are subject to vesting and forfeiture restrictions.

(2) Mr. Nyman is our director. Includes 25,000 shares underlying options, to the extent exercisable within 60 days.

(3) Includes 25,000 shares underlying options, to the extent exercisable within 60 days.

(4) Steve Strasser is our former President and director.

(5) Mr. Regan is our director. Includes 25,000 shares, of which 6,250 have vested and 18,750 shares are subject to vesting and forfeiture restrictions.

(6) Ron Cohan, our director, is the trustee of the trust and is deemed to be the indirect beneficial owner of such shares by reason of voting and disposition control over the shares. Also includes 25,000 shares issued in the name of Mr. Cohan directly, of which 6,250 have vested and 18,750 shares are subject to vesting and forfeiture restrictions.

(7) Mr. Smith is our former Vice President and former director.

(8) Mr. Landa is our former Secretary and former director.

(9) Mr. Carnahan is our Chief Financial Officer. Includes 25,000 shares underlying options, to the extent exercisable within 60 days.

(10) Robert Freiheit is a principal of Liberty Associates, LLC. Mr. Freiheit is our former President and former director.

(11) Terrell W. Smith, our former director and officer, is a principal of TATS, LLC, a family organized and operated entity.

(12) Howard S. Landa and Terrell W. Smith, our former directors and officers, are directors and President and Vice President, respectively, of Pamplona, Inc.

50

(13) Byron Roth and Gordon Roth are principals. Roth Capital Partners, LLC was our private placement agent for our offering of up to 16,000,000 shares of our common stock. Each of Byron Roth and Gordon Roth has voting and dispositive power with respect to the shares to be resold by BTG Investments LLC. BTG Investments LLC, an affiliate of a broker-dealer, acquired the securities offered hereby in the ordinary course of business, and at the time of the acquisition, had no agreements or understandings, directly or indirectly, with any person to distribute the securities.

(14) Consists of warrants to purchase up to 800,000 shares of common stock.

(15) Mr. Moore is Vice President of Manufacturing of SPI. Includes 25,000 shares underlying options, to the extent exercisable within 60 days. We have entered into a lock-up agreement with Mr. Moore.

PLAN OF DISTRIBUTION

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

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

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

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

· an exchange distribution in accordance with the rules of the applicable exchange;

· privately negotiated transactions;

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

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

· a combination of any such methods of sale; and

· any other method permitted pursuant to applicable law.

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

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

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

51

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

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

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

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

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

DESCRIPTION OF SECURITIES

Common Stock

We are authorized by our Articles of Incorporation to issue 100,000,000 shares of common stock, $0.0001 par value. As of December 29, 2006, there were 32,266,667 shares of common stock outstanding and no shares of preferred stock outstanding. Holders of shares of common stock have full voting rights, one vote for each share held of record. Stockholders are entitled to receive dividends as may be declared by the Board out of funds legally available therefore and share pro rata in any distributions to stockholders upon liquidation. Stockholders have no conversion, preemptive or subscription rights. All outstanding shares of common stock are fully paid and nonassessable, and all the shares of common stock issued by us upon the exercise of outstanding warrants will, when issued, be fully paid and nonassessable.

52

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

Preferred Stock

Under our Articles of Incorporation we may issue up to 20,000,000 shares of preferred stock, $0.0001 par value. No shares of preferred stock are currently outstanding. Our board of directors has the authority to determine the designation of each series of preferred stock and the authorized number of shares of each series. The board of directors also has the authority to determine and alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of shares of preferred stock and to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series subsequent to the issuance of shares of that series. Any or all rights of the preferred stock may be greater than the rights of the common stock. The issuance of preferred stock with voting and/or conversion rights may also adversely affect the voting power of the holders of common stock.

DISCLOSURE OF COMMISSION POSITION OF

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Under the Nevada General Corporation Law, our directors will have no personal liability to us or our stockholders for damages incurred as the result of any act or failure to act in the capacity as a director or officer. This provision does not apply to the directors’ (i) acts or omissions that involve intentional misconduct, fraud or knowing violation of law; (ii) breach of fiduciary duty; or (iii) approval of an unlawful dividend, distribution, stock repurchase or redemption under Section 78.300 of the Nevada Revised Statutes. This provision would generally absolve directors of personal liability for negligence in the performance of duties, including gross negligence.

The Nevada General Corporation Law grants corporations the right to indemnify directors, officers, employees and agents in accordance with applicable law. Our Articles of Incorporation, as amended, requires us to indemnify our officers and directors to the full extent permissible by the laws of the State of Nevada. In addition, our Bylaws authorize us to indemnify our directors and officers in cases where our officer or director acted in good faith and in a manner reasonably believed to be in our best interest, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

In connection with our engagement of Roth Capital as our exclusive agent for the offering of up to $16,000,000, we have agreed to indemnify Roth Capital against various liabilities, including liabilities under the Securities Act of 1933, as amended.

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

LEGAL MATTERS

The validity of the shares of common stock offered by the Selling Security Holders will be passed on by the law firm of Bullivant Houser Bailey PC, Sacramento, California.

53

EXPERTS

The financial statements of Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) have been included in the Prospectus and elsewhere in the registration statement in reliance on the report of Hansen Barnett & Maxwell, an independent registered public accounting firm, given on the authority of that firm as experts in auditing and accounting.

The consolidated financial statements for SPI for the year ended 2005 has been audited by BDO McCabe Lo Limited and the financial statements for DRCI for the year ended 2005 has been audited by Macias, Gini & O'Connell LLP. We have included our financial statements in the Prospectus and elsewhere in the registration statement in reliance on the reports of BDO McCabe Lo Limited and Macias, Gini & O'Connell LLP GIVEN ON authority as experts in accounting and auditing.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is Interwest Transfer Co., Inc., located at 1981 East 4800 South, Suite 100, Salt Lake City, UT 84117, with the same mailing address and telephone number (801) 272-9294.

WHERE YOU CAN FIND MORE INFORMATION

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

54

Index to Financial Statements

		Page
A.	Financial Statements of Solar Power, Inc., a California corporation
	Report of BDO McCabe Lo Limited, an Independent Registered Public Accounting Firm	F-3
	Consolidated Balance Sheets of Solar Power, Inc., a California corporation, as of December 31, 2005 (audited) and September 30, 2006 (unaudited)	F-4
	Consolidated Statements of Income of Solar Power, Inc., a California corporation, for the eleven-month period ended December 31, 2005 (audited) for the nine month period ended September 30, 2006 (unaudited) and for the eight-month period ended September 30, 2005 (unaudited)	F-5
	Consolidated Statements of Stockholder’s Equity for Solar Power, Inc., a California corporation, for the eleven-month period ended December 31, 2005 (audited) and for the nine month period ended September 30, 2006 (unaudited)	F-6
	Consolidated Statements of Cash Flows of Solar Power, Inc., a California corporation, for the eleven month period ended December 31, 2005 (audited), for the nine month period ended September 30, 2006 (unaudited) and for the eight-month period ended September 30, 2005 (unaudited)	F-7
	Notes to Consolidated Financial Statements	F-8
B.	Financial Statements of Dale Renewables Consulting, Inc., a California corporation,
	Independent Auditor’s Report	F-18
	Balance Sheet of Dale Renewables Consulting, Inc. as of December 31, 2005	F-19
	Statements of Operations for period From July 26, 2005 (date of inception) to December 31, 2005	F-20
	Statement of Stockholders’ Deficit for period from July 26, 2005 (date of inception) to December 31, 2005	F-21
	Statement of Cash Flows for period from July 26, 2005 (date of inception) to December 31, 2005	F-22
	Notes to Financial Statements	F-23
C.	Proforma financial information
	Solar Power, Inc. Pro Forma Financial Information Introductory Notes	F-26
	Solar Power, Inc. Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2006 (Unaudited)	F-27
	Solar Power, Inc. Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year Ended December 31, 2005 (Unaudited)	F-28
	Solar Power, Inc. Pro Forma Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 2006 (Unaudited)	F-29

F-1

D.	Financial Statements of Solar Power, Inc., (formerly Welund Fund, Inc., a Nevada corporation
	As of September 30, 2006 and for the Three and Nine Months Ended on September 30, 2006 and September 30, 2005 and for the Period from July 16, 2002 (Date of Inception) through September 30, 2006 (Unaudited)
	Condensed Balance Sheet as of September 30, 2006	F-30

Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2006 and September 30, 2005, and Period from July 16, 2002 (Date of Inception) to September 30, 2006	F-31
Condensed Statement of Stockholders’ Equity (Deficit) for the Nine Months Ended September 30, 2006	F-32
Condensed Statements of Cash Flows for the Three and Nine Months Ended September 30, 2006 and September 30, 2005, And Period from July 16, 2002 (Date of Inception) to September 30, 2006	F-33
Notes to Interim Condensed Financial Statements for the Nine Months Ended September 30, 2006 and September 30, 2005	F-34
As of December 31, 2005 and for the Years Ended December 31, 2005 and December 31, 2004 (Audited) and Period from July 16, 2002 (Date of Inception) to December 31, 2005 (Audited)
Reports of  Hansen, Barnett & Maxwell, an Independent Registered Public Accounting Firm	F-39
Balance Sheet as of December 31, 2005	F-40
Statements of Operations for the Years Ended December 31, 2005 and December 31, 2004 and for the period from July 16, 2002 (Date of Inception) through December 31, 2005	F-41
Statements of Shareholders Equity (Deficit) for the period from July 16, 2002 (Date of Inception) through December 31, 2005	F-42
Statements of Cash Flows for the Years Ended December 31, 2005 and December 31, 2004 and for the period from July 16, 2002 (Date of Inception) through December 31, 2005	F-43
Notes to Financial Statements for the Years Ended December 31, 2005 and December 31, 2004	F-44

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of

Solar Power, Inc.

We have audited the accompanying consolidated balance sheet of Solar Power, Inc. and subsidiaries (the “Company”) as of December 31, 2005, and the related consolidated statements of income, shareholders' equity and cash flows for the eleven months ended December 31, 2005 (from inception January 18, 2005). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Solar Power, Inc. and subsidiaries as of December 31, 2005 and the consolidated results of their operations and their cash flows for the eleven months ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO McCabe Lo Limited

BDO McCabe Lo Limited

Hong Kong, December 29, 2006

F-3

SOLAR POWER, INC.

CONSOLIDATED BALANCE SHEETS

	December			September
	31, 2005			30, 2006
	(Audited)			(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		64,385			46,026
Accounts receivable, less allowances for doubtful accounts of US$ nil and US$ nil, at December 31, 2005 and September 30, 2006, respectively		54,683			1,572,943
Amounts due from affiliates (note 10)		-			5,746
Inventories (note 4)		80,327			1,102,975
Prepaid expenses and other current assets (note 5)		74,331			1,028,238
Total current assets		273,726			3,755,928
Plant and equipment, net (note 6)		15,463			139,154
Goodwill (note 1)		-			701,493
Deferred tax assets, net (note 8)		21,039			46,281
Total assets		310,228			4,642,856
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term loans from affiliates (note 10)		245,000			1,970,000
Accounts payable		82,187			491,198
Accrued payroll and employee benefits		7,733			162,256
Other accrued liabilities and other current liabilities (note 7)		89,891			1,692,928
Amounts due to affiliates (note 10)		-			19,149
Income taxes payable (note 8)		-			180,000
Total current liabilities		424,811			4,515,531
Stockholders’ equity:
Common stock, par value $0.001 per share; authorized 20,000,000 stock, 14,000,000 shares issued and outstanding at December 31, 2005 and 14,000,000 shares at September 30, 2006		14,000			14,000
Additional paid-in capital		(13,999	)		3,949
Retained earnings		(114,584	)		109,376
Total stockholders’ equity		(114,583	)		127,325
Total liabilities and stockholders’ equity		310,228			4,642,856

See accompanying notes to consolidated financial statements.

F-4

SOLAR POWER, INC.

CONSOLIDATED STATEMENTS OF INCOME

	11 Months Ended December 31, 2005			9 Months Ended September 30, 2006			8 Months Ended September 30, 2005
	(Audited)			(Unaudited)			(Unaudited)
Revenue (note 9)		1,371,731			3,304,890			1,163,273
Cost of revenue		(409,828	)		(1,876,281	)		(325,558	)
Gross profit		961,903			1,428,609			837,715
Selling expenses		(74,886	)		(105,681	)		(25,265	)
General and administrative expenses		(1,013,289	)		(1,232,536	)		(651,167	)
Operating (loss) /income		(126,272	)		90,392			161,283
Other income
Interest expenses, net		(11,367	)		(21,553	)		(6,444	)
Exchange gain		-			-			640
Other non-operating income, net		2,016			42,302			-
(Loss) /profit before income taxes		(135,623	)		111,141			155,479
Income taxes (note 8)		21,039			112,819			(34,427	)
Net (loss)/income		(114,584	)		223,960			121,052

See accompanying notes to consolidated financial statements.

F-5

SOLAR POWER, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE ELEVEN MONTHS PERIOD ENDED DECEMBER 31, 2005

AND FOR THE NINE MONTH PERIOD ENDED

SEPTEMBER 30, 2006 (UNAUDITED)

	Common stock										Total stock-
	Stock				Additional			Retained			holders’
	outstanding		Amount		paid-in capital			earnings			equity
Contribution of capital		14,000,000	$	14,000		($13,999	)		-			1
Net loss		-		-		-			(114,584	)		(114,584	)
Balance at December 31, 2005		14,000,000		14,000		(13,999	)		(114,584	)		(114,583	)
Contribution of capital (unaudited)		-		-		17,948			-			17,948
Net income (unaudited)		-		-		-			223,960			223,960
Balance at September 30, 2006 (unaudited)		14,000,000	$	14,000	$	3,949		$	109,376		$	127,325

See accompanying notes to consolidated financial statements.

F-6

SOLAR POWER, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	11 Months Ended December			9 Months Ended September			8 Months Ended September
	31, 2005			30, 2006			30, 2005
	(Audited)			(Unaudited)			(Unaudited)
Cash flows from operating activities
Net (loss)/income		(114,584	)		223,960			121,052
Adjustment to reconcile net income to net cash from operating activities:
Depreciation and amortization of plant and equipment		1,686			5,699			847
Increase/ (decrease) in cash resulting from changes in:
Accounts receivable		(54,683	)		(1,518,260	)		(120,376	)
Amounts due from affiliates		-			(5,746	)		(245,868	)
Inventories		(80,327	)		(987,307	)		(33,309	)
Prepaid expenses and other current assets		(74,331	)		14,374			(18,162	)
Deferred tax assets		(21,039	)		(292,819	)		-
Accounts payable		82,187			409,011			7,545
Accrued payroll and employee benefits		7,733			154,523			10,227
Other accrued liabilities and other current liabilities		89,891			156,472			58,541
Amounts due to affiliates		-			19,149			235,960
Income taxes payable		-			180,000			34,427
Net cash generated from operating activities		(163,467	)		(1,640,944	)		50,884
Cash flows from investing activities
Purchase of plant and equipment		(17,149	)		(120,363	)		(17,100	)
Net cash used in investing activities		(17,149	)		(120,363	)		(17,100	)
Cash flows from financing activities
Contribution of capital		1			17,948			1
Loans from affiliates		245,000			1,725,000			-
Net cash generated from financing activities		245,001			1,742,948			1
Net increase (decrease) in cash and cash equivalents		64,385			(18,359	)		33,785
Cash and cash equivalents, beginning of period		-			64,385			-
Cash and cash equivalents, end of period		64,385			46,026			33,785
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest		-			-			-
Income taxes		-			-			-

See accompanying notes to consolidated financial statements.

F-7

1. Organization and Basis of Financial Statements

Solar Power Inc. (the “Company”) is a corporation incorporated under the laws of the State of California. The Company was incorporated in California on May 22, 2006.

On August 6, 2006, the Board of Directors of the Company passed a resolution to enter into share exchange agreement with all the shareholders of International Assembly Solutions, Limited (“IAS HK”), which was incorporated in Hong Kong on January 18, 2005 with limited liability and was majority owned by the major shareholder of the Company. Pursuant to the share exchange agreements, the equity owners of IAS HK transferred all their equity interest in IAS HK to the Company in exchange for a total of 14,000,000 shares at par value of US$0.001 each of the Company in November 2006 and IAS HK became a wholly owned subsidiary of the Company. Being a group reorganization entered into among entities under common control, the Company combined the historical financial statements of IAS HK and its wholly owned subsidiary, IAS Electronics (Shenzhen) Co., Ltd. (“IAS Shenzhen”). The accompanying consolidated financial statements have been restated on a retroactive basis to reflect the 14,000,000 shares of common stock outstanding for all periods presented.

In May 2006, the Company and the shareholders of Dale Renewables Consulting, Inc., (“DRCI”), a California corporation engaged in photovoltaic installation, integration and sales, agreed in principle on the acquisition of DRCI by the Company with an effective date of June 1, 2006. In June 2006, prior to the finalization of the acquisition agreement, DRCI’s personnel moved into the offices of the Company and combined its operations with that of the Company. In August 2006, the Company and DRCI formalized the Agreement and Plan of Merger (the “Merger Agreement”) and the Assignment and Interim Operating Agreement (the "Operating Agreement") was entered into among the Company, DRCI and Dale Stickney Construction, Inc., a California corporation and the parent company of DRCI ("DSCI"). The Operating Agreement obligated the Company to provide all financing necessary for DRCI’s operations subsequent to June 1, 2006 until the consummation of the acquisition in exchange for all the revenues generated from its operations. The Operating Agreement also provided that the Company was to provide all management activities of DRCI on its behalf from June 1 until the consummation of the acquisition. On November 15, 2006, the Company completed the acquisition of DRCI, paying US$1,446,565 in cash in exchange for 100% of the outstanding shares of DRCI. Funds for the acquisition payment were provided on behalf of the Company by Solar Power, Inc. (Nevada), formerly known as Welund Fund Inc., (“SPI Nevada”). The Company and SPI Nevada have agreed to merge in a reverse acquisition.

By virtue of control, funding, operation and obligation,, the acquisition of DRCI became effective on June 1, 2006. As a result, the interim financials of the Company include the results of operations of DRCI subsequent to June 1, 2006 and the purchase price was allocated to the acquired assets and liabilities as of June 1, 2006.

The Company has preliminarily allocated the purchase price of US$1,446,565 to estimated fair values of the acquired assets and liabilities as follows:

	(Unaudited)
Inventories		35,341
Prepaid expenses and other current assets		968,281
Plant and equipment		9,027
Goodwill		701,493
Deferred tax liability		(267,577	)
Purchase price payable		1,446,565

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

The Company, through its wholly owned subsidiaries, IAS HK and IAS Shenzhen, currently manufactures cable, wire and mechanical assemblies and is expanding its operations to produce solar panel systems, and through the Merger Agreement and Operating Agreement with DRCI, engages in photovoltaic installation, integration and sales.

The financial statements for the periods ended December 31, 2005 and September 30, 2005 covered eleven months and eight months, respectively commencing on January 18, 2005, the date of inception of IAS HK.

F-8

2. Summary of Significant Accounting Policies

Principles of consolidation-The consolidated financial statements, prepared in accordance with generally accepted accounting principles in the United States of America, include the assets, liabilities, revenues, expenses and cash flows of all subsidiaries. Intercompany balances, transactions and cash flows are eliminated on consolidation.

Cash and cash equivalents-Cash and cash equivalents include cash on hand, cash accounts and interest bearing savings accounts.

Non-cash investing activities- During the period ended September 30, 2006, the Company acquired net assets and liabilities of estimated fair values amounted to US$1,446,565 in aggregate. The consideration payable was included in other accrued liabilities and other current liabilities as of September 30, 2006 and was settled by cash subsequent to September 30, 2006.

Inventories-Inventories are stated at the lower of cost, determined by the weighted-average cost method. Work-in-progress and finished goods inventories consist of raw materials, direct labor and overhead associated with the manufacturing process.

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

Plant and machinery	5 years
Furniture, fixtures and equipment	5 years
Leasehold improvements	the shorter of 5 years or the lease term

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

Revenue recognition - Sales of goods are recognized when title of goods sold has passed to the purchaser, which is generally at the time of shipment. Customers do not have a general right of return on products shipped. Processing fees, relating to assemblies of cables, wires and mechanicals, are recognized when services are rendered. Service fees, relating to photovoltaic installation and integration are recognized on percentage of completion method when major system components have been delivered and installed.

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

Shipping and handling cost - Shipping and handling costs related to the delivery of finished goods are included in selling expenses. During the periods ended December 31, 2005, September 30, 2005 and September 30, 2006, shipping and handling costs expensed to selling expenses were US$74,318, US$25,265 and US$70,506, respectively.

Income taxes - Income taxes are provided on an asset and liability approach for financial accounting and reporting of income taxes. Deferred income tax liabilities or assets are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and the financial reporting amounts at each year-end. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized.

Foreign currency translation - The consolidated financial statements of the Company are presented in U.S. dollars as the Company and its subsidiaries conduct substantially all of their business in U.S. dollars.

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

Aggregate net foreign currency transaction income/(losses) included in the income statement were US$2,016, US$640 and US$(10,344) for the periods ended December 31, 2005, September 30, 2005 and September 30, 2006, respectively.

Post-retirement and post-employment benefits - IAS Shenzhen contributes to a state pension scheme in respect of its PRC employees. Neither the Company nor its subsidiaries provide any other post-retirement or post-employment benefits.

F-9

2. Summary of Significant Accounting Policies (Continued)

Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

3. Recently Issued Accounting Pronouncements

In December 2004, the Financial Accounting Statements Board (FASB) issued SFAS No. 123 (revised 2004), "Share-Based Payment", which is a revision of SFAS No. 123, "Accounting for Stock-Based Compensation", SFAS No. 123(R) supersedes APB Opinion No.25, “Accounting for Stock Issued to Employees and amends SFAS No.95, “Statement of Cash Flows”. Generally, the approach in SFAS No.123(R) is similar to the approach described in SFAS No. 123. However, SFAS No.123 (R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. SFAS No. 123 (R) was to be effective from the beginning of the first interim or annual reporting period after June 15, 2005. In April 2005, the Securities and Exchange Commission delayed the implementation of SFAS 123(R). As a result, SFAS 123(R) will be effective from the beginning of the first annual reporting period after June 15, 2005, which is the period ending December 31, 2006 for the Company. In November 2006, the Company adopted an equity incentive plan and intends to grant options to purchase up to 2,000,000 shares of its common stock.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29”. SFAS No. 153 addresses the measurement of exchanges of nonmonetary assets and redefines the scope of transactions that should be measured based on the fair value of the assets exchanged. SFAS No. 153 is effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005, which is the fiscal year ending December 31, 2006. The adoption of SFAS No. 153 does not have a material effect on the Company’s consolidated financial position or results of operations.

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

In March 2005, FASB issued FASB Interpretation (“FIN”) No. 47, “Accounting for Conditional Asset Retirement Obligations.” FIN 47 clarifies that the term “Conditional Asset Retirement Obligation” as used in FASB Statement No. 143, “Accounting for Asset Retirement Obligation,” refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. Accordingly, an entity is required to recognize a liability for the fair value of a Conditional Asset Retirement Obligation if the fair value of the liability can be reasonably estimated. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The adoption of FIN 47 does not have a material affect on the Company’s financial position, results of operations or cash flows.

In May 2005, the Financial Accounting Standards Board (“FASB”) SFAS No. 154, Accounting Changes and Error Corrections (“SFAS No. 154”), which replaces Accounting Principles Board Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the requirements for the accounting for and reporting of a change in accounting principles. It requires retrospective application to prior periods’ financial statements of changes in accounting principles, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 does not have a material effect on the Company’s consolidated financial position or results of operations.

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006, with earlier adoption permitted. The Company is currently evaluating the provisions of FIN 48.

F-10

3. Recently Issued Accounting Pronouncements (Continued)

On September 13, 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements” (SAB 108”), which provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The guidance is applicable of the fiscal 2008. The Company does not expect SAB 108 to have any impact on the consolidated financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements. SFAS No. 157 establishes a common definition for fair value to be applied to US GAAP guidance requiring use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The Company does not expect SFAS No. 157 to have any impact on the consolidated financial statements.

4. Inventories

Inventories by major categories are summarized as follows:

	December		September
	31, 2005		30, 2006
	(Audited)		(Unaudited)
	US$		US$
Raw materials		80,327		307,557
Finished goods		-		795,418
		80,327		1,102,975

5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

	December		September
	31, 2005		30, 2006
	(Audited)		(Unaudited)
	US$		US$
Trade deposits to suppliers		70,983		280,286
Deferred costs		-		612,595
Rental and utility deposits		740		61,547
VAT Receivable		-		9,027
Advances to staff		-		16,773
Others		2,608		48,010
		74,331		1,028,238

6. Plant and Equipment

Plant and equipment consists of the following:

	December		September
	31, 2005		30, 2006
	(Audited)		(Unaudited)
	US$		US$
At cost:
Plant and machinery		4,844		40,573
Furniture, fixtures and equipment		12,305		33,717
Leasehold improvements		-		72,249
Total cost		17,149		146,539
Less: accumulated depreciation and amortization		1,686		7,385
Net book value		15,463		139,154

F-11

7. Other Accrued liabilities and other current liabilities

Other accrued liabilities and other current liabilities consist of the following:

	December		September
	31, 2005		30, 2006
	(Audited)		(Unaudited)
	US$		US$
Trade deposits from customers		70,804		77,611
Accrued interest expenses		11,367		32,920
Accrued legal and professional fees		7,282		119,068
Consideration payable for the acquisition of DRCI		-		1,446,565
Other accrued expenses		438		16,764
		89,891		1,692,928

8. Income Taxes

United States

The Company is incorporated in the United States of America and is subject to United States of America tax law. No provision for income taxes has been made for the Company as it has no taxable income for the periods. The applicable federal income tax rate is 34% and the applicable state tax rate is 9%.

Hong Kong

A subsidiary of the Company is incorporated in Hong Kong and is subject to Hong Kong profits tax. The Company is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising in or derived from Hong Kong. The applicable profits tax rate for all periods is 17.5%. No provision for profits tax for the period ended December 31, 2005 has been made as the subsidiary did not generate net assessable income for that period.

China

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

The components of income taxes are as follows:

	11 Months Ended December 31, 2005			9 Months Ended September 30, 2006			8 Months Ended September 30, 2005
	(Audited)			(Unaudited)			(Unaudited)
	US$			US$			US$
Current tax
- US		-			-			-
- Hong Kong		-			180,000			34,427
- China		-			-			-
Deferred tax
- US		-			(313,858	)		-
- Hong Kong		(21,039	)		21,039			-
- China		-			-			-
		(21,039	)		(112,819	)		34,427

F-12

8. Income Taxes (Continued)

Reconciliation between the provision for income taxes computed by applying the statutory tax rate in Hong Kong to income before income taxes and the actual provision for income taxes is as follows:

	11 Months Ended December 31, 2005			9 Months Ended September 30, 2006			8 Months Ended September 30, 2005
	(Audited)			(Unaudited)			(Unaudited)
	US$			US$			US$
Provision for income taxes at Hong Kong statutory tax rate of 17.5%		(23,734	)		19,450			27,209
Effect of different tax rates in other jurisdictions		(419	)		(184,088	)		(346	)
Effect of expenses not deductible for tax purpose		-			30			-
Increase in valuation allowances		15,097			16,096			12,438
Utilization of tax losses		-			(21,039	)		-
Others		(11,983	)		56,732			(4,874	)
		(21,039	)		(112,819	)		34,427

The components of deferred income tax are as follows:

	December			September
	31, 2005			30, 2006
	(Audited)			(Unaudited)
	US$			US$
Deferred tax asset:
Net operating loss carry forwards		36,136			334,764
Less: Valuation allowances		(15,097	)		(31,193	)
		21,039			303,571
Deferred tax liability:
Temporary differences in recognition of deferred costs		-			(257,290	)
Net deferred tax asset		21,039			46,281

Adjustments to the valuation allowance will be made if there is a change in management’s assessment of the amount of the deferred tax asset that is realizable. At December 31, 2005, the Company had net operating loss carryforwards of US$21,039 and US$15,097 which are of unlimited carry forward and expire in 2011, respectively. At September 30, 2006, the Company had net operating loss carry forward of US$31,193 which will expire between 2011 and 2012 and of US$303,571 which will expire in 2027.

9. Revenue

	11 Months Ended December 31, 2005		9 Months Ended September 30, 2006		8 Months Ended September 30, 2005
	(Audited)		(Unaudited)		(Unaudited)
	US$		US$		US$
Sales of cables and wires		1,340,813		2,654,225		1,142,931
Sales of solar panels		-		121,583		-
Photovoltaic installation, integration and sales		-		476,641		-
Processing of cables and wires		30,918		52,441		20,342
		1,371,731		3,304,890		1,163,273

F-13

10. Related Party Transactions

Service fees

During the periods ended December 31, 2005, September 30, 2005 and September 30, 2006, the Company paid service fees to IAS, Inc. amounting to US$889,878, US$556,174 and US$419,605, respectively. Certain shareholders of IAS HK had beneficial interests in IAS, Inc. Included in the balance sheets were amounts due from IAS, Inc., of US$ nil, US$nil and US$5,746, respectively as at December 31, 2005, September 30, 2005 and September 30, 2006. The amounts outstanding are unsecured, interest-free and repayable on demand.

During the periods ended December 31, 2005, September 30, 2005 and September 30, 2006, the Company paid service fees to Granite Bay Technologies, Inc. (“Granite Bay”) amounting to US$ nil, US$ nil and US$134,600, respectively. Certain shareholders of IAS HK had beneficial interests in Granite Bay. Included in the balance sheets were amounts due to Granite Bay, of US$ nil, US$ nil and US$19,149, respectively as at December 31, 2005, September 30, 2005 and September 30,2006. The amounts outstanding are unsecured, interest-free and repayable on demand.

Short-term loans

Details of the short-term loans are as follows:

	December		September
	31, 2005		30, 2006
	(Audited)		(Unaudited)
	US$		US$
Notes payable
Stephen C. Kircher (note a and note b)		-		320,000
SPI Nevada (note b)		-		1,405,000
Short-term loan
Loan from Hannex Investments Limited (“Hannex”) (note c)		245,000		245,000
		245,000		1,970,000

Note a: Mr. Stephen C. Kircher is the major shareholder and a director of the Company. The loan is unsecured, bears interest at 8% per annum and is repayable on demand. During the periods ended December 31, 2005, September 30, 2005 and September 30, 2006, the Company accrued interest to Mr. Stephen C. Kircher amounting to US$ nil, US$ nil and US$3,245, respectively.

Note b: Included in the amount is US$1,205,000 which was drawn from the revolving loan facility provided by SPI Nevada (formerly known as Welund Fund, Inc.) to the Company with maximum amount of US$2,500,000. The amount is repayable on March 31, 2007, secured by collateral, including all goods, accounts, equipment, inventory, intellectual property, chattel paper, instruments, investment property, letter-of-credit rights, documents, and all proceeds of the Company, and bears interest at 8% per annum.

The remaining amount US$200,000 is repayable on demand, unsecured and bears interest at 8% per annum. Pursuant to an agreement signed among Mr. Stephen C. Kircher, SPI Nevada and the Company, Mr. Stephen C. Kircher agreed to subordinate the payment of that amount owed by the Company to him to that of SPI Nevada.

During the periods ended December 31, 2005, September 30, 2005 and September 30, 2006, the Company accrued interest to SPI Nevada amounting to US$ nil, US$ nil and US$3,691, respectively.

Note c: Hannex is a shareholder of IAS HK. The loan is unsecured, bears interest at 8% per annum and is repayable on demand. During the periods ended December 31, 2005, September 30, 2005 and September 30, 2006, the Company accrued interest to Hannex amounting to US$11,367, US$6,444 and US$14,579, respectively.

11. Stock Option Plan

On November 15, 2006, the Company adopted the 2006 Equity Incentive Plan (the “Plan”) which permits the Company to grant stock options to directors, officers or employees of the Company or others to purchase shares of common stock of the Company through the awards of Incentive and Nonqualified Stock Options (“Options”), Incentive Stock Options and Stock Appreciation Rights (“SARs”).

The Plan permits the total number of common stock reserved and available for award be equal to 2,000,000 shares of common stock of which the number of shares of common stock reserved and available for award of Incentive Stock Options will be 250,000.

The effective date of the Plan will be within twelve months of the adoption of the Plan.

Each Option and all rights or obligations thereunder will expire on such date as will be determined by the Company, but not later than ten years after the date of grant and five years in the case of an Incentive Stock Option when the optionee owns more than 10% (“Ten Percent Stockholder”) of the total combined voting power of all classes of stock of the Company, and will be subject to earlier termination as hereinafter provided.

F-14

The exercise price of any Option will be determined by the Company when the Option is granted and may not be less than 100% of the fair market value of the shares on the date of grant, and the exercise price of any Incentive Stock Option granted to a Ten Percent Stockholder will not be less than 110% of the fair market value of the shares on the date of grant. The exercise price per share of an SAR will be determined by the Company at the time of grant, but will in no event be less than the fair market value of a share of Company’s stock on the date of grant.

On December 28, 2006, the Company granted 2,000,000 restricted stock awards and options with an exercise price of $1.00 per share.

12. Commitments and Contingencies

Operating leases- The Company leases premises under various operating leases. Rental expenses under operating leases included in the statement of income were US$18,417, US$9,285 and US$44,292 for the periods ended December 31, 2005, September 30, 2005 and September 30, 2006, respectively. The Company was obligated under operating leases requiring minimum rentals as follows:

	US$
Three months ending December 31, 2006		66,102
Years ending December 31,
2007		243,428
2008		243,428
2009		110,008
Total minimum lease payments		662,966

13. Employee Benefits

The Company’s subsidiary in the PRC contributes to a state pension scheme run by the Chinese government in respect of its employees in China. The expense related to this plan, which is calculated at average rates of 8%, 8% and 9% of the average monthly salary for the periods ended December 31, 2005, September 30, 2005 and September 30, 2006, respectively. Amounts charged to income statements were US$4,813, US$1,923 and US$9,833 for the periods ended December 31, 2005, September 30, 2005 and September 30, 2006, respectively.

14. Operating Risk

Concentrations of Credit Risk and Major Customers-A substantial percentage of the Company's sales are made to a small number of customers and are typically sold either under letters of credit or on open account basis. Details of customers accounting for 10% or more of total net sales for each of the periods ended December 31, 2005, September 30, 2005 and September 30, 2006 are as follows:

	11 Months Ended December		9 Months Ended September		8 Months Ended September
	31, 2005		30, 2006		30, 2005
	(Audited)		(Unaudited)		(Unaudited)
	US$		US$		US$
Flextronics		*		1,333,033		*
Motion Control Inc.		340,130		*		278,446
Occam Networks		*		396,567		*
Poway		*		346,554		*
Siemens Transportation Systems, Inc.		250,811		425,405		165,017
Surge Technologies		*		514,113		*
Tellabs		549,919		*		540,842

* Less than 10%

Sales to the above customers relate to cable and wire assemblies and photovoltaic installation, integration and sales.

Details of the amounts receivable from the five customers with the largest receivable balances at December 31, 2005 and September 30, 2006, respectively, are as follows:

F-15

	December		September
	31, 2005		30, 2006
	(Audited)		(Unaudited)
	US$		US$
Flash Electronics		297		N/A
Flextronics		N/A		572,125
Motion Control Inc.		5,590		N/A
Occam Networks		10,084		96,830
Poway		N/A		346,554
Siemens Transportation Systems, Inc.		38,510		N/A
Sundance Power LLC		N/A		121,583
Surge Technologies		202		327,728
		54,683		1,464,820

There were no provisions for bad debts expense charged to the income statement for the periods ended December 31, 2005, September 30, 2005 and September 30, 2006.

Credit risk - The Company is exposed to credit risk from its cash held at banks and fixed deposits and accounts receivable. The credit risk on cash at bank and fixed deposits is limited because the counterparties are reputable financial institutions. Accounts receivable are subjected to credit evaluations. Allowance for estimated irrecoverable amounts is assessed by reference to past default experience and the current economic environment.

Foreign currency risk - Most of the transactions of the Company were settled in U.S. dollars. Because most of the foreign currency transactions that the Company enters into are transacted in U.S. dollars, the Company believes that future foreign currency exchange rates should not materially adversely affect the overall financial position, results of operations or cash flow.

15. Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and are reasonable estimates of their fair values. All the financial instruments are for trade purposes.

16. Geographical Information

The Company has two reportable segments: (i) cable, wire and mechanical assemblies sales and processing “cable, wire and mechanical assemblies”), and (ii) photovoltaic installation, integration and sales and solar panel sales (“Photovoltaic installation, integration and sales”. The Company's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies. Most of the businesses were acquired as a unit, and the management at the time of the acquisition was retained.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company accounts for inter-segment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices.

Contributions of the major activities, profitability information and asset information of the Company's reportable segments for the periods ended December 31, 2005, September 30, 2005 and September 30, 2006 are as follows:

	11 months ended							9 months ended							8 months ended
	December 31, 2005							September 30, 2006							September 30, 2005
	Net sales		Intersegment Sales		Profit (loss)			Net sales		Intersegment Sales		Profit (loss)			Net sales		Intersegment Sales		Profit (loss)
Segment:
Cable, wire and mechanical assemblies		1,371,731		-		(135,623	)		2,706,666		-		988,621			1,163,273		-		155,479
Photovoltaic installation, integration and sales		-		-		-			598,224		-		(877,480	)		-		-		-
Segment total		1,371,731		-		(135,623	)		3,304,890		-		111,141			1,163,273		-		155,479
Reconciliation to consolidated totals:
Sales eliminations		-		-		-			-		-		-			-		-		-
Consolidated totals:
Net sales		1,371,731		-					3,304,890		-					1,163,273		-
Income before income taxes						(135,623	)						111,141							155,479

F-16

	11 months ended					9 months ended					8 months ended
	December 31, 2005					September 30, 2006					September 30, 2005
	Interest income		Interest expenses			Interest income		Interest expenses			Interest income		Interest expenses
Segment:
Cable, wire and mechanical assemblies		33		(11,367	)		85		-			14		(6,444	)
Photovoltaic installation, integration and sales		-		-			-		-			-		-
Unallocated		-		-			-		(21,553	)		-		-
Consolidated total		33		(11,367	)		85		(21,553	)		14		(6,444	)

16. Geographical Information (Continued)

	11 months ended							9 months ended							8 months ended
	December 31, 2005							September 30, 2006							September 30, 2005
	Identifiable assets		Capital expenditure		Depreciation and amortization			Identifiable assets		Capital expenditure		Depreciation and amortization			Identifiable assets		Capital expenditure		Depreciation and amortization
Segment:
Cable, wire and mechanical assemblies		310,228		17,149		(1,686	)		2,707,714		75,259		(3,371	)		467,752		17,100		(847	)
Photovoltaic installation, integration and sales		-		-		-			1,935,142		45,104		(2,328	)		-		-		-
Consolidated total		310,228		17,149		(1,686	)		4,642,856		120,363		(5,699	)		467,752		17,100		(847	)

Since all the goods of the Company were sold to the United States, no analysis of sales by geographical location is presented.

The locations of the Company's identifiable assets are as follows:

	December		September		September
	31, 2005		30, 2006		30, 2005
	(Audited)		(Unaudited)		(Unaudited)
	US$		US$		US$
Hong Kong		165,116		1,016,249		391,007
China		145,112		1,691,465		76,745
US		-		1,935,142		-
		310,228		4,642,856		467,752

F-17

Dale Renewables Consulting, Inc.

(A Development Stage Company)

Independent Auditor’s Report and Financial Statements

For the period from July 26, 2005 (date of inception) to December 31, 2005

Independent Auditor’s Report

To the Shareholders and Directors of Dale Renewables Consulting, Inc.:

We have audited the accompanying balance sheet of Dale Renewables Consulting, Inc. (a development stage company) (the Company) as of December 31, 2005, and the related statements of operations, stockholders' deficit and cash flows for the period from July 26, 2005 (date of inception) to December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Dale Renewables Consulting, Inc. as of December 31, 2005, and the results of its operations and its cash flows for the period from July 26, 2005 (date of inception) to December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered losses from operations and has a working capital deficit that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Macias Gini & O’Connel LLP

Certified Public Accountants

Sacramento, California

November 15, 2006 as to the fourth paragraph of Note 9

F-18

Dale Renewables Consulting, Inc.

(A Development Stage Company)

Balance Sheet

As of December 31, 2005

Assets
Current Assets
Security Deposit	$	2,546
Total Current Assets		2,546
Property and Equipment, net		24,785
Total Assets	$	27,331
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts Payable	$	9,201
Accrued Expenses		6,991
Due to Related Party		179,399
Total Current Liabilities		195,591
Total Liabilities		195,591
Stockholders' Deficit
Common Stock
Class A, no par value; 500,000 shares authorized;
333,334 issued and outstanding		-
Class B, no par value; 500,000 shares authorized;
none issued and outstanding		-
Deficit Accumulated During Development Stage		(168,260	)
Total Stockholders' Deficit		(168,260	)
Total Liabilities and Stockholders' Deficit	$	27,331

F-19

Dale Renewables Consulting, Inc.

(A Development Stage Company)

Statement of Operations

For the Period from July 26, 2005 (date of inception) to December 31, 2005

Revenue	$	-
Operating Expenses
Payroll and Employee Benefits		76,001
Professional Fees		47,602
Office Expense		21,601
Rent		15,124
Travel		4,996
Advertising		1,872
Depreciation		1,064
Total Operating Expenses		168,260
Loss from Operations		(168,260	)
Net Loss	$	(168,260	)

F-20

Dale Renewables Consulting, Inc.

(A Development Stage Company)

Statement of Stockholders' Deficit

For the Period from July 26, 2005 (date of inception) to December 31, 2005

					Deficit
					Accumulated
					During			Total
	Common Stock				Development			Stockholders'
	Shares				Stage			Deficit
Balance beginning July 26, 2005		-	$	-	$	-		$	-
Issuance of Founders' Stock		333,334		-		-			-
Net loss		-		-		(168,260	)		(168,260	)
Balance, December 31, 2005		333,334	$	-	$	(168,260	)	$	(168,260	)

F-21

Dale Renewables Consulting, Inc.

(A Development Stage Company)

Statement of Cash Flows

For the Period from July 26, 2005 (date of inception) to December 31, 2005

Cash Flows from Operating Activities:
Net Loss	$	(168,260	)
Adjustments to reconcile net loss to cash used by operating activities:
Depreciation		1,064
Change in:
Security Deposit		(2,546	)
Accounts Payable		9,201
Accrued Expenses		6,991
Net cash used by operating activities		(153,550	)
Cash Flows from Investing Activities:
Purchase of Property and Equipment		(25,849	)
Net cash used by investing activities		(25,849	)
Cash Flows from Financing Activities:
Borrowings from Related Party		179,399
Net cash provided by financing activities		179,399
Net increase in cash		-
Cash at beginning of period		-
Cash at end of period	$	-

F-22

Dale Renewables Consulting, Inc.

(A Development Stage Company)

Notes to Financial Statements

December 31, 2005

Reference to “the Company”in this section refers historically to the operations of DRCI.

Note 1 - Organization and Basis of Presentation

Dale Renewables Consulting, Inc. (the Company) was incorporated in the State of California on July 26, 2005. The Company’s business is the design and installation of photovoltaic cells in both residential and commercial settings. At December 31, 2005, the Company was primarily focused on the recruitment of personnel and the raising of capital and had not commenced planned principal operations. As a result, the accompanying financial statements have been presented on a development stage basis.

Note 2 - Losses During Development Stage and Management’s Plans

Since inception, the Company has incurred losses totaling $168,260, had a working capital deficit of $193,045 at December 31, 2005 and is entirely dependent upon an affiliated entity to fund its operations (See Note 5). The Company’s ability to continue as a going concern is dependent upon its ability to obtain sufficient funds to recruit personnel and to successfully market its design and installation services.

Management of the Company believes that funding from the affiliated entity, debt or equity proceeds from third parties or the potential sale of the business to an entity with a larger amount of resources will allow it to continue operations. However, there can be no assurance that the Company will obtain sufficient funding, or generate sufficient revenues to provide positive cash flows from operations, to permit the Company to realize its plans. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Note 3 - Summary of Significant Accounting Policies

Use of Estimates - In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect certain amounts and disclosures. Actual results could materially differ from those estimates under different assumptions or conditions.

Cash and Cash Equivalents - The Company considers all highly liquid investments with original maturities of ninety days or less to be cash and cash equivalents. At December 31, 2005, the Company held no cash and cash equivalents.

Property and Equipment - Property and equipment is recorded at cost and depreciated using the straight-line method, as follows:

Computer Equipment	3 years
Office Equipment	5 years

Repairs and maintenance are charged to operations as incurred and expenditures for significant improvements are capitalized. The cost of property and equipment retired or sold, together with the related accumulated depreciation, is removed from the appropriate asset and depreciation accounts, and the resulting gain or loss is included in operations.

F-23

Income Taxes - The Company accounts for income taxes under Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standard (SFAS) No.109, Accounting for Income Taxes, which requires the use of the liability method. SFAS 109 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

Advertising Costs - Advertising costs are expensed as incurred. Advertising expense was $1,872 for the period from July 26, 2005 (date of inception) to December 31, 2005.

Comprehensive Income (loss) - There were no items of comprehensive income (loss) and therefore comprehensive income (loss) was the same as net income (loss) for the period presented.

Recent Accounting Pronouncements - In July 2006, the FASB issued Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109, which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS No. 109. FIN No. 48 prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. FIN No. 48 is effective for the Company beginning in January 1, 2007. The Company does not believe that the adoption of FIN No. 48 will have a material impact on its financial position, results of operation or cash flows.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. This statement applies to all voluntary changes in accounting principle and to changes required by an accounting pronouncement if the pronouncement does not include specific transition provisions, and it changes the requirements for accounting for and reporting them. Unless it is impractical, the statement requires retrospective application of the changes to prior periods' financial statements. This statement is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005.

Note 4 - Property and Equipment

Property and equipment consist of the following at December 31, 2005:

Office equipment	$	20,286
Computer equipment		5,563
Total property and equipment		25,849
Accumulated depreciation		(1,064	)
	$	24,785

Note 5 - Due to Related Party

Concurrent with its formation, the Company entered into a funding arrangement with an entity controlled by its CEO (Affiliated Entity). Under the funding arrangement, operating costs and capital expenditures of the Company were paid on behalf of the Company by the Affiliated Entity. There is no stated maturity date. There is no stated interest rate on amounts advanced under the arrangement. The Company has not imputed interest on the amounts advanced due to the nature of its relationship with the Affiliated Entity. At December 31, 2005, the Company owed $179,399 under this arrangement.

F-24

Note 6 - Income Taxes

The Company had no income tax provision for the period from July 26, 2005 (date of inception) to December 31, 2005. At December 31, 2005, the Company had net deferred tax assets of approximately $72,000, primarily related to net operating losses. Because the realization of tax benefits related to the Company’s net deferred tax assets is uncertain, a full valuation allowance has been provided against the net deferred tax asset. During the period from July 26, 2005 (date of inception) to December 31, 2005, the valuation allowance increased by $72,000. At December 31, 2005 the Company had net operating losses of approximately $168,000 for federal and state income tax purposes. Such net operating losses will expire in 2025 and 2015, respectively. Under Section 382 of the Internal Revenue Code, a change in ownership of the Company entity may create limitations on the utilization of its net operating losses.

Note 7 -Stockholders' Equity

The Company’s articles of incorporation authorize the Company to issue up to 500,000 each of Class A and Class B common stock. Shares of Class A and Class B common stock have similar rights and privileges except that Class B shareholders do not have voting rights. At December 31, 2005, there were no Class B shares outstanding.

Note 8 - Related Party Transactions

At December 31, 2005, the Company owed $179,399 under a funding arrangement with the Affiliated Entity (See Note 5). Professional fees for the period from July 26, 2005 (date of inception) to December 31, 2005 include $44,242 related to administrative services provided by the Affiliated Entity to the Company.

During the period from July 26, 2005 (date of inception) to December 31, 2005, the Company incurred rent expense of $15,124 for office space it rented from the Affiliated Entity under the terms of a sublease that ended in May 2006.

Note 9 - Subsequent Events

In January 2006, the Company issued 166,666 shares of Class A common stock to a newly hired officer of the Company. The Company received no proceeds from the issuance of these shares.

In August 2006, the Company entered into a management agreement with Solar Power, Inc. (SPI). Under the terms of the management agreement SPI absorbs certain of the Company’s payroll and inventory costs and is to provide general management and accounting functions to the Company. All other costs of the Company are to be absorbed by the Company and the Affiliated Entity.

In August 2006, the Company entered into an acquisition agreement with SPI. Under the terms of the acquisition agreement, the shareholders of the Company agreed to the Company being acquired in exchange for $500,000 cash, the assumption of any balances owed to the Affiliated Entity, shares of SPI’s common stock with an estimated fair value of $500,000, the granting of certain future franchise rights to certain of the Company’s shareholders and potential contingent payments up to $500,000.

In November 2006, the Company agreed to modify its acquisition agreement with SPI and on November 15, 2006 was acquired by SPI in exchange for $1,446,5654 cash, in lieu of any and all other forms of consideration.

F-25

PRO FORMA FINANCIAL INFORMATION

Introductory Notes

The Transaction

On December 29, 2006, we completed the merger contemplated by the certain Agreement and Plan of Merger dated August 23, 2006, as amended by that certain First Amendment to the Agreement and Plan of Merger dated October 4, 2006, Second Amendment to the Agreement and Plan of Merger dated December 1, 2006, and Third Amendment to the Agreement and Plan of Merger dated December 21, 2006 (collectively, the “Agreement”), by and among us, Solar Power, Inc., a California corporation (“SPI-CA”), and our wholly-owned subsidiary, Welund Acquisition Corp., a Nevada corporation (“Merger Sub”) as previously reported on Current Reports on Form 8-K filed with the SEC on August 29, 2006, October 26, 2006, December 6, 2006, and December 22, 2006, pursuant to which our Merger Sub merged with and into SPI with SPI surviving as our wholly owned subsidiary (the “Merger”).

This Merger was treated as a reverse acquisition with Solar Power, Inc., a California corporation, considered as the acquiring entity for accounting purposes. The assets and liabilities of Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc., consisting primarily of cash and cash equivalents of $11,208,167 were recorded at their historical values.

In connection with the Merger, (a) we issued an aggregate of 14,500,000 shares of our restricted common stock to the existing shareholders of SPI in exchange for the cancellation of the outstanding shares of common stock of SPI owned by the SPI shareholders, (b) we substituted a total of 2,000,000 outstanding restricted stock awards and options of SPI with our restricted stock awards and options to purchase shares of our common stock on the same terms and conditions as their SPI options, and (c) replaced our officers and directors with the officers and directors of SPI who assumed control of the combined companies.

As a closing condition to the Merger, we sold our pool of finance receivables to Village Auto, LLC, a California limited liability and affiliate of Robert Freiheit, our former director, president and chief executive officer.

The Entities Involved

Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.) (“SPI-NV”), Solar Power Inc., a California corporation (“SPI-CA”), and Dale Renewables Consulting, Inc., a California corporation (“DRCI”) acquired by SPI-CA effective June 1, 2006 closing on November 15, 2006.

Pro-Forma Reporting Periods

SPI-NV, SPI-CA and DRCI all report on a calendar year ending December 31.

Statements of Operations

For calendar year 2005 SPI-NV reported twelve months of operations. SPI-CA reported operations from inception to December 31 (eleven months). DRCI reported operations from inception to December 31 (approximately five months).

For the nine months ended September 30, 2006 SPI-NV and SPI-CA reported nine months of operations. DRCI reported operations for five months ended May 31, 2006. Operations of DRCI were consolidated with SPI-CA from June 1, 2006, the date of assumption of control.

F-26

SOLAR POWER, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 2006

	Solar Power Inc., a Nevada corporation (Formerly Welund Fund, Inc.)			Solar Power Inc., a California corporation		Dale Renewables Consulting, Inc., a California corporation			Pro Forma Adjustments				Combined
ASSETS
Current Assets									$	28,065		(6)
Cash & cash equivalents	$	9,650,779		$	46,026	$	4,850		$	5,615,021		(2)	$	15,344,741
Accounts receivable		-			1,572,943		-			-				1,572,943
Security deposits		-			-		113,467			-				113,467
Notes receivable from SPI- CA		1,405,000			-		-			1,405,000		(1)		-
Interest receivable from SPI-CA		3,828								3,828		(1)		-
Receivable from related party		515			-		-			-				515
Inventories		-			1,102,975		68,959			-				1,171,934
Amounts due from affiliates		-			5,746		-			-				5,746
Prepaid loan servicing fees receivable from related party		6,444			-		-			(6,444	)	(6)		-
Finance Receivables net of discount		21,621			-		-			(21,621	)	(6)		-
Prepaid Expenses and other current assets		-			1,028,238		-			-				1,028,238
Total Current Assets		11,088,187			3,755,928		187,277			4,206,193				19,237,584
Plant & equipment, net		-			139,154		15,758			-				154,912
Goodwill		-			701,493		2,546			(2,546	)	(5)		701,493
Other Assets		-			-		1,287							76,287
Deferred tax assets		-			46,281		-			-				46,281
Total Assets	$	11,088,187		$	4,642,856	$	206,867		$	4,203,647			$	20,220,462
LIABILITIES & STOCKHOLDER'S EQUITY
Current Liabilities
Short-term loans from affiliates		-		$	1,970,000		-		$	(1,408,828	)	(1)	$	561,172
Accounts Payable		25,557			491,198		223,770			-				740,525
Financing Costs payable		597,927			-		-			(597,927	)	(2)
Accrued payroll and employee benefits		-			162,256		-			-				162,256
Accrued registration costs		75,000			-		-			(75,000	)	(3)		-
Other accrued liabilities and other current liabilities		-			1,692,928		345,508			-				2,038,436
Amounts due affiliates		-			19,149		-			-				19,149
Income tax payable		-			180,000		-			-				180,000
Total Current Liabilities		698,484			4,515,531		569,278			(2,081,755	)			3,701,538
Stockholder's Equity
Common stock3		1,248			14,000		-			569		(3)		15,817
										6,212,379		(2)
										75,000		(3)
Additional paid in capital		10,589,966			3,949					(201,511)		(4)		16,679,783
Net Income							(212,628	)		(2,546	)	(5)		(212,628	)
Deficit accumulated during development stage		(201,511	)				(149,783	)		201,511		(4)		(152,329	)
Retained earnings		-			109,376		-			-				109,376
Total Stockholder's Equity		10,389,703			127,334		(362,410	)		6,285,402				16,518,924
Total Liabilities and Stockholders’ Equity	$	11,088,187		$	4,642,856	$	206,867		$	4,203,647			$	20,220,462

Footnotes:

¹ Gives effect to the elimination of $1,408,828 in the amounts due to SPI (NV) from SPI (CA).

² Records the consummation of a private placement by SPI (NV) on October 4, 2006 in conjunction with the transaction as if it had occurred on September 30, 2006.

³ Eliminates the accrued financing costs of the private placement.

⁴ Gives effect to the elimination of SPI (NV) deficit accumulated during development stage.

⁵ Eliminates the goodwill of DRCI post acquisition

⁶ Eliminates the finance receivables of SPIN sold pursuant to the Merger agreement

F-27

SOLAR POWER, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE PERIODS ENDED DECEMBER 31, 2005

	Solar Power Inc., a Nevada corporation (Formerly Welund Fund, Inc.)			Solar Power Inc., a California corporation (from inception to December 31, 2005			Dale Renewables Consulting, Inc., a California corporation (from inception to December 31, 2005			Pro Forma Adjustments				Combined
Revenues	$	13,460		$	1,371,731					$	(13,460	)	(1)	$	1,371,731
Amortization of discount on purchsed finance receivables		7,333			-			-			(7,333	)	(1)		-
Interest Income		3,288			-			-			(3,288	)	(1)		-
															-
Cost of Revenues		-			(409,828	)		-							(409,828	)
Total Gross Profit		24,081			961,903			-			(24,081	)			961,903
Selling Expenses		-			(74,886	)		-							(74,886	)
General and Administrative Expenses		(101,509	)		(1,013,289	)		(168,260	)						(1,283,058	)
Total Operating (loss)/income		(77,428	)		(126,272	)		(168,260	)		(24,081	)			(396,041	)
Other Income
Interest Expense		-			(11,367	)		-							(11,367	)
Exchange gain															-
Other non-operating income, net		-			2,016			-							2,016
(Loss)/profit before income taxes		(77,428	)		(135,623	)		(168,260	)		(24,081	)			(405,392	)
Income Taxes		-			21,039			-							21,039
Net (loss)/income	$	(77,428	)	$	(114,584	)	$	(168,260	)	$	(24,081	)		$	(384,353	)
Shares outstanding		3,122,252			14,000,000			333,334			14,711,081		(2)		32,166,667	(3)
Earnings Per Share	$	(0.02	)	$	-		$	-						$	-

Footnotes:

¹ Gives effect to the discontinuation of operations at SPI (NV) as a condition of the transaction.

² Gives effect to the following items:

a) a reverse 3 for 1 stock split and the issuance of 625,916 shares by SPI (NV);

b) elimination of 333,334 shares from DRCI in November 2006;

c) issuance of 500,000 shares from SPI (CA) in December 2006; and

d) issuance of 16,000,000 shares raised in the private offerings by SPI (NV) in September and October, 2006.

F-28

SOLAR POWER, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

NINE MONTH PERIOD ENDED SEPTEMBER 30, 2006

	Solar Power Inc., a Nevada corporation (Formerly Welund Fund, Inc.)			Solar Power Inc., a California corporation (including DRCI from June 1, 2006)			Dale Renewables Consulting, Inc., a California corporation (January 1, 2006 to May 31, 2006)			Pro Forma Adjustments			Combined
Revenues		-		$	3,304,890		$	246,899			-		$	3,551,789
														-
Cost of revenues		-			(1,876,281	)		(163,982	)		-			(2,040,263	)
Total Gross Profit		-			1,428,609			82,917			-			1,511,526
Selling expenses		-			(105,681	)		(4,959	)					(110,640	)
General and administrative expenses		(128,625	)		(1,232,536	)		(213,200	)		-			(1,574,361	)
Total Operating (loss)/income		(128,625	)		90,392			(135,242	)		-			(173,475	)
Other Income
Interest income (expense)		3,880			(21,553	)		(14,541	)		(3,880	) (1)		(28,334	)
Exchange gain														-
Other non-operating income, net					42,302									42,302
Income from discontinued operations		8,430									(8,430	) (2)		8,430
(Loss) profit before income taxes		(116,315	)		111,141			(149,783	)					(159,507	)
Income taxes					191,724									191,724
														-
Net (loss) income	$	(116,315	)	$	302,865		$	(149,783	)				$	32,217
Shares outstanding		1,681,282												32,166,667
Earnings Per Share	$	(0.07	)										$	0.001

¹  Eliminates intercompany interest charges

² Eliminates expenses related to discontinued operations of SPIN

F-29

SOLAR POWER, INC., a Nevada Corporation

(Formerly Welund Fund, Inc.)

Condensed Balance Sheets

(Unaudited)

	September 30,
	2006
ASSETS
Current Assets
Cash	$	9,650,779
Notes receivable from SPI		1,405,000
Interest receivable from SPI		3,828
Receivable from related party		515
Finance receivables, net of unamortized discount of $0 and $9,665		-
Assets Held for Sale
Prepaid loan servicing fees receivable from related party		6,444
Finance receivables, net of unamortized discount of $3,766 and $0		21,621
Total Assets	$	11,088,187
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	25,557
Payable to Roth Capital Partners, LLC		597,927
Accrued registration costs		75,000
Payables to related parties		-
Total Current Liabilities		698,484
Stockholders' Equity
Preferred stock, $0.0001 par value; 20,000,000 shares authorized; none issued and outstanding		-
Common stock, $0.0001 par value; 100,000,000 shares authorized; 12,476,646 shares and 1,146,667 shares outstanding at September 30, 2006 and December 31, 2005, respectively		1,248
Additional paid in capital		10,589,966
Deficit accumulated during the development stage		(201,511	)
Total Stockholders' Equity		10,389,703
Total Liabilities and Stockholders' Equity	$	11,088,187

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

F-30

SOLAR POWER, INC., a Nevada Corporation

(Formerly Welund Fund, Inc.)

Condensed Statements of Operations

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended						For the Period from July 16, 2002 (date of inception) through
	September 30,						September 30,						September 30,
	2006			2005			2006			2005			2006
Interest income	$	3,880		$	2,104		$	3,880		$	2,104		$	7,168
General and administrative expense		96,754			9,361			128,625			75,850			233,565
Loss from Continuing Operations		(92,874	)		(7,257	)		(124,745	)		(73,746	)		(226,397	)
Income from Discontinued Operations		2,028			5,794			8,430			13,174			24,886
Net Loss	$	(90,846	)	$	(1,463	)	$	(116,315	)	$	(60,572	)	$	(201,511	)
Basic and Diluted Income (Loss) Per Common Share
Continuing operations	$	(0.03	)	$	(0.01	)	$	(0.08	)	$	(0.07	)
Discontinued operations		-			0.01			0.01			0.01
Basic and Diluted Income (Loss) Per Common Share	$	(0.03	)	$	-		$	(0.07	)	$	(0.06	)
Weighted-Average Common Shares Outstanding		2,733,078			1,146,667			1,681,282			1,005,057

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

F-31

SOLAR POWER, INC., a Nevada Corporation

(Formerly Welund Fund, Inc.)

Statement of Shareholders' Equity (Deficit)

For the Nine Months Ended September 30, 2006

							Deficit
							Accumulated			Total
					Additional		During the			Shareholders'
	Common Stock				Paid-In		Development			Equity
	Shares		Amount		Capital		Stage			(Deficit)
Balance - December 31, 2005		1,146,667	$	115	$	287,609	$	(85,196	)	$	202,528
Issuance of 1,560,000 shares common stock for cash, $0.0001 par value, 8/9/06		520,000		52		166,386		-			166,438
Issuance of 10,809,979 shares common stock for cash, $0.0001 par value, 9/30/06, net of offering costs of $885,000		10,809,979		1,081		10,135,971		-			9,924,979
Net loss		-		-		-		(116,315	)		(120,143	)
Balance - September 30, 2006		12,476,646	$	1,248	$	10,589,966	$	(201,511	)	$	10,173,802

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

F-32

SOLAR POWER, INC., a Nevada Corporation

(Formerly Welund Fund, Inc.)

Condensed Statements of Cash Flows

(Unaudited)

	For the Nine Months Ended						For the period from July 16, 2002 (date of inception) through
	September 30,						September 30,
	2006			2005			2006
Cash Flows From Operating Activities
Net loss	$	(116,315	)	$	(60,572	)	$	(201,511	)
Adjustments to reconcile net loss to net cash used in operating activities
Amortization of discount on purchased finance receivables		(5,148	)		(6,077	)		(12,481	)
Issuance of common stock for services		-			50,000			50,224
Changes in assets and liabilities:
Prepaid loan servicing fees receivable from related party		(6,444	)		(2,343	)		(6,444	)
Accrued interest receivable		(3,828	)		(2,104	)		(3,828	)
Prepaid expenses		-			(219	)		-
Payables to related parties		(2,740	)		725			-
Accounts payable		15,656			5,816			25,557
Net Cash Used In Operating Activities		(118,819	)		(14,774	)		(148,483	)
Cash Flows From Investing Activities
Purchase of finance receivables from a related party		-			(107,357	)		(107,357	)
Collection of finance receivables		34,407			40,758			85,253
Proceeds from sale of nonperforming finance receivables		4,091			-			12,449
Investment in note receivable from Paxton Energy, Inc.		-			(100,000)	)		(100,000	)
Proceeds from collection of note receivable from Paxton Energy, Inc.		-			-			100,000
Net Cash Used In Investing Activities		38,498			(166,599	)		(9,655	)
Cash Flows From Financing Activities
Proceeds from issuance of common stock, net of offering costs paid		10,976,417			237,500			11,213,917
Investment in notes receivable from SPI		(1,405,000	)		-			(1,405,000	)
Net Cash Provided By Financing Activities		9,571,417			237,500			9,808,917
Net Increase In Cash		9,491,096			56,127			9,650,779
Cash At Beginning Of Period		159,683			-			-
Cash At End Of Period	$	9,650,779		$	56,127		$	9,650,779

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

F-33

SOLAR POWER, INC., a Nevada Corporation

(Formerly Welund Fund, Inc.)

Notes to Interim Condensed Financial Statements

(Unaudited)

Note 1 Organization, Change in Control, and Significant Accounting Policies

Organization, Nature of Operations, Change in Control, and Recent Events — Solar Power, Inc. ("the Company") was originally incorporated under the name “Welund Fund, Inc.” in the State of Delaware on July 16, 2002. The Company is a development stage company organized to serve as a vehicle to effect a merger, exchange of capital stock, asset acquisition or other business combination with a domestic or foreign private business. Effective February 1, 2006, the Company consummated a merger with and into Welund Fund, Inc. (a Nevada corporation), a newly-created wholly-owned subsidiary. Concurrent with the merger, the Company changed its legal domicile from Delaware to the State of Nevada. Since July 16, 2002, the Company’s activities have primarily related to the Company's formation and the seeking of investment or merger opportunities.

On June 9, 2004, an entity acquired 100% of the stock of the Company from the former sole shareholder of the Company for $90,000. At that time, control of the Company was transferred to the new shareholder who appointed a new board of directors. The change of control did not constitute a business combination or reorganization, and consequently, the assets and liabilities of the Company continued to be recorded at historical cost. From July 16, 2002 through March 31, 2005, the Company did not recognize revenue from any of its business activities. Between March and June of 2005, the Company issued 1,000,000 shares of common stock in a private placement for $250,000, less offering costs of $12,500. In March 2005, the Company used part of the proceeds from the issuance of common stock to purchase a pool of sub-prime auto loans from an affiliate of the Company’s president at that time for $107,357. Although the Company began recognizing revenue from the auto loans in 2005, the Company continues to be considered to be in the development stage because revenues recognized have not been significant in relation to the level of planned future operations.

On August 23, 2006, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Solar Power, Inc., a California corporation (“SPI), and with a newly-created subsidiary of the Company, Welund Acquisition, Corp., a Nevada corporation. If the Merger Agreement is completed, of which there can be no assurance, Welund Acquisition, Corp. will be merged with and into SPI, with SPI surviving as a wholly-owned subsidiary of the Company and the shareholders of SPI will receive 14,000,000 shares of the Company’s common stock. Consummation of the merger is conditioned upon, among other things: (a) final audit of SPI and its subsidiaries, (b) the successful completion of a $10 million financing, (c) the change of the Company’s name to “Solar Power, Inc.,” (d) liquidation or sale of the Company’s current business, (e) reverse split of the Company’s common stock 1 for 3, (f) approval of various legal matters, and (g) the absence of regulatory inquiries or investigations.

On September 5, 2006, the Company elected Stephen C. Kircher as the Chairman. Mr. Kircher currently holds the same position with SPI and is also the Chief Executive Officer and President of SPI. Between August 9, 2006 and September 5, 2006, the former directors and officers of the Company resigned and a new board of directors and officers was appointed.

On October 5, 2006, the Company amended its articles of incorporation to change its name to Solar Power, Inc. and affected a 1 for 3 reverse split of its outstanding common stock. The reverse stock split has been retroactively applied for all periods presented in the accompanying financial statements and all references to shares of stock in the notes to financial statements are on a post-reverse split basis.

F-34

SOLAR POWER, INC., a Nevada Corporation

(Formerly Welund Fund, Inc.)

Notes to Interim Condensed Financial Statements

(Unaudited)

Condensed Interim Financial Statements - The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB. Accordingly, these financial statements do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the Company’s annual financial statements and the notes thereto, included in the Company’s annual report on Form 10-KSB. In the opinion of the Company’s management, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to fairly present the Company’s financial position as of September 30, 2006, its results of operations for the three months ended September 30, 2006 and 2005, and its results of operations and cash flows for the nine months ended September 30, 2006 and 2005, and for the period from July 16, 2002 (date of inception), through September 30, 2006. The results of operations for the three months and the nine months ended September 30, 2006, is not likely indicative of the results that may be expected for the year ending December 31, 2006.

Business Condition - The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles which contemplate continuation of the Company as a going concern. However, the Company’s operating losses and lack of significant operations, raise substantial doubt about the ability of the Company to continue as a going concern. The Company took the first step toward meeting concerns about its ability to continue as a going concern by issuing 1,560,000 shares of common stock in August 2006 for $166,438. In September and October 2006, the Company issued 16,000,000 shares of common stock for net proceeds of $15,040,000. In August 2006, the Company entered into the Merger Agreement with SPI, pursuant to which it is contemplated that Welund Acquisition Corp., a wholly-owned subsidiary of the Company, will merge with SPI with SPI surviving as the wholly-owned subsidiary of the Company. SPI is in the business of developing, manufacturing and marketing solar panels and system component products as a complete photovoltaic system to institutional, commercial and residential facilities located primarily in the United States. Upon the merger, it is contemplated that SPI’s current business will be the Company’s primary business. Any substantial increase in business may require the Company to raise additional funds. There is no assurance that the Company will be successful in raising additional capital, or if successful, on terms favorable to the Company. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Basic and Diluted Income (Loss) Per Share - Basic income (loss) per share amounts are computed by dividing net income (loss) by the weighted-average number of common shares outstanding during each period. At September 30, 2006 and 2005, there were no potentially dilutive common stock equivalents outstanding.

Note 2 Finance Receivables Held for Sale

On March 30, 2005, the Company purchased a pool of sub-prime auto loans with a pay-off balance of $126,302 from an affiliate of the Company’s then primary shareholder, officer, and director for $107,357. The purchase price was 85% of the loan pool’s pay-off balance. The discount of $18,945 on the purchase of the loans is being amortized over the term of the loans using a method which approximates the effective yield method. The seller of the pool is required to repurchase loans that become 90 days delinquent. As such, no allowance for uncollectible loans is needed. At the date of purchase, the average loan had a principal balance of approximately $4,708 with an average annual percentage interest rate of approximately 21.54%. The remaining terms of the loans ranged from 6 to 46 months. The Company contracted with Accredited Adjusters, LLC, a related party, to service and administer the loans for a monthly fee equal to ½% of the outstanding principal balance. Accredited Adjusters , LLC, is an affiliate of the Company’s then primary shareholder, officer, and director.

F-35

SOLAR POWER, INC., a Nevada Corporation

(Formerly Welund Fund, Inc.)

Notes to Interim Condensed Financial Statements

(Unaudited)

On August 23, 2006, the Company decided to sell its current business of finance receivables in order to comply with the conditions set forth in the Merger Agreement, as discussed in Note 1. Management intends to sell and is in the process of completing an agreement with a shareholder to sell the Company’s current pool of finance receivables for 85% of the loan pool’s payoff balance for cash, which approximates the carrying value of the receivables. The Company has reclassified the loan pool and the prepaid loan servicing fees receivable from the shareholder as held for sale. Revenues from these discontinued operations for the three and nine months ended September 30, 2006 were $2,470 and $10,327, respectively. Revenues from discontinued operations for the three and nine months ended September 30, 2005 were $7,239 and $16,382, respectively.

Summary information regarding finance receivables for the nine months ended September 30, 2006 is as follows:

	Finance Receivables (Payoff)			Unamortized Discount			Finance Receivables, net
Balance at December 31, 2005	$	65,151		$	(9,665	)	$	55,486
Collections of auto loans		(34,407	)		-			(34,407	)
Sale of delinquent auto loans		(5,357	)		751			(4,606	)
Amortization of discount		-			5,148			5,148
Balance at September 30, 2006	$	25,387		$	(3,766	)	$	21,621

Note 3 Common Stock

On October 5, 2006, the Company amended its articles of incorporation to change its name to Solar Power, Inc. and affected a 1 for 3 reverse split of its outstanding common stock. The reverse stock split has been retroactively applied for all periods presented in the accompanying financial statements and all references to shares of stock in the notes to financial statements are on a post-reverse split basis.

On August 9, 2006, the Company issued 520,000 shares of common stock for $166,438. Purchasers of the common stock received piggyback registration rights and included Steven P. Strasser, the Company’s President and Director, who purchased 156,214 shares for $50,000; Tats, LLC, a family-controlled entity of Terrell W. Smith, the Company’s Vice-President and Director, who purchased 62,485 shares for $20,000; and Howard S. Landa, a director of the Company, who purchased 62,485 shares for $20,000. Mr. Strasser and Mr. Smith, were also appointed to the Board of Directors.

F-36

SOLAR POWER, INC., a Nevada Corporation

(Formerly Welund Fund, Inc.)

Notes to Interim Condensed Financial Statements

(Unaudited)

In September 2006, the Company commenced a private placement offering of 16,000,000 shares of its common stock at $1.00 per share (the “Offering”). The Company conducted two closings for the Offering. On September 19, 2006, the Company issued 10,809,979 shares of common stock at $1.00 per share for $10,809,979. The remaining 5,190,021 shares of common stock were issued on October 4, 2006 for $5,190,021. The following directors, director nominees, and executive officers, and family members of such individuals participated as investors in this private placement: Mr. Strasser purchased 225,000 shares of common stock for $225,000; Mr. Smith purchased 100,000 shares for $100,000; and Mr. Landa purchased 75,000 shares of common stock for $75,000.

In connection with this offering, the Company entered into a Registration Rights Agreement with the investors, pursuant to which the Company agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the shares sold in the offering. The Registration Rights Agreement includes provisions that if the registration statement is not filed by certain dates, or is not declared effective by certain other dates, then the Company will have to pay liquidated damages equal to 1% of the aggregate amount invested for each month that the Company fails to meet the deadlines, up to a maximum of 10% of the amount invested. In connection with the offering, the Company has accrued $75,000 of estimated registration costs at September 30, 2006, which is reflected as a liability and a reduction of additional paid-in capital in the accompanying balance sheet.

The Company engaged Roth Capital Partners, LLC (“Roth Capital”) to act as the agent in the offering. In connection with the entire offering, Roth Capital was paid a total of $885,000 on October 6, 2006 in compensation and reimbursement of expenses. Of the total paid, $597,927 is reflected as a payable in the accompanying balance sheet at September 30, 2006 for that portion of the offering that closed in September 2006, and has been deducted from additional paid in capital. Additionally, as part of their compensation, Roth Capital was issued a five-year warrant to purchase 800,000 shares of the Company’s common stock at $1.15 per share.

Note 4 Notes Receivable from SPI

In August and September 2006, in connection with the contemplated merger with SPI, the Company loaned SPI an aggregate of $200,000 to be used as working capital in the interim period before the SPI Merger. The notes are due on demand and bear interest at 8% per annum.

On September 19, 2006, the Company entered into a Credit Facility Agreement and a Security Agreement (the “Loan Documents”) with SPI, pursuant to which the Company granted SPI a revolving credit line of up to $2,000,000 (the Credit Facility). Under the terms of the Loan Documents, except for certain permitted liens, the Company was granted a first priority security interest in all of SPI’s assets owned now or in the future. Advances made under the Credit Facility bear interest at 8% per annum and are available until February 28, 2007. Amounts advanced under the Credit Facility, including accrued interest, are due for repayment on March 31, 2007. As of September 30, 2006, the Company has advanced an aggregate of $1,205,000 under the Credit Facility. On November 3, 2006, the Company entered into a First Amendment to the Credit Facility pursuant to which the Company agreed to increase the existing revolving credit line from $2,000,000 to $2,500,000. Between September 30, 2006 and November 7, 2006, the Company advanced an additional $1,095,000 under the Credit Facility. As of November 7, 2006, the Company has advanced SPI $2,300,000 under the Credit Facility.

F-37

SOLAR POWER, INC., a Nevada Corporation

(Formerly Welund Fund, Inc.)

Notes to Interim Condensed Financial Statements

(Unaudited)

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

As of November 15, 2006, SPI owes the Company an aggregate amount of $3,946,565.

Note 5 Related Party Transactions

Since the inception of the Company, certain expenses of the Company had been paid by the principal shareholder of the Company. The Company does not own any real or personal property. The Company currently pays rent in the amount of $2,300 per month to an affiliate of the former officer and director for the use of certain office space on a month-to-month basis. Total rental expense for the three months and nine months ended September 30, 2006 was $6,900 and $20,700, respectively. Total rental expense for the three months and nine months ended September 30, 2005 was $5,400 and $12,600, respectively.

In connection with the servicing of the auto loans, the Company pays Accredited Adjusters, LLC, a related party, to service and administer the loans for a monthly fee equal to ½% of the outstanding principal balance. The fee for the three months and nine months ended September 30, 2006 for servicing the loans was $442 and $1,897, respectively. The fee for the three months ended September 30, 2005 and for the period from March 30, 2005 through September 30, 2005 for servicing the loans was $1,445 and $3,209, respectively. At September 30, 2006, the Company has a receivable from Accredited Adjusters, LLC of $6,444 for amounts paid in excess of the amounts earned under the servicing agreement. Management intends to collect this prepaid loan servicing fee receivable in connection with the sale of the finance receivables and has reclassified the receivable as held for sale.

During the three months and the nine months ended September 30, 2006, the Company incurred consulting fees with Village Auto, a related party, in the amount of $6,800 and $10,000, respectively. At September 30, 2006, the Company also has a receivable from Village Auto, a related party, in the amount of $515, in connection with the repurchase of a delinquent loan.

Stephen C. Kircher holds the position of Chairman of the Board of Directors for both the Company and SPI. The Company has appointed a Special Merger Committee consisting of Steven P. Strasser, Terrell W. Smith, and Howard S. Landa, which has the power to deal with all merger matters with SPI without the participation or vote of Stephen C. Kircher.

F-38

HANSEN, BARNETT& MAXWELL
A Professional Corporation	Registered with the Public Company
CERTIFIED PUBLIC ACCOUNTANTS	Accounting Oversight Board
5 Triad Center, Suite 750
Salt Lake City, UT 84180-1128 Phone: (801) 532-2200
Fax: (801) 532-7944
www.hbmcpas.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and the Shareholders

Solar Power, Inc.

We have audited the accompanying balance sheet of Solar Power, Inc., a Nevada corporation (formerly Welund Fund, Inc.), (a development stage company) as of December 31, 2005, and the related statements of operations, shareholders’ equity (deficit) and cash flows for the years ended December 31, 2005 and 2004 and for the period from July 16, 2002 (date of inception) through December 31, 2005. These financial statements are the responsibility of the Company's management.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Solar Power, Inc., (formerly Welund Fund, Inc.) as of December 31, 2005 and the results of its operations and its cash flows for the years ended December 31, 2005 and 2004, and for the period from July 16, 2002 (date of inception) through December 31, 2005 in accordance with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company’s operating losses and lack of significant operations raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ HANSEN, BARNETT & MAXWELL

HANSEN, BARNETT & MAXWELL

March 29, 2006

Salt Lake City, Utah

F-39

SOLAR POWER, INC.

(FORMERLY WELUND FUND, INC.)

(A Development Stage Company)

Balance Sheet

December 31, 2005

ASSETS

Cash	$	159,683
Finance receivables, net of discount of $9,665		55,486
Total Assets	$	215,169
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable	$	9,901
Payables to related parties		2,740
Total Liabilities		12,641
Preferred stock, $0.0001 par value; 20,000,000 shares authorized; none issued and outstanding		-
Common stock, $0.0001 par value; 100,000,000 shares authorized; 3,440,000 shares issued and outstanding		344
Additional paid-in capital		287,380
Deficit accumulated during the development stage		(85,196	)
Total Shareholders' Equity		202,528
Total Liabilities and Shareholders' Equity	$	215,169

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

F-40

SOLAR POWER, INC.

(FORMERLY WELUND FUND, INC.)

(A Development Stage Company)

Statements of Operations

	For the Years Ended December 31,						For the Period from July 16, 2002 (Date of Inception) through December 31,
	2005			2004			2005
Revenues
Finance income	$	13,460		$	-		$	13,460
Amortization of discount on purchased finance receivables		7,333			-			7,333
Interest income		3,288			-			3,288
Total Revenues		24,081			-			24,081
General and administrative expense		101,509			7,544			109,277
Net Loss	$	(77,428	)	$	(7,544	)	$	(85,196	)
Loss Per Common Share	$	(0.02	)	$	-
Weighted-Average Common Shares Outstanding		3,122,252			2,240,000

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

F-41

SOLAR POWER, INC.

(FORMERLY WELUND FUND, INC.)

(A Development Stage Company)

Statements of Stockholders' Equity (Deficit)

For the Period from July 16, 2002 (Date of Inception) through December 31, 2003

and for the Years Ended December 31, 2004 and 2005

							Deficit
							Accumulated			Total
					Additional		During the			Shareholders'
	Common Stock				Paid-In		Development			Equity
	Shares		Amount		Capital		Stage			(Deficit)
Balance - July 16, 2002 (date of inception)		-	$	-	$	-	$	-		$	-
Issuance of stock for services on July 16, 2002 at $0.0001 per share		1,240,000		124		-		-			124
Issuance of stock to convert debt to equity on December 31, 2003 at $0.0001 per share		1,000,000		100		-		-			100
Net loss		-		-		-		(224	)		(224	)
Balance - December 31, 2003		2,240,000		224		-		(224	)		-
Net loss		-		-		-		(7,544	)		(7,544	)
Balance - December 31, 2004		2,240,000		224		-		(7,768	)		(7,544	)
Issuance of stock for cash from March to June 2005, at $0.25 per share, less offering costs of $12,500		1,000,000		100		237,400		-			237,500
Issuance of stock for services in May 2005 at $0.25 per share		200,000		20		49,980		-			50,000
Net loss		-		-		-		(77,428	)		(77,428	)
Balance - December 31, 2005		3,440,000	$	344	$	287,380	$	(85,196	)	$	202,528

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

F-42

SOLAR POWER, INC.

(FORMERLY WELUND FUND, INC.)

(A Development Stage Company)

Statements of Cash Flows

	For the Years Ended December 31,						For the period from July 16, 2002 (Date of Inception) through December 31,
	2005			2004			2005
Cash Flows From Operating Activities
Net loss	$	(77,428	)	$	(7,544	)	$	(85,196	)
Adjustments to reconcile net loss to net cash used in operating activities
Amortization of discount on purchased finance receivables		(7,333	)		-			(7,333	)
Issuance of common stock for services		50,000			-			50,124
Changes in assets and liabilities:
Change in payables to related parties		(1,935	)		4,675			2,840
Accounts payable		7,032			2,869			9,901
Net Cash Used In Operating Activities		(29,664	)		-			(29,664	)
Cash Flows From Investing Activities
Purchase of finance receivables from a related party		(107,357	)		-			(107,357	)
Collection of finance receivables		50,846			-			50,846
Proceeds from sale of nonperforming finance receivables		8,358			-			8,358
Investment in note receivable from Paxton Energy, Inc.		(100,000	)		-			(100,000	)
Proceeds from collection of note receivable from Paxton Energy, Inc.		100,000			-			100,000
Net Cash Used In Investing Activities		(48,153	)		-			(48,153	)
Cash Flows From Financing Activities
Proceeds from the sale of common stock, net of offering costs		237,500			-			237,500
Net Cash Provided By Financing Activities		237,500			-			237,500
Net Increase In Cash		159,683			-			159,683
Cash At Beginning Of Period		-			-			-
Cash At End Of Period	$	159,683		$	-		$	159,683

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

F-43

SOLAR POWER, INC.

(FORMERLY WELUND FUND, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

December 31, 2005 and 2004

NOTE 1 - ORGANIZATION, NATURE OF OPERATIONS, CHANGE IN CONTROL, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization, Nature of Operations, and Change in Control— Welund Fund, Inc. ("the Company") was incorporated in the State of Delaware on July 16, 2002 to serve as a vehicle to effect a merger, exchange of capital stock, asset acquisition or other business combination with a domestic or foreign private business. Effective February 1, 2006, the Company consummated a merger with and into Welund Fund, Inc. (a Nevada corporation), a newly-created wholly-owned subsidiary. Concurrent with the merger, the Company changed its legal domicile from Delaware to the State of Nevada.

Since July 16, 2002, the Company’s activities have primarily related to the Company's formation and the seeking of investment or merger opportunities. On June 9, 2004, Liberty Associates Holdings, LLC, an entity controlled by the Company’s current president, acquired 100% of the stock of the Company from the then sole shareholder of the Company for cash of $90,000. As a result, control of the Company was transferred to the new shareholder who appointed a new board of directors. The change of control did not constitute a business combination or reorganization, and consequently, the assets and liabilities of the Company continued to be recorded at historical cost. From July 16, 2002 through March 31, 2005, the Company did not recognize revenue from any of its business activities. As further described in Notes 2 and 3 to the financial statements, the Company has recently sold 1,000,000 shares of common stock for $250,000, less offering costs, and has purchased a pool of sub-prime auto loans from an affiliate of the Company’s president for $107,357. Although the Company has recognized revenue from the auto loans, the Company continues to be considered to be in the development stage because revenues recognized have not been significant in relation to the level of planned future operations.

Use of Estimates— The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, and require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. They may also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Concentrations— The Company’s operations currently consist of solely the purchase and servicing of sub-prime auto loans in the Sacramento, California area.

Income Taxes— Deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and on the amount of operating loss carry forwards, and are measured using the enacted tax rates and laws that are expected to be in effect when the temporary differences and carry forwards are resolved. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.

Business Condition - The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles which contemplate continuation of the Company as a going concern. However, the Company’s operating losses and lack of significant operations, raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management’s plans include raising additional funds to meet its ongoing expenses through sale of its equity securities. There is no assurance that the Company will be successful in raising additional capital, or if successful, on terms favorable to the Company. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

F-44

SOLAR POWER, INC.

(FORMERLY WELUND FUND, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

December 31, 2005 and 2004

Basic Loss Per Share - Loss per share amounts are computed by dividing net loss by the weighted-average number of common shares outstanding during each period. At December 31, 2005, there were no potentially issuable common shares outstanding.

NOTE 2 - PREFERRED AND COMMON STOCK

Preferred Stock— The Company is authorized to issue 20,000,000 shares of preferred stock, $0.0001 par value, with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. No shares of preferred stock have been issued.

Common Stock— The Company is authorized to issue 100,000,000 shares of common stock, $0.0001 par value. On March 24, 2005, the Company opened a private offering of its stock for sale at $0.25 per share. Through June 30, 2005, the Company sold 1,000,000 shares of common stock for $250,000. Total cost of the offering was $12,500, which was charged against additional paid in capital.

During May 2005, the Company issued 200,000 shares of common stock for consulting and legal services valued at $50,000, or $0.25 per share. The value assigned to the services was valued based upon the value of shares issued for cash.

NOTE 3 - FINANCE RECEIVABLES

On March 30, 2005, the Company purchased a pool of sub-prime auto loans with a pay-off balance of $126,302 from an affiliate of the Company’s primary shareholder, officer, and director for $107,357. The purchase price was 85% of the loan pool’s pay-off balance. The discount of $18,945 on the purchase of the loans is being amortized over the term of the loans using a method which approximates the effective yield method. The seller of the pool is required to repurchase loans that become 90 days delinquent. As such, no allowance for uncollectible loans is provided. At the date of purchase, the average loan had a principal balance of approximately $4,708, a weighted average annual interest rate of approximately 21.54%, a weighted average annual effective interest rate of approximately 32.59%, and remaining terms from 6 to 46 months. The Company has contracted with Accredited Adjusters, LLC, a related party, to service and administer the loans for a monthly fee equal to ½% of the outstanding principal balance. Accredited Adjusters is an affiliate of the Company’s primary shareholder, officer, and director.

F-45

SOLAR POWER, INC.

(FORMERLY WELUND FUND, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

December 31, 2005 and 2004

Summary information regarding finance receivables for the year ended December 31, 2005 is as follows:

	Finance Receivables (Payoff)			Unamortized Discount			Finance Receivables, net
Purchase of auto loans, March 30, 2005	$	126,302		$	(18,945	)	$	107,357
Collections of auto loans		(50,846	)		-			(50,846	)
Sale of delinquent auto loans		(10,096	)		1,738			(8,358	)
Amortization of discount		-			7,333			7,333
Other		(209	)		209			-
Balance at December 31, 2005	$	65,151		$	(9,665	)	$	55,486

NOTE 4 - RELATED PARTY TRANSACTIONS

Since the inception of the Company, certain expenses of the Company had been paid by the principal shareholder of the Company. The Company does not own any real or personal property. Office services had been provided without charge by the officer and director of the Company. Such costs had not been significant to the financial statements and accordingly, have not been reflected therein.

Commencing March 1, 2005, the Company began paying rent in the amount of $1,800 per month to an affiliate of the officer and director for the use of certain office space on a month-to-month basis. The monthly rental was increased to $2,300 on October 1, 2005. Total rental expense for the year ended December 31, 2005 was $19,500.

In connection with the servicing of the auto loans, the Company has paid Accredited Adjusters, LLC $4,000, and has a current liability of $909 for services rendered. Furthermore, $1,831 has been received in error by the Company, is now due to an affiliate of the Company, and was transferred to the affiliate subsequent to December 31, 2005.

On July 28, 2005, the Company loaned $100,000 to Paxton Energy, Inc. (Paxton), a related party through common ownership and common management. The note bore interest at 12% per annum, was payable on demand, and was secured by all of the assets of Paxton. In November 2005, the President of the Company purchased the loan and accrued interest of $3,288 from the Company for $103,288, and in turn the Company assigned the demand note to its President.

NOTE 5 - INCOME TAXES

At December 31, 2005, the Company has net operating loss carry forwards of $85,196, expiring in 2022 through 2025, if unused. The utilization of the net operating loss carry forwards is dependent upon the tax laws in effect at the time the net operating loss carry forwards can be utilized. No income tax benefit or deferred tax asset has been recorded in the financial statements because it is not presently likely that such tax benefits will be realized.

F-46

SOLAR POWER, INC.

(FORMERLY WELUND FUND, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

December 31, 2005 and 2004

The components of net deferred tax assets and liabilities were as follows at December 31, 2005:

Deferred tax asset - Operating loss carry forwards	$	28,967
Valuation allowance		(28,967	)
Net deferred tax asset	$	-

The valuation allowance increased $26,326 and $2,565 during the years ended December 31, 2005 and 2004, respectively. The following is a reconciliation of the income tax benefit computed at the statutory federal rate of 34% to income tax expense included in the accompanying financial statements for the years ended December 31, 2005 and 2004:

	2005			2004
Income tax benefit at statutory rate	$	(26,326	)	$	(2,565	)
Change in valuation allowance		26,326			2,565
Net income tax benefit	$	-		$	-

F-47

PART II INFORMATION NOT REQUIRED IN PROSPECTUS

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under the Nevada General Corporation Law, our directors will have no personal liability to us or our stockholders for damages incurred as the result of any act or failure to act in the capacity as a director or officer. This provision does not apply to the directors’ (i) acts or omissions that involve intentional misconduct, fraud or knowing violation of law; (ii) breach of fiduciary duty; or (iii) approval of an unlawful dividend, distribution, stock repurchase or redemption under Section 78.300 of the Nevada Revised Statutes. This provision would generally absolve directors of personal liability for negligence in the performance of duties, including gross negligence.

The Nevada General Corporation Law grants corporations the right to indemnify directors, officers, employees and agents in accordance with applicable law. Our Articles of Incorporation, as amended, requires us to indemnify our officers and directors to the full extent permissible by the laws of the State of Nevada. In addition, our Bylaws authorize us to indemnify our directors and officers in cases where our officer or director acted in good faith and in a manner reasonably believed to be in our best interest, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses payable by us in connection with the issuance and distribution of the securities being registered hereunder. No expenses will be borne by the Selling Security Holders. All of the amounts shown are estimates, except for the SEC registration fee.

SEC registration fee	$	2,029
Accounting fees and expenses	$	46,000
Legal fees and expenses	$	50,000
Total	$	98,029

RECENT SALES OF UNREGISTERED SECURITIES

During the past three years, we have sold and issued the following securities:

1.On December 31, 2003, we issued to our former Executive Officer and Director 1,000,000 (pre-reverse stock split) shares of common stock upon the conversion of debt in the amount of $100. We granted to the officer the right for conversion of the debt on December 31, 2004 and on that date, the fair value of the common stock issued approximated the fair value of the debt. The issuance was exempt from the registration provisions of the Securities Act of 1933, as amended, by virtue of Section 4(2).

2.On March 24, 2005, we commenced a private offering pursuant to which we issued 950,000 (pre-reverse stock split) shares of common stock for $225,000 cash, or $0.25 per share, after $12,500 of offering costs. The offering closed on April 30, 2005. This issuance consisted of restricted securities bearing the Rule 144 legend and was exempt from the registration provisions of the Securities Act of 1933, as amended, by virtue of Section 4(2).

3.On August 9, 2006, we issued an aggregate of 520,000 shares of restricted common stock for total proceeds of $166,438. Purchasers of the common stock received piggyback registration rights. Two of the purchasers, Mr. Strasser and Mr. Smith, were also appointed to the Board of Directors. Mr. Strasser purchased 156,214 shares of common stock for $50,000 and TATS LLC, a family-controlled entity of Mr. Smith, purchased 62,485 shares of common stock for $20,000l and Mr. Landa purchased 62,485 shares for $20,000. All purchasers were accredited investors and had long-standing business relationships with our former Chief Executive Officer. The transaction was a result of personal negotiations with our former Chief Executive Officer and the use of proceeds was not specified. All of the common stock was sold pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.

II - 1

4.In September and October 2006, we conducted a private placement of our shares of common stock, $.0001 par value, for a minimum of 10,000,000 and up to a maximum of 16,000,000 shares of our restricted common stock for $1.00 per share (the “Offering”). On September 19, 2006, we received investment amounts of $10,809,979 and accordingly conducted the first closing for the Offering. In connection with the first closing we issued 10,809,979 shares of our common stock. On October 4, 2006, we conducted our second and final closing by issuing 5,190,021 shares of our restricted common stock for an aggregate gross proceed of $5,190,021. The Offering was conducted primarily by us and Roth Capital. The shares in the Offering were offered and sold only to accredited investors in reliance upon Rule 506 of Regulation D of the Securities Act of 1933, as amended.

5.In connection with our private placement in September and October 2006, we issued to our placement agent, Roth Capital Partners, LLC, a warrant to purchase up to 800,000 shares of common stock for a three year term with an exercise price of $1.15 per share. The warrant was issued in reliance upon Rule 506 of Regulation D of the Securities Act of 1933, as amended.

6.In connection with the Merger, we issued an aggregate of 14,500,000 shares of our common stock to the shareholders of SPI as merger consideration, and substituted 2,000,000 SPI options and restricted stock awards for our restricted stock awards and options to purchase our shares of common stock (the “Merger Consideration”). The 14,500,000 were issued to SPI Shareholders in exchange for the cancellation and retirement of their shares of SPI common stock. The issuance of the Merger Consideration was conducted by us. The Merger Consideration was issued in reliance upon Rule 506 of Regulation D of the Securities Act of 1933, as amended. In addition, in connection with the Merger, the directors and executive officers of SPI became our directors and executive officers, and assumed control.

EXHIBIT INDEX

Exhibit No.	Description
2.1	Agreement and Plan of Merger dated as of January 25, 2006 between Welund Fund, Inc. (Delaware) and Welund Fund, Inc. (Nevada) (1)
2.2	Agreement and Plan of Merger by and among Solar Power, Inc., a California corporation, Welund Acquisition, Inc., a Nevada corporation, and Welund Fund, Inc. a Nevada corporation dated as of August 23, 2006(2)
2.3	First Amendment to Agreement and Plan of Merger dated October 4, 2006(3)
2.4	Second Amendment to Agreement and Plan of Merger dated December 1, 2006(4)
2.5	Third Amendment to Agreement and Plan of Merger dated December 21, 2006(5)
2.6	Agreement and Plan of Merger by and between Solar Power, Inc., a California corporation and Dale Renewables Consulting, Inc., a California corporation, and James M. Underwood, Ronald H. Stickney and Todd Lindstrom, dated as of August 20, 2006, as amended by the First Amendment to Agreement and Plan of Merger dated October 31, 2006, and further amended by the Second Amendment to Agreement and Plan of Merger dated November 15, 2006*

II - 2

Exhibit No.	Description
2.7	Agreement of Merger by and between Solar Power, Inc., a California corporation, Dale Renewables Consulting, Inc., a California corporation, and James M. Underwood, Ronald H. Stickney and Todd Lindstrom dated November 15, 2006*
2.8	Agreement of Merger by and between Solar Power, Inc., a California corporation, Solar Power, Inc., a Nevada corporation and Welund Acquisition Corp., a Nevada corporation dated December 29, 2006*
3.1	Certificate of Incorporation (Delaware)(6)
3.2	Articles of Incorporation (Nevada)(7)
3.3	Certificate of Amendment to Articles of Incorporation(3)
3.4	Bylaws ( Nevada)(7)
3.5	Specimen*
4.1	Form of Subscription Agreement(8)
4.2	Form of Registration Rights Agreement(8)
5.1	Opinion by Bullivant Houser Bailey PC*
10.1	Share Purchase Agreement for the Purchase of Common Stock dated as of April 1, 2004, by and between Kevin G. Elmore and Mr. T. Chong Weng(9)
10.2	Share Purchase Agreement for the Purchase of Common Stock dated as of June 9, 2004, by and between Kevin G. Elmore and Liberty Associates Holdings, LLC(10)
10.3	Purchase and Servicing Agreement between Welund Fund, Inc. and Village Auto, LLC, dated March 30, 2005(11)
10.4	Demand Promissory Note issued by Paxton Energy Corp. (12)
10.5	Engagement Letter with Roth Capital Partners, dated August 29, 2006(13)
10.6	Credit Facility Agreement by and between the Company and Solar Power, Inc., a California corporation effective September 19, 2006(13)
10.7	Security Agreement by and between the Company and Solar Power, Inc., a California corporation effective September 19, 2006(13)
10.8	Promissory Note issued by Solar Power, Inc., a California corporation in favor of the Company(13)
10.9	First Amendment to the Credit Facility Agreement dated November 3, 2006(14)
10.10	Securities Purchase Agreement dated September 19, 2006 (13)
10.11	Registration Rights Agreement dated September 19, 2006(13)

II - 3

Exhibit No.	Description
10.12	Securities Purchase Agreement dated October 4, 2006 (15)
10.13	Registration Rights Agreement dated October 4, 2006(15)
10.14	Roth Capital Warrant(12)
10.15	Subordination Agreement bya and between Steve Kircher, the Company and Solar Power, Inc., a California corporation dated August 31, 2006(15)
10.16	Addendum to Subordination Agreement dated September 6, 2006(15)
10.17	Unsecured Promissory Note for $150,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated August 31, 2006(15)
10.18	Unsecured Promissory Note for $50,000 issued by Solar Power, Inc., a California corporation dated September 6, 2006(15)
10.19	Secured Promissory Note for $975,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated September 19, 2006(15)
10.20	Secured Promissory Note for $100,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated September 25, 2006(15)
10.21	Secured Promissory Note for $130,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated September 27, 2006(15)
10.22	Secured Promissory Note for $75,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated October 6, 2006(15)
10.23	Secured Promissory Note for $340,000 issued by Solor Power, Inc., a California corporation in favor of the Company dated October 16, 2006(15)
10.24	Secured Promissory Note for $235,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated October 30, 2006(15)
10.25	Secured Promissory Note $445,000 issued by Solar Power, Inc., a California corporation in favor of the Company dated November 7, 2006 (15)
10.26	Demand Note $1,446,565 issued by Solar Power, Inc., a California corporation in favor of the Company dated November 15, 2006 (15)
10.27	2006 Equity Incentive Plan*
10.28	Form of Nonqualified Stock Option Agreement*
10.29	Form of Restricted Stock Award Agreement*
10.30	Assignment and Interim Operating Agreement by and between Solar Power, Inc., a California corporation, Dale Stickney Construction, Inc., a California corporation, and Dale Renewables Consulting, Inc., a California corporation dated August 20, 2006*

II - 4

Exhibit No.	Description
10.31	Restrictive Covenant Agreement by and between Solar Power, Inc., a California corporation, Todd Lindstrom, James M. Underwood and Ronald H. Stickney dated November 15, 2006*
10.32	Reveivables and Servicing Rights Purchase and Sale Agreement by and between the Company and Village Auto, LLC a California limited liability company dated Decembert 29, 2006(16)
16.1	Letter of Hansen Barnett & Maxwell(17)
21.1	List of Subsidiaries*
23.1	Consent of BDO McCabe Lo Limited*
23.2	Consent of Hansen Barnett & Maxwell*
23.3	Consent of Macias, Gini & O'Connell LLP*
23.4	Consent of Bullivant Houser Bailey PC(see 5.1)

__________________________________________________________

* Filed herewith

(1) Incorporated by reference to Form 8-K filed with the SEC on February 3, 2006.

(2) Incorporated by reference to Form 8-K filed with the SEC on August 29, 2006.

(3) Incorporated by reference to Form 8-K filed with the SEC on October 6, 2006.

(4) Incorporated by reference to Form 8-K filed with the SEC on December 6, 2006.

(5) Incorporated by reference to Form 8-K filed with the SEC on December 22, 2006.

(6) Incorporated by reference to Registration Statement on Form 10-SB filed with the SEC on January 2, 2003.

(7) Incorporated by reference to the Company’s report on Form DEF 14C filed with the SEC on January 3, 2006.

(8) Incorporated by reference to Form 10-QSB filed with the SEC on August 14, 2006.

(9) Incorporated by reference to Form 8-K filed with the SEC on April 2, 2004.

(10) Incorporated by reference to Form 8-K filed with the SEC on June 18, 2004.

(11) Incorporated by reference to Form 10-QSB filed with the SEC on May 23, 2005.

(12) Incorporated by reference to Form 10-QSB filed with the SEC on November 14, 2005.

(13) Incorporated by reference to Form 8-K filed with the SEC on September 25, 2006

(14) Incorporated by reference to Form 8-K filed with the SEC on November 7, 2006.

(15) Incorporated by reference to Form 10-QSB filed with the SEC on November 20, 2006.

(16) Incorporated by reference to Form 8-K filed with the SEC on January 8, 2007.

(17) Incorporated by reference to Form 8-K filed with the SEC on January 8, 2007 (disclosing change in auditors).

UNDERTAKINGS

The undersigned registrant hereby undertakes to:

(1)   File, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

II - 5

(i)Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii)   Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective Registration Statement; and

(iii)   Include any additional or changed material information with respect to the plan of distribution.

(2)   For determining liability under the Securities Act of 1933, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

(3)   File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

(4)   For determining liability of the undersigned small business issuer under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned small business issuer undertakes that in a primary offering of securities of the undersigned small business issuer pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned small business will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i)Any preliminary prospectus or prospectus of the undersigned small business issuer relating to the offering required to be filed pursuant to Rule 424;

(ii)        Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned small business issuer or used or referred to by the undersigned small business issuer;

(iii)        The portion of any other free writing prospectus relating to the offering containing material information about the undersigned small business issuer or its securities, provided by or on behalf of the undersigned small business issuer; and

(iv)       Any other communication that is an offer in the offering made by the undersigned small business issuer to the purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

II - 6

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunder duly authorized, in Granite Bay, California.

	Solar Power, Inc., a Nevada Corporation
Dated: January 16, 2007	/s/ Stephen C. Kircher
	By: Stephen C. Kircher Its: Chief Executive Officer (Principal Executive Officer) and Director
Dated: January 16, 2007	/s/ Glenn Carnahan
	By: Glenn Carnahan Its: Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

POWER OF ATTORNEY

Known All Persons By These Present, that each person whose signature appears below appoints Mr. Stephen C. Kircher as his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, to sign any amendment (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he may do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or any of them, or of his/her substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Dated: January 16, 2007	/s/ Stephen C. Kircher
	Stephen C. Kircher, Chief Executive Officer and Director
Dated: January 16, 2007	/s/ Larry Kelley
	Larry Kelley, Director
Dated: January 11, 2007	/s/ Ronald Cohan
	Ronald Cohan, Director
Dated: January 14, 2007	/s/ Timothy Nyman
	Timothy Nyman, Director
Dated: January 15, 2007	/s/ D. Paul Regan
	D. Paul Regan, Director

 II - 7

EX-2.6

Exhibit 2.6

AGREEMENT AND PLAN OF MERGER

by and between

SOLAR POWER, INC.,

and

DALE RENEWABLE CONSULTING, INC.

Dated as of August 20, 2006

TABLE OF CONTENTS

			Page
1. Definitions
2. Transactions and Terms of Merger
	2.1	Merger	6
	2.2	Time and Place of Closing	7
	2.3	Effective Time and Effective Date	7
	2.4	Restructure of Transaction	7
	2.5	Merger Consideration	7
	2.6	Assignment and Interim Operation Agreement	7
3. Terms of Merger
	3.1	Articles of Incorporation; Bylaws	7
	3.2	Board Members and Officers	7
	3.3	Conversion of Shares	8
	3.4	Exchange of Shares	8
	3.5	Adjustments to Upfront Consideration	9
	3.6	Earnout	9
	3.7	Withholding Rights	10
4. Representations and Warranties of the Company and Sellers
	4.1	Organization and Good Standing	11
	4.2	Authority; No Conflict	11
	4.3	Capitalization; Share Ownership	12
	4.4	Financial Statements	12
	4.5	Books and Records	13
	4.6	Title to Properties; Encumbrances	13
	4.7	Condition and Sufficiency of Assets	13
	4.8	Accounts Receivable	14
	4.9	No Undisclosed Liabilities	14
	4.10	Taxes	14
	4.11	Employee Benefits	16
	4.12	Compliance with Legal Requirements; Governmental Authorizations	18
	4.13	Legal Proceedings; Orders	18
	4.14	Absence of Certain Changes and Events	19
	4.15	Contracts; No Defaults	20
	4.16	Insurance	22
	4.17	Employees	22
	4.18	Intellectual Property	23
	4.19	Certain Payments	23
	4.20	Brokers	24
	4.21	Relationships with Related Persons	24
	4.22	Disclosure	24
	4.23	Privacy of Customer Information	24

i

	4.24	Customer Relations	24
	4.25	Real Property	25
	4.26	Environmental, Health and Safety Matters	25
	4.27	Payment and Condition of Indebtedness	26
	4.28	State Takeover Laws	26
5. Representations and Warranties of the Company Shareholders
	5.1	Authority; No Conflict	26
	5.2	Ownership of Shares	27
	5.3	Investment and Securities Matters	27
6. Representations and Warranties of Acquiror
	6.1	Organization and Good Standing	28
	6.2	Authority; No Conflict	28
	6.3	Capital Stock	29
	6.4	Compliance with Legal Requirements; Governmental Authorizations	29
	6.5	Legal Proceedings; Orders	30
	6.6	Authority of Acquiror	30
7. Other Agreements
	7.1	Publicity	30
	7.2	Operational Covenants of Company Pending Closing of the Merger	30
	7.3	Certain Tax Matters	33
	7.4	Reserved	33
	7.5	State Takeover Laws	33
	7.6	Employee Benefits	33
	7.7	Release of Claims	34
	7.8	Independent Financial Audit	34
7.9 Future Franchise Territories and Photo-Voltaic Equipment Supplies \f C \l
8. Conditions Precedent to Acquiror’s and Parent’s Obligations
	8.1	Third-Party Consents	35
	8.2	Director Resignations; Books and Records	35
	8.3	Other Agreements	35
	8.4	Certified Documents	36
	8.5	Shareholder Approval	36
	8.6	Legal Proceedings	36
	8.7	Representations and Warranties	36
	8.8	Performance of Agreements and Covenants	36
	8.9	No Material Adverse Effect	37
	8.10	Independent Financial Audit	37
	8.11	No Material Adverse Effect	37
	8.12	Opinion of Counsel	37
	8.13	Insurance	37

ii

9. Conditions Precedent to the Company’s and Each Company Shareholder’s and Beneficial Owner’s Obligations
	9.1	Third-Party Consents	37
	9.2	Representations and Warranties	38
	9.3	Performance of Agreements and Covenants	38
10. Indemnification
	10.1	Indemnification and Payment of Damages by Company Shareholders and Beneficial Owners	38
	10.2	Indemnification and Payment of Damages by Surviving Company	40
	10.3	Survival of Representations and Warranties	40
	10.4	Limitations on Liability	40
	10.5	Exceptions to Limitations	41
	10.6	Indemnification Procedure	41
	10.7	Errors and Omissions	42
	10.8	Right to Indemnification Not Affected by Knowledge	42
	10.9	Set Off	42
11. Shareholder Representative
	11.1	Appointment	43
	11.2	Acceptance	43
	11.3	Successor	43
	11.4	Liability	43
	11.5	Reliance	43
12. General Provisions
	12.1	Expenses	44
	12.2	Notices	44
	12.3	Further Assurances	45
	12.4	Waiver	45
	12.5	Entire Agreement and Modification	45
	12.6	Assignments, Successors, and No Third-Party Rights	45
	12.7	Severability	46
	12.8	Section Headings, Construction	46
	12.9	Governing Law	46
	12.10	Counterparts	46
	12.11	Schedules and Exhibits	47
	12.12	Time of Essence	47
	12.13	Attorneys Fees	47

iii

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made as of August 20, 2006 (“Effective Date”) by and among Solar Power, Inc., a California corporation (“Acquiror”), Dale Renewable Consulting, Inc., a California corporation (the “Company”) and the Company’s stockholders as listed on Schedule 1, attached hereto (“Selling Shareholders”).

RECITALS

WHEREAS, Acquiror is a Subchapter “C” corporation duly formed and operating under the laws of the state of California, for the purpose of engaging in the manufacture, distribution and sale of solar power systems and modules;

WHEREAS, the Company is a Subchapter “S” corporation duly formed and operating under the laws of the state of California, for the purpose of engaging in photo-voltaic marketing, sales and installation;

WHEREAS, Acquiror intends to acquire the Company through the merger of the Company with and into Acquiror;

WHEREAS, Acquiror intends to continue the Company’s existing photo-voltaic business, and use the Company’s historic assets after the consummation of the Merger;

WHEREAS, at the effective time of such merger, each outstanding share of common stock of the Company will be converted into and exchanged for a right to receive a mix of cash and shares of common stock in Acquiror as further described herein;

WHEREAS, the Board of Directors of Acquiror, the Board of Directors of the Company, and the Selling Shareholders have approved the merger of the Company with and into Acquiror;

WHEREAS, as partial consideration for the foregoing premises and the mutual promises and covenants contained herein, each Selling Shareholder has executed and delivered to Acquiror a Restrictive Covenant Agreement substantially in the form attached hereto as Exhibit A (the “Restrictive Covenant Agreement”)

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1

ARTICLE 1

DEFINITIONS

For purposes of this Agreement, the following terms have the meanings specified or referred to in this Article 1:

“Acquiror” - as defined in the preamble.

“Affiliate” - - shall have the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities and Exchange Act of 1934, as amended.

“Agreement” - as defined in the preamble.

“Assignment and InterimOperating Agreement” - - as defined in Section 2.6.

“CGCL” - means the California General Corporation Law.

“Certificate of Merger” - - in the form attached hereto as Exhibit C.

“Charter Documents” - means, with respect to any entity, as applicable, its Certificate or Articles of Incorporation, its Certificate or Articles of Formation or Organization, its bylaws, its Operating Agreement, and similar documents having a different name.

“Closing” and “Closing Date” - as defined in Section 2.2.

“Closing Documents” - as defined in Section 4.2(a).

“Code” - means the Internal Revenue Code of 1986 or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law.

“Company” - as defined in the preamble.

“Company Common Stock” - means the common stock of the Company.

“Common Stock” - means the common stock of Acquiror.

“Control”“Controlling”“Controlled By” and “Under Common Control With” - mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and shall be construed as such term is used in the rules promulgated under the Securities Act.

“Current Assets” - means and includes the Company’s cash, cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses and any other assets that could be converted to cash in less than one year, in each case determined in accordance with GAAP consistently applied.

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“Current Liabilities” - means and includes the Company’s accounts payable, accrued expenses (including, without limitation, expenses related to employee severance, vacation, bonuses and sick leave), Tax obligations of any kind (including estimated Taxes), premiums payable, commissions payable, surplus lines tax payable, Company Plan obligations of any kind, and any other current liabilities incurred in the operation of the Company’s business in each case determined in accordance with GAAP consistently applied.

“DSCI” - means Dale Stickney Construction, Inc., a California corporation which is an Affiliate of the Company and whose stockholders are Ray Charles Beard and two of the Selling Shareholders, James M. Underwood and Ronald H. Stickney.

“Earnout Payment” - as defined in Section 3.6(a).

“Earnout Period” - means the period beginning on the Closing Date and ending on December 31, 2007.

“Effective Time” - as defined in Section 2.3.

“Fiscal Year” - means a period beginning on January 1 of the applicable calendar year and ending on December 31 of the same year.

“GAAP” - - means generally accepted accounting principles for financial reporting in the United States, applied on a consistent basis.

“Hazardous Materials” - means (A) any hazardous substance, hazardous material, hazardous waste, regulated substance or toxic substance (as those terms are defined by any applicable Environmental Laws) and (B) any chemicals, pollutants, contaminants, petroleum, petroleum products, or oil, asbestos-containing materials and any polychlorinated biphenyls.

“IRS” - the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury.

“Knowledge” - with respect to the Company, shall include the executive officers of the Company, including facts of which such officers, in the reasonably prudent exercise of their duties, should be aware; with respect to Acquiror, the knowledge of the executive officers of Acquiror, including facts of which such officers, in the reasonably prudent exercise of their duties, should be aware.

“Law” - - means any code, law, ordinance, regulation, reporting or licensing requirement, rule, or statute applicable to a Person or its assets, liabilities or business, including those promulgated, interpreted or enforced by any foreign, federal, state and local regulatory agencies and other governmental entities or bodies having jurisdiction over the parties and their respective assets, employees, businesses and/or Subsidiaries, including the NASD, Securities and Exchange Commission, Federal Trade Commission and the U.S. Department of Justice.

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“Long-Term Liabilities” - means for the Company without double counting, (A) all indebtedness, including any portion classified as a current liability, or other obligations of the Company for borrowed money or for the deferred purchase price of property or services, (B) all indebtedness created or arising under any Encumbrance with respect to property acquired by the Company (even though the rights and remedies of the lender under such agreement in the event of default are limited to repossession or sale of such property), (C) all obligations under leases that are or should be, in accordance with GAAP, recorded as capital leases in respect of which the Company is liable as lessee, (D) liabilities in respect of unfunded or underfunded benefits under any Company Plan, (E) all obligations related to deferred compensation, (F) all obligations of the type set forth in the foregoing for which the Company is responsible or liable, directly or indirectly, as obligor, guarantor, surety or otherwise, including guarantee of such obligations, (G) deferred rents, (H) any accrued but unpaid interest, fees, penalties, premiums and the like in respect of any of the foregoing, and (I) all known or unknown errors and omissions claims resulting from or arising out of acts or omissions occurring on or before Closing.

“Material Adverse Effect” - shall mean (i) with respect to the Company, any material adverse effect on (a) the Company’s business, (b) the assets, profits, prospects, operations, affairs, properties or financial condition of the Company, taken as a whole, (c) the ability of the Company to perform its obligations under this Agreement or (d) the binding nature, validity or enforceability of this Agreement or (ii) with respect to Acquiror, any material adverse affect on (a) the ability of Acquiror to perform its obligations under this Agreement or (b) the binding nature, validity or enforceability of this Agreement.

“Material” and “Materially” - for the purposes of this Agreement shall be determined in light of the facts and circumstances of the matter in question; provided that any specific monetary amount stated in this Agreement shall determine materiality in that instance.

“Material Interest” - means direct or indirect beneficial ownership (defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of voting securities or other voting interests representing at least five percent (5%) of the outstanding voting power of a Person or equity securities or other equity interests representing at least five percent (5%) of the outstanding equity securities or equity interests in a Person.

“Ordinary Course of Business” - - means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency) as it relates to the business and operations of the Company.

“Permit” - means anyfranchise, permit, contractor licenses and other governmental authorization that is held by the Company or that otherwise relate to the Company’s business, or to any of the assets owned or used by, the Company.

“Person” - any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or any federal, state, local, municipal, foreign or other government or governmental agency.

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“Pro Forma Balance Sheet” - means the balance sheet of the Company setting forth the Working Capital of the Company and amounts of any Long-Term Liabilities of the Company to be assumed by Acquiror as of the Effective Time.

“Receivables” - means all cash receipts and revenue prior to the Effective Date where cash receipts and revenue will be received after the Effective Date.

“Related Person” - means with respect to a particular individual: (I) each other member of such individual’s family; (II) any Person that is directly or indirectly Controlled By any one or more members of such individual’s family; (III) any Person in which members of such individual’s family hold (individually or in the aggregate) a Material Interest; and (IV) any Person with respect to which one or more members of such individual’s family serves as a director, officer, partner, executor or trustee (or in a similar capacity). With respect to a specified Person other than an individual: (I) any Person that directly or indirectly Controls, is directly or indirectly Controlled By or is directly or indirectly Under Common Control With such specified Person; (II) any Person that holds a Material Interest in such specified Person; (III) each Person that serves as a director, officer, partner, executor or trustee of such specified Person (or in a similar capacity); (IV) any Person in which such specified Person holds a Material Interest; and (V) any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity). The family of an individual includes (i) the individual, (ii) the individual’s spouse, (iii) any other natural person who is the parent, child, grandparent, grandchild or sibling of the individual or the individual’s spouse and (iv) any other natural person who resides with such individual.

“Representative” - with respect to a particular Person, any director, officer, employee, agent, consultant, advisor or other representative of such Person, including legal counsel, accountants, investment bankers and financial advisors.

“Restrictive Covenant Agreement” - as defined in the preamble.

“Securities Act” - means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Securities Laws” - means the Securities Act, the Securities Exchange Act of 1934, as amended, the Investment Advisors Act of 1940, as amended, the Trust Indenture Act of 1939, as amended, relevant state corporate and securities laws, and the rules and regulations promulgated thereunder.

“Selling Shareholders” means the shareholders of the Company set forth on Schedule I hereto, consisting of all holders of shares of Company Common Stock immediately before the Effective Time.

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“Surviving Company” - means Acquiror as the surviving company resulting from the Merger.

“Tax” or “Taxes” - shall mean taxes of any kind, liens or other like assessments, customs duties, imposts, charges or fees, including, without limitation, income, gross receipts, ad valorem, value-added, excise, real or personal property, asset, sales, use, stamp, stock transfer, license, payroll, transaction, capital, net worth and franchise taxes, withholding, employment, social security, workers’ compensation, occupation, premium, windfall profits, surplus lines, transfer and gains taxes or other governmental taxes imposed or payable to the United States, or any state, county, local or foreign government or subdivision or agency thereof, and in each instance such term shall include any interest, penalties or additions to tax attributable to such tax, and shall include any liability for Taxes of any other Person under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or foreign law), or as a transferee or successor, by contract or otherwise.

“Tax Return” - any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any federal, state, local, municipal, foreign or other government or governmental agency in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any legal requirement relating to any Tax.

“Upfront Cash Consideration” - means the Upfront Consideration payable to each of the Selling Shareholders in cash as set forth and allocated on Schedule I hereto and incorporated herein by reference.

“Upfront Consideration” - means $1,000,000, which shall be subject to the adjustments set forth in Section 3.5(b) and (c) and allocated between the Upfront Cash Consideration and the Upfront Equity Consideration in accordance with Schedule I attached hereto and incorporated herein by reference.

“Upfront Equity Consideration” - means the amount of the Upfront Consideration payable to each of the Selling Shareholders in shares of Common Stock as set forth and allocated on Schedule I attached hereto and incorporated herein by reference.

“Working Capital” - means the Current Assets of the Company less the Current Liabilities of the Company.

ARTICLE 2

TRANSACTIONS AND TERMS OF MERGER

2.1 Merger.

Subject to the terms and conditions of this Agreement, at the Effective Time (defined below), the Company shall be merged with and into Acquiror in accordance with the provisions of Sections 1113 of the CGCL and with the effect provided in Sections 1113(i) of the CGCL (the “Merger”). Acquiror shall be the Surviving Company resulting from the Merger and shall continue to be governed by the laws of the State of California. The Merger shall be consummated pursuant to the terms of this Agreement, which has been approved and adopted in accordance with the respective Charter Documents and laws governing the Company and Acquiror.

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2.2 Time and Place of Closing.

The consummation of the transactions contemplated hereby (the “Closing”) will take place at the offices of Bullivant Houser Bailey PC, 1415 L Street, Suite 1000, 9:00 A.M. Pacific Daylight Time, on or before October 31, 2006 (the “Closing Date”).

2.3 Effective Time.

The Merger and other transactions contemplated by this Agreement shall become effective on the date and at the time a Certificate of Merger in the form attached hereto as Exhibit C reflecting the Merger shall become effective with the Secretary of State of the State of California (the “Effective Time”).

2.4 Reserved.

2.5 Merger Consideration.

The aggregate consideration that may be paid in the Merger in exchange for all of the Company Common Stock shall have an aggregate value equal to the sum of (a) the Upfront Cash Consideration, (b) the Upfront Equity Consideration, and (c) the Earnout Payments, each as may be adjusted hereunder.

2.6 Assignment and Interim Operating Agreement

On and from June 1, 2006 and up until the Effective Time, the Company, DSCI and Acquiror agree to operate the Company in accordance with the terms and conditions as set forth on Exhibit B attached hereto (“Assignment and Interim Operating Agreement”).

ARTICLE 3

TERMS OF MERGER

3.1 Articles of Incorporation; Bylaws.

The Articles of Incorporation and the Bylaws of Acquiror shall be the Articles of Incorporation and the Bylaws of the Surviving Company until duly amended or repealed. From and after the Effective Time, the Articles of Incorporation of the Company and the Bylaws of the Company shall be null and void and of no further force and effect.

3.2 Board Members and Officers.

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The members of the Board of Directors of Acquiror as of the Effective Time shall remain the members of the Board of Directors of the Surviving Company. The officers of Acquiror as of the Effective Time shall remain the officers of the Surviving Company, together with such additional persons as may thereafter be appointed, and shall serve as the officers of the Surviving Company from and after the Effective Time.

3.3 Conversion of Shares.

At the Effective Time, by virtue of the Merger and without any action on the part of Acquiror, the Company or any other party, each share of Company Common Stock shall automatically be canceled and shall cease to exist and shall be converted into and exchanged for the following consideration such that each Selling Shareholder will receive the aggregate consideration set forth beside his or her name on Schedule I:

(a) Upfront Cash Consideration;

(b) Upfront Equity Consideration; and

(c) the right to receive the Earnout Consideration in accordance with Section 3.6.

Until surrendered for exchange in accordance with Section 3.4, each certificate theretofore representing shares of Company Common Stock shall from and after the Effective Time represent for all purposes only the right to receive the consideration provided in this Section 3.3 in exchange therefor. Acquiror shall not be under any obligation to make any payment in exchange for shares of Company Common Stock until certificates representing such shares have been surrendered in accordance with Section 3.4.

3.4 Exchange of Shares.

At the Closing:

(a)Acquiror will deliver to each Selling Shareholder, by wire transfer to a bank account designated in writing by such Selling Shareholder, immediately available funds in an amount as set forth on Schedule I.

(b)Acquiror will issue to each Selling Shareholder on the books and records of the Company, free and clear of all Encumbrances, claims and other charges thereon of every kind, a number of shares as set forth on Schedule I.

(c)Selling Shareholders will deliver to Acquiror for cancellation, free and clear of all transfer and stamp tax obligations, Encumbrances, claims and other charges thereon of every kind, a certificate representing the shares of Company Common Stock held by Selling Shareholders immediately before the Effective Time.

(d)Selling Shareholders shall cause full possession and control of all of the assets and properties of every kind and nature, tangible and intangible, of the Company and of all other things and matters pertaining to the operation of the business of the Company to be transferred and delivered to the Surviving Company.

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3.5 Adjustments to Upfront Consideration.

The Upfront Consideration shall be adjusted in the manner set forth below:

(a)On the Closing Date, the Company and Acquiror shall agree on, and the Company shall deliver, the Pro Forma Balance Sheet setting forth the Working Capital of the Company as of the Closing Date (the “Final Working Capital”) and the amounts of any Long-Term Liabilities to be assumed by the Surviving Company at the Effective Time.

(b)The Upfront Consideration will be decreased prorata at Closing, on a dollar-for-dollar basis, for any amounts owed to the Acquiror by DSCI pursuant to the Assignment and Interim Operating Agreement and to the extent that the Final Working Capital is less than the Company’s Working Capital as of May 31, 2006 or increased at Closing, on a dollar-for-dollar basis, for any amounts owed by the Acquiror to DSCI pursuant to the Assignment and Interim Operating Agreement and to the extent that the Final Working Capital is greater than the Company’s Working Capital as of May 31, 2006. The adjusted Upfront Consideration shall be further reduced prorata by the amount the Long-Term Liabilities set forth on the Pro Forma Balance Sheet exceeds the Company’s Long-Term Liabilities as of May 31, 2006.

(c)The Upfront Consideration will be further decreased prorata at Closing, on a dollar-for-dollar basis, for any debts then owed by the Company to DSCI, and Acquiror shall pay such amount to DSCI in full satisfaction of such debt at Closing.

3.6 Earnout.

(a)Acquiror shall pay to the Selling Shareholders, in accordance with Schedule I up to a maximum aggregate amount of $500,000 consisting of $250,000 in cash and $250,000 worth of Acquiror Common Stock (the “Earnout Payment”) as follows:

(i) Fifty percent (50%) of the Earnout Payment, or $250,000, in equal portions of cash and Acquiror Common Stock shall be distributed as provided on Schedule I when at least seventy-five percent (75%) of the $17,943,136 sum in contracts executed from Schedule II (“Executed Contract Sum”) equaling $13,457,352, have been received by and represent current contracts of the Acquiror.

(ii)Twenty-five percent (25%) of the Earnout Payment, or $125,000, in equal portions of cash and Acquiror Common Stock shall be distributed as provided on Schedule I when at least eighty-seven and one-half percent (87.5%) of the Executed Contract Sum equaling $15,700,244, have been received by and represent current contracts of the Acquiror.

(iii)   The remaining twenty-five percent (25%) of the Earnout Payment, or $125,000, in equal portions of cash and Acquiror Common Stock shall be distributed as provided on Schedule I when at least one hundred percent (100%) of the Executed Contract Sum equaling $17,943,136, have been received by and represent current contracts of the Acquiror.

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(b)In the event that Todd Lindstrom terminates his relationship with the Surviving Company for any reason, except for termination by SPI without cause, the Earnout Payment shall be reduced by 50% (“Lost Revenue Deduction”).

(c)The aggregate number of shares of Common Stock to be issued to the Shareholders by Acquiror as Earnout Payments in accordance with Schedule I shall equal (A) the value of the Earnout Payment to be paid in shares of Common Stock divided by (B) the Fair Market Value of Acquiror Common Stock as of 4.00 p.m. Pacific Standard Time five (5) days after the applicable milestone as set forth above is satisfied.

(d)“Fair Market Value” with respect to any class or series of the capital stock of Acquiror shall mean, as of the date of determination, (i) the value determined in good faith by the Board of Directors of Acquiror, (ii) in the event of a determination upon an initial public offering, the public offering price as set forth on the cover page of the prospectus or (iii) if the capital stock of Acquiror is publicly traded, the average of the daily last sales prices for such stock for the five consecutive full trading days on which such shares are actually traded (as reported by The Wall Street Journal or, if not reported thereby, any other authoritative source selected by Acquiror) ending at the close of the trading day two full trading days prior to the date of determination. In the event that Fair Market Value is determined by the Board of Directors of Acquiror, Acquiror will, within fifteen (15) days after the date with respect to which such determination is made, deliver to the Shareholders’ Representative a written notice setting forth the proposed Fair Market Value. If, within fifteen (15) days after receipt of such notice, the Shareholders’ Representative do not object to the determination of Fair Market Value set forth therein, then the Fair Market Value which shall be conclusive.If within such fifteen (15) day period the Shareholders’ Representative object to Acquiror’s determination of Fair Market Value, Acquiror and the Shareholders’ Representative will attempt to agree within fifteen (15) days following the expiration of such period on one independent appraiser to determine the Fair Market Value. Selling Shareholders shall bear the costs of such independent appraiser.

3.7 Withholding Rights.

Acquiror shall be entitled to withhold, from all amounts otherwise payable pursuant to this Agreement to any Selling Shareholder, such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by the Acquiror, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Selling Shareholders in respect of such deduction.

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ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLING SHAREHOLDERS

As a material inducement to Acquiror to enter into this Agreement and consummate the transactions contemplated thereby, the Company and Selling Shareholders hereby, jointly and severally, make the representations and warranties contained in this Article 4 as follows:

4.1 Organization and Good Standing.

(a)The Company is a corporation duly organized, validly existing and in good standing under the laws of California. The Company has full power and authority and possesses all Permits and approvals necessary to conduct its business as it has been, is currently or is proposed to be conducted, to own, lease and use its properties and assets, and to perform all its obligations under its Contracts. Schedule 4.1(a) contains a complete list of each jurisdiction in which the Company is required to be qualified as a foreign corporation authorized to do business except for any jurisdiction where the failure to be so qualified will not have a Material Adverse Effect. The Company is duly qualified and is in good standing in each jurisdiction listed on Schedule 4.1(a).

(b)The Company has delivered to Acquiror true and complete copies of the Charter Documents of the Company. All of such Charter Documents are in full force and effect.

4.2 Authority; No Conflict.

(a)The Company has all necessary power and authority to execute and deliver this Agreement and the several other documents to be delivered at Closing pursuant to this Agreement (the “Closing Documents”), and to perform its obligations under this Agreement and the Closing Documents, and no other action on the part of the Company is required in connection therewith. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid, and binding obligation of the Company, enforceable against it in accordance with its terms, and has been approved by the Board of Directors of the Company and by all of the Selling Shareholders, which are the only approvals required for the consummation of the Merger by the Company. Upon the execution and delivery by the Company of the Closing Documents, the Closing Documents will constitute the legal, valid, and binding obligations of the Company, enforceable against it in accordance with their respective terms.

(b)The execution, delivery or performance of this Agreement or the Closing Documents will not contravene or violate (i) the Charter Documents, (ii) any law, rule or regulation to which the Company is subject or (iii) any judgment, order, writ, injunction or decree of any court, arbitrator or governmental or regulatory official, body or authority which is applicable to the Company.

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(c)Such execution, delivery or performance will not cause the Company to (i) become subject to, or to become liable for the payment of any Tax, cause any of the assets owned by the Company to be reassessed or revalued by any taxing authority or (ii) violate, be in conflict with or result in the breach (with or without the giving of notice or lapse of time, or both) of any term, condition or provision of, or require the notice or consent of any other party to, or result in the creation of any lien, Encumbrance, claim or other charge thereon of any kind under, any Contract, Real Property Lease, Permit, document or other understanding, oral or written, to or by which the Company is a party or otherwise bound or affected or by which any of the assets or properties of the Company may be bound or affected or give any party with rights thereunder the right to terminate, modify, accelerate, renegotiate or otherwise change the existing rights or obligations of the Company thereunder.

(d)No authorization, approval, notice, license or consent, and no registration or filing with, any governmental or regulatory official, body or authority is required in connection with the execution, delivery and performance of this Agreement or the Closing Documents by the Company other than in connection or compliance with the provisions of the Securities Laws or the filing of the Certificate of Merger with Secretary of State of California.

4.3 Capitalization; Share Ownership.

(a)The total authorized capital stock of the Company consists of 1,000,000 shares of common stock, of which 500,000 shares are issued and outstanding. All of the shares of the Company Common Stock have been duly authorized and validly issued, are fully paid and non-assessable, were not issued in violation of the terms of any agreement or other understanding binding upon the Company and were issued in compliance with all applicable Charter Documents of the Company and all applicable federal, state and foreign laws, rules and regulations.

(b)The Selling Shareholders are the lawful owner of all right, title and interest (legal and beneficial) in and to all of the issued and outstanding shares of Company Common Stock. There are no outstanding subscriptions, options, warrants, convertible securities, calls, commitments, preemptive rights, agreements or rights (contingent or otherwise) of any character to purchase, receive or otherwise acquire from the Company any shares of, or any securities convertible into, the capital stock of the Company. There are no outstanding rights to either demand registration of any shares of the capital stock of the Company under the Securities Act or to sell any shares of the capital stock of the Company in connection with such a registration. There are no voting agreements, trusts, proxies or other agreements, instruments or undertakings with respect to the voting of the capital stock of the Company to which the Company is a party.

4.4 Financial Statements.

The Company has delivered to Acquiror as set forth on Schedule 4.4(a) hereto correct and complete copies of:

(a)the unaudited consolidated balance sheet of the Company as of December 31, 2005, and the related consolidated statements of income for the periods then ended (the “Annual Financial Statements”);

(b)an unaudited consolidated pro forma balance sheet of the Company as of May 31, 2006 and the related unaudited consolidated statements of income for the five months then ended (the “Interim Financial Statements” together with the Annual Financial Statements, the “Financial Statements”).

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The Financial Statements (including, without limitation all notes, comments, schedules and supplemental data contained in or annexed to such Financial Statements) are accurate and complete in all material respects, were prepared in accordance with the books and records of the Company and fairly present the financial condition and the results of operations of the Company as of the respective dates of and for the periods referred to in such Financial Statements, all in accordance with the Company’s usual and customary accounting practices each consistently applied.

4.5 Books and Records.

The books of account, minute books, stock record books, and other records of the Company are true and complete in all material respects and accurately reflect all of their items of income and expense, assets, liabilities and businesses of the Company. The minute books of the Company contain accurate and complete records of all meetings held of, and corporate action taken by, the shareholders and Boards of Directors of the Company. The Company has delivered true and complete copies of all such minute books and the stock transfer ledgers of the Company to Acquiror.

4.6 Title to Properties; Encumbrances.

Schedule 4.6 contains a true and correct list of all equipment, assets and all other personal property owned by the Company and a true and correct list of all equipment, assets and all other personal property leased by the Company. The Company owns outright and has good, valid and marketable title to, or a valid leasehold in, all the properties and assets (whether real, personal, or mixed and whether tangible or intangible) used in the operation of the business of the Company or reflected as owned in the books and records of the Company, including all of the properties and assets reflected in the Financial Statements, and all of the properties and assets purchased or otherwise acquired by the Company since December 31, 2005. Except for liens for current Taxes not yet due and payable but which Taxes will be reflected on Schedule 4.6, all such properties and assets are free and clear of all mortgages, liens, pledges, security interests, charges, claims, restrictions and other encumbrances and defects of title of any nature whatsoever (“Encumbrances”).

4.7 Condition and Sufficiency of Assets.

All facilities, buildings, vehicles, equipment, furniture and fixtures, leasehold improvements and other material items of tangible personal property owned or used by the Company are structurally sound and in good operating condition and repair, subject to normal wear and maintenance, are useable in the regular and ordinary course of its business, and, together with the Contracts and intangible assets of the Company, are sufficient for the continued conduct of the business of the Company, and conform to all applicable laws, ordinances, codes, rules and regulations relating to their construction, use, operation and maintenance.

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4.8 Accounts Receivable.

All of the accounts receivable of the Company that are reflected on the Financial Statements or the accounting records of the Company as of the Closing (collectively, the “Accounts Receivable”) represent or will represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business and are not subject to any defenses, counterclaims, or rights of set off other than those arising in the ordinary course of business and for which adequate reserves have been established. The Accounts Receivable are fully collectible to the extent not reserved for on the balance sheet on which they are shown. Schedule 4.8 contains a complete and accurate list of all Accounts Receivable as of the date hereof, which list sets forth the aging of such Accounts Receivable.

4.9 No Undisclosed Liabilities.

The Company has no liabilities or obligations of any nature (whether fixed or unfixed, secured or unsecured, known or unknown and whether absolute, accrued, contingent, or otherwise) except for liabilities or obligations reflected or reserved against in the Financial Statements and Current Liabilities incurred in the ordinary course of business since May 31, 2006.

4.10 Taxes.

(a)The Company has timely filed or caused to be timely filed all Tax Returns in all jurisdictions in which Tax Returns are or were required to be filed by it, and all Tax Returns are true, complete and correct in all respects. Schedule 4.10(a) contains a complete and accurate list of all such Tax Returns filed since 2001. The Company has fully and timely paid all Taxes that have or may have become due pursuant to those Tax Returns or otherwise, or pursuant to any assessment received by the Company. With respect to any period for which Tax Returns of or relating to the Company has not yet been filed or for which Taxes are not yet due or owing, the Company has made due and sufficient accruals for such Taxes on its books and records and such accruals are at least equal to the liability of the Company for Taxes. All required estimated Tax payments sufficient to avoid any underpayment penalties have been made by or on behalf of the Company.

(b)The United States federal and state Tax Returns of the Company has been audited by the IRS or relevant state tax authorities or are closed by the applicable statute of limitations for all taxable years through 2001. Schedule 4.10(b) contains a complete and accurate list of all audits of all such Tax Returns, including a reasonably detailed description of the nature and outcome of each audit. All deficiencies proposed as a result of such audits have been paid or, as described in Schedule 4.10(b), are being contested in good faith by appropriate proceedings and have been fully reserved against on the books and records of the Company, separate and in addition to any accruals for Taxes as described in subsection (a) of this Section 4.10. Schedule 4.10(b) describes all adjustments to the Tax Returns filed by the Company for all taxable years since formation, and the resulting deficiencies proposed by the IRS or any other taxing authority. No issue has been raised by the IRS or any other taxing authority in any prior examination of the Company which, by application of the same or similar principles, could reasonably be expected to result in a proposed deficiency for any subsequent taxable period. Except as described in Schedule 4.10(b), the Company has not given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) of any statute of limitations relating to the payment of Taxes of the Company or for which the Company may be liable.

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(c)There exists no proposed Tax assessment against the Company, and, to the Knowledge of the Company, there are no threatened disputes, claims, audits or examinations regarding any Taxes of the Company. No claim has been made by a taxing authority in a jurisdiction where the Company does not file Tax Returns such that it is or may be subject to taxation by that jurisdiction. All Taxes that the Company is or was required to withhold or collect have been duly withheld or collected and, to the extent required, have been paid.

(d)The Company is, and has been since incorporation, a Subchapter S corporation which such status has not been terminated on or prior to Closing.

(e)The Company has not distributed stock of another Person, or has had stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 of the Code.

(f) The Company has not made any payments, is not obligated to make any payments, or is not a party to any contract that could obligate it to make any payments that could be disallowed as a deduction under Section 280G or 162(m) of the Code.

(g)The Company, or any other Person on its behalf has (i) filed a consent pursuant to Section 341(f) of the Code (as in effect prior to the repeal under the Jobs and Growth Tax Reconciliation Act of 2003), (ii) agreed to or is or will be required to make any adjustments pursuant to Section 481(a) of the Code or any comparable provision under state or foreign Tax laws or has any Knowledge that any taxing authority has proposed any such adjustment, or has any application pending with any taxing authority requesting permission for any changes in accounting methods that relate to the Company, (iii) executed or entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of law with respect to the Company, (iv) requested any extension of time within which to file any Tax Return, which Tax Return has since not been filed, (v) granted to any Person any power of attorney that is currently in force with respect to any Tax matter.

(h)The Company has never been a member of any consolidated, combined, affiliated or unitary group of corporations for any Tax purposes.

(i) The Company is not subject to any private letter ruling of the IRS or comparable rulings of any taxing authority.

(j) The Company has disclosed on its federal income Tax Returns all positions taken therein that could give rise to substantial understatement of federal income tax within the meaning of Section 6662 of the Code.

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(k)The Company has not participated in any reportable or listed transaction as provided for in Treasury Regulations Section 1.6011-4(b) or Section 6707A of the Code, or a transaction similar to a reportable or listed transaction.

4.11 Employee Benefits.

(a) The following terms have the meanings set forth below.

“Company Other Benefit Obligation” means an Other Benefit Obligation owed, adopted, followed or provided by the Company or any ERISA Affiliate (each such entity a “Company Entity”), or with respect to which any Company Entity has any liability.

“Company Plan” means all Plans of which any Company Entity was or is a Plan Sponsor, or to which any Company Entity contributed or contributes, in which any Company Entity participated or participates or with respect to which any Company Entity has any liability.

“ERISA Affiliate” means any Person that, under Code § 414(b), (c), (m) or (o), is or may be treated as a single employer along with the Company.

“Other Benefit Obligations” means all obligations, arrangements, agreements or customary practices or policies (including any Welfare Plan), whether or not legally enforceable, to provide benefits, other than salary, to present or former directors, agents, employees or independent contractors, or to individuals who provide or who have provided services to or with respect to the Company or the business conducted or to be conducted by the Company, including without limitation consulting agreements under which the compensation paid does not depend upon the amount of service rendered, leave policies, severance payment policies, and fringe benefits within the meaning of Code § 132, but excluding obligations, arrangements, agreements, practices and policies that are Company Plans.

“Plan” has the meaning given in ERISA § 3(3).

“Plan Sponsor” has meaning given in ERISA § 3(16)(B).

“Pension Plan” means any Company Plan that is subject to Title IV of ERISA, including without limitation any multiemployer pension plan (as defined in ERISA § 4001(b)(3)) that is currently or that has in the past been maintained or contributed to by any Company Entity.

“Qualified Plan” means any Company Plan that is intended to meet or that purports to meet the requirements of Code § 401(a).

“Welfare Plan” has the meaning given in ERISA § 3(1).

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(b)Schedule 4.11(b) contains a complete and accurate list of all Company Plans and Company Other Benefit Obligations, and identifies as such all Company Plans that are Pension Plans or Qualified Plans. With respect to each Company Plan and Company Other Benefit Obligations, as applicable, the Company has delivered to Acquiror complete and accurate copies of: (i) all documents that set forth the terms of such Company Plan and Company Other Benefit Obligation, and of any related trust, including all governing plan documents, summary plan descriptions and individual agreements with employees, (ii) all summaries and descriptions furnished to participants and beneficiaries regarding Company Plans and Company Other Benefit Obligations for which a plan description or summary plan description is not required, (iii) the latest actuarial report with respect to each Pension Plan that is a single-employer plan (within the meaning of Section 4001(a)(15) of ERISA), (iv) the latest financial statements, (v) the latest annual report (Form 5500), to the extent applicable, and (vi) the latest IRS determination letter issued with respect to each Qualified Plan.

(c)Neither the Company nor any of its affiliates provide welfare benefits (including retiree health and life insurance or insurance-type-benefits) for any of their respective employees except as required by Section 4980B of the Code and similar state statutes.

(d)With respect to Company Plans and Company Other Benefit Obligations, as applicable:

(i) Each Company Entity has (A) made all contributions and paid all benefits which are required to be made or paid by such Company Entity on or prior to the Closing with respect to the Company Plans and Company Other Benefit Obligations, and (B) paid all Taxes with respect to the employment of all employees for the period through the Closing. Appropriate entries in the Financial Statements have been made for all material obligations and liabilities under such Company Plans and Company Other Benefit Obligations that have accrued but are not due as of the Closing. All Qualified Plans have been determined by the IRS to be qualified under Code Section 401(a) and exempt from taxation under Code Section 501(a) and nothing has occurred that would adversely affect the qualification of any such plan. Each Company Plan and Company Other Benefit Obligation complies in all material respects with and has been administered in substantial compliance with, (i) the provisions of ERISA and the Code, (ii) all other applicable Laws, (iii) the terms of such Company Plan or Company Other Benefit Obligation, and (iv) the terms of any collective bargaining or collective labor agreements entered into by the Company. The Company has not received any written notice from any governmental authority questioning or challenging such compliance. There has not been any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Company Plan or Company Other Benefit Obligation, and no litigation has been commenced or, to the Knowledge of the Company, is threatened with respect to any such Company Plan or Company Other Benefit Obligation.

(ii)No statement, either written or oral, has been made to any Person, including any Employee (as defined in Section 4.17 hereof) with regard to any Company Plan or Other Benefit Obligation that was not in accordance with the Company Plan or Other Benefit Obligation and that, in the case of a written statement, could reasonably have a Material Adverse Effect or that could reasonably have a material adverse economic consequence to Acquiror.

(iii)        Other than claims for benefits submitted by participants or beneficiaries in the Ordinary Course of Business, no claim against, or legal proceeding involving, any Company Plan or Company Other Benefit Obligation is pending or threatened.

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(iv)        Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby and thereby will: (i) result in any material payment (including any bonus, severance, unemployment compensation, deferred compensation, forgiveness of indebtedness or golden parachute payment) becoming due to any current or former employee under any Company Plan or Company Other Benefit Obligation; (ii) increase in any material respect any benefit otherwise payable under any Company Plan or Company Other Benefit Obligation; (iii) result in the acceleration in any material respect of the time of payment or vesting of any such benefits under any Company Plan or Company Other Benefit Plan; or (iv) result in any material obligation to fund any trust or other arrangement with respect to compensation or benefits under a Company Plan or Company Other Benefit Obligation.

(v)None of the Company Plans or Company Other Benefit Obligations shall, from and after the Closing, impose or result in the imposition of any obligation on the Company, the Acquiror or any of Acquiror’s affiliates to provide any type or level of compensation or benefits to employees or other service providers of the Company. Each Company Plan or Company Other Benefit Obligation may be terminated at any time without imposition of a penalty or liability on the Company.

(vi)   The Company and its affiliates have complied in all respects with the provisions of the Worker Adjustment and Retraining Notification Act (“WARN”) with respect to any “mass layoff” or “plant closing” (as such terms are defined in WARN), and any comparable state statues and related regulations, effected or initiated by the Company or any such affiliate prior to the Closing.

4.12 Compliance with Legal Requirements; Governmental Authorizations.

(a)The Company has complied in all material respects and is presently complying in all material respects with all applicable laws, rules or regulations to which it or its business is, or its operations, assets or properties are, subject and has not failed in any material way to obtain or adhere to the requirements of any Permit or other authorization necessary to the ownership of its assets and properties or to the conduct of the Company’s business. The Company has not received any notice of a violation or alleged violation of any such law, rule or regulation.

(b)Except as set forth in Schedule 4.12(b), the Company has not received any notice or other communication (whether oral or written) from any governmental authority or any other person regarding (A) any actual, alleged, possible or potential violation of or failure to comply with any term or requirement of any governmental authority, or (B) any actual, proposed, possible, or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to, any governmental authorization;

4.13 Legal Proceedings; Orders.

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There are no disputes, claims, actions, suits or proceedings, arbitrations or investigations, either administrative or judicial, pending or, to the Knowledge of the Company and Selling Shareholders, threatened or contemplated, by or against or affecting the Company or their respective assets or business or questioning the validity of this Agreement or the transactions contemplated hereby, before or by any court or governmental or regulatory official, body or authority, or before an arbitrator of any kind. The Company and Selling Shareholders have no Knowledge of any condition or state of facts or the occurrence of any event that might reasonably form the basis of any such claim, liability or litigation. The Company nor any of its respective business or assets is a party to or subject to the provisions of any judgment, order, writ, injunction or decree of any court, arbitrator or governmental or regulatory official, body or authority.

4.14 Absence of Certain Changes and Events.

Except as set forth on Schedule 4.14, since May 31, 2006, there has not been any transaction or occurrence in which the Company has:

(a)suffered any change that would have a Material Adverse Effect on the operations, condition (financial or otherwise), liabilities, assets, or earnings of the Company or the Company’s business generally nor, to the Company’s and Selling Shareholders’ Knowledge, has there been any event that may reasonably be expected to have a Material Adverse Effect on any of the foregoing;

(b)incurred any liabilities of any nature other than items incurred in the regular and ordinary course of business, consistent with past practice, or increased (or experienced any change in the assumptions underlying or the methods of calculating) any bad debt, contingency, or other reserve, other than in the ordinary course of business consistent with past practice;

(c)paid, discharged, or satisfied any lien or liability other than the payment, discharge, or satisfaction in the ordinary course of business consistent with past practice of liens or liabilities of the type reflected or reserved against in the Financial Statements or which were incurred since May 31, 2006 in the ordinary course of business consistent with past practice;

(d)permitted, allowed, or suffered any of its assets or properties (real, personal or mixed, tangible or intangible) to be subjected to any lien;

(e)canceled any debts or waived any claims or rights in excess of $10,000 individually or $25,000 in the aggregate;

(f) disposed of or permitted to lapse any right to the use of any intellectual property owned by the Company or used in the Company’s business or disposed of or, to Company’s and Selling Shareholders’ Knowledge, disclosed to any Person not authorized to have such information any of such intellectual property not previously a matter of public knowledge or existing in the public domain;

(g)made any material capital expenditure or commitment for additions to property, plant, equipment, intangible, or capital assets or for any other purpose, other than for emergency repairs or replacement;

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(h) incurred any Long-Term Liability;

(i)paid, loaned, distributed or advanced any amounts to or sold, transferred, or leased any assets or properties (real, personal or mixed, tangible or intangible) to or purchased, leased, licensed, or otherwise acquired any assets or properties from, or entered into any other agreement or arrangement with (i) any Related Person of the Company, (ii) any corporation or partnership in which any Selling Shareholderis a Related Person, or (iii) any Person Controlling, Controlled By or Under Common Control With any such Related Person except for compensation not exceeding $10,000 and for routine travel advances to officers and employees;

(j)sold, transferred, or otherwise disposed of any of its assets or properties except in the ordinary course of business consistent with past practice;

(k)granted or incurred any obligation for any increase in the compensation of any officer or employee of the Company (including any increase pursuant to any Company Plan or Company Other Benefit Obligation or otherwise) except for raises to employees in the Ordinary Course of Business consistent with past practice, or adopted, modified or amended any Company Plan or Company Other Benefit Obligation to increase benefits provided thereunder or having the effect of increasing the cost thereof;

(l) made any change in any method of accounting or accounting principle, practice, or policy;

(m)        suffered any casualty loss or damage in excess of $25,000 in the aggregate (whether or not insured against);

(n)made or agreed to make any charitable contributions or incurred or agreed to incur any non-business expenses in excess of $25,000 in the aggregate;

(o)taken any other action which is not either in the Ordinary Course of Business and consistent with past practice or provided for in this Agreement;

(p)amended any provision of its Charter Documents or changed any of its authorized or issued capital stock; or

(q)agreed, so as to legally bind the Company whether in writing or otherwise, to take any of the actions set forth in this Section 4.14 and not otherwise permitted by this Agreement.

4.15 Contracts; No Defaults.

(a)Except as listed and described on Schedule 4.15(a), the Company is not a party or subject to, and none of the Company’s assets is bound by or subject to, any of the following agreements, contracts, commitments or other arrangements, whether oral or written (“Contracts”):

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(i) Contract with any present or former shareholder, director, officer, employee or consultant or for the employment of any person, including any consultant;

(ii)Contract with any labor union or other Representative of employees;

(iii)        Contract for the future purchase of, or payment for, supplies or products, or for the performance of services by a third party, involving in any one case $10,000 or more;

(iv)        Contract to sell or supply products or to perform services, involving in any one case $10,000 or more;

(v)Contract continuing over a period of more than six months from the date hereof or exceeding $10,000 in value;

(vi)  representative or sales agency Contract;

(vii)  lease under which it is either lessor or lessee;

(viii)      note, debenture, bond, conditional sale agreement, equipment trust agreement, letter of credit agreement, loan agreement or other Contract or commitment for the borrowing or lending of money (including, without limitation, loans to or from officers, directors or a Selling Shareholder or any of its Related Persons), agreement or arrangement for a line of credit or guarantee, pledge or undertaking in any manner whatsoever of the indebtedness of any other person;

(ix)  Contract for any charitable or political contribution;

(xi)  Contract for any capital expenditure in excess of $10,000;

(xii)       Contract limiting or restraining it from engaging or competing in any lines of business with any person, nor is any officer or employee of the Company subject to any such agreement;

(xiii)       license, franchise, distributorship or other Contract, including those which relate in whole or in part to any patent, trademark, trade name, service mark or copyright or to any ideas, technical assistance or other know-how of or used by the Company; or

(xiv)  Contract not made in the Ordinary Course of Business.

(b)Each Contract, lease and other document identified or required to be identified in Schedule 4.15(a) is in full force and effect and is valid and enforceable in accordance with its terms. There exists no actual or, to the Knowledge of the Company or Selling Shareholders, any threatened termination, cancellation, or limitation of, or any amendment, modification, or change to such Contracts that would reasonably be expected to have a Material Adverse Effect. The Company has delivered to Acquiror a true and correct copy of each such Contract.

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(c)With respect to the Contracts, leases and other documents listed in Schedule 4.15(a):

(i) the Company, is, and has been, in compliance with all terms and requirements thereof; and

(iieach other Person that has or had any obligation or liability thereunder is, and has been, in compliance with all terms and requirements thereof.

4.16 Insurance.

(a)The Company, its assets and properties and its employees are insured under various policies of general liability and other forms of insurance as stated on Schedule 4.16. Schedule 4.16 contains a true and complete description of all insurance coverage currently in effect with respect to the Company, and its respective business and properties, together with a description of all claims made with respect to such coverage since inception.

(b)There is no default under any such coverage, nor has there been any failure to give any notice or present any claim under any such coverage in a timely fashion or in the manner or detail required by the policy or binder. There are no outstanding unpaid premiums, and there are no provisions under such insurance coverage of the Company for retroactive or retrospective premium adjustments. No notice of cancellation or nonrenewal with respect to, or disallowance of any claim under, any such coverage has been received by the Company. The Company has not been refused any insurance with respect to its business by any insurance carrier to which it has applied for insurance or with which it has carried insurance during its existence. There are no outstanding requirements or recommendations by any current insurer or underwriter of the Company, which require or recommend changes in the conduct of its business, or require any repairs or other work to be done with respect to any of the Company’s assets, properties or operations.

4.17 Employees.

(a)Schedule 4.17 contains a list of all employment, confidentiality, non-competition or non-solicitation agreements to which the Company and any employee are a party (and copies of the same have been delivered to Acquiror) and a complete and accurate list of the following information for each current employee of the Company, including part-time employee and each employee on leave of absence or layoff status (each an “Employee”): name of entity for which services are provided; name of Employee; job title; date of hire; and current compensation, including salary, wages, bonus, accrued vacation and other remuneration. Except as set forth on Schedule 4.17, none of the persons engaged in the business is an independent contractor or has been treated as an independent contractor by the Company within the past five (5) years. The Company has complied in all material respects with all Tax withholding, Tax reporting, and other similar obligations with respect to each person engaged in the business by the Company.

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(b)No Employee is a party to, or is otherwise bound by, any agreement or arrangement, including any confidentiality or non-competition agreement, between such Employee and any other Person that in any way adversely affects or will affect: (i) the performance of its duties as an Employee of the Company; or (ii) the ability of the Company to conduct its business. To the Company’s and Selling Shareholders’ Knowledge, no officer or key Employee of the Company intends to terminate his or her employment with the Company.

(c)None of the Employees are represented by a union or other labor organization, and neither the Company is a party to any collective bargaining or other labor agreement with respect to any Employee or the business conducted by the Company. To the Knowledge of the Company and Selling Shareholders, no union or labor organization is seeking to organize or represent any of the Employees. None of the Employees is under investigation or the subject of any claim or litigation asserting that such Employee has engaged in improper conduct in the course of such person’s employment by the Company or with respect to the Company’s business, including without limitation any investigation, claim or litigation relating to sexual harassment, employment discrimination or unlawful conduct.

(d)The Company has complied in all respects with all legal requirements relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar Taxes and occupational safety and health. The Company is not liable for the payment of any compensation, damages, Taxes, fines, penalties, or other amounts, however designated, for failure to comply with any of the foregoing legal requirements.

4.18 Intellectual Property.

The Company owns or has valid rights to use the trademarks, trade names, domain names, copyrights, patents, logos, licenses and computer software programs (including, without limitation, the source codes thereto) that are necessary for the conduct of its respective businesses as now being conducted. All of the Company’s licenses to use software programs are current and have been paid for the appropriate number of users. Each registered trademark, trade name, copyright and patent owned by the Company and necessary for the conduct of their business on the date hereof, and each license to use any registered trademark, trade name, copyright, patent or computer software program necessary for the conduct of their business on the date hereof is listed on Schedule 4.18. To the Knowledge of the Company and Selling Shareholders, the Company is not infringing on any trademark, trade name, domain names, copyright, patent or other intangible property right or any registration thereof or application pending which is necessary for the conduct of their business on the date hereof.

4.19 Certain Payments.

Neither the Company nor any Representative of the Company, nor any other Person associated with or acting for or on behalf of the Company, has directly or indirectly: (a) made any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment to any Person, private or public, regardless of form, whether in money, property, or services (i) to obtain favorable treatment in securing business, (ii) to pay for favorable treatment for business secured, (iii) to obtain special concessions or for special concessions already obtained, for or in respect of the Company, or (iv) in violation of any law, rule or other governmental order or regulation; or (b) established or maintained any fund or asset that has not been recorded in the books and records of the Company.

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4.20 Brokers.

The Company and Selling Shareholders and their agents have incurred no obligation or liability, contingent or otherwise, for brokerage fees, finders’ fees, agents’ commissions or other fees, commissions or payments in connection with this Agreement or the transactions contemplated hereby.

4.21 Relationships with Related Persons.

Except as set forth on Schedule 4.21, none of the Selling Shareholders nor any Related Person of any Selling Shareholder has had any interest in any property used in or pertaining to the businesses of the Company. None of the Selling Shareholders nor any Related Person of any Selling Shareholder is a party to any Contract with, nor has any claim or right against, the Company. The Company, nor any Selling Shareholder, nor any officer, supervisory employee or director of the Company or to the Knowledge of the Company and Selling Shareholders, any of their respective Related Persons, owns directly or indirectly on an individual or joint basis any interest in, or serves as an officer or director or in another capacity of, any competitor of the Company or any organization that has a Contract or arrangement with the Company.

4.22 Disclosure.

Neither this Agreement nor any statement contained in any certificate, Exhibit, Schedule or other instrument, document, agreement or writing furnished or to be furnished to, or made with, Acquiror pursuant hereto or in connection with the negotiation, execution or performance of this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary to make any statement herein or therein not misleading.

4.23 Privacy of Customer Information.

The Company has not used nor currently uses any of the consumer or customer information that it has received or currently receives in an unlawful manner, or in a manner contrary to the Company’s privacy policy, the privacy rights of its consumers or customers. The Company has not collected any customer information in an unlawful manner or in violation of its privacy policy. The Company has industry standard commercially reasonable security measures in place to protect the consumer or customer information it receives and which it stores in its computer systems from illegal use or access by third parties or use by third parties in a manner violative of the rights of privacy of its customers.

4.24 Customer Relations.

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The Company has not received any notice of a threatened termination, cancellation or limitation of, or any adverse modification or change in, the business relationship of the Company, or the business of the Company, with any customer or supplier or any group of customers or suppliers whose purchases, products or services provided to the Company’s business or customers are individually or in the aggregate material to the business, financial condition, operations or affairs of the Company and, to the Company’s and Selling Shareholders’ Knowledge, there exists no present condition or state of fact or circumstances that would have a Material Adverse Effect or prevent the Company from conducting such business relationships or such business with any such customer or supplier or group of customers or suppliers in the same manner as heretofore conducted by the Company.

4.25 Real Property.

The Company owns no real property. Schedule 4.25(a) contains a true, correct and complete list of all real property leases and subleases (including, without limitation, all modifications, extensions or amendments thereto) under which the Company is tenant or subtenant (as so modified, extended or amended, the “Real Property Leases”). True and complete copies of all Real Property Leases have been delivered to Acquiror. To the Company’s and Selling Shareholders’ Knowledge, the Real Property Leases are subject to no Encumbrances, are in full force and effect and are enforceable in accordance with their respective terms. Subject to the terms of the respective Real Property Leases, the Company has a valid and subsisting leasehold estate in and the right to quiet enjoyment to each parcel of leased real property for the full term of the respective Real Property Lease. The Company, nor any Selling Shareholder has assigned, pledged, hypothecated or otherwise transferred any Real Property Lease. The Company has sublet all or any portion of any leased real property and the Company is in full possession thereof. No landlord or tenant under any Real Property Lease has exercised any option or right to (i) cancel or terminate such Real Property Lease or shorten the term thereof, (ii) lease additional premises, (iii) reduce or relocate the premises demised by such Real Property Lease or (iv) purchase any property. Except as set forth on Schedule 4.25(b), each Real Property Lease was negotiated at arms length and none of the Selling Shareholders or the Company or any affiliate of any of the forgoing are affiliated with any landlord under any Real Property Lease. There are no disputes under any Real Property Lease. Each Real Property Lease is the only document between the applicable parties thereto with respect to the subject matter thereof. No security deposit under any Real Property Lease has been utilized by any landlord and the full amount of any security deposit required under the applicable Real Property Lease is on deposit. The Company is not a party to any oral lease of real property. None of the Company, or any Selling Shareholder owes or will owe any brokerage commissions or finders fees with respect to any Real Property Lease or any renewal or extension thereof or the exercise of any right or option thereunder.

4.26 Environmental, Health and Safety Matters.

The Company is in compliance with all applicable laws relating to pollution, protection of health and the environment and occupational safety and health (“Environmental Laws”) in all material respects. The Company holds all Permits and authorizations required under applicable Environmental Laws, unless the failure to hold such Permits and authorizations would not have a Material Adverse Effect, and are is compliance with all terms, conditions and provisions of all such Permits and authorizations in all material respects. No releases of Hazardous Materials have occurred at, from, in, to, on or under any real property currently or formerly owned, operated or leased by the Company or any predecessor thereof and no Hazardous Materials are present in, on, about or migrating to or from any such property which could result in any liability to the Company. The Company has not transported or arranged for the treatment, storage, handling, disposal, or transportation of any Hazardous Material to any off-site location which could result in any liability to the Company. The Company has no liability, absolute or contingent, under any Environmental Law that if enforced or collected would have a Material Adverse Effect. There are no past, pending or threatened claims under Environmental Laws against the Company and the Company is not aware of any facts or circumstances that could reasonably be expected to result in a liability or claim against the Company pursuant to Environmental Laws.

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4.27 Payment and Condition of Indebtedness.

Schedule 4.27 sets forth the parties to and the total amount outstanding (separately identifying any prepayment penalties) of each Long-Term Liability of the Company. Except for Current Liabilities and Long-Term Liabilities set forth on the Pro Forma Balance Sheet, all indebtedness owed to the Company by any Person has been paid in full or will be paid in full as of the Effective Time. Schedule 4.27 identifies all Long-Term Liabilities that will accelerate and become due upon consummation of the transactions contemplated herein or that provide for penalties if paid prior to maturity.

4.28 State Takeover Laws.

The Company has taken all necessary action to comply with or, if applicable, exempt the transactions contemplated by this Agreement from, or if necessary to challenge the validity or applicability of, any applicable “fair price,” “business combination,” “control share,” or other anti-takeover laws.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF SELLING SHAREHOLDERS

Each Selling Shareholder, as applicable, severally, but not jointly, represents and warrants to Acquiror as follows:

5.1 Authority; No Conflict.

(a)Each Selling Shareholder has all necessary power and authority to execute and deliver this Agreement and the Closing Documents, and to perform their obligations under this Agreement and the Closing Documents, and no other action on the part of any Selling Shareholder is required in connection therewith. This Agreement has been duly executed and delivered by each Selling Shareholder and constitutes the legal, valid, and binding obligation of each Selling Shareholder, enforceable against each Selling Shareholder in accordance with its terms.

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(b)The execution, delivery and performance of this Agreement or the Closing Documents will not contravene or violate: (i) any law, rule or regulation to which any Selling Shareholder is subject; or (ii) any judgment, order, writ, injunction or decree of any court, arbitrator or governmental or regulatory official, body or authority which is applicable to any Selling Shareholder; nor will such execution, delivery or performance violate, be in conflict with or result in the breach (with or without the giving of notice or lapse of time, or both) of any term, condition or provision of, or require the consent of any other party to, or result in the creation of any pledge, lien, encumbrance, claim or other charge thereon of any kind under, any contract, commitment, agreement, lease, license, permit, authorization, document or other understanding, oral or written, to or by which any Selling Shareholder is a party or otherwise bound or affected or by which any of the assets or properties of any Selling Shareholder may be bound or affected or give any party with rights thereunder the right to terminate, modify, accelerate, renegotiate or otherwise change the existing rights or obligations of any Selling Shareholder thereunder. No authorization, approval or consent, and no registration or filing with, any governmental or regulatory official, body or authority is required in connection with the execution, delivery and performance of this Agreement or the Closing Documents by any Selling Shareholder other than in connection or compliance with the provisions of the Securities Laws.

5.2 Ownership of Shares.

(a)Each Selling Shareholder is the owner of all right, title and interest (legal and beneficial) in and to that number of shares of Company Common Stock set forth next to his or her name on Schedule I, free and clear of all Encumbrances, claims and other charges thereon of every kind, including, without limitation, any agreements, subscriptions, options, warrants, calls, commitments or rights (contingent or otherwise) of any character granting to any Person any interest or right to acquire from any Selling Shareholder at any time any such shares owned. Each Selling Shareholder has approved the Merger in accordance with applicable law and no Selling Shareholder is entitled to dissenters’ or appraisal rights related to the Merger.

5.3 Investment and Securities Matters.

(i) Each Selling Shareholder acknowledges and understands that (i) the issuance of the Common Stock will not be registered under the Securities Act or any other applicable Securities Laws; (ii) the issuance of the Common Stock is intended to be exempt from registration under the Securities Act and any other applicable Securities Laws by virtue of certain exemptions thereunder, including Section 4(2) of the Securities Act promulgated thereunder, and, therefore, the Common Stock cannot be resold unless registered under the Securities Act and any other applicable Securities Laws or unless an exemption from registration is available.

(ii)Each Selling Shareholder acknowledges that Acquiror and their advisors will rely on the representations and warranties of such Selling Shareholder contained in this Section 5.3 for purposes of determining whether the issuance of the Common Stock is exempt from registration under the Securities Act and any other applicable Securities Laws.

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(iii)Each Selling Shareholder understands that the Common Stock will be characterized as “restricted securities” under the Securities Act. Each Selling Shareholder represents that such Selling Shareholder is familiar with Rule 144 promulgated under the Securities Act.

(iv)Each Selling Shareholder is acquiring the Common Stock solely for its own account for investment purposes and not with a view toward any distribution, except as permitted under applicable Securities Laws.

(v) Each Selling Shareholder has reviewed the Charter Documents of Acquiror, and any other documents reasonably requested by such Selling Shareholder for review, and has been afforded an opportunity to ask questions regarding the same.

(vi) Each Selling Shareholder (i) has the financial ability to bear the economic risk of the investment in the Common Stock, (ii) has adequate means for providing for his or its current needs and contingencies, (iii) has no need for liquidity with respect to the investment in the Common Stock, and (iv) can afford a complete loss of the investment in the Common Stock at this time and in the foreseeable future.

(vii)Each Selling Shareholder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Common Stock and of making an informed investment decision with respect thereto.

(viii)  Each Selling Shareholder is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF ACQUIROR

Acquiror represents and warrants to the Company and to the Selling Shareholders as follows:

6.1 Organization and Good Standing.

Acquiror is a corporation duly organized, validly existing and in good standing under the laws of California. Acquiror has full power and authority and possesses all Permits and approvals necessary to conduct its business as it has been, is currently or is proposed to be conducted, to own, lease and use its properties and assets, and to perform all its obligations under its Contracts, except for those Permits and approvals, the absence of which would not, individually or in the aggregate, have a Material Adverse Effect on Acquiror.

6.2 Authority; No Conflict.

(a)This Agreement has been duly executed and delivered by Acquiror and constitutes the legal, valid, and binding obligations of Acquiror, enforceable against Acquiror in accordance with its terms. Acquiror has all necessary power and authority to execute and deliver this Agreement and the Closing Documents, and to perform its obligations under this Agreement and the Closing Documents.

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(b)The execution, delivery and performance of this Agreement or the Closing Documents will not contravene or violate: (i) any law, rule or regulation to which Acquiror is subject; (ii) any judgment, order, writ, injunction or decree of any court, arbitrator or governmental or regulatory official, body or authority which is applicable to Acquiror or (iii) the Charter Documents of Acquiror; nor will such execution, delivery or performance violate, be in conflict with or result in the breach (with or without the giving of notice or lapse of time, or both) of any term, condition or provision of, or require the consent of any other party to, or result in the creation of any pledge, lien, encumbrance, claim or other charge thereon of any kind under, any contract, commitment, agreement, lease, license, permit, authorization, document or other understanding, oral or written, to or by which Acquiror is a party or otherwise bound or affected or by which any of the assets or properties of Acquiror may be bound or affected or give any party with rights thereunder the right to terminate, modify, accelerate, renegotiate or otherwise change the existing rights or obligations of Acquiror thereunder. No authorization, approval or consent, and no registration or filing with, any governmental or regulatory official, body or authority is required in connection with the execution, delivery and performance of this Agreement or the Closing Documents by Acquiror other than in connection or compliance with the provisions of the Securities Laws.

6.3 Capital Stock.

All of the issued and outstanding shares of Acquiror capital stock are, and all of the shares of Common Stock to be issued in exchange for shares of Company Common Stock upon consummation of the Merger, when issued in accordance with the terms of this Agreement, will be, duly and validly issued and outstanding and fully paid and nonassessable. None of the outstanding shares of Acquiror’s capital stock has been, and none of the shares of Common Stock to be issued in exchange for shares of Company Common Stock upon consummation of the Merger will be, issued in violation of any preemptive rights of the current or past stockholders of Acquiror.

6.4 Compliance with Legal Requirements; Governmental Authorizations.

(a)Acquiror has complied in all material respects and is presently complying in all material respects with all applicable laws, rules or regulations to which it or its business is, or its operations, assets or properties are, subject and has not failed in any material way to obtain or adhere to the requirements of any Permit or other authorization necessary to the ownership of its assets and properties or to the conduct of its business. Acquiror has not received any notice of a violation or alleged violation of any such law, rule or regulation.

(b)  Except as set forth in Schedule 6.4(b):

(i) Acquiror has not received any notice or other communication (whether oral or written) from any governmental authority or any other person regarding (A) any actual, alleged, possible or potential violation of or failure to comply with any term or requirement of any governmental authority, or (B) any actual, proposed, possible, or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to, any governmental authorization; and

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(ii)all applications required to have been filed for the renewal of its permits have been duly filed on a timely basis with the appropriate governmental agents, and all other filings required to have been made with respect to such permits have been duly made on a timely basis with the appropriate governmental authorities.

6.5 Legal Proceedings; Orders.

Except as set forth on Schedule 6.5, there are no disputes, claims, actions, suits or proceedings, arbitrations or investigations, either administrative or judicial, pending or, to the Knowledge of the Acquiror, threatened or contemplated, by or against or affecting Acquiror or Acquiror which question the validity of this Agreement or the transactions contemplated hereby, before or by any court or governmental or regulatory official, body or authority, or before an arbitrator of any kind.

6.6 Authority of Acquiror.

Acquiror is a corporation organized, validly existing and in good standing under the laws of the State of California. Acquiror has the power and authority necessary to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein, including the Merger, have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Acquiror. This Agreement represents a legal, valid, and binding obligation of Acquiror, enforceable against Acquiror in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought).

ARTICLE 7

OTHER AGREEMENTS

7.1 Publicity.

Except as may be required by law, no Selling Shareholder, Acquiror, the Company nor any of their subsidiaries will engage in, encourage or support any publicity, announcements or disclosure of any kind or form in connection with the proposed transaction unless Acquiror consents in advance as to the form, timing and content of any public announcement or disclosure.

7.2 Operational Covenants of Company Pending Closing of the Merger

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(a) Cooperation. Company and each Selling Shareholder shall cooperate with Acquiror and provide all additional materials and documents reasonably requested by Acquiror in connection with its due diligence.

(b) Access. Company and each Selling Shareholder shall permit Acquiror and its representatives to have reasonable access to, and to examine and make copies of the books and records of Company for purposes of conducting due diligence.

(c) Notices and Consents. Company will obtain all required consents necessary to consummate the transactions contemplated herein, which shall include, but not be limited to, obtaining the necessary third-party consents to consummate the transactions contemplated herein.

(d) Preservation of Business. Company will use its best efforts keep its business and properties substantially intact, including its present operations, physical facilities, working conditions, and relationships with lessors, licensors, suppliers, customers, and employees.

(e) Operation of Business. Without the prior written consent of Acquiror, or as provided for in the Assignment and Interim Operating Agreement, Company will not engage in any practice, take any action, or enter into any transaction outside the Ordinary Course of Business. Company will not engage in any activity or take any actions that could have a Material Adverse Effect on the business of Company. Without limiting the generality of the foregoing:

(1) Company will not authorize or effect any change of its Charter Documents;

(2) Company will not grant any options, warrants, or other rights to purchase or obtain any of its capital stock or issue, sell, or otherwise dispose of any of its capital stock (except upon the conversion or exercise of options, warrants, and other rights currently outstanding);

(3) Company will not split, combine, subdivide or reclassify any Company's common stock;

(4) Except for the transactions contemplated herein, Company will not make any acquisition by merger, consolidation or otherwise, or material disposition of inventory, supplies and products, of assets or securities, or permit any assets to become subject to any material lien, or encumbrance;

(5) Company will not pay or agree to pay or accelerate the payment of any pension, retirement allowance or other employee benefit not required or contemplated by any of the existing Company Plans and Company Other Benefit Obligations;

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(6) Company will not declare, set aside, or pay any dividend or distribution with respect to its capital stock or registered capital (whether in cash or in kind), or redeem, repurchase, or otherwise acquire any of its capital stock;

(7) Company will not issue any note, bond, or other debt security or create, incur, assume, or guarantee any indebtedness for borrowed money or capitalized lease obligation;

(8) Company will not impose any Encumbrance upon any of its assets;

(9) Company will not make any capital investment in, make any loan to, or acquire the securities or assets of any other Person;

(10)        Company will not make any changes in employment terms, including any increases in compensation, grants of severance payments, for any of its directors, officers, and employees;

(11)        Company will not hire any employees outside the Ordinary Course of Business;

(12)        Company will not make or effect any corporate or operational changes;

(13)        Company will not transfer any of its assets without the prior written consent of Acquiror;

(14)        All outstanding employment offers will have been rescinded or otherwise withdrawn without any Material Adverse Effect to the business Company without any outstanding obligations remaining;

(15)        Company will not undertake any Material new business opportunity;

(16)        Company will not make or commit to make any capital expenditure, or enter into any lease of capital equipment as lessee or lessor;

(17)        Company will not pay, prepay or discharge any liability or fail to pay any liability when due;

(18)        Company will not write-off or write-down any assets of the Company;

(19)        Company will not make any changes in its accounting methods or practices or revalue its assets, except for (i) those changes required by GAAP, and (ii) changes in its tax accounting methods or practices that may be necessitated by changes in applicable Tax Laws;

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(20)        Company will not take any actions that would make any representation and warranty of the Company hereunder inaccurate in any Material respect at the Effective Time; and

(21)        Company will not authorize any, or commit or agree to take any of, the foregoing actions.

7.3 Certain Tax Matters.

(a)Preparation of Tax Returns. The Shareholders’ Representative shall prepare or cause to be prepared, at the cost of the Selling Shareholders, at least 30 days prior to their due date, all Tax Returns for the Company ending on or prior to the Effective Time, including the Tax Returns for the taxable period beginning January 1, 2006 and ending with the Effective Time (together with all other Tax Returns for periods ending on or prior to the Effective Time, the “Pre-Closing Tax Returns”). Except to the extent otherwise required by Law, such Pre-Closing Tax Returns shall be prepared on a basis consistent with the past practices of the Company. Within 30 days prior to their due date, the Shareholders’ Representative shall provide Acquiror with a copy of such Tax Returns for Acquiror’s review, and shall make such changes to the Tax Returns as are requested by Acquiror. The Shareholders Representative shall file or cause to be filed such Tax Returns reflecting Acquiror’s comments and changes.

(b)Cooperation on Tax Matters. The Surviving Company and each Selling Shareholder shall cooperate fully, to the extent reasonably requested by the other party, in connection with the filing of all Tax Returns and in the course of any audit or other administrative or judicial proceeding with respect to Taxes. Each Selling Shareholder shall provide Acquiror upon request all information that may be required by Acquiror to report pursuant to Section 6043A of the Code and all Treasury Regulations promulgated thereunder.

(c)Certain Taxes and Fees. All transfer, documentary, sales, use, stamp, registration and other such Taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with the consummation of the transactions contemplated by this Agreement shall be paid by the Selling Shareholders when due, and the Shareholders’ Representative will, at the expense of the Selling Shareholders, file all necessary Tax Returns and other documentation with respect to all such taxes, fees and charges, and, if required by applicable law, Acquiror will, and will cause its affiliates to, join in the execution of any such Tax Returns and other documentation.

7.4 Reserved.

7.5 State Takeover Laws.

The Company shall take all necessary steps to comply with or exempt the transactions contemplated by this Agreement from, or if necessary to challenge the validity or applicability of, any applicable Takeover Law.

7.6 Employee Benefits.

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Each Company Plan and Company Other Benefit Obligation shall be terminated as of the Effective Time, and Acquiror shall provide benefits to employees who continue to be employed by the Surviving Company following the Closing in accordance with benefit plans maintained by Acquiror or its affiliates.

7.7 Release of Claims.

In consideration of the transactions contemplated by this Agreement and effective upon the Effective Time, each Selling Shareholder agrees, on behalf of itself and its successors and assigns, now and forever, to release and discharge the Company and its affiliates, officers, directors, shareholders, employees, agents, attorneys, successors and assigns from any and all liabilities, claims, charges, allegations, actions, causes of action, sums of money due, suits, debts, contracts, agreements, promises and demands whatsoever, in law or in equity, whether known or unknown, which any Selling Shareholder may now have or may later claim to have had arising out of anything that has occurred up through the Effective Time, as a result of such Selling Shareholder’s relationship with the Company as a director, officer, employee or shareholder of the Company.

7.8 Independent Financial Audit.

Selling Shareholders shall provide Acquiror and the Company with all records, information and supporting documentation for the Company’s financial transactions from the Company’s inception, in order to facilitate an audit of the financial records of the Company by an independent public accountant in accordance with GAAP before the Closing Date, including any necessary onsite inspections of DSCI or Company premises. Selling Shareholders shall provide assistance as requested by Acquiror and the Company in facilitating such audit and Selling Shareholders’ contact for such matters shall be James M. Underwood, or his designee.

7.9 Future Franchise Territories and Photo-Voltaic Equipment Supplies.

(a)The Acquiror represents that it has the resources and expertise and intends to establish a photo-voltaic products and services franchise system that will facilitate expanding and financing of the Acquiror’s vertically integrated photo-voltaic business following the Merger. The Acquiror intends to offer James M. Underwood and Ronald H. Stickney the right to acquire standard franchise territories for three territories comprising that geographic area that is north of, and not including Sacramento, California, in California, including the Marysville/Yuba City, Chico/Oroville and Redding metropolitan areas as the primary franchise territory hubs (the “Future Franchise Territories”). There will be no fees or costs to Mr. Underwood and Mr. Stickney to acquire such standard franchises. This right to a franchise license is personal to Mr. Underwood and Mr. Stickney and not transferable or delegable to third parties except to a company in which either jointly or individually are the majority owner.

(b)Pending Acquiror’s offering of the intended franchise licenses for up to three (3) areas within the herein described geographic territory, the Acquiror shall provide the affected Shareholders, or the entity or entities to operate as PV system installers within these areas, access to Acquiror’s PV panels and related system equipment on “preferred client” price and volume terms on mutually agreed upon payment terms.

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(c)For all PV installation work secured by DRCI or SPI within the Future Franchise Territories, DSCI shall have a right of first refusal to sub-contract for such work, upon entering into a mutually acceptable sub-contractor agreement.

ARTICLE 8

CONDITIONS PRECEDENT TO ACQUIROR’S OBLIGATIONS

The obligations of Acquiror under this Agreement are subject to the fulfillment or satisfaction, prior to or at the Closing, of each of the following conditions precedent:

8.1 Third-Party Consents.

All consents, approvals, transfers, permissions, waivers, orders and authorizations of (and all filings or registrations with) all courts, governmental agencies and bodies which are required to be obtained or made in connection with the consummation of the transactions contemplated by this Agreement shall have been obtained and made and delivered to Acquiror. All consents, approvals, waivers and authorizations required for the consummation of the Merger, the preventing of any default under any Contract or Permit or the assignment of any Contract or Permit shall have been obtained and made and delivered to Acquiror.

8.2 Director and Officer Resignations; Books and Records

The Company shall have delivered to Acquiror the written resignations of all the directors and officers of the Company effective as of the Closing and shall cause to be delivered to Acquiror and the Company all minute books, stock record books, books of account, corporate seals, and other documents, instruments and papers belonging to the Company.

8.3 Other Agreements.

(a)Each Selling Shareholder shall have executed and delivered a power of attorney authorizing Acquiror to transfer from such Selling Shareholder to Acquiror all or any portion of the shares of Company Common Stock held on the books and records of the Company in the name of such Selling Shareholder, as applicable.

(b)Each Selling Shareholder shall have delivered to Acquiror a letter in a form satisfactory to Acquiror to the effect that such Selling Shareholder is an “accredited investor” as that term is defined by Rule 501(a) of Regulation D under the Securities Act, and Acquiror shall be satisfied in its sole discretion that each Selling Shareholder will qualify as an accredited investor at the Effective Time.

(c)The Company shall have delivered evidence reasonably satisfactory to Acquiror of the termination and/or non-existence of any and all Encumbrances on the assets of the Company being transferred to the Surviving Company upon the Merger.

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(d)The Company shall have also delivered such other documents as Acquiror may reasonably request to otherwise facilitate the consummation or performance of any of the transactions contemplated herein.

8.4 Certified Documents.

Acquiror shall have received the following documents: a certificate executed by the Secretary of the Company certifying as of the Effective Time (i) a true and correct copy of the resolutions duly adopted by the Board of Directors of the Company authorizing the transactions set forth herein, (ii) the Articles of Incorporation of the Company, as amended, certified as of a recent date by the Secretary of State of the State of California, (iii) a copy of the Bylaws of the Company, as amended, (iv) a certificate of status, good standing or existence with respect to the Company from the Secretary of State of California and of each state in which the Company is qualified to do business, dated as of a recent date and (v) the incumbency and authority of the officers signing this Agreement on behalf of the Company;

8.5 Shareholder Approval.

All of the shares of Company Common Stock shall have been voted in favor of the Merger.

8.6 Legal Proceedings.

No court or governmental or regulatory authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law or order (whether temporary, preliminary or permanent) or taken any other action which prohibits, restricts in a material and fundamental manner or makes illegal the consummation of the transactions contemplated by this Agreement.

8.7 Representations and Warranties.

The accuracy of the representations and warranties of the Company and the Selling Shareholders set forth in this Agreement shall be assessed as of the Effective Time with the same effect as though all such representations and warranties had been made on and as of the Effective Time (provided that representations and warranties which are confined to a specified date shall speak only as of such date). The representations and warranties set forth in Articles 4 and 5 shall be true and correct in all respects. The Company and each Selling Shareholder shall deliver to Acquiror a certificate dated as of the Closing to the effect contemplated by this Section 8.7.

8.8 Performance of Agreements and Covenants.

Each and all of the agreements and covenants of the Company and each Selling Shareholder to be performed and complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Effective Time shall have been duly performed and complied with in all material respects. The Company and each Selling Shareholder shall deliver to Acquiror a certificate dated as of the Closing to the effect contemplated by this Section 8.8.

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8.9 No Material Adverse Effect.

Since December 31, 2005, there shall not have occurred, and there shall not be continuing, a Material Adverse Effect with respect to the Company and the business of the Company.

8.10 Independent Financial Audit.

The Company shall have completed an independent financial audit in accordance with GAAP and provided to the Acquiror, such audit report by an independent public accountant.

8.11 No Material Adverse Effect.

The Selling Shareholders shall have entered into the Restricted Covenant Agreement.

8.12 Opinion of Counsel.

Acquiror shall have received the opinion of James M. Underwood, dated as of the Closing Date, substantially in the form attached hereto as Exhibit D.

8.13 Insurance.

The Company shall have obtained all insurance necessary to operate its business, including without limitation, general liability, workers compensation, errors and omission, property and hazardous insurance, and provided copies of the policies thereof to the Acquiror.

8.14 Tax Liability.

The Company shall file its 2005 federal and state tax returns and pay any taxes due thereon prior to the Closing Date.

ARTICLE 9

CONDITIONS PRECEDENT TO THE COMPANY’S AND EACH SELLING SHAREHOLDER’S OBLIGATIONS

The obligations of the Company and each Selling Shareholder under this Agreement are subject to the fulfillment or satisfaction, prior to or at the Closing, of each of the following conditions precedent:

9.1 Third-Party Consents.

All consents, approvals, transfers, permissions, waivers, orders and authorizations of (and all filings or registrations with) all courts, governmental agencies and bodies which are required to be obtained or made in connection with the consummation of the transactions contemplated by this Agreement shall have been obtained and made and delivered to the Company. All consents, approvals, waivers and authorizations required for the consummation of the Merger, the preventing of any default under any Contract or Permit or the assignment of any Contract or Permit shall have been obtained and made and delivered to the Company.

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9.2 Representations and Warranties.

The accuracy of the representations and warranties of Acquiror set forth in this Agreement shall be assessed as of the date of this Agreement and as of the Effective Time with the same effect as though all such representations and warranties had been made on and as of the Effective Time (provided that representations and warranties which are confined to a specified date shall speak only as of such date). There shall not exist inaccuracies in the representations and warranties of Acquiror set forth in this Agreement. Acquiror shall have delivered to the Company a certificate dated as of the Closing to the effect contemplated by this Section 9.2.

9.3 Performance of Agreements and Covenants.

Each and all of the agreements and covenants of Acquiror to be performed and complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Effective Time shall have been duly performed and complied with in all material respects. Acquiror shall have delivered to the Company a certificate dated as of the Closing to the effect contemplated by this Section 9.3. Acquiror shall have also delivered such other documents as the Company may reasonably request to otherwise facilitate the consummation or performance of any of the transactions contemplated herein.

9.4 Financing.

Acquiror shall have secured the necessary financing to satisfy its obligations as contemplated by the Merger.

9.5 DSCI Debt.

Acquiror shall have fully satisfied the Company’s debt to DSCI in that amount stated and resulting in the Upfront Consideration adjustment provided for in Section 3.5(c).

ARTICLE 10

INDEMNIFICATION

10.1 Indemnification and Payment of Damages by Selling Shareholders.

From and after the Closing (and subject to the limitations on survival as provided herein) each Selling Shareholder shall jointly and severally indemnify and hold harmless Acquiror, the Surviving Company, and each of their respective subsidiaries, Representatives, stockholders, affiliates, directors, officers and employees (collectively, the “Indemnified Parties”) for, and shall pay to the Indemnified Parties up to the amount of One Million Five Hundred Thousand Dollars ($1,500,000), any loss, liability, claim, damage, action, suit, proceeding, demand, deficiency, adjustment, settlement payment, cost and expense (including costs of investigation, costs of Tax audits and defense and reasonable attorneys’ fees), suffered or incurred, whether or not involving a third-party claim (collectively, “Damages”), directly or indirectly resulting from or arising out of:

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(a)any breach of any representation or warranty made by the Company or by any Selling Shareholder in this Agreement or any certificate or other writing delivered by or on behalf of any Selling Shareholder, or the Company in connection herewith;

(b)any nonfulfillment or breach of any covenant of the Company or any Selling Shareholder set forth in this Agreement or any certificate or other writing delivered by or on behalf of the Company, or any Selling Shareholder in connection herewith; provided that liability arising from the breach of a covenant to be performed by a particular individual shall be several, and not joint, with respect to such individual;

(c)any claim against or relating to the Company, whether asserted, instituted, or commenced prior to or after the date hereof, for damages suffered by reason of or resulting from the operation of the business or ownership of the Company prior to or at the Closing, including without limitation, any liability for any ERISA or benefit plan liabilities (including liabilities with respect to any Company Plan or Company Other Benefit Obligation) arising from any event or transaction at or prior to the Closing, including any liability for error and omission claims against the Company for acts or omissions occurring on or before the Closing, subject to the limits set forth in Section 10.7, and including any liability for any retroactive or retrospective premium adjustments under the Company’s insurance policies;

(d)for any and all amounts by which the Lost Revenue Deduction exceeds the Earnout Payment;

(e)all Taxes (or the non-payment thereof) of the Company for all taxable periods ending on or before the Effective Time and the portion through the end of the Effective Time for any taxable period that includes (but does not end on) the Effective Time (the “Pre-Closing Tax Period”), including any increase in Taxes due to the unavailability or denial of any loss or deductions claimed by the Company, and including any liability for Taxes related to the employment of any employees or other individuals with the Company through the Closing, but excluding Taxes that may be owed by the Company or the Surviving Company resulting from the failure of the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Code, or any analogous provision of state or local law subject to Section 10.1(f). Selling Shareholders shall reimburse the Surviving Company for any Taxes described in this Section 10.1(e) within ten (10) business days after payment of such Taxes by the Surviving Company, Acquiror or its affiliates. In the case of any taxable period that includes (but does not end on) the Effective Time (a “Straddle Period”), the amount of any Taxes based on or measured by income or receipts of Company for the Pre-Closing Tax Period shall be determined based on an interim closing of the books as of the close of business on the Effective Time (and for such purpose, the taxable period of any partnership or other pass-through entity in which Company holds a beneficial interest shall be deemed to terminate at such time) and the amount of other Taxes of Company for a Straddle Period that relates to the Pre-Closing Tax Period shall be deemed to be the amount of such tax for the entire taxable period multiplied by a fraction, the numerator of which is the number of days in the taxable period ending on the Effective Time and the denominator of which is the number of days in such Straddle Period;

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(f)  any claim arising from the consummation of the transactions contemplated herein.

10.2 Indemnification and Payment of Damages by Surviving Company.

Surviving Company will indemnify and hold harmless Selling Shareholders, and will pay to the Shareholders Representative up to the amount of One Million Five Hundred Thousand Dollars ($1,500,000) of any Damages directly or indirectly resulting from or arising out of:

(a)any breach of any representation or warranty made by Acquiror in this Agreement; and

(b)any nonfulfillment of any covenant or agreement of Acquiror set forth in this Agreement or any certificate or other writing delivered by or on behalf of Acquiror in connection herewith.

10.3 Survival of Representations and Warranties.

All representations, warranties, and obligations in this Agreement, the Schedules, and any other certificate or document delivered pursuant to this Agreement will survive the Closing for a period of two years after the Closing and shall terminate thereafter and be of no further force and effect; provided, however, that (a) all representations and warranties relating to Taxes, Tax Returns or ERISA matters of the Company, or relating to any Company Plan, Company Other Benefit Obligation or Other Benefit Obligation, including without limitation, Sections 4.10 and 4.11, shall survive the Closing until sixty (60) days after the expiration of applicable statutes of limitation plus any extensions or waivers thereof, (b) a claim with respect to Section 10.7 or a claim for indemnification or reimbursement under Section 10.1(c), (d), or (e) above may be made at any time, (c) any representation or warranty as to which a claim shall have been asserted during the survival period shall continue in effect with respect to such claim until such claim shall have been finally resolved or settled and (d) any covenants which expressly (or by implication of their terms) provide for obligations extending more than two years after the Closing (such as Selling Shareholders’ obligations under the Restrictive Covenant Agreement) shall remain outstanding until the obligations have been satisfied by their terms.

10.4 Limitations on Liability.

Except as otherwise provided in Section 10.5 of this Agreement, Selling Shareholders shall not be liable to any Indemnified Party under Section 10.1(a) hereof for any breach of any representation or warranty until the amount for which it would otherwise (but for this provision) be liable to any or all Indemnified Parties for all such breaches exceeds in the aggregate $20,000 (the “Deductible”), at which time Selling Shareholders shall be obligated to indemnify the Indemnified Parties for all losses or Damages to the first dollar without regard for the Deductible. Acquiror will not have any liability to any Selling Shareholder under Section 10.2 for any breach of any representation or warranty until the Deductible is met with respect to any Damages of the Selling Shareholders for all losses or Damages to the first dollar, without regard to the Deductible.

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10.5 Exceptions to Limitations.

Nothing herein shall be deemed to limit or restrict in any manner any rights or remedies which any Indemnified Party or Selling Shareholder has, or might have, at law, in equity or otherwise, against any party based on such party’s willful misrepresentation, willful breach of warranty or willful failure to fulfill any agreement or covenant set forth herein.

10.6 Indemnification Procedure.

(a)For purposes of this Section 10.6, any notice to be delivered to a Selling Shareholder shall be deemed to be delivered to such Selling Shareholder when delivered to the Shareholders’ Representative.

(b)Promptly after receipt by an indemnified party of notice of the commencement of any proceeding against it, including such claim and/or process and all legal pleadings in connection therewith, such indemnified party will give notice to the indemnifying party of the commencement of such claim, but the failure to notify the indemnifying party will not relieve the indemnifying party of any liability that it may have to any indemnified party, except to the extent that the indemnifying party demonstrates that the defense of such action is Materially prejudiced by the indemnified party’s failure to give such notice.

(c)If any proceeding is brought against an indemnified party and it gives notice to the indemnifying party of the commencement of such proceeding, the indemnifying party will be entitled to participate in such proceeding and, to the extent that it wishes (unless (i) the indemnifying party is also a party to such proceeding and the indemnified party determines in good faith that joint representation would be inappropriate, or (ii) the indemnifying party fails to provide reasonable assurance to the indemnified party of its financial capacity to defend such proceeding and provide indemnification with respect to such proceeding), to assume the defense of such proceeding with counsel satisfactory to the indemnified party. If the indemnifying party assumes the defense of a proceeding: (i) it will be conclusively established for purposes of this Agreement that the claims made in that proceeding are within the scope of and subject to indemnification; (ii) no compromise or settlement of such claims may be effected by the indemnifying party without the indemnified party’s consent unless the sole relief provided is monetary damages that are paid in full by the indemnifying party; and (iii) the indemnified party will have no liability with respect to any compromise or settlement of such claims effected without its consent. If notice is given to an indemnifying party of the commencement of any proceeding and the indemnifying party does not, within ten (10) days after the indemnified party’s notice is given, give notice to the indemnified party of its election to assume the defense of such proceeding, the indemnifying party will be bound by any determination made in such proceeding or any compromise or settlement effected by the indemnified party; provided, however, that such compromise or settlement shall not, unless consented to in writing by such indemnifying party, which shall not be unreasonably withheld, be conclusive as to the liability of such indemnifying party to the indemnified party.

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(d)Notwithstanding the foregoing, if an indemnified party determines in good faith that there is a reasonable probability that a proceeding may Materially and adversely affect it or its affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the indemnified party may, by notice to the indemnifying party, assume the exclusive right to defend, compromise, or settle such proceeding, and provided further, that such settlement or compromise shall not, unless consented to in writing by such indemnifying party, which shall not be unreasonably withheld, be conclusive as to the liability of such indemnifying party to the indemnified party.

(e)A claim for indemnification for any matter not involving a third-party claim may be asserted by notice to the party from whom indemnification is sought.

10.7 Errors and Omissions.

In the event of any liability for error and omission claims brought against an Indemnified Party for acts or omissions occurring on or before the Closing, the loss shall be recovered as follows:

(a)from the error and omissions insurance policy of the Company of such loss; provided, however, that any deductibles required to be paid under such policy shall be charged against the revenue of the Surviving Company for purposes of the Earn Out Payment calculation;

(b)the excess loss, if any, shall be offset against the Earnout Payment set forth in Section 3.6 to the extent not yet paid to the Selling Shareholders; and

(c)the excess loss, if any, shall become the personal liability of Selling Shareholders subject to indemnification by the Selling Shareholders hereunder without regard to any Deductible described herein.

10.8 Right to Indemnification Not Affected by Knowledge.

The right to indemnification, payment of Damages or other remedy based on breaches of representations, warranties, covenants, and obligations will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or obligation. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, payment of Damages, or other remedy based on such representations, warranties, covenants, and obligations.

10.9 Set Off.

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Acquiror may, at Acquiror’s election, withhold and set off against any portion of the Earnout Payment to be paid by Acquiror to the Selling Shareholders the amount of any indemnification due and owing hereunder.

ARTICLE 11

SHAREHOLDER REPRESENTATIVE

11.1 Appointment.

James M. Underwood is hereby irrevocably appointed, with full power and authority to act alone and with full power of substitution, to act for all purposes with respect to all matters relating to or arising out of this Agreement or the Merger, including with respect to any claim (indemnification or otherwise) of any party, or any other matter, arising under and in accordance with Article 11 on behalf of Selling Shareholders. All actions required or permitted to be approved by, and taken by, the Shareholders’ Representative shall be final and binding upon the Selling Shareholders and their respective successors, heirs and representatives including without limiting the generality of the foregoing, with regard to all notices received by, agreements and determinations made by, documents executed and delivered by, or other actions or omissions of the Shareholders’ Representative with respect to any such claim or other matter.

11.2 Acceptance.

By executing and delivering this Agreement, the Shareholders’ Representative hereby (1) accepts his appointment and authorization to act as Shareholders’ Representative in accordance with the terms of this Agreement and (2) agrees to perform his obligations under this Agreement.

11.3 Successor.

This appointment shall terminate and be of no further force and effect with respect to the Shareholders’ Representative, upon the earlier to occur of (i) the resignation of such Shareholders’ Representative, which resignation shall be preceded by 30 days notice to Acquiror and the Surviving Company, or (ii) the death or permanent disability of such Shareholders’ Representative. Upon the resignation, termination, death or permanent disability of any Shareholders’ Representative, the Selling Shareholders shall elect a new Shareholders’ Representative. No resignation of such sole Shareholders’ Representative shall be effective until a successor has been appointed.

11.4 Liability.

The Shareholders’ Representative shall have no liability to Selling Shareholders for actions or omissions taken or suffered in good faith.

11.5 Reliance.

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Acquiror, the Surviving Company and any Indemnified Party hereunder may rely conclusively on all notices received from, agreements and determinations made by, documents executed and delivered by, or other actions or omissions of the Shareholder Representative.

ARTICLE 12

GENERAL PROVISIONS

12.1 Expenses.

Except as otherwise expressly provided in this Agreement, each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the transactions contemplated by this Agreement, whether consummated or not, including all fees and expenses of any Representatives of the parties (collectively, “Transaction Expenses”). Without limiting the foregoing, all expenses incurred or owed by Selling Shareholders or the Company shall be borne by the Company or Selling Shareholders.

12.2 Notices.

All notices, requests, consents, waivers, approvals, demands and other communications required or permitted under this Agreement must be in writing and delivered personally or sent by overnight delivery, by registered or certified mail, postage prepaid, or by facsimile, in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties):

To Company:

Dale Renewable Consulting, Inc.

2727 Churn Creek Road, Suite A

Redding, California 96002

Attn:James M. Underwood

Facsimile: (530) 222-2543

To Selling Shareholders (the address as provided on the signature page)

To Acquiror or the Surviving Company:

Solar Power, Inc.

4080 Cavitt Stallman Road, Suite 100

Granite Bay, California 95746

Attn: Stephen Kircher

Facsimile: (916) 789-7411

with a copy to:

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David C. Adams

Bullivant Houser Bailey PC

1415 L Street, Suite 1000

Sacramento, California 95814

Facsimile: (916) 442-3442

12.3 Further Assurances.

The parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.

12.4 Waiver.

The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

12.5 Entire Agreement and Modification.

This Agreement supersedes all prior written or oral agreements between the parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement or delivered pursuant to this Agreement, including, without limitation, the Restrictive Covenant Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement duly executed by each of the parties hereto and in accordance with CGCL, as applicable.

12.6 Assignments, Successors, and No Third-Party Rights.

Neither the Company nor any Selling Shareholder may assign any of its rights under this Agreement without the prior consent of Acquiror. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns.

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12.7 Severability.

If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. As to provisions held invalid or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner, to the end that transactions contemplated hereby are fulfilled to the extent possible.

12.8 Section Headings, Construction.

The headings of Sections in and Schedules to this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word “including” does not limit the preceding words or terms.

12.9 Governing Law and Jurisdiction.

This Agreement will be governed by, and construed and enforced in accordance with the laws of the State of California as applied to contracts that are executed and performed in California, without regard to the principles of conflicts of law thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Sacramento County, California, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.

12.10 Counterparts.

This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

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12.11 Schedules and Exhibits.

All Exhibits and Schedules referred to herein are intended to be and hereby are specifically made a part of this Agreement.

12.12 Time of Essence.

With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence.

12.13 Attorneys Fees.

If any action or proceeding relating to this Agreement, or the enforcement of any provision of this Agreement is brought by a party hereto against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled).

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SIGNATURE PAGE

IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement as of the date first written above.

DALE RENEWABLE CONSULTING, INC. a California corporation By: _________________________________ Name:  Ronald H. Stickney Title:    Chief Executive Officer

SOLAR POWER, INC. a California corporation By: ___________________________________ Name: Stephen C. Kircher Title:   Chief Executive Officer

SELLING SHAREHOLDERS: ____________________________________ Name:  James M. Underwood Address: _____________________________ ____________________________________ ____________________________________ ____________________________________ Name:  Ronald H. Stickney Address: _____________________________ ____________________________________ ____________________________________ ____________________________________ Name:  Todd Lindstrom Address: _____________________________ ____________________________________ ____________________________________

[Signature Page - Merger Agreement]

FIRST AMENDMENT TO THE AGREEMENT AND

PLAN OF MERGER

This First Amendment to the Agreement and Plan of Merger (this “Amendment”) is entered into and effective as of October 31, 2006 by and among Solar Power, Inc., a California corporation (“SPI”), Dale Renewables Consulting, Inc., a California corporation (“DRCI”), and James M. Underwood, Ronald H. Stickney and Todd Lindstrom (collectively referred to herein as the “Selling Shareholders”). SPI, DRCI and the Selling Shareholders are also each individually referred to herein as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, SPI, DRCI and the Selling Shareholders are parties to that certain Agreement and Plan of Merger dated as of August 20, 2006 (the “Merger Agreement”).

WHEREAS, SPI, DRCI and the Selling Shareholders desire to amend the Merger Agreement to extend the “Closing Date” from October 31, 2006 to November 7, 2006, or as otherwise extended by mutual consent of the Parties.

WHEREAS, capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Merger Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

(ii) Closing Date. Section 2.2 of the Merger Agreement is hereby amended and restated as follows:

“2.2 Time and Place of Closing.

Subject to the terms and conditions of this Agreement, the consummation of the transactions contemplated hereby (the “Closing”) will take place at the offices of Bullivant Houser Bailey, 1415 L Street, Suite 1000, at 9:00 A.M. Pacific Standard Time, on or before November 7, 2006 unless otherwise extended by mutual consent (the “Closing Date”).”

2.Effect of Amendment. Except as expressly modified by the provisions hereof, the Merger Agreement is in all respects ratified and confirmed, and shall continue in full force and effect in accordance with its terms. To the extent that there are any inconsistencies between this Amendment and the Merger Agreement, the terms and provisions of this Amendment shall prevail.

3.Entire Agreement. The Merger Agreement and this Amendment, taken as a whole, shall supersede any and all agreements, either oral or written, between the Parties with respect to their subject matter. Each Party acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any Party or anyone acting on behalf of any Party, which are not embodied herein, in the Merger Agreement or in the related Assignment and Interim Operating Agreement dated as of August 20, 2006 by and between SPI , DRCI and Dale Stickney Construction, Inc., a California corporation, and that no other agreement, statement, or promise shall be valid or binding.

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4.Counterparts. This Amendment may be executed in one or more counterparts (including by facsimile) each of which when so executed will be deemed an original and all of which, when taken together, will constitute one and the same agreement.

IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date first above written.

SOLAR POWER, INC., a California corporation

By: __________________________________________

Name:  _______________________________________

Title: _________________________________________

DALE RENEWABLES CONSULTING, INC., a California corporation

By: __________________________________________

Name:  _______________________________________

Title: _________________________________________

SELLING SHAREHOLDERS

____________________________________

Ronald H. Stickney

____________________________________

James M. Underwood

____________________________________

Todd Lindstrom

2

SECOND AMENDMENT TO THE AGREEMENT AND

PLAN OF MERGER

This Second Amendment to the Agreement and Plan of Merger (this “Amendment”) is entered into and effective as of November 15, 2006 by and among Solar Power, Inc., a California corporation (“SPI”), Dale Renewables Consulting, Inc., a California corporation (“DRCI”), and James M. Underwood, Ronald H. Stickney and Todd Lindstrom (collectively referred to herein as the “Selling Shareholders”). SPI, DRCI and the Selling Shareholders are also each individually referred to herein as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, SPI, DRCI and the Selling Shareholders are parties to that certain Agreement and Plan of Merger dated as of August 20, 2006 (the “Original Merger Agreement”), as amended by that certain First Amendment to the Agreement and Plan of Merger dated October 31, 2006 (collectively referred to as the “Merger Agreement”).

WHEREAS, SPI, DRCI and the Selling Shareholders desire to amend certain terms of the Merger Agreement as set forth herein in this Amendment.

WHEREAS, capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Merger Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

1.  Defined Terms. For all purposes of this Amendment, except as otherwise expressly provided or amended herein, all capitalized terms used herein shall have the meanings attributed to them by the Original Merger Agreement.

2.  Purpose. It is the intent of the parties that (a) total consideration for the shares of Common Stock of DRCI shall be in cash, (b) the Selling Shareholders shall have no franchise rights or subcontract rights in any existing or future PV contracts, (c) the Selling Shareholders shall not be entitled to any earnout payments and franchise rights, and (d) the total merger consideration shall be $1,446,565, of which $420,000 in cash shall be paid to the Selling Shareholders on a pro rata basis ($140,000 each), and the balance of $1,026,565 shall be paid to DSCI in consideration for (i) payment of outstanding indebtedness owed to DSCI by DRCI, and (ii) transfer and assignment of existing PV contracts to DRCI or SPI.

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3.  Recital. The fifth clause of the Recitals of the Original Merger Agreement is hereby amended and restated in its entirety as follows:

“WHEREAS, at the effective time of such merger, each outstanding share of common stock of the Company will be converted into and exchanged for a right to receive cash as further described herein.”

4.  Definitions. Article I (Definitions) of the Original Merger Agreement shall be amended as follows:

(a)The following defined terms shall be deleted in their entirety: Current Assets, Current Liabilities, Earnout Payment, Earnout Period, Pro Forma Balance Sheet, Upfront Cash Consideration, Upfront Consideration, Upfront Equity Consideration and Working Capital. Accordingly, any references to the deleted defined terms throughout the Original Merger Agreement shall also be deleted.

(b)The following term shall be added:

“Total Consideration”- means $1,446,565, of which $420,000 shall be paid pro rata to the Selling Shareholders ($140,000 each) as set forth in Schedule I, and the balance of $1,026,565 shall be paid to DSCI to pay for any outstanding indebtedness owed to DSCI by the Company, and as consideration for the assignment and transfer of any existing PV contracts.”

5.  Effective Time. Section 2.2 of the Original Merger Agreement shall be amended and restated in its entirety as follows:

“2.3 Time and Place of Closing.

The consummation of the transactions contemplated hereby (the “Closing”) will take place at the offices of Bullivant Houser Bailey PC, 1415 L Street, Suite 1000, on November 15, 2006 (the “Closing Date”), or as extended upon mutual consent.”

6. Merger Consideration. Section 2.5 of the Original Merger Agreement shall be amended and restated in its entirety as follows:

“2.5 Merger Consideration.

The aggregate consideration that may be paid in the Merger in exchange for all of the Company Common Stock shall have an aggregate value equal to the Total Consideration.”

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7.  Conversion of Shares. Section 3.3 of the Original Merger Agreement shall be amended and restated in its entirety as follows:

“3.3 Conversion of Shares.

At the Effective Time, by virtue of the Merger and without any action on the part of Acquiror, the Company or any other party, each share of Company Common Stock shall automatically be canceled and shall cease to exist and shall be converted into and exchanged for the right to receive a cash payment in the amount of $0.84 such that each Selling Shareholder will receive an aggregate of $140,000.

Until surrendered for exchange in accordance with Section 3.4, each certificate theretofore representing shares of Company Common Stock shall from and after the Effective Time represent for all purposes only the right to receive the consideration provided in this Section 3.3 in exchange therefor. Acquiror shall not be under any obligation to make any payment in exchange for shares of Company Common Stock until certificates representing such shares have been surrendered in accordance with Section 3.4.”

8.  Exchange of Shares. Section 3.4 of the Original Merger Agreement is hereby amended and restated as follows:

“3.4 Exchange of Shares.

At the Closing:

(e)Acquiror will deliver to each Selling Shareholder, by wire transfer to a bank account designated in writing by such Selling Shareholder, immediately available funds in an amount as set forth on Schedule I.

(f)     Selling Shareholders will deliver to Acquiror for cancellation, free and clear of all transfer and stamp tax obligations, Encumbrances, claims and other charges thereon of every kind, a certificate representing the shares of Company Common Stock held by Selling Shareholders immediately before the Effective Time.

(g)Selling Shareholders shall cause full possession and control of all of the assets and properties of every kind and nature, tangible and intangible, of the Company and of all other things and matters pertaining to the operation of the business of the Company to be transferred and delivered to the Surviving Company.”

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9.  Adjustments to Upfront Consideration, Earnout, Investment and Securities Matters and Future Franchise. Section 3.5 (Adjustments to Upfront Consideration), Section 3.6 (Earnout), Section 5.3 (Investment and Securities Matters) and Section 7.9 (Future Franchise Territories and Photo-Voltaic Equipment Supplies) of the Original Merger Agreement shall be deleted in their entirety.

10. DSCI Debt. Section 9.5 of the Original Merger Agreement shall be amended and restated in its entirety as follows:

“9.5 DSCI Debt.

Acquiror shall have (a) fully satisfied the Company’s debt to DSCI in full, and (b) paid DSCI consideration for the transfer of certain PV contracts set forth on Exhibit B of the Assignment and Interim Operating Agreement and release of any subcontract and franchise rights provided thereunder, which full and complete satisfaction shall be evidenced by a total payment of $1,026,565 to DSCI.”

11.  Schedule I. Schedule I of the Original Merger Agreement is hereby amended and restated in its entirety as follows:

Schedule I

Selling Shareholders

Shareholder	Ownership %	Cash
		Consideration
James M. Underwood	33.33%	$140,000
Ronald H. Stickney	33.34%	$140,000
Todd Lindstrom	33.33%	$140,000
	Total	$420,000

12.Indemnification Amount. In Sections 10.1 and 10.2 of the Original Merger Agreement, the term “One Million Five Hundred Thousand Dollars ($1,500,000)” shall be deleted and replaced by “One Million Four Hundred Forty Six Thousand Five Hundred Sixty Five Dollars ($1,446,565).”

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13.Agreement of Merger. Agreement of Merger of Solar Power, Inc., and Dale Renewables Consulting Inc. attached as Exhibit C of the Original Merger Agreement shall be deleted and replaced in its entirety with the Exhibit C attached hereto.

14.Effect of Amendment. Except as expressly modified by the provisions hereof, the Merger Agreement is in all respects ratified and confirmed, and shall continue in full force and effect in accordance with its terms. To the extent that there are any inconsistencies among this Amendment, the Assignment and Interim Operating Agreement or the Merger Agreement, the terms and provisions of this Amendment shall prevail.

15.Entire Agreement. The Merger Agreement and this Amendment, taken as a whole, shall supersede any and all agreements, either oral or written, between the Parties with respect to their subject matter. Each Party acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any Party or anyone acting on behalf of any Party, which are not embodied herein, in the Merger Agreement or in the related Assignment and Interim Operating Agreement and that no other agreement, statement, or promise shall be valid or binding.

16.Counterparts. This Amendment may be executed in one or more counterparts (including by facsimile) each of which when so executed will be deemed an original and all of which, when taken together, will constitute one and the same agreement.

(Balance of Page Intentionally Left Blank)

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IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date first above written.

SOLAR POWER, INC., a California corporation

By: __________________________________________

Name:  _______________________________________

Title: _________________________________________

DALE RENEWABLES CONSULTING, INC., a California corporation

By: __________________________________________

Name:  _______________________________________

Title: _________________________________________

SELLING SHAREHOLDERS

____________________________________

Ronald H. Stickney

____________________________________

James M. Underwood

____________________________________

Todd Lindstrom

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EX-2.7

Exhibit 2.7

AGREEMENT OF MERGER

OF

SOLAR POWER, INC.

AND

DALE RENEWABLES CONSULTING, INC.

This Agreement of Merger, dated as of the15^th day of November, 2006 (this “Merger Agreement”), is entered into by and among Solar Power, Inc., a California corporation (“SPI”), Dale Renewables Consulting, Inc., a California corporation (the “Company”), and James M. Underwood, Ronald H. Stickney and Todd Lindstrom (the “Selling Shareholders”).

RECITALS

A.SPI, the Selling Shareholders and the Company have entered into an Agreement and Plan of Merger, dated as of August 20, 2006, as amended by the First Amendment to the Agreement and Plan of Merger dated as of October 31, 2006, and as further amended by the Second Amendment to the Agreement and Plan of Merger dated as of November 15, 2006 (collectively, the “Agreement and Plan of Merger”), providing for the merger of the Company with and into SPI (the “Merger”).

B.The Board of Directors of the Company and SPI and the shareholders of SPI and the Company have approved the Merger.

AGREEMENT

The parties hereto agree as follows:

1.Effective Time. The Merger shall become effective at such time (the “Effective Time”) as this Merger Agreement and the officers’ certificates of the Company and SPI are filed with the Secretary of State of the State of California pursuant to Section 1103 of the California General Corporation Law (the “CGCL”).

2.Effect of the Merger. At the Effective Time, the Company shall be merged with and into SPI, the separate existence of the Company shall cease and SPI shall continue as the surviving corporation of the Merger (the “Surviving Corporation”). At the Effective Time, all the property, rights, privileges, and powers of the Company and SPI shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and SPI shall become the debts, liabilities and duties of the Surviving Corporation.

3.Articles of Incorporation. The Articles of Incorporation of SPI, as amended and in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation.

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4.Directors and Officers. The directors and officers of SPI immediately prior to the Effective Time shall be the directors and officers of the Surviving Corporation.

5.Effect on Capital Stock. For purposes of this Section 5, the following definitions shall apply:

“Company Stock” shall mean the Common Stock of the Company.

“Dissenting Shares” shall mean those shares, if any, held by persons who have not voted such shares for approval of the Merger and with respect to which such persons shall become entitled to exercise dissenters’ rights in accordance with the CGCL.

“DSCI” means Dale Stickney Construction, Inc., a California corporation which is an affiliate of the Company and whose stockholders are Ray Charles Beard and two of the Selling Shareholders, James M. Underwood and Ronald H. Stickney.

“Total Consideration” means $1,446,565, of which $420,000 shall be paid in pro rata to the Selling Shareholders ($140,000 each) as set forth in Schedule I, and the balance of $1,026,565 shall be paid to DSCI to pay for any outstanding indebtedness owed to DSCI by the Company, and assignment and transfer of any existing PV contracts.

By virtue of the Merger and without any action on the part of SPI, the Company or their respective shareholders, the following shall occur at the Effective Time:

5.1 Conversion of Common Stock. Shares of Company Stock issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares and any shares to be cancelled pursuant to Section 5.2 below) shall, by virtue of the Merger, be converted automatically into the right to receive a cash payment in the amount of $0.84 per share of Company Stock such that the shareholders of the Company shall receive the Total Consideration set forth in Schedule I.

5.2 Cancellation of the Company Stock Owned by the Company. All shares of Company Stock that are owned by the Company as treasury stock immediately prior to the Effective Time shall be cancelled and extinguished without any consideration thereof and no consideration shall be delivered or deliverable in exchange therefore hereunder or otherwise.

6.Capital Stock of SPI. At the Effective Time, each share of capital stock of SPI (“SPI Common Stock”) issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of Common Stock of the Surviving Corporation.

7.Dissenters’ Rights. Any Dissenting Shares shall not be converted into the right to receive any portion of the Total Consideration, unless and until the holder of any such Dissenting Shares fails to perfect or withdraws or otherwise loses his right to an appraisal of the fair market value of his Dissenting Shares. If, after the Effective Time, any such holder fails to perfect or withdraws or loses his right to an appraisal of the fair market value of his Dissenting Shares under the CGCL, such Dissenting Shares shall thereupon be treated as if they had been converted as of the Effective Time into the right to receive the Total Consideration to which such holder is entitled, without interest thereon.

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The Company shall give SPI prompt notice of any demands received by the Company for the payment of fair market value for Dissenting Shares, and SPI shall have the right to direct all negotiations and proceedings with respect to such demands. The Company shall not make any such payment without SPI’s prior written consent.

8. General Provisions.

8.1Amendment. Prior to the Effective Time, this Merger Agreement may be amended by the parties hereto any time before or after approval hereof by the shareholders of the Company, but, after such approval, no amendment shall be made which by law requires the further approval of such shareholders without obtaining such approval. This Merger Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

8.2Severability. If one or more provisions of this Merger Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Merger Agreement, (ii) the balance of the Merger Agreement shall be interpreted as if such provision was so excluded and (iii) the balance of the Merger Agreement shall be enforceable in accordance with its terms.

8.3Counterparts. This Merger Agreement may be signed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one agreement.

8.4Gender. For purposes of this Merger Agreement, references to the masculine gender shall include feminine and neuter genders and entities.

[Remainder of Page Intentionally Left Blank; Signature Page to Follow]

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IN WITNESS WHEREOF, the parties have executed this Merger Agreement as of the date first written above.

DALE RENEWABLES CONSULTING, INC. a California corporation By: _________________________________ Name: Ronald H. Stickney Title:    Chief Executive Officer By: _________________________________ Name: James M. Underwood Title:   Secretary	SOLAR POWER, INC. a California corporation By: _________________________________ Name: Stephen C. Kircher Title:    Chief Executive Officer and Secretary
SELLING SHAREHOLDERS ____________________________________ Name:James M. Underwood ____________________________________ Name:Ronald H. Stickney ____________________________________ Name:Todd Lindstrom

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Schedule I

Selling Shareholders

Shareholder	Ownership %	Cash
		Consideration
James M. Underwood	33.33%	$140,000
Ronald H. Stickney	33.34%	$140,000
Todd Lindstrom	33.33%	$140,000
	Total	$420,000

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SOLAR POWER, INC.

OFFICERS’ CERTIFICATE

The undersigned, Stephen Kircher, on behalf of Solar Power, Inc., a California corporation (the “Corporation”), does hereby certify that:

1.He is the Chairman of the Board of Directors and President and Secretary of the Corporation.

2.This Certificate is attached to the Agreement of Merger, dated November 15, 2006 (the “Agreement of Merger”), in the form duly approved by the Board of Directors of the Corporation providing for the merger (the “Merger”) of the Corporation with Dale Renewables Consulting, Inc., a California corporation.

3.The Corporation has one authorized class of stock outstanding, designated as Common Stock. As of August 9, 2006 the authorized capital stock of the Corporation issued and outstanding and entitled to vote upon the Merger, consists of 14,000,000 shares of Common Stock.

4.The principal terms of the Agreement of Merger in the form attached to this Certificate were duly approved by the unanimous vote of the outstanding shares of the Corporation’s Common Stock.

5.The percentage vote required for such approval was more than 50% of the outstanding shares of the Corporation’s Common Stock.

The undersigned declares under penalty of perjury under the laws of the State of California that he has read the foregoing Certificate and knows the contents thereof and that the same is true and correct of his own knowledge. In witness whereof, the undersigned has signed and verified this Certificate in Granite Bay, California on November 15, 2006.

________________________________________

Stephen Kircher, Chairman, President and Secretary

DALE RENEWABLES CONSULTING, INC.

OFFICERS’ CERTIFICATE

The undersigned, Ronald H. Stickney and James M. Underwood, on behalf of Dale Renewables Consulting, Inc., a California corporation (the “Corporation”), do hereby certify that:

1.They are the President and Secretary, respectively, of the Corporation.

2.This Certificate is attached to the Agreement of Merger, dated November 15, 2006 (the “Agreement of Merger”), in the form duly approved by the Board of Directors of the Corporation providing for the merger (the “Merger”) of the Corporation with and into Solar Power, Inc., a California corporation.

3.The Corporation has authorized two classes of shares, designated as Class A Common and Class B Common. The Corporation only has one class designated as Class A common stock outstanding. As of August 10, 2006, the number of shares of the Corporation’s Class A Common Stock issued and outstanding and entitled to vote upon the Merger was 500,000. No shares of Class B Common stock are outstanding.

4.The principal terms of the Agreement of Merger in the form attached to this Certificate were duly approved by the unanimous vote of the outstanding shares of the Corporation’s Common Stock.

5.The percentage vote required for such approval was more than 50% of the outstanding shares of the Corporation’s Common Stock.

The undersigned declare under penalty of perjury under the laws of the State of California that they have read the foregoing Certificate and know the contents thereof and that the same is true and correct of their own knowledge. In witness whereof, the undersigned have signed and verified this Certificate at Redding, California on November 15, 2006.

___________________________________

Ronald H. Stickney, President

___________________________________

James M. Underwood, Secretary

EX-2.8

Exhibit 2.8

AGREEMENT OF MERGER

This Agreement of Merger dated as of the 29th day of December 2006 (“Merger Agreement”), by and among Solar Power, Inc., a California corporation (“Company”), Solar Power, Inc., a Nevada corporation (“SPI-Nevada”) and Welund Acquisition Corp., a Nevada corporation and wholly owned subsidiary of SPI-Nevada (the “Merger Sub”).

RECITALS

A.The Company, SPI-Nevada and the Merger Sub have entered into an Agreement and Plan of Merger, dated as of August 23, 2006, as amended by that First Amendment to the Agreement and Plan of Merger dated October 4, 2006, the Second Amendment to the Agreement and Plan of Merger dated December 1, 2006 and the Third Amendment to the Agreement and Plan of Merger dated December 21, 2006 (collectively, the “Agreement and Plan of Merger”), providing for the merger of the Merger Sub with and into the Company in accordance with Chapter 11 of the California General Corporation Law (the “Merger”).

B.The Boards of Directors of the Company, Merger Sub and SPI-Nevada have adopted resolutions approving this Agreement and the Agreement and Plan of Merger, and the shareholders of the Company and Merger Sub have approved the Merger.

AGREEMENT

The parties hereto agree as follows:

1.Constituent Corporations. The Company and the Merger Sub shall be the constituent corporations with respect to the Merger.

2.Effective Time. The Merger shall become effective at such time this Merger Agreement and the officers’ certificates of the Company, Merger Sub and SPI-Nevada are filed with the Secretary of State of the State of California (the “Effective Time”) pursuant to the California General Corporation Law (the “CGCL”).

3.Effect of the Merger. At the Effective Time, the Merger Sub shall be merged with and into the Company and the separate corporate existence of the Merger Sub shall cease and the Company shall be the surviving corporation of the Merger (the “Surviving Corporation”) and shall continue its corporate existence under the laws of the State of California. At the Effective Time, all the property, rights, privileges, and powers of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

4.Articles of Incorporation and Bylaws. The Articles of Incorporation of the Company in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or in accordance with applicable law. The Bylaws of the Company in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation until thereafter changed or amended as provided therein or in accordance with applicable law.

5.Directors and Officers. The directors and officers of the Company immediately prior to the Effective Time shall be the directors and officers of the Surviving Corporation until their successors shall have been duly elected or appointed and qualified in accordance with applicable law or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s Articles of Incorporation and Bylaws.

6.Effect on Capital Stock. By virtue of the Merger and without any action on the part of parties or their respective shareholders or board of directors, the following shall occur at the Effective Time:

6.1Defined Terms. For purposes of this Section 6, the following definitions shall apply:

“CGCL” shall mean the California General Corporations Law.

“SPI-Nevada Stock” shall mean the common stock of SPI-Nevada.

“Dissenting Shares” shall mean those shares, if any, held by persons who have not voted such shares for approval of the Merger and with respect to which such persons shall become entitled to exercise dissenters’ rights in accordance with the CGCL.

“Merger Consideration” shall mean the right to receive one share of SPI-Nevada’s common stock in exchange for one Share of Company’s capital stock.

“Share“ or “Shares” shall mean each issued and outstanding shares of the Company’s capital stock immediately prior to the Effective Time.

6.2Capital Stock of the Merger Sub. Each issued and outstanding share of capital stock of the Merger Sub shall by virtue of the Merger and without any action on the part of any holder thereof, be converted into one share of the Company’s common stock. Such newly issued shares shall thereafter constitute all of the issued and outstanding capital stock of the Surviving Corporation.

6.3 Capital Stock of the Company.

(a)Each issued and outstanding share of the Company’s capital stock immediately prior to the Effective Time (individually a “Share” and collectively the “Shares”), other than (i) Shares held by SPI-Nevada, and (ii) Dissenting Shares, shall, by virtue of the Merger, automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive, upon surrender of any such certificates, the Merger Consideration to be issued or exchanged in consideration therefor upon the surrender of such certificate.

(b)Each Share issued and outstanding immediately prior to the Effective Time that is restricted or not fully vested shall upon such conversion have the same restrictions or vesting arrangements as were applicable to such shares prior to the conversion. The capitalization of the Company immediately prior to the Effective Time shall be set forth on a Merger Consideration Certificate to be delivered by the Company to SPI-Nevada at Closing (the “Merger Consideration Certificate”). SPI-Nevada shall be entitled to rely on the Merger Consideration Certificate in connection with issuance of the Merger Consideration.

(c)At the Effective Time, each Share held by the Company as treasury stock or held by SPI-Nevada immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the Company, SPI-Nevada or the holder thereof, be canceled, retired and cease to exist, and no consideration shall be delivered with respect thereto.

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(d)At the Effective Time, each holder of then outstanding options to purchase or otherwise acquire shares of the Company (“Company’s Option”), whether or not such Company’s Option is then exercisable, issued pursuant to the Company’s 2006 Equity Incentive Plan (“Company’s Option Plan”) or otherwise, will be granted awards under the SPI-Nevada’s 2006 Equity Incentive Plan ("SPI-Nevada Option Plan") in substitution for awards issued under the Company’s Option Plan (the “Substituted Option”). SPI-Nevada Option Plan is substantially similar in all material respects to the Company’s Option Plan and each Substituted Option shall continue to have, and be subject to, substantially similar terms and conditions set forth in such option and, if applicable, in the Company’s Option Plan, immediately before the Effective Time, including provisions with respect to vesting (except as amended to terminate vesting provisions), except that each Substituted Option will be exercisable for that number of shares of common stock of SPI-Nevada, $.0001 par value, equal to the number of shares of the Company’s common stock that were issuable upon the exercise of such option immediately before the Effective Time. The duration and others terms of each Substituted Option shall be the same as the original option, including the exercise price for such shares, which shall also remain the same, provided however, all references to the Company shall be deemed to be references to SPI-Nevada.

7.Dissenters’ Rights. Any Dissenting Shares shall not be converted into the right to receive any portion of the Merger Consideration, unless and until the holder of any such Dissenting Shares fails to perfect or withdraws or otherwise loses his right to an appraisal of the fair market value of his Dissenting Shares. If, after the Effective Time, any such holder fails to perfect or withdraws or loses his right to an appraisal of the fair market value of his Dissenting Shares under the CGCL, such Dissenting Shares shall thereupon be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration to which such holder is entitled, without interest thereon.

Company shall give SPI-Nevada prompt notice of any demands received by the Company for the payment of fair market value for Shares, and SPI-Nevada shall have the right to direct all negotiations and proceedings with respect to such demands. Company shall not make any such payment without SPI-Nevada’s prior written consent.

8. General Provisions.

8.1Amendment. Prior to the Effective Time, the Merger Agreement may be amended by the parties hereto any time before or after approval hereof by the shareholders of the Company, but, after such approval, no amendment shall be made which by law requires the further approval of such shareholders without obtaining such approval. This Merger Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

8.2Severability. If one or more provisions of this Merger Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provisions shall be excluded from this Merger Agreement, (ii) the balance of the Merger Agreement shall be interpreted as if such provision was so excluded and (iii) the balance of the Merger Agreement shall be enforceable in accordance with its terms.

8.3Counterparts. This Merger Agreement may be signed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one agreement.

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8.4Gender. For purposes of this Merger Agreement, references to the masculine gender shall include feminine and neuter genders and entities.

[Remainder of Page Intentionally Left Blank; Signature Page to Follow]

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IN WITNESS WHEREOF, the parties have executed this Merger Agreement as of the date first written above.

SOLAR POWER, INC., a California corporation

_____________________________________________

Stephen C. Kircher, Chairman, President and Secretary

SOLAR POWER, INC., a Nevada corporation

_____________________________________________

Steven Strasser, President

_____________________________________________

Howard S. Landa, Secretary

WELUND ACQUISITION CORP., a Nevada corporation

_____________________________________________

Terrell W. Smith, President and Secretary

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OFFICERS’ CERTIFICATE OF APPROVAL

OF

AGREEMENT OF MERGER

SOLAR POWER, INC.,

a California corporation

The undersigned, Stephen Kircher, on behalf of Solar Power, Inc., a California corporation (the “Corporation”), does hereby certify that:

1.He is the Chairman of the Board of Directors, President and Secretary of the Corporation.

2.The Agreement of Merger dated December 29, 2006 (the “Agreement of Merger”) providing for the merger (the “Merger”) of the Corporation with Welund Acquisition Corp., a Nevada corporation, in the form attached was duly approved by the Board of Directors of the Corporation which equalled or exceeded the vote required.

3.The principal terms of the Agreement of Merger in the form attached to this Certificate were duly approved by the shareholders of the Corporation which equalled or exceeded the vote required.

4.The shareholder approval was by the holders of 14,000,000 of the outstanding shares of common stock of the Corporation, which represents 96.55% of the issued and outstanding shares of common stock of the Corporation. The percentage vote required for such approval was more than 50% of the outstanding shares of the Corporation’s common stock.

5.The Corporation has only one authorized class of stock outstanding, designated as common stock. The authorized capital stock of the Corporation issued and outstanding and entitled to vote upon the Merger consists of 14,500,000 shares of common stock.

We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge.

DATE: December 29, 2006

______________________________________________

Stephen Kircher, Chairman, President and Secretary

OFFICERS’ CERTIFICATE OF APPROVAL

OF

AGREEMENT OF MERGER

SOLAR POWER, INC.,

a Nevada corporation

The undersigned, Steven P. Strasser and Howard Landa, on behalf of Solar Power, Inc., a Nevada corporation (the “Corporation”), does hereby certify that:

1.There are the President and Secretary of the Corporation, respectively.

2.The Agreement of Merger dated December 29, 2006 (the “Agreement of Merger”) providing for the merger (the “Merger”) of Solar Power, Inc., a California corporation, and Welund Acquisition Corp., a Nevada corporation, in the form attached was duly approved by the Board of Directors of the Corporation which equalled or exceeded the vote required.

3.No vote of the shareholders of the Corporation was required

5.There is only one class of shares authorized of which there are 17,666,667 shares of common stock outstanding.

We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge.

DATE: December 29, 2006	_______________________________________
	Steven P. Strasser, President
	_______________________________________
	Howard S. Landa, Secretary

OFFICERS’ CERTIFICATE OF APPROVAL

OF

AGREEMENT OF MERGER

WELUND ACQUISITION CORP.,

a Nevada corporation

The undersigned, Terrell Smith, on behalf of Welund Acquisition Corp., a Nevada corporation (the “Corporation”), does hereby certify that:

1.He is the President and Secretary of the Corporation.

2.The Agreement of Merger dated December 29, 2006 (the “Agreement of Merger”) providing for the merger (the “Merger”) of the Corporation with Welund Acquisition Corp., a Nevada corporation, in the form attached was duly approved by the Board of Directors and shareholder of the Corporation which equalled or exceeded the vote required.

3.The shareholder approval was by the holder of 100% of the outstanding shares of the Corporation.

4.There is only one class of shares authorized of which there are 1,000 shares of common stock outstanding and entitled to vote on the Merger.

5.No vote of the shareholders of the Corporation’s parent was required.

We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge.

DATE: December 29, 2006	_______________________________________
	Terrell W. Smith, President and Secretary

EX-3.5

Exhibit 3.5

NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT

INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA.

NUMBER		SHARES
	Solar Power, Inc.
AUTHORIZED COMMON STOCK: 100,000,000 SHARES PAR VALUE $.0001		CUSIP NO. 84390A 10 0

THIS CERTIFIES THAT

IS THE RECORD HOLDER OF

Shares ofSOLAR POWER, INC.Common Stock

transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar.

Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.

Dated:

	SOLAR POWER, INC.
________________________________	CORPORATE SEAL	__________________________________
SECRETARY		PRESIDENT

EX-5.1

Exhibit 5.1

BULLIVANT HOUSER BAILEY PC

David Adams

E-mail: david.adams@bullivant.com

January 16, 2007

Solar Power, Inc.

4080 Cavitt Stallman Road

Granite Bay, CA 95746

Re: Opinion of Counsel for Registration Statement on Form SB-2

To Whom It May Concern:

We act as counsel to Solar Power, Inc., a Nevada corporation (the "Company"), in connection with the registration of 18,833,334 shares of the Company's common stock (the "Shares") under the Securities Act of 1933, as amended (the "Securities Act"), of which 800,000 of the Shares will be issued upon the exercise of the Company’s warrants, and all of which will be sold by the selling security holder of the Company as defined and further described in the Company's registration statement on Form SB-2 filed under the Securities Act (the "Registration Statement").

For the purpose of rendering this opinion, we examined originals or copies of such documents as deemed to be relevant. In conducting our examination, we assumed, without investigation, the genuineness of all signatures, the correctness of all certificates, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted as certified or photostatic copies, the authenticity of the originals of such copies, and the accuracy and completeness of all records made available to us by the Company. In addition, in rendering this opinion, we assumed that the Shares will be offered in the manner and on the terms identified or referred to in the Registration Statement, including all amendments thereto.

Our opinion is limited solely to matters set forth herein. The law covered by the opinions expressed herein is limited to the Federal Law of the United States and the law applicable to corporations of the State of Nevada.

January 16, 2007

Page 2

Based upon and subject to the foregoing, after giving due regard to such issues of law as we deemed relevant, and assuming that (i) the Registration Statement becomes and remains effective, and the Prospectus which is a part of the Registration Statement (the "Prospectus"), and the Prospectus delivery requirements with respect thereto, fulfill all of the requirements of the Securities Act, throughout all periods relevant to the opinion; (ii) all offers and sales of the Shares will be made in compliance with the securities laws of the states having jurisdiction thereof; and (iii) the Company receives, to the extent applicable, the consideration set forth in the warrants, we are of the opinion that the Shares issued are, and the Shares to be issued will be, legally issued, fully paid and nonassessable under the corporate laws of the state of Nevada.

We hereby consent in writing to the use of our opinion as an exhibit to the Registration Statement and any amendment thereto. By giving such consent, we do not thereby admit that we come within the category of persons where consent is required under Section 7 of the Securities Act or the rules and regulations of the Securities and Exchange Commission.

Sincerely,

/s/ BULLIVANT HOUSER BAILEY PC

BULLIVANT HOUSER BAILEY PC

EX-10.27

Exhibit 10.27

SOLAR POWER, INC.,

A Nevada corporation

2006 EQUITY INCENTIVE PLAN

1.PURPOSE. The purpose of this Plan is to provide incentives to attract, retain and motivate Eligible Persons whose present and potential contributions are important to the success of the Company by offering them an opportunity to participate in the Company’s future performance through awards of Incentive and Nonqualified Stock Options (“Options”), Stock (“Restricted Stock” or “Unrestricted Stock”) and Stock Appreciation Rights (“SARs”). This Plan is not intended to replace any current plan of, or awards issued by, the Company, nor will it limit the ability of the Company to create additional or new plans, or to issue additional or new awards. Capitalized terms not defined in the text are defined in Section 29.

2.ADOPTION AND STOCKHOLDER APPROVAL. This Plan will be approved by the Stockholders of the Company, consistent with applicable laws, after the date this Plan is approved by the Board. No Award will be granted after termination of this Plan but all Awards granted prior to termination will remain in effect in accordance with their terms. The effective date of this Plan will be the date of approval by the Board subject to approval of the Stockholders within twelve (12) months of such adoption (the “Effective Date”). So long as the Company is subject to Section 16(b) of the Exchange Act, the Company will comply with the requirements of Rule 16b-3 (or its successor), as amended.

3.TERM OF PLAN. Unless earlier terminated as provided herein, this Plan will terminate ten (10) years from the date this Plan is adopted by the Board.

4.SHARES SUBJECT TO THIS PLAN.

4.1. Number of Shares Available. Subject to Section 4.2, the total number of Shares

reserved and available for grant and issuance pursuant to this Plan will be equal to nine percent (9%) of the number of outstanding shares of the Company (the “Maximum Number”). Not more than two million (2,000,000) shares of Stock shall be granted in the form of Incentive Stock Options.

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

Outstanding shares of the Company shall, for the purposes of such calculation, include the number of shares of Stock into which other securities or instruments issued by the Company are currently convertible (e.g., convertible preferred stock, convertible debentures, or warrants for common stock), but not outstanding Options to acquire Stock.

4.1.1.   Future Awards. Subject to Section 4.2 and to the fullest extent permissible under Rule 16b-3 under the Exchange Act and Section 422 of the Code and any other applicable laws, rules and regulations, (i) if an Award is canceled, terminates, expires, is forfeited or lapses for any reason without having been exercised or settled, any shares of Stock subject to the Award will be added back into the Maximum Number and will again be available for the grant of an Award under the Plan and (ii) and the number of shares of Stock withheld to satisfy a Participant’s minimum tax withholding obligations will be added back into the Maximum Number and will be available for the grant of an Award under the Plan. Also, only the net numbers of Shares that are issued pursuant to the exercise of an Award will be counted against the Maximum Number.

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However, in the event that prior to the Award’s cancellation, termination, expiration, forfeiture or lapse, the holder of the Award at any time received one or more elements of “beneficial ownership” pursuant to such Award (as defined by the SEC, pursuant to any rule or interpretations promulgated under Section 16 of the Exchange Act), the Shares subject to such Award will not again be made available for regrant under the Plan.

4.1.2.  Acquired Company Awards. Notwithstanding anything in the Plan to the contrary, the Plan Administrator may grant Awards under the Plan in substitution for awards issued under other plans, or assume under the Plan awards issued under other plans, if the other plans are or were plans of other acquired entities (“Acquired Entities”) (or the parent of an Acquired Entity) and the new Award is substituted, or the old award is assumed, by reason of a merger, consolidation, acquisition of property or stock, reorganization or liquidation (the “Acquisition Transaction”). In the event that a written agreement pursuant to which the Acquisition Transaction is completed is approved by the Board and said agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, said terms and conditions will be deemed to be the action of the Plan Administrator without any further action by the Plan Administrator, except as may be required for compliance with Rule 16b-3 under the Exchange Act, and the persons holding such awards will be deemed to be Participants.

4.1.3.  Reserve of Shares. At all times, the Company will reserve and keep available a sufficient number of Shares as will be required to satisfy the requirements of all outstanding Awards granted under this Plan. The Shares to be issued hereunder upon exercise of an Award may be either authorized but unissued; supplied to the Plan through acquisitions of Shares on the open market; Shares purchased under the Plan and forfeited back to the Plan; Shares surrendered in payment of the exercise price of an option; or Shares withheld for payment of applicable employment taxes and/or withholding obligations resulting from the exercise of an Option. The following rules will apply for purposes of the determination of the number of Shares available for grant under the Plan:

i. Grants. The grant of an Award will reduce the Shares available for grant under the Plan by the number of Shares subject to such Award.

ii.Outstanding. While an Award is outstanding, it will be counted against the authorized pool of Shares regardless of its vested status.

4.2.Adjustments. Should any change be made to the Stock of the Company by reason of any stock split (including reverse stock split), stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Company’s receipt of consideration, the Administrator will make the appropriate adjustments to (i) the maximum number and/or class of securities issuable under the Plan; and (ii) the number and/or class of securities and the exercise price per Share in effect under each outstanding Award in order to prevent the dilution or enlargement of benefits thereunder; provided however, that the number of Shares subject to any Award will always be a whole number and the Administrator will make such adjustments as are necessary to insure Awards of whole Shares.

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4.3. Limitations on Awards. Notwithstanding any provision in the Plan to the contrary (but subject to adjustment as provided in Section 4.2), the Maximum Number of Shares of Stock with respect to one or more Options and/or SARs that may be granted during any one fiscal year under the Plan to any one Participant will be two hundred fifty thousand (250,000), except that the Company may make an additional one-time grant of such Award to a newly-hired individual for up to one hundred thousand (100,000) shares for a maximum annual grant of three hundred fifty thousand (350,000) (all of which may be granted as Incentive Stock Options). Determinations under the preceding sentence will be made in a manner that is consistent with Section 162(m) of the Code and regulations promulgated thereunder. The provisions of this Section will not apply in any circumstance with respect to which the Administrator determines that compliance with Section 162(m) of the Code is not necessary.

4.4. No Repricing. Absent stockholder approval, neither the Administrator nor the Board will have any authority, with or without the consent of the affected holders of Awards, to "reprice" an Award in the event of a decline in the price of Shares after the date of their initial grant either by reducing the exercise price from the original exercise price or through cancellation of outstanding Awards in connection with regranting of Awards at a lower price to the same individual. This paragraph may not be amended, altered or repealed by the Administrator or the Board without approval of the stockholders of the Company.

4.5. No Reloading. No Option or SAR will provide for the automatic grant of replacement or reload Options or SARs upon the Participant exercising the Option or SAR and paying the Exercise Price by tendering Shares of Stock, net exercise or otherwise. This paragraph may not be amended, altered or repealed by the Administrator or the Board without approval of the stockholders of the Company.

5. ADMINISTRATION OF THIS PLAN.

5.1. Authority. Authority to control and manage the operation and administration of this Plan will be vested in a committee consisting of two (2) or more independent members of the Board (the “Committee”). It is intended that the directors appointed to serve on the Committee will be “non-employee directors” (within the meaning of Rule 16b-3 promulgated under the Exchange Act) and “outside directors” (within the meaning of Section 162(m) of the Code) to the extent that Rule 16b-3 and, if necessary for relief from the limitation under Section 162(m) of the Code and such relief sought by the Company, Section 162(m) of the Code, respectively, are applicable. However, the mere fact that a Committee member will fail to qualify under either of the foregoing requirements will not invalidate any Award made by the Committee which Award is otherwise validly made under the Plan. Members of the Committee may be appointed from time to time by, and will serve at the pleasure of, the Board. As used herein, the term “Administrator” means the Committee.

5.2. Interpretation. Subject to the express provisions of this Plan, the Administrator will have the exclusive power, authority and discretion to:

(1)   construe and interpret this Plan and any agreements defining the rights and obligations of the Company and Participants under this Plan;

(2) select Participants;

(3)       determine the terms and conditions of any Award granted under the Plan, including, but not limited to, the Exercise Price, grant price or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of the Award, and acceleration or waivers thereof, based in each case on such considerations as the Administrator in its sole discretion determines that is not inconsistent with any rule or regulation under any tax or securities laws or includes an alternative right that does not disqualify an Incentive Stock Option under applicable regulations. Determinations made by the Administrator under this Plan need not be uniform but may be made on a Participant-by-Participant basis;

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(4)   determine the number of Shares or other consideration subject to Awards;

(5)   determine whether Awards will be subject to a condition, or grant a right, that is not inconsistent with any rule or regulation under any tax or securities laws or includes an alternative right that does not disqualify an incentive stock option under applicable regulations;

(6)   prescribe the form of each Award Agreement, which need not be identical for each Participant;

(7)   further define the terms used in this Plan;

(8)   correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Award Agreement;

(9)   provide for rights of refusal and/or repurchase rights;

(10)     amend outstanding Award Agreements to provide for, among other things, any change or modification which the Administrator could have provided for upon the grant of an Award or in furtherance of the powers provided for herein that does not disqualify an Incentive Stock Option under applicable regulations unless the Participant so consents;

(11)     prescribe, amend and rescind rules and regulations relating to the administration of this Plan; and

(12)     make all other determinations necessary or advisable for the administration of this Plan.

5.3. Decisions Binding. Any decision or action of the Administrator in connection with this Plan or Awards granted or shares of Stock purchased under this Plan will be final and binding. The Administrator will not be liable for any decision, action or omission respecting this Plan, or any Awards granted or shares of Stock sold under this Plan.

5.4. Limitation on Liability. To the extent permitted by applicable law in effect from time to time, no member of the Committee will be liable for any action or omission of any other member of the Committee nor for any act or omission on the member’s own part, excepting only the member’s own willful misconduct, gross negligence, or bad faith and without reasonable belief that it was in the best interests of the Company, arising out of or related to this Plan. The Company will pay expenses incurred by, and satisfy a judgment or fine rendered or levied against, a present or former member of the Committee in any action against such person (whether or not the Company is joined as a party defendant) to impose liability or a penalty on such person for an act alleged to have been committed by such person while a member of the Committee arising with respect to this Plan or administration thereof or out of membership on the Committee or by the Company, or all or any combination of the preceding, provided, the Committee member was acting in good faith, within what such Committee member reasonably believed to have been within the scope of his or her employment or authority and for a purpose which he or she reasonably believed to be in the best interests of the Company or its stockholders. Payments authorized hereunder include amounts paid and expenses incurred in settling any such action or threatened action. The provisions of this section will apply to the estate, executor, administrator, heirs, legatees or devisees of a Committee member, and the term “person” as used on this section will include the estate, executor, administrator, heirs, legatees, or devisees of such person.

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6. GRANT OF OPTIONS; TERMS AND CONDITIONS OF GRANT.

6.1. Grant of Options. One or more Options may be granted to any Eligible Person. Subject to the express provisions of this Plan, the Administrator will determine from the Eligible Persons those individuals to whom Options under this Plan may be granted. Each Option granted under this Plan will be evidenced by an Award Agreement, which will expressly identify the Option as an Incentive Stock Option or a Non-Qualified Stock Option. The Shares underlying a grant of an Option may be in the form of Restricted Stock or Unrestricted Stock.

Further, subject to the express provisions of this Plan, the Administrator will specify the grant date (the “Grant Date”), the number of Shares covered by the Option, the Exercise Price and the terms and conditions for exercise of the Options. As soon as practicable after the Grant Date, the Company will provide the Participant with a written Award Agreement in the form approved by the Administrator.

The Administrator may, in its absolute discretion, grant Options under this Plan at any time and from time to time before the expiration of this Plan.

6.2. General Terms and Conditions. Except as otherwise provided herein, the Options will be subject to the following terms and conditions and such other terms and conditions not inconsistent with this Plan as the Administrator may impose:

6.2.1.   Exercise of Option. The Administrator may determine in its discretion whether any Option will be subject to vesting and the terms and conditions of any such vesting. The Award Agreement will contain any such vesting schedule.

6.2.2.   Option Term. Each Option and all rights or obligations thereunder will expire on such date as will be determined by the Administrator, but not later than ten (10) years after the Grant Date (five (5) years in the case of an Incentive Stock Option when the Optionee owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company (“Ten Percent Stockholder”)), and will be subject to earlier termination as hereinafter provided.

6.2.3.   Exercise Price. The Exercise Price of any Option will be determined by the Administrator when the Option is granted and may not be less than one hundred percent (100%) of the Fair Market Value of the Shares on the Grant Date, and the Exercise Price of any Incentive Stock Option granted to a Ten Percent Stockholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the Grant Date. Payment for the Shares purchased will be made in accordance with Section 10 of this Plan. The Administrator is authorized to issue Options, whether Incentive Stock Options or Non-Qualified Stock Options, at an option price in excess of the Fair Market Value on the Grant Date.

6.2.4.   Method of Exercise. Options may be exercised only by delivery to the Company of a stock option exercise agreement (the “Exercise Agreement”) in a form approved by the Administrator (which need not be the same for each Participant), stating the number of Shares being purchased, the restrictions imposed on the Shares purchased under such Exercise Agreement, if any, and such representations and agreements regarding the Participant’s investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws, together with payment in full of the Exercise Price for the number of Shares being purchased.

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6.2.5.   Transferability of Options. Except as otherwise provided below for Non-Qualified Stock Options, no Option will be transferable other than by will or by the laws of descent and distribution and during the lifetime of a Participant only the Participant, his guardian or legal representative may exercise an Option, except in the case of an Incentive Stock Option, pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Award under the Plan and Nonqualified Options may be transferred to a Participant's former spouse pursuant to a property settlement made part of an agreement or court order incident to the divorce.

At its discretion, the Administrator may provide for transfer of an Option (other than an Incentive Stock Option), without payment of consideration, to the following family members of the Participant, including adoptive relationships: a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, niece, nephew, former spouse (whether by gift or pursuant to a domestic relations order), any person sharing the employee’s household (other than a tenant or employee), a family-controlled partnership, corporation, limited liability company and trust, or a foundation in which family members heretofore described control the management of assets. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the Option pursuant to the assignment. The terms applicable to the assigned portion will be the same as those in effect for the Option immediately prior to such assignment and will be set forth in such documents issued to the assignee as the Administrator may deem appropriate. A request to assign an Option may be made only by delivery to the Company of a written stock option assignment request in a form approved by the Administrator, stating the number of Options and Shares underlying Options requested for assignment, that no consideration is being paid for the assignment, identifying the proposed transferee, and containing such other representations and agreements regarding the Participant’s investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws.

6.2.6.   Beneficiaries. Notwithstanding Section 6.2.5, a Participant may, in the manner determined by the Administrator, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Option upon the Participant’s death. If no beneficiary has been designated or survives the Participant, payment will be made to the Participant’s estate. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time, provided the change or revocation is filed with the Administrator.

6.2.7. Exercise After Certain Events.

i. Termination of Employment - Employee/Officer

(1) Incentive Stock Options.

(a)Termination of All Services. If for any reason other than retirement (as defined below), permanent and total Disability (as defined below) or death, a Participant Terminates employment with the Company (including employment as an Officer of the Company), vested Incentive Stock Options held at the date of such termination may be exercised, in whole or in part, at any time within three (3) months after the date of such Termination or such lesser period specified in the Award Agreement (but in no event after the earlier of (i) the expiration date of the Incentive Stock Option as set forth in the Award Agreement, and (ii) ten (10) years from the Grant Date (five (5) years for a Ten Percent (10%) Stockholder)).

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(b)Continuation of Services as Consultant/Advisor. If a Participant granted an Incentive Stock Option terminates employment but continues as a consultant, advisor or in a similar capacity to the Company, Participant need not exercise the Incentive Stock Option within three (3) months of Termination of employment but will be entitled to exercise within three (3) months of Termination of services to the Company (one (1) year in the event of permanent and total Disability or death) or such lesser period specified in the Award Agreement (but in no event after the earlier of (i) the expiration date of the Option as set forth in the Award Agreement, and (ii) ten (10) years from the Grant Date). However, if Participant does not exercise within three (3) months of Termination of employment, the Option will not qualify as an Incentive Stock Option.

(2) Non-Qualified Stock Options.

(a)Termination of All Services. If for any reason other than Retirement (as defined below), permanent and total Disability (as defined below) or death, a Participant terminates employment with the Company (including employment as an Officer of the Company), vested Options held at the date of such Termination may be exercised, in whole or in part, at any time within three (3) months of the date of such Termination or such lesser period specified in the Award Agreement (but in no event after the earlier of (i) the expiration date of the Option as set forth in the Award Agreement, and (ii) ten (10) years from the Grant Date).

(b)Continuation of Services as Consultant/Advisor. If a Participant Terminates employment but continues as a consultant, advisor or in a similar capacity to the Company Participant need not exercise the Option within three (3) months of Termination but will be entitled to exercise within three (3) months of Termination of services to the Company (one (1) year in the event of permanent and total Disability or death) or such lesser period specified in the Award Agreement (but in no event after the earlier of (i) the expiration date of the Option as set forth in the Award Agreement, and (ii) ten (10) years from the Grant Date).

ii. Retirement. If a Participant ceases to be an employee of the Company (including as an officer of the Company) as a result of Retirement, Participant need not exercise the Option within three (3) months of Termination of employment but will be entitled to exercise the Option within the maximum term of the Option to the extent the Option was otherwise exercisable at the date of Retirement. However, if a Participant does not exercise within three (3) months of Termination of employment, the Option will not qualify as an Incentive Stock Option if it otherwise so qualified. The term “Retirement” as used herein means such Termination of employment as will entitle the Participant to early or normal retirement benefits under any then existing pension or salary continuation plans of the Company excluding 401(k) participants (except as otherwise covered under other pension or salary continuation plans).

iii.Permanent Disability and Death. If a Participant becomes permanently and totally Disabled while employed by the Company (including as an officer of the Company), or dies while employed by the Company (including as an Officer of the Company) or death occurs three (3) months thereafter, vested Options then held may be exercised by the Participant, the Participant’s personal representative, or by the person to whom the Option is transferred by will or the laws of descent and distribution, in whole or in part, at any time within one (1) year after the Termination of employment because of the Disability or death or any lesser period specified in the Award Agreement (but in no event after the earlier of (i) the expiration date of the Option as set forth in the Award Agreement, and (ii) ten (10) years from the Grant Date).

6.3. Limitations on Grant of Incentive Stock Options.

6.3.1.   Threshold. The aggregate Fair Market Value (determined as of the Grant Date) of the Shares for which Incentive Stock Options may first become exercisable by any Participant during any calendar year under this Plan, together with that of Shares subject to Incentive Stock Options first exercisable by such Participant under any other plan of the Company or any Subsidiary, will not exceed $100,000. For purposes of this Section, all Options in excess of the $100,000 threshold will be treated as Non-Qualified Stock Options notwithstanding the designation as Incentive Stock Options. For this purpose, Options will be taken into account in the order in which they were granted, and the Fair Market Value of the Shares will be determined as of the date the Option with respect to such Shares is granted.

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6.3.2.   Compliance with Section 422 of the Code. There will be imposed in the Award Agreement relating to Incentive Stock Options such terms and conditions as are required in order that the Option be an "incentive stock option" as that term is defined in Section 422 of the Code.

6.3.3.   Requirement of Employment. No Incentive Stock Option may be granted to any person who is not an Employee of the Company or a Subsidiary of the Company.

7. RESTRICTED STOCK AWARDS.

7.1. Grant of Restricted Stock Awards. Subject to the terms and provisions of this Plan, the Administrator is authorized to make awards of Restricted Stock to any Eligible Person in such amounts and subject to such terms and conditions as may be selected by the Administrator (a “Restricted Stock Award”). All Restricted Stock Awards will be evidenced by an Award Agreement.

7.2. Issue Date and Vesting Date. At the time of the grant of shares of Restricted Stock, the Administrator will establish an Issue Date or Issue Dates and a Vesting Date or Vesting Dates with respect to such Shares. The Administrator may divide such shares of Restricted Stock into classes and assign a different Issue Date and/or Vesting Date for each class. If the Participant is employed by the Company on an Issue Date (which may be the date of grant), the specified number of shares of Restricted Stock will be issued in accordance with the provisions of Section 7.6. Provided that all conditions to the vesting of a share of Restricted Stock imposed hereto are satisfied, such share will vest and the restrictions will cease to apply to such share.

7.3. Conditions to Vesting. Restricted Stock will be subject to such restrictions on or conditions to vesting as the Administrator may impose (including, without limitation, as a condition to the vesting of any class or classes of shares of Restricted Stock, that the Participant or the Company achieves such performance goals as the Administrator may specify as provided for in this Plan, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, time-based, or upon the satisfaction of performance goals as provided for in this Plan, as the Administrator determines at the time of the grant of the Award or thereafter.

7.4. Voting and Dividends. Unless the Administrator in its sole and absolute discretion otherwise provides in an Award Agreement, holders of Restricted Stock will have the right to vote such Restricted Stock and the right to receive any dividends declared or paid with respect to such Restricted Stock. The Administrator may require that any dividends paid on shares of Restricted Stock will be held in escrow until all restrictions on such shares have lapsed and/or the Administrator may provide that any dividends paid on Restricted Stock must be reinvested in shares of Stock, which may or may not be subject to the same vesting conditions and restrictions applicable to such Restricted Stock. All distributions, if any, received by a Participant with respect to Restricted Stock as a result of any stock split, stock dividend, combination of shares, or other similar transaction will be subject to the restrictions applicable to the original Award.

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7.5. Forfeiture. Except as otherwise determined by the Administrator at the time of the grant of the Award or thereafter, upon failure to affirmatively accept the grant of a Restricted Stock Award by execution of a Restricted Stock Award Agreement, termination of employment during the applicable restriction period, failure to satisfy the restriction period or failure to satisfy a performance goal during the applicable restriction period, Restricted Stock that is at that time subject to restrictions will immediately be forfeited and returned to the Company; provided, however, that the Administrator may provide in any Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Administrator may in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock. The Company also will have the right to require the return of all dividends paid on such shares, whether by termination of any escrow arrangement under which such dividends are held or otherwise.

7.6. Certificates for Restricted Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Administrator will determine. The Administrator may provide in an Award Agreement that either (i) the Secretary of the Company will hold such certificates for the Participant’s benefit pursuant to the provisions of this Plan until such time as the Restricted Stock is forfeited to the Company or the restrictions lapse) or (ii) such certificates will be delivered to the Participant, provided, however, that such certificates will bear a legend or legends that comply with the applicable securities laws and regulations and make appropriate reference to the restrictions imposed under this Plan and the Award Agreement.

7.7. Restrictions on Transfer Prior to Vesting. Unless otherwise provided, prior to the vesting of Restricted Stock, Restricted Stock Awards, granted under this Plan, and any rights and interests therein, including the Restricted Stock itself, will not be transferable or assignable by the Participant, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution or as consistent with the Award Agreement provisions relating thereto. Unless otherwise provided in this Plan, during the lifetime of the Participant, a Restricted Stock Award and any rights and interests therein, will be exercisable only by the Participant, and any election with respect thereto may be made only by the Participant. Any attempt to transfer a Restricted Stock Award or any rights and interests therein including the Restricted Stock itself, will be void and unless the Administrator determines in its sole and absolute discretion that the attempt was inadvertent or unintentional, such Award, including the Restricted Stock itself and any rights and interests therein, will be forfeited by the Participant.

7.8. Consequences of Vesting. Upon the vesting of a share of Restricted Stock pursuant to the terms of the Plan and the applicable Award Agreement, the restrictions as provided by the Administrator will cease to apply to such share. Reasonably promptly after a share of Restricted Stock vests, the Company will cause to be delivered to the Participant to whom such shares were granted, a certificate evidencing such share, free of the legend referenced with respect to such restriction. Notwithstanding the foregoing, such share still may be subject to restrictions on transfer as a result of applicable securities laws or otherwise pursuant to this Plan.

8.UNRESTRICTED STOCK AWARDS. The Administrator may, in its sole discretion, award Unrestricted Stock to any Participant as a Stock Bonus or otherwise pursuant to which such Participant may receive shares of Stock free of restrictions or limitations that would otherwise be applied under Section 7 of this Plan.

9. STOCK APPRECIATION RIGHTS.

9.1. Awards of SARs. A SAR is an award to receive a number of Shares (which may consist of Restricted Stock), or cash, or Shares and cash, as determined by the Administrator in accordance with this Plan. A SAR will be awarded pursuant to an Award Agreement that will be in such form (which need not be the same for each Participant) as the Administrator will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. A SAR may vary from Participant to Participant and between groups of Participants, and may be based upon performance objectives as provided for in this Plan.

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9.2. Exercise Price. The exercise price per share of an SAR will be determined by the Administrator at the time of grant, but will in no event be less than the Fair Market Value of a share of Company Stock on the date of grant.

9.3. Term. The term of a SAR will be set forth in the Award Agreement as determined by the Administrator.

9.4. Exercise. A Participant desiring to exercise a SAR will give written notice of such exercise to the Company no less than one nor more than ten business days in advance of the effective date of the proposed exercise. Such notice will specify the number of Shares with respect to which the SAR is being exercised, and the proposed effective date of the proposed exercise, which notice will state the proportion of Shares and cash that the Participant desires to receive pursuant to the SAR exercised, subject to the discretion of the Administrator, and will be signed by the Participant. Upon receipt of the notice from the Participant, subject to the Administrator’s election to pay cash as provided below, the Company will deliver to the person entitled thereto (i) a certificate or certificates for Shares and/or (ii) a cash payment, in accordance with Section 9.5. The later of the date the Company receives written notice of such exercise or the proposed effective date set forth in the written notice hereunder is referred to in this Section as the "exercise date."

9.5. Number of Shares or Amount of Cash. Subject to the discretion of the Administrator to substitute cash for Shares, or some portion of the Shares for cash, the amount of Shares that may be issued pursuant to the exercise of a SAR will be determined by dividing: (i) the total number of Shares as to which the SAR is exercised, multiplied by the amount by which the Fair Market Value of the Shares on the exercise date exceeds the Fair Market Value of a Share on the date of grant of the SAR, by (ii) the Fair Market Value of a Share on the exercise date; provided, however, that fractional Shares will not be issued and in lieu thereof, a cash adjustment will be paid. In lieu of issuing Shares upon the exercise of a SAR, the Administrator in its sole discretion may elect to pay the cash equivalent of the Fair Market Value of the Shares on the exercise date for any or all of the Shares that would otherwise be issuable upon exercise of the SAR.

9.6. Effect of Exercise. A partial exercise of an SAR will not affect the right to exercise the remaining SAR from time to time in accordance with this Plan and the applicable Award Agreement with respect to the remaining shares subject to the SAR.

9.7. Forfeiture. Except as otherwise determined by the Administrator at the time of the grant of the Award or thereafter, upon failure to affirmatively accept the grant of a SAR by execution of an Award Agreement, or an event of forfeiture pursuant to the Award Agreement including failure to satisfy any restriction period or a performance objective, any SAR that has not vested prior to the date of termination will automatically expire, and all of the rights, title and interest of the Participant thereunder will be forfeited in their entirety; provided, however that the Administrator may provide in any Award Agreement that restrictions or forfeiture conditions relating to the SAR will be waived in whole or in part in the event of termination resulting from specified causes, and the Administrator may in other cases waive in whole or in part restrictions or forfeiture conditions relating to the SAR.

9.8. Effect of Termination of Employment. Notwithstanding the foregoing, the provisions set forth in Section 6.2.7 with respect to the exercise of Options following termination of employment will apply as well to such exercise of SARs.

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9.9. Transferability. During the lifetime of a Participant each SAR granted to a Participant will be exercisable only by the Participant and no SAR will be assignable or transferable otherwise than by will or by the laws of descent and distribution. In no event may a SAR be transferred for consideration. Notwithstanding the foregoing, to the extent permissible, SARs may be transferred to a Participant's former spouse pursuant to a property settlement made part of an agreement or court order incident to the divorce.

10. PAYMENT FOR SHARE PURCHASES.

10.1.    Payment. Payment for Shares purchased pursuant to this Plan may be made in cash (by check) or, where expressly approved for the Participant at the sole discretion of the Administrator and where permitted by law as follows:

10.1.1. Cancellation of Indebtedness. By cancellation of indebtedness of the Company to the Participant.

10.1.2.Surrender of Shares. By surrender of shares of Stock of the Company that have been owned by the Participant for more than six (6) months or lesser period if the surrender of Shares is otherwise exempt from Section 16 of the Exchange Act and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares.

10.1.3.Deemed Net-Stock Exercise. By forfeiture of Shares equal to the value of the exercise price pursuant to a “deemed net-stock exercise” by requiring the Participant to accept that number of Shares determined in accordance with the following formula, rounded down to the nearest whole integer:

where:

a = net Shares to be issued to Participant

b = number of Awards being exercised

c = Fair Market Value of a Share

d = Exercise price of the Awards

10.1.4.Broker-Assisted. By delivering a properly executed exercise notice to the Company together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay the exercise price and the amount of any required tax or other withholding obligations.

10.1.5.Combination of Methods. By any combination of the foregoing methods of payment or any other consideration or method of payment as will be permitted by applicable corporate law.

11. WITHHOLDING TAXES.

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11.1.    Withholding Generally. Whenever Shares are to be issued in satisfaction of Awards granted under this Plan or Shares are forfeited pursuant to a “deemed net-stock exercise,” the Company may require the Participant to remit to the Company an amount sufficient to satisfy federal, state and local taxes and FICA withholding requirements prior to the delivery of any certificate or certificates for such Shares. When, under applicable tax laws, a Participant incurs tax liability in connection with the exercise or vesting of any Award, the Company will have the authority and the right to deduct or withhold an amount sufficient to satisfy federal, state and local taxes and FICA withholding requirements, with respect to such transactions. Any such payment must be made promptly when the amount of such obligation becomes determinable.

11.2.    Stock for Withholding. To the extent permissible under applicable tax, securities and other laws, the Administrator may, in its sole discretion and upon such terms and conditions as it may deem appropriate, permit a Participant to satisfy his or her obligation to pay any such withholding tax, in whole or in part, with Stock up to an amount not greater than the Company’s minimum statutory withholding rate for federal and state tax purposes, including payroll taxes. The Administrator may exercise its discretion, by (i) directing the Company to apply shares of Stock to which the Participant is entitled as a result of the exercise of an Award, or (ii) delivering to the Company Shares of Stock owned by the Participant for more than six (6) months, unless the delivery of the Shares is otherwise exempt from Section 16 of the Exchange Act. A Participant who has made an election pursuant to this Section 11.2 may satisfy his or her withholding obligation only with shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements. The shares of Stock so applied or delivered for the withholding obligation will be valued at their Fair Market Value as of the date of measurement of the amount of income subject to withholding.

12. PROVISIONS APPLICABLE TO AWARDS.

12.1.    Acceleration. The Administrator may, in its absolute discretion, without amendment to the Plan, (i) accelerate the date on which any Award granted under the Plan becomes exercisable, (ii) waive or amend the operation of Plan provisions respecting exercise after termination of service or otherwise adjust any of the terms of such Award and (iii) accelerate the Vesting Date, or waive any condition imposed hereunder, with respect to any share of Restricted Stock or otherwise adjust any of the terms applicable to such share.

12.2.    Compliance with Section 162(m) of the Code. Notwithstanding any provision of this Plan to the contrary, if the Administrator determines that compliance with Section 162(m) of the Code is required or desired, all Awards granted under this Plan to Named Executive Officers will comply with the requirements of Section 162(m) of the Code. In addition, in the event that changes are made to Section 162(m) of the Code to permit greater flexibility with respect to any Award or Awards under this Plan, the Administrator may make any adjustments it deems appropriate.

12.3.    Performance Goals. In order to preserve the deductibility of an Award under Section 162(m) of the Code, the Administrator may determine that any Award granted pursuant to this Plan to a Participant that is or is expected to become a Covered Employee will be determined solely on the basis of (a) the achievement by the Company or Subsidiary of a specified target return, or target growth in return, on equity or assets, (b) the Company’s stock price, (c) the Company’s total shareholder return (stock price appreciation plus reinvested dividends) relative to a defined comparison group or target over a specific performance period, (d) the achievement by the Company or a Parent or Subsidiary, or a business unit of any such entity, of a specified target, or target growth in, net income, earnings per share, earnings before income and taxes, and earnings before income, taxes, depreciation and amortization, or (e) any combination of the goals set forth in (a) through (d) above, and will be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m)(4)(C) of the Code, and the Plan will be deemed amended to the extent deemed necessary by the Administrator to conform to such requirements. If an Award is made on such basis, the Administrator will establish goals prior to the beginning of the period for which such performance goal relates (or such later date as may be permitted under Section 162(m) of the Code or the regulations thereunder but not later than ninety (90) days after commencement of the period of services to which the performance goal relates), and the Administrator has the right for any reason to reduce (but not increase) the Award, notwithstanding the achievement of a specified goal. Any payment of an Award granted with performance goals will be conditioned on the written certification of the Administrator in each case that the performance goals and any other material conditions were satisfied.

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In addition, to the extent that Section 409A is applicable, (i) performance-based compensation will also be contingent on the satisfaction of preestablished organizational or individual performance criteria relating to a performance period of at least twelve (12) consecutive months in which the Eligible Participant performs services and (ii) performance goals will be established not later than ninety (90) days after the beginning of any performance period to which the performance goal relates, provided that the outcome is substantially uncertain at the time the criteria are established.

12.4.    Compliance with Section 409A of the Code. Notwithstanding any provision of this Plan to the contrary, if any provision of this Plan or an Award Agreement contravenes any regulations or Treasury guidance promulgated under Section 409A of the Code or could cause an Award to be subject to the interest and penalties under Section 409A of the Code, such provision of this Plan or any Award Agreement will be modified to maintain, to the maximum extent practicable, the original intent of the applicable provision without violating the provisions of Section 409A of the Code. In addition, in the event that changes are made to Section 409A of the Code to permit greater flexibility with respect to any Award under this Plan, the Administrator may make any adjustments it deems appropriate.

12.5.    Section 280G of the Code. Notwithstanding any other provision of this Plan to the contrary, unless expressly provided otherwise in the Award Agreement, if the right to receive or benefit from an Award under this Plan, either alone or together with payments that a Participant has a right to receive from the Company, would constitute a "parachute payment" (as defined in Section 280G of the Code), all such payments will be reduced to the largest amount that will result in no portion being subject to the excise tax imposed by Section 4999 of the Code.

12.6.    Cancellation of Awards. In the event a Participant’s Continuous Services has been terminated for “Cause”, he or she will immediately forfeit all rights to any and all Awards outstanding. The determination by the Board that termination was for Cause will be final and conclusive. In making its determination, the Board will give the Participant an opportunity to appear and be heard at a hearing before the full Board and present evidence on the Participant's behalf. Should any provision to this Section be held to be invalid or illegal, such illegality will not invalidate the whole of this Section, but rather this Plan will be construed as if it did not contain the illegal part or narrowed to permit its enforcement, and the rights and obligations of the parties will be construed and enforced accordingly.

13.   PRIVILEGES OF STOCK OWNERSHIP. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock. The Company will issue (or cause to be issued) such stock certificate promptly upon exercise of the Award. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued.

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14.  RESTRICTION ON SHARES. At the discretion of the Administrator, the Company may reserve to itself and/or its assignee(s) in the Award Agreement that the Participant not dispose of the Shares for a specified period of time, or that the Shares are subject to a right of first refusal or a right to repurchase at the Shares Fair Market Value at the time of sale. The terms and conditions of any such rights or other restrictions will be set forth in the Award Agreement evidencing the Award.

15.  CERTIFICATES. All certificates for Shares or other securities delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Administrator may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted.

16.  ESCROW, PLEDGE OF SHARES. To enforce any restrictions on a Participant’s Shares, the Administrator may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Administrator, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Administrator may cause a legend or legends referencing such restrictions to be placed on the certificates. In connection with any pledge of the Shares, the Participant will be required to execute and deliver a written pledge agreement in such form, as the Administrator will from time to time approve.

17. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE.

17.1.   Compliance With Applicable Laws. An Award will not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the Grant Date and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to (i) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and/or (ii) completion of any registration or other qualification of such Shares under any state or federal laws or rulings of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so. Upon exercising all or any portion of an Award, a Participant may be required to furnish representations or undertakings deemed appropriate by the Company to enable the offer and sale of the Shares or subsequent transfers of any interest in such Shares to comply with applicable securities laws. Evidences of ownership of Shares acquired pursuant to an Award will bear any legend required by, or useful for purposes of compliance with, applicable securities laws, this Plan or the Award Agreement.

17.2.    Rule 16b-3 Exemption. During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is the intent of the Company that Awards pursuant to the Plan and the exercise of Awards granted hereunder will qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any provision of the Plan or action by the Board or the Administrator does not comply with the requirements of Rule 16b-3, it will be deemed inoperative to the extent permitted by law and deemed advisable by the Board or the Administrator, and will not affect the validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the Board or the Administrator may exercise its discretion to modify this Plan in any respect necessary to satisfy the requirements of, or to take advantage of any features of, the revised exemption or its replacement.

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18.  NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or to limit in any way the right of the Company to terminate such Participant’s employment or other relationship at any time, with or without cause.

19.  ADJUSTMENT FOR CHANGES IN CAPITALIZATION. The existence of outstanding Awards will not affect the Company’s right to effect adjustments, recapitalizations, reorganizations or other changes in its or any other corporation’s capital structure or business, any merger or consolidation, any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock, the dissolution or liquidation of the Company’s or any other corporation’s assets or business or any other corporate act whether similar to the events described above or otherwise.

20. DISSOLUTION, LIQUIDATION, MERGER.

20.1.   Company Not the Survivor. In the event of a dissolution or liquidation of the Company, a merger, consolidation, combination or reorganization in which the Company is not the surviving corporation, or a sale of substantially all of the assets of the Company (as determined in the sole discretion of the Board), the Administrator, in its absolute discretion, may cancel each outstanding Award upon payment in cash or stock, or combination thereof, as determined by the Board, to the Participant of the amount by which any cash and the fair market value of any other property which the Participant would have received as consideration for the Shares covered by the Award if the Award had been exercised before such liquidation, dissolution, merger, consolidation, combination, reorganization or sale exceeds the Exercise Price of the Award or negotiate to have such option assumed by the surviving corporation. In addition to the foregoing, in the event of a dissolution or liquidation of the Company, or a merger, consolidation, combination, or reorganization in which the Company is not the surviving corporation, or a sale or transfer of all or substantially all of the Company’s assets, the Administrator, in its absolute discretion, may accelerate the time within which each outstanding Award may be exercised, provided however, that the Change of Control in Section 21 will control with respect to acceleration in vesting in the event of a merger, consolidation, combination or reorganization that results in a change of control as so defined.

20.2.   Company is the Survivor. In the event of a merger, consolidation, combination or reorganization in which the Company is the surviving corporation, the Board will determine the appropriate adjustment of the number and kind of securities with respect to which outstanding Awards may be exercised, and the exercise price at which outstanding Awards may be exercised. The Board will determine, in its sole and absolute discretion, when the Company will be deemed to survive for purposes of this Plan.

21.  CHANGE OF CONTROL. The Administrator will have the authority, in its absolute discretion exercisable either in advance of any actual or anticipated “change of control” in the Company, to fully vest all outstanding Awards. A “change of control” will mean an event involving one transaction or a related series of transactions, in which (i) the Company issues securities equal to 50% or more of the Company’s issued and outstanding voting securities, determined as a single class, to any individual, firm, partnership, limited liability company, or other entity, including a “group” within the meaning of Exchange Act Rule 13d-3, (ii) the Company issues voting securities equal to 50% or more of the issued and outstanding voting stock of the Company in connection with a merger, consolidation other business combination, (iii) the Company is acquired in a merger, consolidation, combination or reorganization in which the Company is not the surviving company, or (iv) all or substantially all of the Company’s assets are sold or transferred.

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22.  DEFERRAL OF AWARDS. The Administrator may permit or require the deferral of payment or settlement of any Stock Award subject to such rules and procedures as it may establish. Payment or settlement of Options or SARs may not be deferred unless such deferral would not cause the provisions of Section 409A of the Code to be violated.

23.  NOTIFICATION OF ELECTION UNDER SECTION 83(b) OF THE CODE. If any Participant will, in connection with the acquisition of shares of Company Stock under the Plan, make the election permitted under Section 83(b) of the Code (i.e., an election to include in gross income in the year of transfer the amounts specified in Section 83(b)), such Participant will notify the Company of such election within ten (10) days of filing notice of the election with the Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under the authority of Code Section 83(b).

24.  TERMINATION; AMENDMENT. The Board may amend, suspend or terminate this Plan at any time and for any reason; provided, however, that shareholder approval will be required for the following types of amendments to this Plan: (i) any increase in Maximum Number of Common Stock issuable under the Plan except for a proportional increase in the Maximum Number as a result of stock split or stock dividend or (ii) a change in the class of Employees entitled to be granted Incentive Stock Options. Further, the Board may, in its discretion, determine that any amendment should be effective only if approved by the Stockholders even if such approval is not expressly required by this Plan or by law. No Awards will be made after the termination of the Plan. At any time and from time to time, the Administrator may amend or modify any outstanding Award or Award Agreement without approval of the Participant; provided, however, that no amendment or modification of any Award will adversely affect any outstanding Award without the written consent of the Participant; provided further,however, that the original term of any Award may not be extended unless it would not cause the provisions of Section 409A to be violated.No termination, amendment, or modification of the Plan will adversely affect any Award previously granted under the Plan, without the written consent of the Participant. Notwithstanding any provision herein to the contrary, the Administrator will have broad authority to amend this Plan or any outstanding Award under this Plan without approval of the Participant to the extent necessary or desirable (i) to comply with, or take into account changes in, applicable tax laws, securities laws, accounting rules and other applicable laws, rules and regulations, or (ii) to ensure that an Award is not subject to interest and penalties under Section 409A of the Code or the excise tax imposed by Section 4999 of the Code.

25.  TRANSFERS UPON DEATH; NONASSIGNABILITY. Upon the death of a Participant outstanding Awards granted to such Participant including Options, Stock and SARs may be transferred and exercised only by the executor or administrator of the Participant's estate or by a person who will have acquired the right to such exercise by will or by the laws of descent and distribution in accordance with and as provided for in this Plan. No transfer of an Award by will or the laws of descent and distribution will be effective to bind the Company unless the Company will have been furnished with (a) written notice thereof and with a copy of the will and/or such evidence as the Administrator may deem necessary to establish the validity of the transfer and (b) an agreement by the transferee to comply with all the terms and conditions of the Award that are or would have been applicable to the Participant and to be bound by the acknowledgments made by the Participant in connection with the grant of the Award. Except as otherwise provided, no Award or interest in it may be transferred, assigned, pledged or hypothecated by the Participant, whether by operation of law or otherwise, or be made subject to execution, attachment or similar process.

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26.  FAILURE TO COMPLY. In addition to the remedies of the Company elsewhere provided for herein, failure by a Participant (or beneficiary) to comply with any of the terms and conditions of the Plan or the applicable Award Agreement, unless such failure is remedied by such Participant (or beneficiary) within ten days after notice of such failure by the Administrator, will be grounds for the cancellation and forfeiture of such Award, in whole or in part, as the Administrator, in its sole discretion, may determine.

27.  GOVERNING LAW. Except to the extent preempted by any applicable federal law, this Plan and the rights of all persons under this Plan will be construed in accordance with and under applicable provisions of the laws of the State of Nevada, without reference to the principles of conflicts of laws thereunder.

28.  MISCELLANEOUS. Except as specifically provided in a retirement or other benefit plan of the company or a related entity, Awards will not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the company or a related entity, and will not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. This Plan is not a “retirement plan” or “welfare plan” under the Employee Retirement Income Security Act of 1974, as amended.

29.  DEFINITIONS. As used in this Plan, the following terms will have the following meanings:

“Administrator” means the Committee appointed by the Board to administer this Plan or if there is no such Committee, the Board itself.

“Award” means, individually and collectively, any award under this Plan, including any Option, Restricted Stock Award, Unrestricted Stock Award or SAR.

“Award Agreement” means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award.

“Board” means the Board of Directors of the Company.

“Cause” will mean, termination of employment of a Participant for cause under the Company's generally applicable policies and procedures or, in the case of a non-employee director of the Company, for circumstances which would constitute cause if such policies and procedures were applicable.

“Code” means the Internal Revenue Code of 1986, as amended.

“Committee” means the Committee appointed by the Board to administer this Plan.

“Company” means Solar Power, Inc., a Nevada corporation, or any successor corporation, and its Subsidiary as the context so warrants.

“Continuous Service” means that the provision of services to the Company or a Subsidiary in any capacity of employee, director or consultant that is not interrupted or terminated. Continuous Service will not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers between locations of the Company or among the Company, any Subsidiary, or any successor, in any capacity of employee, director or consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Subsidiary in any capacity of employee, director or consultant (except as otherwise provided in the Award Agreement). An approved leave of absence will include sick leave, maternity or paternity leave, military leave, or any other authorized personal leave as determined by the Administrator. For purposes of incentive stock options, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract.

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“Covered Employee” means a covered employee as defined in Section 162(m)(3) of the Code, provided that no employee will be a Covered Employee until the deduction limitations of Section 162(m) of the Code are applicable to the Company and any reliance period under Treasury Regulation Section 1.162-27(f) has expired.

“Disability” or “Disabled” means a disability covered under a long-term disability plan of the Company applicable to a Participant. The Committee may require such medical or other evidence as it deems necessary to judge the nature and permanency of the Participant’s condition. Notwithstanding the above, (i) with respect to an Incentive Stock Option, “Disability” or “Disabled” will mean permanent and total disability as defined in Section 22(e)(3) of the Code and (ii) to the extent an Option is subject to Section 409A of the Code, and payment or settlement of the Option is to be accelerated solely as a result of the Eligible Participant's Disability, Disability will have the meaning ascribed thereto under Section 409A of the Code and the Treasury guidance promulgated thereunder.

“Effective Date” has the meaning set forth in Section 2.

“Eligible Person” means any director, officer or employee of the Company or other person who, in the opinion of the Committee, is rendering valuable services to the Company, including without limitation, an independent contractor, outside consultant, or advisor to the Company.

“Employee” means any and all employees of the Company or a Subsidiary.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time and any successor statute.

“Exercise Agreement” has the meaning set forth in Section 6.2.4.

“Exercise Price” means the price at which a holder of an Option may purchase the Shares issuable upon exercise of the Option.

“Fair Market Value” means the fair market value of the Stock at the date of grant as determined in good faith by the Administrator. By way of illustration, but not limitation, for this purpose, good faith will be met if the Administrator employs the following methods:

(i) Listed Stock. If the Stock is traded on any established stock exchange or quoted on a national market system, fair market value will be the closing sales price for the Stock as quoted on that stock exchange or system for the date the value is to be determined (the “Value Date”). If no sales are reported as having occurred on the Value Date, fair market value will be that closing sales price for the last preceding trading day on which sales of Stock is reported as having occurred. If no sales are reported as having occurred during the five (5) trading days before the Value Date, fair market value will be the closing bid for Stock on the Value Date. If Stock is listed on multiple exchanges or systems, fair market value will be based on sales or bids on the primary exchange or system on which Stock is traded or quoted.

(ii)Stock Quoted by Securities Dealer. If Stock is regularly quoted by a recognized securities dealer but selling prices are not reported on any established stock exchange or quoted on a national market system, fair market value will be the mean between the high bid and low asked prices on the Value Date. If no prices are quoted for the Value Date, fair market value will be the mean between the high bid and low asked prices on the last preceding trading day on which any bid and asked prices were quoted.

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(iii)   No Established Market. If Stock is not traded on any established stock exchange or quoted on a national market system and are not quoted by a recognized securities dealer, the Administrator will determine fair market value in good faith. The Administrator will consider the following factors, and any others it considers significant, in determining fair market value: (X) the price at which other securities of the Company have been issued to purchasers other than employees, directors, or consultants, (Y) the Company’s net worth, prospective earning power, dividend-paying capacity, and non-operating assets, if any, and (Z) any other relevant factors, including the economic outlook for the Company and the Company’s industry, the Company’s position in that industry, the Company’s goodwill and other intellectual property, and the values of securities of other businesses in the same industry.

(iv)   Additional Valuation. Methods for Publicly Traded Companies. Any valuation method permitted under Section 20.2031-2 of the Estate Tax Regulations.

(v)Non-Publicly Traded Stock. For non-publicly traded stock, the fair market value of the Stock at the Grant Date based on an average of the fair market values as of such date set forth in the opinions of completely independent and well-qualified experts (the Participant’s status as a majority or minority shareholder may be taken into consideration).

Regardless of whether the Stock offered under the Award is publicly traded, a good faith attempt for this purpose will not be met unless the fair market value of the Stock on the Grant Date is determined with regard to nonlapse restrictions (as defined in Section 1.83-3(h) of the Treasury Regulations) and without regard to lapse restrictions (as defined in Section 1.83-3(i) of the Treasury Regulations).

“Incentive Stock Option” means an Option within the meaning of Section 422 of the Code.

“Issue Date” will mean the date established by the Administrator on which Certificates representing shares of Restricted Stock will be issued by the Company pursuant to the terms of this Plan.

“Named Executive Officer” means, if applicable, a Participant who, as of the date of vesting and/or payout of an Award is one of the group of “covered employees,” as defined in the regulations promulgated under Section 162(m) of the Code, or any successor statute.

“Non-Qualified Stock Option” means an Option which is not an Incentive Stock Option.

“Officer” means an officer of the Company and an officer who is subject to Section 16 of the Exchange Act.

“Option” means an award of an option to purchase Shares pursuant to Section 6.

“Optionee” means the holder of an Option.

“Participant” means a person who receives an Award under this Plan.

“Plan” means this Solar Power, Inc. 2006 Equity Incentive Plan, as amended from time to time.

“Restricted Stock Award” means an award of Shares pursuant to Section 7.

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“Rule 16b-3” means Rule 16b-3 under Section 16(b) of the Exchange Act, as amended from time to time, and any successor rule.

“SAR” means a stock appreciation right entitling the Participant Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of shares of Stock of the Company as provided for in Section 9.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended from time to time.

“Shares” means shares of the Company’s Stock reserved for issuance under this Plan, as adjusted pursuant to this Plan, and any successor security.

“Stock” means the Common Stock, $.0001 par value, of the Company, and any successor entity.

“Stock Award” means an Award of Restricted Stock or Unrestricted Stock.

“Subsidiary” means any corporation in an unbroken chain of corporations beginning with the Company if, at the time of granting of an Award, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

“Ten Percent Stockholder” has the meaning set forth in Section 6.2.2.

“Termination” or “Terminated” means, for purposes of this Plan with respect to a Participant, that the Participant has for any reason ceased to provide services as an employee, officer, director, consultant, independent contractor or advisor of the Company. An employee will not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Administrator; provided, that such leave is for a period of not exceeding three (3) months, or if longer, so long as reemployment with the Company granting the option or the corporation assuming or substituting an option under Section 1.424-1(a) upon the expiration of such leave is guaranteed by contract or statute.

“Unrestricted Stock Award” means an award of Shares pursuant to Section 8.

"Vesting Date" will mean the date established by the Administrator on which a Share of Restricted Stock may vest.

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EX-10.28

Exhibit 10.28

NEITHER THIS OPTION NOR THE SECURITIES INTO WHICH THIS OPTION IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.

SOLAR POWER, INC.

________________, 200__

[NAME OF PARTICIPANT]

[Address of Participant]

Dear Participant:

Pursuant to the terms and conditions of the Solar Power, Inc. 2006 Equity Incentive Plan(the “Plan”), you have been granted a Non-Qualified Stock Optionto purchase_________shares of common stock (the “Option”) as outlined below.

Granted To:	_____________________
Grant Date:	_____________________
Options Granted:	_____________________
Exercise Price per Share:	_____________________
Total Cost to Exercise:	_____________________
Expiration Date:	_____________________
Vesting Schedule:	____% per year for __ years
	___% on __________
	___% on __________
	___% on __________
	___% on __________

Any portion of this Option not exercised prior to the Expiration Date will become null and void.

This Option grant is subject to all of the Terms and Conditions attached hereto and incorporated herein by reference. The capitalized terms used in this Option will have the same meaningsas set forth in the Plan.A Summary of the Plan and a copy of the Plan is provided herewith.

SOLAR POWER, INC.PARTICIPANT

By:	____________________________(signature)	___________________________ (signature)
	_______________________________(title)
Date: ___________		Date: _____________

Notice: All notices to be given by either party to the other will be in writing and may be transmitted by overnight courier; or mail, registered or certified, postage prepaid with return receipt requested; or personal delivery; or facsimile transmission, provided, however, that notices of change of address or facsimile number will be effective only upon actual receipt by the other party. Notices will be delivered to Solar Power, Inc., 4080 Cavitt Stallman R.d., Granite Bay, CA 95746 Attn: Glenn Carnahan, and to the employee at the last known address of the employee as provided to Solar Power, Inc.

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Term And Conditions Of

Nonqualified Stock Option Agreement

Solar Power, Inc. is referred to as "Company" and Employee granted option is referred to as "Participant".

1.Plan Controls. The terms contained in the Plan are incorporated into and made a part of this Option and this Option will be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Option, the provisions of the Plan will be controlling and determinative.

2.Manner of Exercise. The Vested Portion of this Option may be exercised from time to time, in whole or in part, by delivery to the Company at its principal office of a stock option exercise agreement (the “Exercise Agreement”) substantially in the form attached hereto (the “Form”), which need not be the same for each Participant, stating the number of Shares being purchased, the restrictions imposed on the Shares purchased under such Exercise Agreement, if any, and such representations and agreements regarding the Participant’s investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws. The Form must be duly executed by Participant and be accompanied by payment in cash, or by check payable to the Company, in full for the Exercise Price for the number of Shares being purchased. Alternatively, but only if the Administrator authorizes at the time of exercise at its sole discretion, and where permitted by law (i) by surrender of shares of Stock of the Company that have been owned by the Participant for more than six (6) months or lesser period if the surrender of Shares is otherwise exempt from Section 16 of the Exchange Act and if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares, (ii) by forfeiture of Shares equal to the value of the exercise price pursuant to a “deemed net-stock exercise” as provided for in the Plan, (iii) by broker sale by following the required instructions therefore including as so authorized by the Administrator and its sole discretion instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay the exercise price and the amount of any required tax or other withholding obligations, or (iv) by any combination of the foregoing methods of payment or any other consideration or method of payment.

3.Privileges Of Stock Ownership. Participant will not have any of the rights of a stockholder with respect to any Shares until the Shares are issued to Participant. The Company will issue (or cause to be issued) such stock certificate promptly upon exercise of this Option. All certificates for Shares or other securities delivered will be subject to such stock transfer orders, legends and other restrictions as the Administrator may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued.

4.Notification of Disposition. Participant agrees to notify the Company in writing within 30 days of any disposition of Shares acquired pursuant to the exercise of this Option.

5.Withholding . The Company may require the Participant to remit to the Company by cash or check payable to the Company, an amount sufficient to satisfy federal, state and local taxes and FICA withholding requirements whenever Shares are to be issued upon exercise of this Option or Shares are forfeited pursuant to the “deemed net-stock exercise”, or when under applicable tax laws, Participant incurs tax liability in connection with the exercise or vesting of this Option. Any such payment must be made promptly when the amount of such obligation becomes determinable. In lieu thereof, the Company may withhold the amount of such taxes from any other sums due or to become due from the Company as the Administrator will prescribe.

To the extent permissible by law, and at its sole discretion, the Administrator may permit the Participant to satisfy any such withholding tax at the time of exercise, in whole or in part, with shares of Stock up to an amount not greater than the Company’s minimum statutory withholding rate for federal and state tax purposes, including payroll taxes. The Administrator may exercise its discretion, by (i) directing the Company to apply shares of Stock to which the Participant is entitled as a result of the exercise of this Option, or (ii) delivering to the Company shares of Stock owned by the Participant for more than six (6) months, unless the delivery of the Shares is otherwise exempt from Section 16 of the Exchange Act; but Participant may only satisfy his or her withholding obligation with shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.

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6.Exercise After Certain Events.

6.1.Termination of All Services. If for any reason other than Retirement, permanent and total Disability or death, Participant terminates all services to the Company, as an employee, consultant, advisor, or in a similar capacity, vested Options held at the date of such termination may be exercised, in whole or in part, at any time within three (3) months after the date of such termination (but in no event after the earlier of (i) the expiration of this Option and (ii) 10 years from the Grant Date).

6.2Retirement. If Participant ceases all services to the Company as an employee, consultant, advisor or in a similar capacity as a result of Retirement, Participant need not exercise this Option within three (3) months of termination of such services but will be entitled to exercise vested Options held at the date of such termination within the maximum term of this Option. The term “Retirement” as used herein means such termination of services as will entitle Participant to early or normal retirement benefits under any then existing pension or salary continuation plans of the Company excluding 401(k) participants (except as otherwise covered under other pension or salary continuation plans).

6.3Permanent Disability and Death. If Participant becomes permanently and totally Disabled while rendering services to the Company as an employee, consultant, advisor or in a similar capacity, or dies while employed by the Company (including as an Officer of the Company) or death occurs within three (3) months thereafter, vested Options then held may be exercised by Participant, Participant’s personal representative, or by the person to whom this Option is transferred by will or the laws of descent and distribution, in whole or in part, at any time within 1 year after the termination of services because of the Disability or death (but in no event after the earlier of (i) the expiration date of this Option, and (ii) 10 years from the Grant Date).

6.4Cancellation of Awards. In the event Participant’s services to the Company have been terminated for “Cause”, he or she will immediately forfeit all rights to this Option. The determination by the Board that termination was for Cause will be final and conclusive. In making its determination, the Board will give Participant an opportunity to appear and be heard at a hearing before the full Board and present evidence on the Participant's behalf.

7.Restrictions on Transfer of Option. This Option will not be transferable by Participant other than by will or by the laws of descent and distribution and during the lifetime of Participant, only Participant, his guardian or legal representative may exercise this Option except that Participant may transfer this Option to a Spouse pursuant to a property settlement, agreement, or court order incident to a divorce. In addition, at the discretion of the Administrator, this Option may be transferred without payment of consideration to the following family members of Participant, including adoptive relationships: a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, niece, nephew, former spouse (whether by gift or pursuant to a domestic relations order), any person sharing the employee’s household (other than a tenant or employee), a family-controlled partnership, corporation, limited liability company and trust, or a foundation in which family members heretofore described control the management of assets. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in this Option pursuant to the assignment. The terms applicable to the assigned portion will be the same as those in effect for this Option immediately prior to such assignment and will be set forth in such documents issued to the assignee as the Administrator may deem appropriate. A request to assign an Option may be made only by delivery to the Company of a written stock option assignment request in a form approved by the Administrator, stating the number of Options and Shares underlying Options requested for assignment, that no consideration is being paid for the assignment, identifying the proposed transferee, and containing such other representations and agreements regarding the Participant’s investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws.

Participant may designate a beneficiary to exercise this Option after Participant's death. If no beneficiary has been designated or survives Participant, payment will be made to Participant’s estate. Subject to the foregoing, a beneficiary designation may be changed or revoked by Participant at any time, provided the change or revocation is filed with the Administrator.

8.Dissolution, Liquidation and Merger.

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8.1.Company Not The Survivor. In the event of a dissolution or liquidation of the Company, a merger, consolidation, combination or reorganization in which the Company is not the surviving corporation, or a sale of substantially all of the assets of the Company (as determined in the sole discretion of the Board), the Administrator, in its absolute discretion, may cancel this Option upon payment in cash or stock, or combination thereof, as determined by the Board, to Participant of the amount by which any cash and the fair market value of any other property which Participant would have received as consideration for the Shares covered by this Option if the Option had been exercised before such liquidation, dissolution, merger, consolidation, combination, reorganization or sale exceeds the Exercise Price of this Option or negotiate to have this Option assumed by the surviving corporation. In addition to the foregoing, in the event of a dissolution or liquidation of the Company, or a merger, consolidation, combination or reorganization, in which the Company is not the surviving corporation, the Administrator, in its absolute discretion, may accelerate the time within which this Option may be exercised, provided however, that the Change of Control provisions of the Plan will control with respect to acceleration in vesting in the event of a merger, consolidation, combination or reorganization that results in a Change of Control as so defined.

8.2.Company is the Survivor. In the event of a merger, consolidation, combination or reorganization in which the Company is the surviving corporation, the Board will determine the appropriate adjustment of the number and kind of securities with respect to which outstanding Options may be exercised, and the exercise price at which outstanding Options may be exercised. The Board will determine, in its sole and absolute discretion, when the Company will be deemed to survive for purposes of the Plan.

9.No Obligation To Employ. Nothing in the Plan or this Option will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or a Subsidiary, or to limit in any way the right of the Company or a Subsidiary, to terminate Participant's employment or other relationship at any time, with or without cause.

10.  Compliance With Code Section 162(m). At all times when the Administrator determines that compliance with Code Section 162(m) is required or desired, this Option if granted to a Named Executive Officer will comply with the requirements of Section 162(m). In addition, in the event that changes are made to Section 162(m) to permit greater flexibility with respect to this Option, the Administrator may, subject to this provision make any adjustments it deems appropriate.

11.  Compliance With Code Section 409A. Notwithstanding any provision of the Plan to the contrary, if any provision of the Plan or this Option contravenes any regulations or Treasury guidance promulgated under Code Section 409A or could cause this Option or any Award to be subject to the interest and penalties under Section 409A, such provision of the Plan, this Option will be modified to maintain, to the maximum extent practicable, the original intent of the applicable provision without violating the provisions of Section 409A. In addition, in the event that changes are made to Section 409A to permit greater flexibility with respect to this Option, the Administrator may make any adjustments it deems appropriate.

12.  Code Section 280G. Notwithstanding any other provision of the Plan to the contrary, if the right to receive or benefit from this Option, either alone or together with payments that Participant has a right to receive from the Company, would constitute a "parachute payment" (as defined in Code Section 280G), all such payments will be reduced to the largest amount that will result in no portion being subject to the excise tax imposed by Code Section 4999.

13.  Securities Law And Other Regulatory Compliance. The Company will not be obligated to issue any Shares upon exercise of this Option unless such Shares are at that time effectively registered or exempt from registration under the federal securities laws and the offer and sale of the Shares are otherwise in compliance with all applicable securities laws. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so. Upon exercising all or any portion of this Option, Participant may be required to furnish representations or undertakings deemed appropriate by the Company to enable the offer and sale of the Shares or subsequent transfers of any interest in such Shares to comply with applicable securities laws. Evidences of ownership of Shares acquired upon exercise of this Option will bear any legend required by, or useful for purposes of compliance with, applicable securities laws, the Plan or this Option.

14.  Arbitration.

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14. General. Any controversy, dispute, or claim arising out of or relating to this Option which cannot be amicably settled within thirty (30) days (or such longer period as may be mutually agreed upon) from the date either the Company or Participant notifies the other in writing that such dispute or disagreement exists will be settled by arbitration. Said arbitration will be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association.

14.2Injunctive Actions. Nothing herein contained will bar the right of either the Company or Participant to seek to obtain injunctive relief or other provisional remedies against threatened or actual conduct that will cause loss or damages under the usual equity rules including the applicable rules for obtaining preliminary injunctions and other provisional remedies.

15.  Tax Effect. The federal and state tax consequences of stock options are complex and subject to change. Each person should consult with his or her tax advisor before exercising this Option or disposing of any Shares acquired upon the exercise of this Option.

16.  Entire Agreement. This Option Grant including the Terms and Conditions and the Plan constitute the entire contract between the Company and Participant hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied), which relate to the subject matter hereof.

17.  Severability. In the event that any portion of this Agreement is found to be unenforceable, the remaining portions of this Agreement will remain valid and in full force and effect.

18.  Choice of Law. This Agreement will be governed by, and construed in accordance with, the laws of the State of California, as such laws are applied to contracts entered into and performed in such State.

19.  Binding Effect. This Agreement will inure to the benefit of, and be binding upon, the parties hereto and their respective heirs, executors, and successors.

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SOLAR POWER, INC.

Notice of Intent to Exercise Solar Power, Inc. Stock Options

To: Stock Administrator

I hereby give notice to Solar Power, Inc. of my intent to exercise the following stock options on ______________, 200__:

(A)	(B)	(C)	(B X C)
Grant Date	#Options	Strike Price	Payment Due

Method of Payment

_____ Personal Check

_____ Exchange of Previously Owned Shares

_____ Deemed Net-Stock Exercise

_____ Broker Check (Same Day Sale)

Brokerage Company _________________________

Your method of payment may result in a tax liability including alternative minimum tax. You are

strongly urged to consult your tax advisor before exercising your options.

____________________________________	_____________________
Signature	Date
____________________________________
Name

EX-10.29

Exhibit 10.29

NEITHER THIS AWARD NOR THE SECURITIES INTO WHICH THIS AWARD ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.

SOLAR POWER, INC.

________________, 200__

[NAME OF PARTICIPANT]

[Address of Participant]

Dear Participant:

Pursuant to the terms and conditions of the Solar Power, Inc. 2006 Equity Incentive Plan(the “Plan”), you have been granted a Restricted Stock Awardof _________________shares of common stock (the “Award”) as outlined below.

Granted To:	_____________________
Grant Date:	_____________________
Restricted Stock Granted:	_____________________
Expiration Date:	_____________________
Conditions to Vesting:	________________________________________________
	________________________________________________
Market Value at Grant Date:	_______________
Vesting Schedule:	____% per year for __ years
(if applicable)
	___% on __________
	___% on __________
	___% on __________
	___% on __________

This Award grant is subject to all of the Terms and Conditions attached hereto and incorporated herein by reference. The capitalized terms used in this Award will have the same meaningsas set forth in the Plan.A Summary of the Plan and a copy of the Plan is provided herewith.

SOLAR POWER, INC.PARTICIPANT

By:	____________________________(signature)	___________________________ (signature)
	_______________________________(title)
Date: ___________		Date: _____________

Notice: All notices to be given by either party to the other will be in writing and may be transmitted by overnight courier; or mail, registered or certified, postage prepaid with return receipt requested; or personal delivery; or facsimile transmission, provided, however, that notices of change of address or facsimile number will be effective only upon actual receipt by the other party. Notices will be delivered to Solar Power, Inc., 4080 Cavitt Stallman Rd., Granite Bay, CA 95746 Attn: Glenn Carnahan, and to the employee at the last known address of the employee as provided to Solar Power, Inc.

Term And Conditions Of

Restricted Stock Award Agreement

Solar Power, Inc. is referred to as "Company" and Employee granted award is referred to as "Participant".

1.Plan Controls. The terms contained in the Plan are incorporated into and made a part of this Award and this Award will be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Award, the provisions of the Plan will be controlling and determinative.

2.Notification of Disposition. Participant agrees to notify the Company in writing within 30 days of any disposition of Shares acquired pursuant to this Award.

3.Issue Date, Vesting Date and Consequences of Vesting. If the Participant is employed by the Company on an Issue Date (which may be the date of grant), the specified number of shares of Restricted Stock will be issued in accordance with the provisions of Section 5 below. Provided that all conditions to the vesting of a share of Restricted Stock imposed hereto are satisfied, such share will vest and the restrictions will cease to apply to such share.

4.Forfeiture. Except as otherwise determined by the Administrator at the time of the grant of this Award or thereafter, upon failure to affirmatively accept the grant of this Restricted Stock Award by execution of this Restricted Stock Award Agreement, termination of employment during the applicable restriction period, failure to satisfy the restriction period or failure to satisfy a performance goal during the applicable restriction period, Restricted Stock that is at that time subject to restrictions will immediately be forfeited and returned to the Company; except as otherwise mutually agreed upon in writing by the Administrator and the Participant. The Company has the right to require the return of all dividends paid on such shares, whether by termination of any escrow arrangement under which such dividends are held or otherwise.

5.Certificates of Restricted Stock. The Secretary of the Company will hold such certificate evidencing this Award of restricted stock for the Participant’s benefit pursuant to the provisions of the Plan until such time as the Restricted Stock is forfeited to the Company or the restrictions lapse. Such certificate will bear a legend or legends that comply with the applicable securities laws and regulations and make appropriate reference to the restrictions imposed by this Award Agreement.

6.Voting and Dividends. Holders of Restricted Stock will have the right to vote such Restricted Stock and the right to receive any dividends declared or paid with respect to such Restricted Stock. The Administrator may require that any dividends paid on shares of Restricted Stock will be held in escrow until all restrictions on such shares have lapsed and/or the Administrator may provide that any dividends paid on Restricted Stock must be reinvested in shares of Stock, which may or may not be subject to the same vesting conditions and restrictions applicable to such Restricted Stock. All distributions, if any, received by the Participant with respect to Restricted Stock as a result of any stock split, stock dividend, combination of shares, or other similar transaction will be subject to the restrictions applicable to the original Award.

7.Withholding. The Company may require the Participant to remit to the Company by cash or check payable to the Company, an amount sufficient to satisfy federal, state and local taxes and FICA withholding requirements whenever Shares are to be issued, or when under applicable tax laws, Participant incurs tax liability in connection with the vesting of this Award. Any such payment must be made promptly when the amount of such obligation becomes determinable. In lieu thereof, the Company may withhold the amount of such taxes from any other sums due or to become due from the Company as the Administrator will prescribe.

To the extent permissible by law, and at its sole discretion, the Administrator may permit the Participant to satisfy any such withholding tax at the time of grant, in whole or in part, with shares of Stock up to an amount not greater than the Company’s minimum statutory withholding rate for federal and state tax purposes, including payroll taxes. The Administrator may exercise its discretion, by (i) directing the Company to apply shares of Stock to which the Participant is entitled as a result of this Award, or (ii) delivering to the Company shares of Stock owned by the Participant for more than six (6) months, unless the delivery of the Shares is otherwise exempt from Section 16 of the Exchange Act; but Participant may only satisfy his or her withholding obligation with shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.

8.Restrictions on Transfer Prior to Vesting. Unless otherwise provided, prior to the vesting of Restricted Stock, Restricted Stock Awards, granted under this Agreement, and any rights and interests therein, including the Restricted Stock itself, will not be transferable or assignable by the Participant, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution. Unless otherwise provided in the Plan, during the lifetime of the Participant, this Restricted Stock Award and any rights and interests herein, will be exercisable only by the Participant, and any election with respect hereto may be made only by the Participant. Any attempt to transfer this Restricted Stock Award or any rights and interests herein including the Restricted Stock itself, will be void unless the Administrator determines in its sole and absolute discretion that the attempt was inadvertent or unintentional, such Award, including the Restricted Stock itself and any rights and interests therein, will be forfeited by the Participant.

9.Dissolution, Liquidation, Merger: Company Not The Survivor. In the event of a dissolution or liquidation of the Company, a merger, consolidation, combination or reorganization in which the Company is not the surviving corporation, or a sale of substantially all of the assets of the Company (as determined in the sole discretion of the Board) (a “Dissolution Event”), the Administrator, in its absolute discretion, will make a determination as to whether the unvested portions of this Award will (i) accelerate and vest at a time prior to the Dissolution Event; (ii) be substituted or assumed by the surviving entity with such Award being subject to the same restrictions, terms and conditions; or (iii) lapse subject to the forfeiture provisions of section 4 above.

10.  No Obligation To Employ. Nothing in the Plan or this Award will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or a Subsidiary, or to limit in any way the right of the Company or a Subsidiary, to terminate Participant's employment or other relationship at any time, with or without cause.

11.  Compliance With Code Section 162(m). At all times when the Administrator determines that compliance with Code Section 162(m) is required or desired, this Award if granted to a Named Executive Officer will comply with the requirements of Section 162(m). In addition, in the event that changes are made to Section 162(m) to permit greater flexibility with respect to this Award, the Administrator may, subject to this provision make any adjustments it deems appropriate.

12.  Compliance With Code Section 409A. Notwithstanding any provision of the Plan to the contrary, if any provision of the Plan or this Award contravenes any regulations or Treasury guidance promulgated under Code Section 409A or could cause this Award or any Award to be subject to the interest and penalties under Section 409A, such provision of the Plan, this Award will be modified to maintain, to the maximum extent practicable, the original intent of the applicable provision without violating the provisions of Section 409A. In addition, in the event that changes are made to Section 409A to permit greater flexibility with respect to this Award, the Administrator may make any adjustments it deems appropriate.

13.  Code Section 280G. Notwithstanding any other provision of the Plan to the contrary, if the right to receive or benefit from this Award, either alone or together with payments that Participant has a right to receive from the Company, would constitute a "parachute payment" (as defined in Code Section 280G), all such payments will be reduced to the largest amount that will result in no portion being subject to the excise tax imposed by Code Section 4999.

14.  Securities Law And Other Regulatory Compliance. The Company will not be obligated to issue any Shares upon the grant of this Award unless such Shares are at that time effectively registered or exempt from registration under the federal securities laws and the offer and sale of the Shares are otherwise in compliance with all applicable securities laws. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so. Upon the grant of all or any portion of this Award, Participant may be required to furnish representations or undertakings deemed appropriate by the Company to enable the offer and sale of the Shares or subsequent transfers of any interest in such Shares to comply with applicable securities laws. Evidences of ownership of Shares acquired upon grant of this Award will bear any legend required by, or useful for purposes of compliance with, applicable securities laws, the Plan or this Award.

15.  Arbitration.

15.1General. Any controversy, dispute, or claim arising out of or relating to this Award which cannot be amicably settled within thirty (30) days (or such longer period as may be mutually agreed upon) from the date either the Company or Participant notifies the other in writing that such dispute or disagreement exists will be settled by arbitration. Said arbitration will be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association.

15.2Injunctive Actions. Nothing herein contained will bar the right of either the Company or Participant to seek to obtain injunctive relief or other provisional remedies against threatened or actual conduct that will cause loss or damages under the usual equity rules including the applicable rules for obtaining preliminary injunctions and other provisional remedies.

16.  Tax Effect. The federal and state tax consequences of restricted stock awards are complex and subject to change. Each person should consult with his or her tax advisor before accepting this Award or disposing of any Shares acquired upon the grant of this Award.

17.  Entire Agreement. This Award Grant including the Terms and Conditions and the Plan constitute the entire contract between the Company and Participant hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied), which relate to the subject matter hereof.

18.  Severability. In the event that any portion of this Agreement is found to be unenforceable, the remaining portions of this Agreement will remain valid and in full force and effect.

19.  Choice of Law. This Agreement will be governed by, and construed in accordance with, the laws of the State of California, as such laws are applied to contracts entered into and performed in such State.

20.  Binding Effect. This Agreement will inure to the benefit of, and be binding upon, the parties hereto and their respective heirs, executors, and successors.

EX-10.30

EX-10.31

Exhibit 10.31

RESTRICTIVE COVENANT AGREEMENT

RESTRICTIVE COVENANT AGREEMENT (this “Agreement”) dated November 15, 2006 (the “Effective Date”), by and among Solar Power, Inc., a California corporation (the “Acquiror”), Todd Lindstrom, James M. Underwood and Ronald H. Stickney, each an individual (all collectively, the “Selling Shareholders”). Capitalized terms not specifically described herein shall have the meaning ascribed to them in the Agreement of Merger (as defined below).

WHEREAS, the Acquiror has entered into an Agreement of Merger with Dale Renewables Consulting, Inc. (“Company”) dated as of even date herewith, whereby the Company merged with and into Acquiror and Acquiror became the surviving corporation (the “Merger”);

WHEREAS, each of the Selling Shareholders is a holder of common stock of the Company;

WHEREAS, as a condition for the Acquiror to close the Merger, the parties agreed to enter into this Agreement; and

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows.

1. Restrictive Covenants.

(a) Definitions. For purposes of this Section 2, the following terms shall have the following meanings:

(i) “Restricted Period” means a period of two (2) years following the Effective Time.

(ii) “Territory” means California, United States of America.

(iii) “Business” means any installation, integration and sales related to the photovoltaic business.

(iv) “Confidential Information” means all information regarding Company, its activities, business or clients that is the subject of reasonable efforts by the Company to maintain its confidentiality and that is not generally disclosed by practice or authority to persons not employed by the Company, but that does not rise to the level of a Trade Secret. “Confidential Information” shall include, but is not limited to, Company's customer and client lists, Company’s financial statements, budgets and forecast, confidential information provided by customers and prospective customers, Company's business strategies and plans (including any merger or acquisition plans), Company's operational methods, Company's compensation information on employees, Company's fee arrangements with customers and vendors, Company's market studies and marketing plans and any of Company's product development techniques or plans. “Confidential Information” shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company. This definition shall not limit any definition of “confidential information” or any equivalent term under state or federal law.

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(v) “Trade Secrets” means all secret, proprietary or confidential information regarding Company or Company activities that fits within the definition of “trade secrets” under the California Uniform Trade Secrets Act, including but not limited to all information, without regard to form, such as, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, distribution lists or a list of actual or potential customers, advertisers or suppliers which is not commonly known by or available to the public and which information: (A) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. “Trade Secrets” shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of Company. This definition shall not limit any definition of “trade secrets” or any equivalent term under the California Uniform Trade Secrets Act or any other state, local or federal law.

(b) Confidentiality and Trade Secret Protection. Except as set forth in the Agreement and Plan of Merger, at all times during the Restricted Period, Selling Shareholders will keep in confidence and trust all Confidential Information, and will not use or disclose any Confidential Information without the written consent of the Acquiror. Further, at all times, during the Restricted Period, Selling Shareholders will keep in confidence and trust and maintain the secrecy of all of the Company's Trade Secrets, for so long as such information remains a Trade Secret as defined herein, and Selling Shareholders will not use or disclose any such Trade Secrets without the written consent of the Acquiror.

(c) Non-Solicitation of Customers. Except as set forth in the Agreement and Plan of Merger, at all times during the Restricted Period, each of Selling Shareholders hereby expressly covenants and agrees that he will not, on his own behalf or on behalf of any other person, company, partnership, corporation or other entity, solicit, divert, take away or accept Business from any Customer of Company for the purpose of engaging in any business that is competitive with the Company’s Business. For purposes of this covenant, the term “Customer” means (i) any person or entity that was a customer of Company during the last twenty-four (24) months prior to the Effective Time; and (ii) any customer of the Acquiror during the Restricted Period.

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(d) Non-Solicitation of Employees. Except as set forth in the Agreement and Plan of Merger, at all times during the Restricted Period, each of Selling Shareholders will not directly or indirectly, on his own behalf or on behalf of any other person, company, partnership, corporation or other entity, solicit or induce, or attempt to solicit or induce, any employee of the Company or Acquiror, to terminate his or her relationship with the Company or Acquiror and/or to enter into an employment or agency relationship with the Selling Shareholders or with any other person or entity with whom the Selling Shareholders are affiliated.

(e) Acknowledgments. Each of Selling Shareholders acknowledges and agree that the restrictions set forth in this Section 2 are intended to protect the Acquiror’s interest in its Confidential Information and Trade Secrets and its commercial relationships and goodwill (with its customers, prospective customers, vendors, consultants and employees), including, without limitation, Confidential Information, Trade Secrets, commercial relationships and goodwill acquired by the Company through any acquisitions or mergers or otherwise developed, and are reasonable and appropriate for these purposes.

(f) Disclosure of Agreement. During the Restricted Period, each of Selling Shareholders agree to immediately inform Acquiror of any employment or affiliation by such Seller with any company other than the Acquiror that provides services related to the Business. In addition, during the Restricted Period, each Shareholder will disclose the existence and terms of this Agreement to any prospective employer, partner, co-venturer, investor or lender prior to entering into an employment, partnership or other business relationship with such person or entity.

(g) Injunction and Attorney’s Fees for Restrictive Covenants. Each of Selling Shareholders acknowledge and agree that the non-competition, non-disclosure, non-solicitation and non-recruitment covenants contained in this Section 2 of this Agreement are a reasonable means of protecting the Acquiror from unfair competition by the Selling Shareholders. Selling Shareholders further agree that any breach of any of these covenants will result in irreparable damage and injury to the Acquiror and that the Acquiror will be entitled to injunctive relief in any court of competent jurisdiction without the necessity of posting any bond. Each of Selling Shareholders also agrees that he shall be responsible for all damages incurred by the Acquiror due to any breach of the restrictive covenants contained in this Agreement if so ordered by the Court and that the prevailing party may seek an award of attorneys’ fees and costs arising out of any litigation or arbitration under this paragraph.

(h) Severability. Selling Shareholders agree that if any provisions of this Section 2 shall be adjudicated to be invalid or unenforceable, such provision shall be deleted from the Agreement, but such deletion is to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made, and the validity or enforceability of any other provision hereof shall not be affected thereby. Selling Shareholders further agree that to the extent any provision hereof is deemed unenforceable by virtue of its scope in terms of area or length of time or for any other reason, but may be made enforceable by limitations thereon, such provision shall be enforceable to the fullest extent permissible under the laws and public policies applied in the jurisdiction in which enforcement is sought.

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(i) Non-Disparagement. Selling Shareholders shall not at any time prior to or after the Effective Time whether in writing or orally, criticize, disparage, or otherwise demean in any way the Company, Acquiror or their affiliates or their respective products, services, reputation, officers, directors, employees or shareholders.

(j) Earnout Payment. The parties hereby acknowledge and agree that upon Selling Shareholder's breach of the terms of the provisions of Sections 2(b), 2(c), or 2(d), the Acquiror may suspend payment of the Earnout Payment until resolution of any disputes concerning such breach, and may offset the Earnout Payment by the amount of damages suffered by the Acquiror as a result of Selling Shareholders’ breach of such. Each of Selling Shareholders hereby agree that they shall also be responsible to the Acquiror (if so ordered by an arbitrator or judge, as applicable) for all costs, attorneys' fees and any and all damages incurred by the Acquiror defending against a claim or suit brought or pursued by the Selling Shareholders in violation of this provision.

2. Future Cooperation. During and after the Effective Date, Selling Shareholders shall cooperate fully with the Acquiror in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Acquiror which relate to events or occurrences that transpired prior to the Effective Time. Selling Shareholders’ full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Acquiror at mutually convenient times. During and after the Effective Date, Selling Shareholders also shall cooperate fully with the Acquiror in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired prior to the Effective Time.

3. Governing Law. The validity, construction, and enforceability of this Agreement shall be governed by and construed in all respects in accordance with the laws of the State of California without giving effect to the conflict of laws provisions thereof.

4. Assignment. The Company and Acquiror may, without Selling Shareholders’ consent, assign this Agreement to any affiliate or any successor to its business.

5. Entire Agreement. This Agreement contains the entire and only agreement between the parties respecting the subject matter hereof and supersedes all prior agreements, whether oral or writte, and understandings between the parties as to the subject matter hereof.

6. Notices. Any notice required or permitted under this Agreement shall be made in accordance with the provisions of the Agreement and Plan of Merger.

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7. Modification; Waiver; Severability. This Agreement may not be released, changed or modified in any manner, except by an instrument in writing signed by the Acquiror and the Selling Shareholders. The failure of either party to enforce any of the provisions of this Agreement shall in no way be construed to be a waiver of any such provision. No waiver of any breach of this Agreement shall be held to be a waiver of any other or subsequent breach. Except as provided in Section 2(h) with respect to Section 2, if any portion or application of this Agreement other than Section 2 should for any reason be declared invalid, illegal or unenforceable, in whole or in part, by a court of competent jurisdiction, such invalid, illegal or unenforceable provision or application or part thereof shall be severable from this Agreement and shall not in any way affect the validity or enforceability of any of the remaining provisions or applications.

8. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by each party and delivered to the other party.

(Remainder of Page Intentionally Left Blank)

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Upon execution below by both parties, this Agreement will enter into full force and effect as of the date first above written.

  SOLAR POWER, INC.       By: _________________________________ Name:Stephen C. Kircher Title:President and Chairman of the Board         SELLING SHAREHOLDERS:       ____________________________________ Ronald H. Stickney   ____________________________________ James M. Underwood   ____________________________________ Todd Lindstrom  

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EX-21.1

Exhibit 21

LIST OF SUBSIDIARIES

1. Solar Power, Inc., a California corporation (“SPI”) is a direct subsidiary of the Company.

2. The following wholly owned subsidiaries of SPI are indirect subsidiaries of the Company: Solar Power Integrators, Residential, Inc., a California corporation; Solar Power Integrators, Commercial, Inc., a California corporation; International Assembly Solutions, Limited, a Hong Kong corporation (“IAS”); and indirectly IAS Electronics (Shenzen), Ltd., a corporation of the Peoples Republic of China (“IAS China”), which is the wholly-owned subsidiary of IAS.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Solar Power, Inc.

We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated December 29, 2006 to the Shareholders and Board of Directors of Solar Power, Inc., a California corporation (“SPI”), on the consolidated balance sheet of SPI and its subsidiaries as of December 31, 2005, and the related consolidated statements of income, stockholders’ equity and cash flow for the eleven months ended December 31, 2005 which is contained in that Prospectus.

We also consent to the reference to us under the caption “Experts” in the Prospectus.

/s/ BDO McCabe Lo Limited            

BDO McCabe Lo Limited            

Hong Kong, January 16, 2007

EX-23.2

Exhibit 23.2

CONSENT OF HANSEN, BARNETT & MAXWELL

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Solar Power, Inc.

As an independent registered public accounting firm, we hereby consent to the use of our report dated March 29, 2006, with respect to the financial statements of Solar Power, Inc., formerly knows as Welund Fund, Inc., in its Registration Statement on Form SB-2 relating to the registration of 18,833,334 shares of common stock. We also consent to the use of our name and the reference to us in the Experts section of the Registration Statement.

/s/ HANSEN, BARNETT & MAXWELL

HANSEN, BARNETT & MAXWELL

Salt Lake City, Utah

January 16, 2007

EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT AUDITOR

Solar Power, Inc.

Sacramento, California

We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated October 30, 2006 (November 15, 2006 as to the fourth paragraph on Note 9), relating to the financial statements of Dale Renewables Consulting, Inc. which is contained in that Prospectus.

We also consent to the reference to us under the caption “Experts” in the Prospectus.

/s/ Macias Gini & O’Connell LLP      

Macias Gini & O’Connell LLP

Sacramento, California

January 16, 2007