As filed with the Securities and Exchange Commission on March 28,April 11, 2008

Registration No. 333-149092

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

AMENDMENT NO. 12 TO

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

REAL GOODS SOLAR, INC.

(Exact name of registrant as specified in its charter)

360 Interlocken Boulevard

Broomfield, Colorado 80021

(303) 222-8400

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Jirka Rysavy

Chairman

Real Goods Solar, Inc.

360 Interlocken Boulevard

Broomfield, Colorado 80021

(303) 222-8400

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Approximate date of commencement of proposed sale to the public:

As soon as practicable after this registration statement becomes effective.

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.  ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) 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.  ¨  _________________

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.  ¨  _________________

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.  ¨  _________________

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which 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 Commission, acting pursuant to said Section 8(a), shall determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is 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.

PRELIMINARY PROSPECTUS

This is the initial public offering of shares of Class A common stock by Real Goods Solar, Inc.

We are offering              shares of our Class A common stock. We expect the initial public offering price to be between $             and $             per share. Prior to this offering, there has been no public market for our Class A common stock.

We intend to apply to have our Class A common stock included for quotation on the Nasdaq Global Market under the symbol “RSOL.”

Investing in our Class A common stock involves risk. See “Risk Factors” beginning on page 8 to read about factors you should consider before buying shares of our Class A common stock.

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.

We have granted the underwriters the right to purchase up to              additional shares of our Class A common stock to cover any over-allotments. The underwriters can exercise this right at any time within 30 days after this offering. We expect that delivery of the shares will be made to investors on or about                     , 2008.

ThinkEquity PartnersThinkPanmure, LLC

Canaccord Adams

Broadpoint.

                    , 2008

Table of contents

You should rely only on the information contained in this prospectus or to which we have referred you, including any free writing prospectus that we file with the Securities and Exchange Commission relating to this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. This prospectus is not an offer to sell nor is it seeking offers to buy these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is correct only as of the date on the front cover, but information may have changed since that date. Information contained in our website does not constitute part of this prospectus.

Until                    , all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

For investors outside of the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

This prospectus includes market and industry data that we obtained from periodic industry publications, third-party studies and surveys, governmental agency sources, filings of public companies in our industry and internal company surveys that we believe to be reliable as of the date of this prospectus. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable.

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Risk factors

An investment in our Class A common stock offered by this prospectus involves a substantial risk of loss. You should carefully consider these risks factors, together with all the other information included in this prospectus, before you decide to purchase shares of our Class A common stock. We believe the risks and uncertainties described below are the most significant ones we face. The occurrence of any of the following factors could harm our business. In that case, the trading price of our Class A common stock could decline, and you could lose all or part of your investment.

Risk Factors Related to Our Business and Our Industry

Our business prospects could be harmed if solar energy is not widely adopted or sufficient demand for solar energy systems does not develop or takes longer to develop than we anticipate.

The solar energy market is at a relatively early stage of development, and the extent to which solar energy will be widely adopted and the extent to which demand for solar energy systems will increase are uncertain. If solar energy does not achieve widespread adoption or demand for solar energy systems fails to develop sufficiently, we may be unable to grow our business at the rate we desire. In addition, demand for solar energy systems in our targeted markets may not develop or may develop to a lesser extent or more slowly than we anticipate. Many factors may affect the demand for solar energy systems, including the following:

A drop in the retail price of conventional energy or non-solar renewable energy sources may negatively impact our business.

The demand for our solar energy systems depends in part on the price of conventional energy, which affects return on investment resulting from the purchase of solar energy systems. Fluctuations in economic and market conditions that impact the prices of conventional and non-solar renewable energy sources, such as decreases in the prices of oil and other fossil fuels, could cause the demand for solar energy systems to decline, which would have a negative impact on our business. Changes in utility electric rates could also have a negative effect on our business.

Risk factors

The reduction, elimination or expiration of government subsidies and economic incentives for solar energy systems could reduce the demand for our products.

Government subsidies are an important factor in the economic determination to purchase a solar energy system. Certain states, including California and Colorado, localities and utilities offer incentives to offset a portion of the cost of qualified solar energy systems. These incentives can take many forms, including direct rebates, state tax credits, system performance payments and renewable energy credits, or RECs. The reduction or elimination of such incentives or delays or interruptions in the implementation of favorable federal or state laws could substantially increase the cost of our systems to our customers, resulting in a significant reduction in demand for our solar energy systems, which would negatively impact our business.

Existing regulations, and changes to such regulations, may present technical, regulatory and economic barriers to the installation of solar energy systems, which may significantly reduce demand for our solar energy systems.

The installation of solar energy systems is subject to oversight and regulation under local ordinances; building, zoning and fire codes; environmental protection regulation; utility interconnection requirements for metering; and other rules and regulations. We attempt to keep up-to-date about these requirements on a national, state and local level and must design and install our solar energy systems to comply with varying standards. Certain cities may have ordinances that prevent or increase the cost of installation of our solar energy systems. In addition, new government regulations or utility policies pertaining to the installation of solar energy systems are unpredictable and may result in significant additional expenses or delays, which could cause a significant reduction in demand for solar energy systems.

Existing regulations and policies pertaining to electricity pricing and technical interconnection of customer-owned electricity generation and changes to these regulations and policies may deter the purchase and use of solar energy systems and negatively impact development of the solar energy industry.

The market for solar energy systems is heavily influenced by foreign, federal, state and local government regulations and policies concerning the electric utility industry, as well as policies adopted by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. For example, there currently exist metering caps in certain jurisdictions, which limit the aggregate amount of power that may be sold by solar power generators into the electric grid. These regulations and policies have been modified in the past and may be modified in the future in ways that could deter purchases of solar energy systems and investment in the research and development of solar energy technology. For example, without a mandated regulatory exception for solar energy systems, utility customers are often charged interconnection or standby fees for putting distributed power generation on the electric utility grid. Such fees could increase the cost to our customers of using solar energy systems and make them less desirable, thereby harming our business, operating results and financial condition. Changes in net metering policies could also deter the purchase and use of solar energy systems. In addition, electricity generated by solar energy systems competes primarily with expensive peak hour electricity rates rather than with the less expensive average price of electricity. Modifications to the peak hour pricing policies of utilities, such as to a flat rate, would require solar energy systems to achieve lower prices in order to compete with the price of electricity.

Our inability to respond to changing technologies and issues presented by new technologies could harm our business.

The solar energy industry is subject to technological change. If we rely on products and technologies that are not attractive to customers, or if we are unable to respond appropriately to changing technologies and changes in product function and quality, we may not be successful in capturing or retaining a significant market share. In addition, any new technologies utilized in our solar energy systems may not perform as expected or as desired, in which event our adoption of such products or technologies may harm our business.

Risk factors

We derive all of the revenue from our solar energy integration services from sales in two states.

We currently derive all of the revenue from our solar energy integration services from projects in California and Colorado. This geographic concentration exposes us to growth rates, economic conditions, and other factors that may be specific to those states to which we would be less subject if we were more geographically diversified. The growth of our business will require us to expand our operations in California and Colorado and to commence operations in other states. Any geographic expansion efforts that we may make may not be successful, which would limit our growth opportunities.

Our success may depend in part on our ability to continue to make successful acquisitions.

As part of our business strategy, we plan to expand our operations through strategic acquisitions in our current markets and in new geographic markets. We acquired Marin Solar in November 2007 and Carlson Solar in January 2008. We cannot accurately predict the timing, size and success of our acquisition efforts. Our acquisition strategy involves significant risks, including the following:

These risks, as well as other circumstances that often accompany expansion through acquisitions, could inhibit our growth and negatively impact our operating results. In addition, the size, timing and success of any future acquisitions may cause substantial fluctuations in our operating results from quarter to quarter. Consequently, our operating results for any quarter may not be indicative of the results that may be achieved for any subsequent quarter or for a full fiscal year. These fluctuations could adversely affect the market price of our Class A common stock.

Our failure to integrate the operations of acquired businesses successfully into our operations or to manage our anticipated growth effectively could materially and adversely affect our business and operating results.

In order to pursue a successful acquisition strategy, we must integrate the operations of acquired businesses into our operations, including centralizing certain functions to achieve cost savings and pursuing programs and processes that leverage our revenue and growth opportunities. The integration of the management, operations, and facilities of acquired businesses with our own could involve difficulties, which could adversely affect our growth rate and operating results. We may be unable to complete effectively the integration of the management, operations, facilities and accounting and information systems of acquired businesses with our own; to manage efficiently the combined operations of the acquired businesses with our operations; to achieve our operating, growth and performance goals for acquired businesses; to achieve additional

Risk factors

revenue as a result of our expanded operations; or to achieve operating efficiencies or otherwise realize cost savings as a result of anticipated acquisition synergies. Our rate of growth and operating performance may suffer if we fail to manage acquired businesses profitably without substantial additional costs or operational problems or to implement effectively combined growth and operating strategies.

We may require significant additional funds, the amount of which will depend upon our working capital and general corporate needs and the size, timing and structure of future acquisitions.

Our operations may not generate sufficient cash to enable us to operate or expand our business. Any borrowings made to finance future acquisitions or for operations could make us more vulnerable to a downturn in our operating results, a downturn in economic conditions or increases in interest rates on future borrowings. If our cash flow from operations is insufficient to meet our debt service requirements, we could be required to sell additional equity securities, refinance our obligations or dispose of assets in order to meet our debt service requirements. Adequate financing may not be available if and when we need it or may not be available on terms acceptable to us. In addition, our operations may not generate sufficient cash for our acquisition plans. The extent to which we would be able or willing to use our equity to consummate future acquisitions will depend on the market price of our equity from time to time and the willingness of potential sellers to accept our equity as full or partial payment. Using our equity for this purpose also may result in significant dilution to our shareholders. To the extent that we are unable to use our equity to make future acquisitions, our ability to grow through acquisitions may be limited by the extent to which we are able to raise capital for this purpose through debt or equity financings. The failure to obtain sufficient financing on favorable terms and conditions could have a material adverse effect on our business, financial condition, operating results and growth prospects.

The loss of or failure to hire additional personnel could materially and adversely affect our business, operating results and our ability to expand.

The expansion of our business could place a significant strain on our managerial, financial and personnel resources, particularly given our current reliance on our Chairman, Jirka Rysavy, who also is the Chairman and Chief Executive Officer of Gaiam. To reach our goals, we must successfully recruit, train, motivate and retain additional employees, including management and technical personnel, integrate new employees into our overall operations and enhance our financial and accounting systems, controls and reporting systems. While we believe we have personnel sufficient for the current requirements of our business, expansion of our business could require us to employ additional personnel. The loss of personnel or our failure to hire additional personnel could materially and adversely affect our business, operating results and our ability to expand.

Our success depends on the value of our Real Goods brand.

We depend on the name recognition of our Real Goods brand in our marketing efforts. Maintaining and building recognition of our brand are important to expanding our customer base. If the value of our brand were adversely affected, our ability to attract customers would be negatively impacted and our growth could be impaired.

We depend upon a limited number of suppliers for the components used in our solar energy systems.

We rely on third-party suppliers for components used in our solar energy systems. Sharp, SunPower and Kyocera Solar currently account for over 90% of our purchases of solar PV modules; and Xantrex, Fronius, PVPowered and SMA currently account for over 90% of our purchases of inverters. The failure of our suppliers to supply us with components in a timely manner or on commercially reasonable terms could result in lost orders, delay our project schedules and harm our operating results and business expansion efforts. Our orders with certain of our suppliers may represent a very small portion of their

Risk factors

total business. As a result, these suppliers may not give priority to our business, leading to potential delays in or cancellation of our orders. If any of our suppliers were to fail to supply our needs on a timely basis or to cease providing us key components we use, we would be required to secure alternative sources of supply. We may have difficulty securing alternative sources of supply in a timely manner and on commercially reasonable terms. If this were to occur, our business would be harmed.

Shortages in the supply of silicon could adversely affect the availability and cost of the solar PV modules used in our solar energy systems.

Shortages of silicon could adversely affect the availability and cost of the solar PV modules we use in our solar energy systems. Manufacturers of solar PV modules depend upon the availability and pricing of silicon, one of the primary materials used in the manufacture of solar PV modules. The worldwide market for silicon from time to time experiences a shortage of supply, primarily because of demand for silicon by the semiconductor industry. Shortages of silicon cause the prices for solar PV modules to increase and supplies to become difficult to obtain. While we have been able to obtain sufficient supplies of solar PV modules to satisfy our needs to date, this may not be the case in the future. Future increases in the price of silicon could result in an increase in costs to us, price increases to our customers or reduced margins.

Because the solar energy system installation market is highly competitive and has low barriers to entry, we may face the loss of market share or reduced margins.

The solar energy system installation market is highly competitive and fragmented with low barriers to entry. We currently compete with a large number of relatively small installers and integrators, some of which do not have extensive industry experience and may lack adequate systems and capital, but some of which benefit from operating efficiencies or from having lower overhead, which enables them to offer lower prices. As the solar energy industry expands and industry consolidation occurs, we are more likely to encounter competition from larger companies, some of which may have greater financial, technical and marketing resources and greater name recognition than we do.

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

Competition in the solar energy system installation market may increase in the future as a result of low barriers to entry. Increased industry competition could result in reductions in price, margins, and market share and in greater competition for qualified personnel. Our business and operating results would be adversely affected if we are unable to compete effectively.

Our failure to meet customer expectations in the performance of our services, and the risks and liabilities associated with placing our employees and technicians in our customers’ homes and businesses could give rise to claims against us.

Our failure or inability to meet customer expectations in the performance of our services could damage our reputation or result in claims against us. In addition, we are subject to various risks and liabilities associated with our employees and technicians providing installation services in the homes and businesses of our customers, including possible claims of errors and omissions, harassment, theft of customer property, criminal activity and other claims.

Risk factors

Product liability claims against us could result in adverse publicity and potentially significant monetary damages.

As a seller of consumer products, we face an inherent risk of exposure to product liability claims in the event that our solar energy systems’ use results in injuries. Since solar energy systems are electricity producing devices, it is possible that our products could result in injury, whether by product malfunctions, defects, improper installation or other causes. If such injuries or claims of injuries were to occur, we could incur monetary damages and our business could be adversely affected by any resulting negative publicity. The successful assertion of product liability claims against us also could result in potentially significant monetary damages and, if our insurance protection is inadequate to cover these claims, could require us to make significant payments from our own resources.

We may be subject to unexpected warranty expenses or service claims that could reduce our profits.

As a result of the length of the warranty periods we provide, we bear the risk of warranty claims long after we have completed the installation of a solar energy system. Our current standard warranty for our installation services includes a 10-year warranty period for defects in material and workmanship in California and a five-year warranty period for defects in material and workmanship in Colorado. In addition, most manufacturers of solar PV modules offer a 25-year warranty period for declines in power performance. Although we maintain a warranty reserve for potential warranty or service claims and we have not had material warranty claims in the past, claims in excess of our reserve could adversely affect our operating results. Our failure to predict accurately future warranty claims could result in unexpected volatility in our financial condition.

We rely upon our catalog and Internet sales channels for potential customers, and interruptions or failures associated with these sales channels could adversely impact our overall business.

We rely upon our Real Goods catalog and Internet channels to increase the awareness of the Real Goods brand and generate potential solar energy system purchaser leads. We believe these cross-marketing channels provide us with an advantage over our competitors because customers that purchase products through these channels may become potential buyers of solar energy systems. As a result, interruptions or failures associated with these channels could have an adverse impact on our business that goes beyond their normal contribution to our revenue.

We rely on communications and shipping networks to deliver our products.

Given our emphasis on customer service, the efficient and uninterrupted operation of order-processing and fulfillment functions is critical to our catalog and Internet business. To maintain a high level of customer service, we rely on a number of third-party service providers, such as delivery companies, telecommunications companies and printers. Any interruption in services from our principal third-party service providers, including delays or disruptions resulting from labor disputes, power outages, human error, adverse weather conditions or natural disasters, could materially and adversely affect our business. In addition, products that we source overseas must be shipped to our distribution center by freight carriers, and a work stoppage or political unrest could adversely affect our ability to fulfill our customer orders.

An increase in interest rates could make it difficult for customers to finance the cost of solar energy systems and could reduce demand for our services and products.

Some of our prospective customers may depend on debt financing, such as home equity loans, to fund the initial capital expenditure required to purchase a solar energy system. Third-party financing sources specifically for solar energy systems are currently limited. Currently, approximately 40% of our customers rely on some form of third-party financing, including home equity loans, to purchase solar energy systems. The lack of financing sources or an increase in interest rates could make it difficult or more costly for our potential customers to secure the financing necessary to purchase a solar energy system on favorable terms, or at all, thus lowering demand for our services and products and negatively impacting our business.

Risk factors

Risk Factors Related to our Relationship with Gaiam

Our historical financial information as a business conducted by Gaiam may not be representative of our results as an independent public company.

The historical financial information included in this prospectus does not necessarily reflect what our financial position, operating results or cash flows would have been had we been an independent entity during the historical periods presented. The historical costs and expenses reflected in our consolidated financial statements include amounts for certain corporate functions historically provided by Gaiam, including costs of fulfillment, systems, finance and other administrative services, and income taxes. These expense allocations were developed on the basis of what we and Gaiam considered to be reasonable prices for the utilization of services provided or the benefits received by us. The historical financial information in our audited and unaudited consolidated financial statements may not be indicative of what our results of operations, financial position, changes in equity and cash flows would have been had we been a separate stand-alone entity during the periods presented or will be in the future. We have not made adjustments to reflect many significant changes that will occur in our cost structure, funding and operations as a result of our separation from Gaiam, including changes in our employee base, changes in our tax structure, potential increased costs associated with reduced economies of scale and increased costs associated with being a publicly traded, stand-alone company, such as audit fees, directors and officers insurance costs and compliance costs, nor have we made offsetting adjustments to reflect the benefits of and income expected from this offering, as these factors are presently difficult to quantify.

Our ability to operate our business effectively may suffer if we or Gaiam terminate our intercorporate services agreement, or if we are unable to establish on a cost-effective basis our own administrative and other support functions in order to operate as a stand-alone company after the expiration or termination of our intercorporate services agreement with Gaiam.

As a wholly owned subsidiary of Gaiam, we have relied on administrative and other resources of Gaiam to operate our business. In connection with this offering, we have enteredwill enter into an intercorporate services agreement to retain the ability for specified periods to use certain Gaiam resources. We may elect to continue this agreement for eighteen months following the completion of this offering and, provided we are not in material default under this agreement, Gaiam may not terminate this agreement during this time if it owns more than 20% of our outstanding common equity. Any decision by us to terminate this agreement would be approved by disinterested members of our management and board of directors under our procedures regarding related party transactions. After the expiration or termination of this agreement, we will need to create our own administrative and other support systems or contract with third parties to replace Gaiam’s services. In addition, we must also establish disclosure controls and procedures and internal controls over financial reporting as part of our becoming a separate public company. These services may not be provided at the same level as when we were a wholly owned subsidiary of Gaiam, and we may not be able to obtain the same benefits that we received prior to the separation. These services may not be sufficient to meet our needs, and after our agreement with Gaiam expires or is terminated, we may not be able to replace these services at all or obtain these services at prices and on terms as favorable as we currently have with Gaiam. Any failure or significant downtime in our own administrative systems or in Gaiam’s administrative systems during the transitional period could result in unexpected costs, impact our results or prevent us from paying our suppliers or employees and performing other administrative services on a timely basis.

The agreement we enteredwill enter into with Gaiam may be amended by the parties. While we are controlled by Gaiam, we may not have the leverage to negotiate amendments to this agreement if required on terms as favorable to us as those we would negotiate with an unaffiliated third party.

Risk factors

Our inability to resolve any disputes that arise between us and Gaiam with respect to our past and ongoing relationships may result in a reduction of our revenue, and such disputes may also result in claims for indemnification.

Disputes may arise between Gaiam and us in a number of areas relating to our past and ongoing relationships, including the following:

We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable than if we were dealing with an unaffiliated party. In addition, we will have indemnification obligations under the tax, intercorporate services and registration rights agreements we will enter into with Gaiam, and disputes between us and Gaiam may result in claims for indemnification. However, we do not currently expect that these indemnification obligations will materially affect our potential liability compared to what it would be if we did not enter into these agreements with Gaiam.

Some of our directors and executive officers may have conflicts of interest because of their ownership of Gaiam common stock, options to acquire Gaiam common stock and positions with Gaiam.

Some of our directors and executive officers own Gaiam common stock and options to purchase Gaiam common stock. In addition, some of our directors are also directors of Gaiam. Ownership of Gaiam common stock and options to purchase Gaiam common stock by our directors and officers after this offering and the presence of directors of Gaiam on our board of directors could create, or appear to create, conflicts of interest with respect to matters involving both us and Gaiam. For example, corporate opportunities may arise that are applicable or complementary to both of our businesses and that each business would be free to pursue, such as the potential acquisition of a particular business or technology focused on environmental sustainability including renewable energy sources, energy efficiency or energy use reduction. However, Gaiam does not intend to acquire businesses that are focused on solar energy. We have not established at this time any procedural mechanisms to address actual or perceived conflicts of interest of these directors and officers and expect that our board of directors, in the exercise of its fiduciary duties, will determine how to address any actual or perceived conflicts of interest on a case-by-case basis. If any corporate opportunity arises and if our directors and officers do not pursue it on our behalf, we may not become aware of, and may potentially lose, a significant business opportunity.

Risk Factors Related to this Offering

Gaiam controls us, and its interests may conflict with or differ from your interests as a shareholder.

Gaiam holds 100% of the currently outstanding shares of our common stock, consisting of 7,846,707 shares of our Class A common stock and 2,153,293 shares of our Class B common stock. The holders of our Class A common stock and our Class B common stock have substantially similar rights, preferences, and privileges except with respect to voting and conversion rights and other protective provisions as set forth in this prospectus. Each share of Class B common stock has ten votes per share, and each share of Class A common stock has one vote per share. Each share of Class B common stock is convertible

Risk factors

at any time into one share of Class A common stock. In addition, if Gaiam transfers shares of our Class B common stock, it must elect whether or not to transfer the shares as Class B common stock or convert those shares into Class A common stock. The Class A common stock has no conversion rights. Immediately after completion of this offering, Gaiam will beneficially own approximately             % of our outstanding shares of common stock, assuming Gaiam’s Class B common stock were converted into Class A common stock. In addition, immediately following this offering and assuming no conversion of any shares of Class B common stock that are currently outstanding, Gaiam will have approximately             % of the total voting power of our common stock voting as a single class. Consequently, Gaiam will be able to exert substantial influence over our company and control matters requiring approval by our shareholders, including the election of directors, increasing our authorized capital stock, financing activities, a merger or sale of our assets and the number of shares available for issuance under our Incentive Plan. Our articles of incorporation provide that our board of directors may authorize the issuance of preferred stock, subject only to the approval of holders of our Class B common stock. As a result of Gaiam’s control, no change of control of our company can occur without Gaiam’s consent. Our Chairman, Jirka Rysavy, who is also the Chairman and Chief Executive Officer of Gaiam, currently owns approximately 25% of the outstanding equity, and in excess of 50% of the voting power, of Gaiam.

Gaiam’s and Mr. Rysavy’s voting control may discourage transactions involving a change of control of our company, including transactions in which you as a holder of our Class A common stock might otherwise receive a premium for your shares over the then current market price. Gaiam is not prohibited from selling a controlling interest in our company to a third party and may do so without your approval and without providing for a purchase of your shares of Class A common stock. Accordingly, your shares of Class A common stock may be worth less than they would be if Gaiam did not maintain voting control over us.

Because there is no existing market for our Class A common stock, our initial public offering price may not be indicative of the market price of our Class A common stock after this offering, which may decrease significantly.

Prior to this offering, there has not been a public market for our Class A common stock, and an active trading market may not develop or be sustained after this offering. The initial public offering price for the Class A common stock will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market on the Nasdaq Global Market or otherwise or how liquid that market might become. The lack of an active market may reduce the value of your shares and impair your ability to sell your shares at the time or price at which you wish to sell them. An inactive market may also impair our ability to raise capital by selling additional shares of our Class A common stock and may impair our ability to acquire or invest in other companies, products or technologies by using our Class A common stock as consideration.

The market price of our Class A common stock may be volatile, which could result in substantial losses for investors.

The market price of our Class A common stock is likely to be volatile and could fluctuate widely in response to various factors, many of which are beyond our control, including the following:

Risk factors

In addition, the stock market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies and industries. These fluctuations may include a so-called “bubble market” in which investors temporarily raise the price of the stocks of companies in certain industries, such as the renewable energy industry, to unsustainable levels. These market fluctuations may significantly affect the market price of our Class A common stock.

If you purchase our Class A common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares.

The initial public offering price of our Class A common stock is substantially higher than the net pro forma tangible book value per share of our Class A common stock. Investors purchasing Class A common stock in this offering will pay a price per share that substantially exceeds the book value of our tangible assets after subtracting our liabilities. As a result, investors purchasing Class A common stock in this offering will incur immediate dilution of $            per share, based on the initial public offering price of $            per share, which is the midpoint of the offering range indicated on the cover of this prospectus. If the holders of outstanding options and warrants exercise those options and warrants, you will suffer further dilution.

Possible future sales of shares by Gaiam could adversely affect the market price of our Class A common stock, even if our business is doing well.

Immediately after completion of this offering, we will have outstanding              shares of Class A common stock and 2,153,293 shares of Class B common stock. Subject to the restrictions described under “Shares Eligible for Future Sale” and

Risk factors

applicable law, Gaiam could sell any or all of the shares of common stock owned by it from time to time for any reason. Under a registration rights agreement between us and Gaiam, Gaiam has the right to require us to register the shares of Class A common stock it owns and the shares it may acquire upon conversion of its shares of Class B common stock to facilitate the possible sale of such shares. Although we cannot predict the effect, if any, that future sales of shares of Class A common stock by Gaiam would have on the market price prevailing from time to time, sales of substantial amounts of Class A common stock or the availability of such shares for sale could adversely affect prevailing market prices.

We do not expect to pay any cash dividends on our Class A common stock for the foreseeable future.

We do not anticipate paying any cash dividends on our Class A common stock for the foreseeable future. Accordingly, you may have to sell some or all of your Class A common stock in order to generate cash flow from your investment. You may not receive a gain on your investment when you sell our Class A common stock and may lose some or all of the amount of your investment. Any determination to pay dividends in the future on our Class A common stock will be made at the discretion of our board of directors and will depend on our results of operations, financial conditions, contractual restrictions, restrictions imposed by applicable law, capital requirements and other factors that our board of directors deems relevant.

We will incur increased costs as a result of being a public company.

As a public company, we will incur significant legal, accounting and other expenses. In addition, the Sarbanes-Oxley Act, as well as rules implemented by the Securities and Exchange Commission, or the SEC, require us to adopt corporate governance practices applicable to public companies. We also expect to incur additional compliance costs as a result of our Class A common stock being included for quotation on the Nasdaq Global Market. We expect these new rules and regulations to increase our legal and financial compliance costs and to make some activities more time consuming and costly. We will incur additional costs associated with our public company reporting requirements. We also expect these new rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain our desired coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.

Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls will be time consuming, difficult, and costly.

It will be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls, processes and reporting procedures personnel. If we are unable to comply with the requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires publicly traded companies to obtain.

If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting, or if we identify or fail to remedy any material weaknesses in our internal controls, such failures could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information, limit our ability to raise capital and have a negative effect on the trading price of our Class A common stock.

Under Section 404 of the Sarbanes-Oxley Act and current SEC regulations, beginning with our annual report on Form 10-K for our fiscal year ending December 31, 2009, we will be required to furnish a report by our management on our internal control over financial reporting. We will soon begin the process of documenting and testing our internal control procedures in order to satisfy these requirements, which is likely to result in increased general and administrative expenses and may shift management time and attention from revenue-generating activities to compliance activities. While we expect to expend significant resources to complete this important project, we may not be able to achieve our objective on a timely basis.

Information regarding forward-looking statements

Some of the statements under “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this prospectus may contain forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance. We generally identify forward-looking statements by terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “could,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this prospectus are based upon the historical performance of us and our subsidiaries and on our current plans, estimates and expectations. We caution you that no forward-looking statement is a guarantee of future performance, and you should not regard any forward-looking statement as a representation by us, the underwriters or any other person that the future plans, estimates or expectations contemplated by us will be achieved. You should not place undue reliance on these forward-looking statements which reflect our view only as of the date of this prospectus. While we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Such forward-looking statements are subject to various known and unknown risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity, including the risks outlined in this prospectus. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from those expressed or implied by these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this prospectus. We do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. We qualify all the forward-looking statements contained in this prospectus by the foregoing cautionary statements.

The risk factors discussed in “Risk Factors” could also cause our results to differ materially from those expressed in forward-looking statements. There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business.

Use of proceeds

We estimate that our net proceeds from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $              million, or approximately $              million if the underwriters exercise their over-allotment option, based upon an assumed initial public offering price of $              per share, which is the midpoint of the offering range indicated on the cover of this prospectus.

We will use approximately $19.8 million of the net proceeds to repay amounts owed to Gaiam for costs to acquire and expand our business. We have no formal written loan agreement with Gaiam regarding our intercompany payable, and it has no maturity date. Gaiam historically did not charge us interest on this intercompany payable. We expect to use approximately $             of the net proceeds to pay expenses related to this offering. While we do not currently have a specific plan for the use of the balance of the net proceeds, our principal reason for this offering is to provide adequate funds for our working capital needs and general corporate purposes, which may include future acquisitions of businesses. We currently have no agreements or commitments to complete any such transaction and are not involved in any negotiations to do so. The amounts and timing of our actual expenditures will depend upon numerous factors, such as our ability to attract new solar energy customers, market acceptance of our product offerings, the cost of ongoing upgrades to our product offerings, our level of expenditures for sales and marketing, our level of investment in support systems and facilities, the availability of market expansion opportunities and other market conditions.

A $1.00 increase (decrease) in the assumed initial public offering price of $              per share would increase (decrease) the net proceeds to us from this offering by $              million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We do not expect that a change in the offering price would have a material effect on our uses of the proceeds from this offering, although it may impact the amount of time prior to which we will need to seek additional capital.

Pending any use of the net proceeds, we intend to invest the net proceeds in investment-grade, short-term interest-bearing securities.

Dividend policy

We have not declared or paid any cash dividends on our Class A common stock, and we do not anticipate doing so in the foreseeable future. We currently intend to retain future earnings, if any, to operate our business and support our future growth strategies. Any future determination to pay dividends on our Class A common stock will be at the discretion of our board of directors and will depend on our financial condition, results of operations, contractual restrictions, restrictions imposed by applicable law, capital requirements and other factors that our board of directors deems relevant.

Capitalization

The following table sets forth our capitalization as of December 31, 2007 on an actual basis, on a pro forma basis to give effect to our new corporate structure and the Carlson Solar acquisition as if those events had occurred on December 31, 2007, and on a pro forma basis as adjusted to give effect to our sale of                     shares of Class A common stock in this offering at an assumed initial public offering price of $             per share, the midpoint of the range indicated on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and the application of the net proceeds from this offering as described under “Use of Proceeds.”

You should read the information in this table together with “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

Dilution

If you invest in our Class A common stock, your interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our Class A common stock and the pro forma net tangible book value of our Class A common stock immediately after the completion of this offering. Dilution results from the fact that the per share offering price of our Class A common stock is substantially in excess of the pro forma net tangible book value per share. Pro forma net tangible book value represents our pro forma net book equity excluding intangible assets. Our pro forma net book equity is derived from our unaudited consolidated pro forma balance sheet, which gives effect to our new corporate structure and the acquisition of Carlson Solar as if those events had occurred on December 31, 2007. Our pro forma net tangible book value at December 31, 2007 was approximately $(6.8) million, or $(0.68) per share. Pro forma net tangible book value per share before this offering has been determined by dividing pro forma net tangible book value (total book value of tangible assets less total liabilities) by the pro forma number of shares of common stock outstanding at December 31, 2007.

After giving effect to the sale of our Class A common stock in this offering at an assumed initial public offering price of $             per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting (a) underwriting discounts and commissions and estimated offering expenses payable by us, (b) the use of the estimated net proceeds as described under “Use of Proceeds,” and (c) the effects on our deferred tax assets and liabilities as a result of our tax sharing agreement with Gaiam, our pro forma as adjusted net tangible book value at December 31, 2007 would have been $             million or $             per share. This represents an immediate increase in pro forma net tangible book value per share of $             to our existing shareholder and immediate dilution in pro forma net tangible book value per share of $             to new investors who purchase Class A common stock in this offering. The following table illustrates this pro forma as adjusted per share dilution to new investors, assuming the underwriters do not exercise their over-allotment option:

Each $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) our pro forma as adjusted net tangible book value by approximately $             million, or approximately $             per share, and the pro forma as adjusted dilution per share to investors in this offering by approximately $            , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and the use of the estimated net proceeds as described under “Use of Proceeds.”

We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 shares in the number of shares offered by us would increase (decrease) our pro forma as adjusted net tangible book value by approximately $             million, or $             per share, and the pro forma as adjusted dilution per share to investors in this offering would be $            , assuming that the assumed initial public offering price remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and the use of the estimated net proceeds as described under “Use of Proceeds.”

Dilution

If the underwriters exercise their option in full to purchase              additional shares of Class A common stock in this offering, the pro forma as adjusted net tangible book value per share after this offering would be $              per share, the increase in the pro forma as adjusted net tangible book value per share to the existing shareholder would be $              per share, and the pro forma as adjusted dilution to new investors in this offering would be $              per share.

The following table sets forth, on the pro forma as adjusted basis described above, at December 31, 2007, the difference between the number of shares of common stock purchased, the total consideration paid, and the average price per share paid by the existing shareholder and by investors purchasing shares in this offering at an assumed initial public offering price of $             per share, the midpoint of the price range set forth on the cover page of this prospectus, before deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The discussions and tables above are based on             shares of our Class A common stock and 10,000,000 shares of our Class B common stock outstanding as of December 31, 2007, and excludes the following:

Effective upon the completion of this offering, an aggregate of up to 700,000 shares of our Class A common stock will be reserved for future issuance under the Incentive Plan, subject to increase in accordance with the terms of the Incentive Plan. To the extent that new options are issued under the Incentive Plan or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our shareholders.

Unaudited pro forma consolidated financial information

The unaudited pro forma consolidated balance sheet as of December 31, 2007 reflects our consolidated balance sheet giving pro forma effect to our new corporate structure as well as the acquisition of Carlson Solar as if those events had occurred on December 31, 2007. Our new corporate structure reflects the contribution to us by Gaiam of our business assets and operations in exchange for 10,000,000 shares of our Class B common stock. The Marin Solar acquisition is included in our historical balance sheet as of December 31, 2007.

The unaudited pro forma consolidated statement of operations for the year ended December 31, 2007 presents our consolidated results of operations giving pro forma effect to the acquisitions of Marin Solar and Carlson Solar as if such transactions had occurred on January 1, 2007. Our historical statement of operations includes Marin Solar’s results of operations for November and December 2007.

Our audited and unaudited pro forma consolidated financial statements include allocations of certain Gaiam expenses, including costs of fulfillment, customer service, financial and other administrative services, and income taxes. The expense allocations are based on what we and Gaiam considered to be reasonable reflections of the utilization of services provided or the benefits received by us. The historical financial information in our audited and unaudited pro forma consolidated financial statements may not be indicative of what our results of operations, financial position, changes in equity and cash flows will be in the future, or what they would have been had we been a separate stand-alone entity during the periods presented.

The pro forma adjustments are based on currently available information and upon assumptions that we believe are reasonable in order to reflect, on a pro forma basis, the impact of these transactions, on our historical financial information. Obtaining additional information necessary to calculate the actual purchase price of the Marin Solar and Carlson Solar acquisitions is subject to final purchase price adjustments as provided for in their respective purchase agreements and to final purchase price allocations. The actual adjustments, therefore, may differ from the pro forma adjustments.

Our unaudited consolidated pro forma financial information should be read together with “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical financial statements and related notes included elsewhere in this prospectus.

The unaudited pro forma consolidated financial information does not purport to reflect our results of operations or financial position that would have occurred had we operated as a public company, rather than as a wholly owned subsidiary of Gaiam, during the periods presented. The unaudited pro forma consolidated financial information should not be relied upon as being indicative of our results of operations or financial condition had the Marin and Carlson acquisitions occurred on the dates assumed. The unaudited pro forma consolidated financial information also does not project the results of operations or financial position for any future period or date.

Unaudited pro forma consolidated financial information

Unaudited Pro Forma Consolidated Balance Sheet

Unaudited pro forma consolidated financial information

Unaudited pro forma consolidated financial information

Unaudited Pro Forma Consolidated Statement of Operations

Selected consolidated financial data

You should read the following selected consolidated financial data together with our consolidated financial statements and the related notes appearing elsewhere in this prospectus and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We derived the consolidated statements of operations data for each of the years ended December 31, 2005, 2006, and 2007 and the consolidated balance sheet data as of December 31, 2006 and 2007 from our audited consolidated financial statements included elsewhere in this prospectus. We derived the consolidated statement of operations data for each of the years ended December 31, 2003 and 2004 and the consolidated balance sheet data as of December 31, 2003, 2004, and 2005 from our unaudited financial statements, which are not included in this prospectus. The consolidated financial data for 2007 includes the effects of the Marin Solar acquisition from the November 2007 date of the transaction.

Our audited and unaudited consolidated financial statements include allocations of certain Gaiam expenses, including costs of fulfillment, customer service, financial and other administrative services, and income taxes. The expense allocations are based on what we and Gaiam considered to be reasonable reflections of the utilization of services provided or the benefits received by us. Income tax expenses were calculated on the separate return approach. The historical financial data in our audited and unaudited consolidated financial statements may not be indicative of what our results of operations, financial position, changes in equity and cash flows will be in the future, or what they would have been had we been a separate stand-alone entity during the periods presented.

Selected consolidated financial data

Management’s discussion and analysis of financial

condition and results of operations

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operation and financial condition. You should read this analysis in conjunction with our audited consolidated financial statements and related footnotes. This discussion and analysis contains statements of a forward-looking nature relating to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements, including those set forth in this prospectus.

Overview

We are a leading residential solar energy integrator. We offer turnkey services to our solar energy system customers, including design, procurement, permitting, build-out, grid connection, financing referrals and warranty and customer satisfaction activities. Our solar energy systems use high-quality solar PV modules from manufacturers such as Sharp, SunPower and Kyocera Solar. We use proven technologies and techniques to help customers achieve meaningful savings by reducing their utility costs. In addition, we help customers lower their emissions output and reliance upon fossil fuel energy sources.

We have 30 years of experience in residential solar energy, beginning with our sale in 1978 of the first solar photovoltaic, or PV, panels in the United States. We believe that we have installed more residential solar energy systems in the United States than any other company, including more than 2,400 residential and small commercial solar energy systems. In addition, we have sold a variety of solar products to more than 30,000 customers since our founding.

Our focused customer acquisition approach and our efficiency in converting leads into customers enable us to have what we believe are low customer acquisition costs. We believe that our Real Goods brand has a national reputation for the highest quality customer service in the solar energy market, which leads to a significant number of word-of-mouth referrals and new customers. In addition, our parent company, Gaiam, is a leader in the sustainable and renewable energy lifestyle market and has a base of over 8 million direct customers, providing us additional lead generation for potential solar energy customers. We also generate leads by selling solar and other renewable energy and sustainable living products and resources through our nationally distributed catalog and website, including books and DVDs on renewable energy and sustainable living, products for solar and other water heating, green building products and systems, air purification products, water conservation and purification products and other solar and sustainable living related products. Our Solar Living Center in Hopland features interactive demonstrations for renewable energy and environmentally sensible technologies and is the largest facility of its kind, with approximately 2 million visitors since it opened in 1996.

Mergers and Acquisitions

Marin Solar, Inc.

On November 1, 2007, we purchased 100% ownership of Marin Solar for $3.2 million in cash, plus direct acquisition costs of approximately $0.2 million. The purchase agreement provides for additional consideration contingent upon the amount of revenue generated from certain potential customers and the collection of certain rebates. As additional consideration we granted to the sellers warrants to purchase 40,000 shares of our Class A common stock.

Management’s discussion and analysis of financial condition and results of operations

Carlson Solar

On January 1, 2008, our 88.4% owned subsidiary acquired certain of the assets of and assumed certain liabilities from Carlson Solar for $3.2 million in cash, plus direct acquisition costs of approximately $0.2 million. As part of the acquisition, as additional consideration, we granted warrants to purchase 30,000 shares of our Class A common stock at an exercise price of $3.20 per share, which will vest 50% upon the earlier to occur of the completion of this offering or a transaction resulting in Gaiam’s ownership of less than 50% of our outstanding shares. Following such initial vesting, 2% of the warrants will vest each month thereafter. The warrants have a seven year term. The assets acquired were determined to have all inputs and processes necessary for the transferred assets to continue to conduct normal operations after acquisition; accordingly, the purchase price was treated as a business combination pursuant to SFAS No. 141,Business Combinations.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the following to be critical accounting policies whose application have a material impact on our reported results of operations, and which involve a higher degree of complexity, as they require us to make judgments and estimates about matters that are inherently uncertain.

Revenue Recognition

Revenue consists of solar energy system installation fees and sales of renewable and sustainable energy products. We recognize revenue from fixed price contracts using either the completed or percentage-of-completion method, based on the size of the solar energy system installation. We recognize revenue from solar energy system installations of less than 250 kilowatts, or kW, when the installation is substantially complete, while we recognize revenue from solar energy system installations equal to or greater than 250 kW on a percentage-of-completion basis, measured by the percentage of contract costs incurred to date to total estimated costs for each contract. We recognize revenue from the sale of renewable and sustainable energy products when the following four basic criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the seller’s price to the buyer is fixed and determinable; and (4) collectibility is reasonably assured.

Goodwill

Goodwill represents the excess of the purchase consideration over the estimated fair value of assets acquired less liabilities assumed in a business acquisition. Goodwill is no longer amortized but is reviewed for impairment annually or more frequently if impairment indicators arise. We compare the estimated fair value of a reporting unit with its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its estimated fair value, the goodwill impairment test is performed to measure the amount of impairment loss. Since we operate in only one business segment, we assess impairment at the enterprise level. The annual process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment at many points during the analysis. Historically, Gaiam has used a market value method for purposes of testing its reporting units for potential goodwill impairment. Factors historically considered by Gaiam were comparable company market values and the ratio of enterprise value to revenue. In assessing our goodwill for impairment, we plan to use a combination of factors, including comparable company market values and multiples of revenue to the extent the information is available. If comparable market information is insufficient, we expect to supplement our assessment with other approaches, such as present value techniques, which will require us to make estimates and judgments about our future cash flows. These cash flow forecasts will be based on assumptions that are consistent with the plans and estimates we use to manage our business. Application of alternative assumptions could yield significantly different results.

Management’s discussion and analysis of financial condition and results of operations

Purchase Accounting

We account for the acquisition of a controlling interest in a business using the purchase method. In determining the estimated fair value of certain acquired assets and liabilities, we make assumptions based upon historical and other relevant information and, in some cases, independent expert appraisals. Assumptions may be incomplete, and unanticipated events and circumstances may occur that could affect the validity of such assumptions, estimates, or actual results. The estimated fair value of assets and liabilities acquired in recent business combinations are preliminary as of December 31, 2007. We expect to obtain information necessary to finalize the estimated values during 2008.

Stock-Based Compensation

As of January 1, 2006, we adopted the provisions of SFAS No. 123(R),Accounting for Stock-Based Compensation (“SFAS 123(R)”), which requires companies to recognize compensation cost for stock-based awards based on the estimated fair value of the award on date of grant. We measure compensation cost at the grant date based on the estimated fair value of the award and recognize compensation cost upon the probable attainment of a specified performance condition or over a service period. We use the Black-Scholes option pricing model to calculate the fair value disclosures under SFAS 123(R). In calculating this fair value, there are certain highly subjective assumptions that we use, as disclosed in note 6 of the notes to our consolidated financial statements, consisting of estimated market value of our stock, the expected life of the option, risk-free interest rate, dividend yield, and volatility. The use of a different estimate for any one of these components could have a material impact on the amount of calculated compensation expense. We do not recognize share-based compensation expense unless the vesting of the options is probable. In determining the estimated fair value of our common stock at the date of grant of stock awards, we set the market value based on the combination of two factors: an independent offer to purchase a portion of us in exchange for preferred stock and the value of recent acquisitions.

Income Taxes

For financial reporting purposes, income tax expense and deferred income tax balances were calculated as if we were a separate entity and had prepared our own separate tax return. We provide for income taxes pursuant to the liability method as prescribed in SFAS No. 109,Accounting for Income Taxes. The liability method requires recognition of deferred income taxes based on temporary differences between financial reporting and income tax bases of assets and liabilities, using current enacted income tax rates and regulations. These differences will result in taxable income or deductions in future years when the reported amount of the asset or liability is recovered or settled, respectively. Considerable judgment is required in determining when these events may occur and whether recovery of an asset is more likely than not. Our effective tax rate remains fairly consistent.

After the date we cease to be a member of Gaiam’s consolidated group for federal income tax purposes, to the extent we become entitled to utilize loss carryforwards from our separate tax returns, we will distribute to Gaiam the tax effect (estimated to be 34% for federal income tax purposes) of the amount of such tax loss carryforwards so utilized. Accordingly, we expect to recognize a valuation allowance against certain of our deferred tax assets as of the effective date of the tax sharing agreement. As of December 31, 2007, we had NOL carryforwards of approximately $6.9 million, meaning that such potential future payments to Gaiam, which would be made over a period of several years, would therefore aggregate to approximately $2.6 million. These NOL carryforwards expire beginning in 2020 if not utilized. Due to Gaiam’s step acquisitions of our company, we experienced “ownership changes” as defined in Section 382 of the Internal Revenue Code. Accordingly, our use of the NOL carryforwards is limited by annual limitations described in Sections 382 and 383 of the Internal Revenue Code. We expect our NOLs to be fully recoverable unless we make a public offering of more than 20% of our capital, in which case we will effectively lose one year of our carryforward period and have to impair our deferred tax asset by approximately $0.2 million.

Management’s discussion and analysis of financial condition and results of operations

Effective January 1, 2007, we adopted the provisions of SFAS Interpretation No. 48,Accounting of Uncertainty in Income Taxes—An Interpretation of FASB Statement No. 109(“FIN 48”). Under FIN 48, we must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. We measure the tax benefits recognized in the consolidated financial statements from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding our income tax exposures. Interpretations of and guidance surrounding income tax law and regulations change over time and may result in changes to our subjective assumptions and judgments which can materially affect amounts recognized in our consolidated financial statements.

Results of Operations

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Net revenue. Net revenue increased $2.1 million, or 12.6%, to $18.9 million during 2007 from $16.8 million during 2006. This increase in net revenue primarily reflects $1.3 million additional revenue recognized in the Northern California market as a result of the acquisition of Marin Solar in November 2007, with the majority of the remaining increase coming from increased penetration in existing markets.

Gross profit. Gross profit increased $0.5 million, or 9.2%, to $6.5 million during 2007 from $6.0 million during 2006. As a percentage of net revenue, gross profit decreased to 34.3% during 2007 from 35.4% during 2006. The decrease in gross profit percentage primarily reflects the acquisition of Marin Solar, which historically has produced lower margins.

Selling and operating expenses. Selling and operating expenses increased $0.8 million, or 15.4%, to $5.7 million during 2007 from $5.0 million during 2006. As a percentage of net revenue, selling and operating expenses increased to 30.3% during 2007 from 29.5% during 2006. The increase in selling and operating expenses resulted primarily from investments in personnel to support the revenue increases described above and the addition of costs associated with the acquisition of Marin Solar in November 2007.

General and administrative expenses. General and administrative expenses increased $15,000, or 2.6%, to $0.6 million during 2007 from $0.6 million during 2006. As a percentage of net revenue, general and administrative expenses decreased to 3.1% during 2007 from 3.4% during 2006, reflecting the stabilization of our fixed costs.

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

Net revenue. Net revenue increased $4.7 million, or 38.8%, to $16.8 million during 2006 from $12.1 million during 2005. The increase in netNet revenue resulted primarily from increased sales in our existing California solar energy systems market and10.8% as a result of the launch of our solar energy system installations in Colorado. The remainder of the increase was generated by our existing markets.

Gross profit. Gross profit increased $1.6 million, or 36.8%, to $6.0 million during 2006 from $4.4 million during 2005. As a percentage of net revenue, gross profit decreased to 35.4% during 2006 from 35.9% during 2005.

Selling and operating expenses. Selling and operating expenses increased $1.5 million, or 43.3%, to $5.0 million during 2006 from $3.5 million during 2005. As a percentage of net revenue, selling and operating expenses increased to 29.5% during 2006 from 28.6% during 2005. This increase was primarily due to increased selling and operating expenses to support the revenue growth described above, the addition of the Colorado solar energy systems sales and support team, and other investments in our infrastructure.

Management’s discussion and analysis of financial condition and results of operations

General and administrative expenses. General and administrative expenses increased $75,000, or 15.2%, to $0.6 million during 2006 from $0.5 million during 2005. As a percentage of net revenue, general and administrative expense improved to 3.4% during 2006 from 4.1% during 2005, reflecting the stabilization of our fixed costs.

Quarterly and Seasonal Fluctuations

The following table sets forth our unaudited quarterly results of operations during each of the quarters in 2006 and 2007. We believe this unaudited financial information includes all adjustments, consisting solely of normal recurring accruals and adjustments, necessary for a fair presentation of the results of operations for the quarters presented. This financial information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. The results of operations for any quarter are not necessarily indicative of future results of operations.

Our quarterly net revenue and operating results for solar energy system installations are difficult to predict and have in the past and may in the future fluctuate from quarter to quarter as a result of changes in state, federal, or private utility company subsidies, as well as weather and other factors. With regards to our renewable and sustainable energy products sold through catalogs and the Internet, sales tend to peak during the spring and end of year holiday seasons.

Liquidity and Capital Resources

Our capital needs arise from working capital required to fund our purchases of solar PV modules and inverters, capital related to acquisitions of new businesses, development of renewable energy products, replacements, expansions and improvements to our infrastructure, and future growth. These capital requirements depend on numerous factors, including business acquisitions, the ability to attract new solar energy system installation customers, market acceptance of our product offerings, the cost of ongoing upgrades to our product offerings, the level of expenditures for sales and marketing, the level of investment in support systems and facilities and other factors. The timing and amount of these capital requirements are variable and cannot accurately be predicted. We did not have any material commitments for capital expenditures as of December 31, 2007, and we do not presently have any plans for future material capital expenditures. Recently, we acquired two solar energy system installation businesses. We plan to continue to pursue business acquisition and other opportunities to expand our sales territories, technologies, and products and increase our sales and marketing programs as needed.

Management’s discussion and analysis of financial condition and results of operations

Intercompany Borrowings from Gaiam

Prior to this offering and since 1999, our business has been funded through our operating income, supplemented by intercompany borrowings from Gaiam. As of December 31, 2007, we had approximately $0.5 million in cash and cash equivalents and approximately $16.3 million of intercompany borrowings owed to Gaiam. The intercompany borrowings include amounts used to acquire and expand our business.

Cash Flows

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

Operating activities. Our operating activities provided net cash of $1.3 million during 2007 and used net cash of $2.0 million during 2006. Our net cash generated from operating activities during 2007 was primarily attributable to cash provided by increased accounts payable of $0.7 million and increased deferred revenue on uncompleted contracts of $0.6 million, partially offset by uses of funds resulting from increased deferred costs on uncompleted contracts of $0.5 million. Our net cash used in operating activities during 2006 was primarily attributable to increases in inventory and accounts receivable by $1.6 million and $1.0 million, respectively, and reductions of accounts payable by $0.4 million, partially offset by cash provided by deferred income taxes of $0.4 million.

Investing activities. Our investing activities used net cash of $3.4 million and $42,000 during 2007 and 2006, respectively. The cash used in investing activities during 2007 was used primarily to acquire Marin Solar on November 1, 2007 and in 2006 to acquire property and equipment.

Financing activities. Our financing activities provided net cash of $2.4 million and $2.1 million during 2007 and 2006, respectively. The financing provided during both 2007 and 2006 that came from Gaiam was used to fund our daily operations and to acquire Marin Solar in November of 2007. We plan to repay these amounts with proceeds from this offering.

We believe our available cash, cash expected to be generated from operations, and cash generated by the sale of Class A common stock should be sufficient to fund our business for the foreseeable future. However, our projected cash needs may change as a result of possible acquisitions, unforeseen operational difficulties, or other factors.

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

Management’s discussion and analysis of financial condition and results of operations

Contractual Obligations

We have commitments under operating leases, our payable to Gaiam, and various service agreements with Gaiam (see note 10 to our notes to consolidated financial statements), but do not have any outstanding commitments under long-term debt obligations or purchase obligations. The following table shows our commitments to make future payments under operating leases and our payable to Gaiam:

After the date we cease to be a member of Gaiam’s consolidated group for federal income tax purposes, to the extent we become entitled to utilize loss carryforwards from our separate tax returns, we will distribute to Gaiam the tax effect (estimated to be 34% for federal income tax purposes) of the amount of such tax loss carryforwards so utilized. Accordingly, we expect to recognize a valuation allowance against certain of our deferred tax assets as of the effective date of the tax sharing agreement. As of December 31, 2007, we had net operating loss carryforwards, or NOLs, of approximately $6.9 million, meaning that such potential future payments to Gaiam, which would be made over a period of several years, would therefore aggregate to approximately $2.6 million. These NOLs expire beginning in 2020 if not utilized. Due to Gaiam’s step acquisitions of us, we experienced “ownership changes” as defined in the Internal Revenue Code. Accordingly, our use of these NOLs is limited by annual limitations described in the Internal Revenue Code. We expect our NOLs to be fully recoverable unless we make a public offering of more than 20% of our capital, in which case we will effectively lose one year of our carryforward period and have to impair our deferred tax asset by approximately $0.2 million.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board, or FASB, issued FASB Statement No. 141 (Revised 2007),Business Combinations (“SFAS 141R”). This statement will significantly change the accounting for business combinations. Under SFAS 141R, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS 141R will change the accounting treatment for certain specific items, including the following:

Management’s discussion and analysis of financial condition and results of operations

Also included in the statement are a substantial number of new disclosure requirements. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier adoption is prohibited. Accordingly, a calendar year-end company is required to record and disclose business combinations following existing GAAP until January 1, 2009. Consequently, we will adopt the provisions of SFAS 141R for our fiscal year beginning January 1, 2009. We believe that SFAS 141R is applicable to us, but cannot yet reasonably estimate the impact of the statement.

In December 2007, FASB issued FASB Statement No. 160,Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51 (“SFAS 160”). SFAS 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. SFAS 160 clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this statement requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the estimated fair value of the noncontrolling equity investment on the deconsolidation date. SFAS 160 also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. We will adopt SFAS 160 at the beginning of our fiscal year commencing January 1, 2009. We believe SFAS 160 will be applicable to us, but cannot yet reasonably estimate the impact to our consolidated financial statements.

In September 2006, FASB issued FASB Statement No. 157,Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS 157 does not require any new fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statements for an interim period within that fiscal year. We will adopt the provisions of SFAS 157 in our fiscal year commencing January 1, 2008. We currently believe that adoption of the provisions of SFAS 157 will not have a material impact on our consolidated financial statements.

In June 2006, FASB issued Interpretation No. 48,Accounting for Uncertainty in Income Taxes—An Interpretation of FASB Statement No. 109 (“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. It 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. Earlier application of the provisions of this Interpretation is encouraged if the enterprise has not yet issued financial statements, including interim financial statement, in the period this Interpretation is adopted. Consequently, we adopted the provisions of FIN 48 for our fiscal year beginning on January 1, 2007 and it has not had a material impact on our consolidated financial statements.

Management’s discussion and analysis of financial condition and results of operations

Off-Balance Sheet Arrangements

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

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks, which include foreign exchange rates and changes in U.S. interest rates. We do not engage in financial transactions for trading or speculative purposes.

We purchase a significant amount of renewable energy and organic product inventory from vendors outside of the United States in transactions that are primarily U.S. dollar denominated transactions. Since the percentage of our international purchases denominated in currencies other than the U.S. dollar is small, any currency risks related to these transactions are immaterial to us. However, a decline in the relative value of the U.S. dollar to other foreign currencies could lead to increased purchasing costs. In order to mitigate this exposure, we make virtually all of our purchase commitments in U.S. dollars.

Business

Introduction

We are a leading residential solar energy integrator. We offer turnkey services to our solar energy system customers, including design, procurement, permitting, build-out, grid connection, financing referrals and warranty and customer satisfaction activities. Our solar energy systems use high-quality solar PV modules from manufacturers such as Sharp, SunPower and Kyocera Solar. We use proven technologies and techniques to help customers achieve meaningful savings by reducing their utility costs. In addition, we help customers lower their emissions output and reliance upon fossil fuel energy sources.

We have 30 years of experience in residential solar energy, beginning with our sale in 1978 of the first solar photovoltaic, or PV, panels in the United States. We believe that we have installed more residential solar energy systems in the United States than any other company, including more than 2,400 residential and small commercial solar energy systems. In addition, we have sold a variety of solar products to more than 30,000 customers since our founding.

For the fiscal year ended December 31, 2007, our net revenue was $18.9 million, and for the fiscal year ended December 31, 2006, our net revenue was $16.8 million. On a pro forma basis (giving effect to the acquisitions of Marin Solar and Carlson Solar as if such transactions had occurred on January 1, 2007), for the fiscal year ended December 31, 2007, our net revenue was $32.7 million and we generated a 30.0% gross margin and $1.0 million of income from operations. Immediately after the completion of this offering, after application of the net proceeds of this offering, we will have $     million of cash and no outstanding debt.

Our focused customer acquisition approach and our efficiency in converting leads into customers enable us to have what we believe are low customer acquisition costs. We believe that our Real Goods brand has a national reputation for the highest quality customer service in the solar energy market, which leads to a significant number of word-of-mouth referrals and new customers. In addition, our parent company, Gaiam, is a leader in the sustainable and renewable energy lifestyle market and has a base of over 8 million direct customers, providing us additional lead generation for potential solar energy customers. We also generate leads by selling solar and other renewable energy and sustainable living products and resources through our nationally distributed catalog and website, including books and DVDs on renewable energy and sustainable living, products for solar and other water heating, green building products and systems, air purification products, water conservation and purification products and other solar and sustainable living related products. Our Solar Living Center in Hopland features interactive demonstrations for renewable energy and environmentally sensible technologies and is the largest facility of its kind, with approximately 2 million visitors since it opened in 1996.

Our History

We are currently a wholly owned subsidiary of Gaiam. We were incorporated in Colorado in 2008 as a successor to a business that began in 1978.1978, which was operated by Gaiam as a separate business (except for certain consolidated corporate functions) from 2001 to 2008 and was consolidated into our corporate entity upon our formation. Our operations are headquartered in Hopland, California. We acquired Marin Solar in November 2007 and Carlson Solar in January 2008, together representing over 1,000 cumulative solar energy system installations. References in this prospectus to “Real Goods,” “we,” “us,” “our,” or “our company” refer to Real Goods Solar, Inc., its predecessors and its consolidated subsidiaries, unless we indicate otherwise.

Growth Strategy

Our goal is to continue to build on our industry-leading position and be the largest and most profitable residential solar energy integrator in the United States. We intend to pursue the following strategies to achieve this goal:

Business

Competitive Advantages

We believe that we have a number of advantages over our competitors, including the following:

Business

Industry Overview

We believe that as demand for electric power increases, the electric power industry will face various challenges, including the

following:

Because the solar energy industry offers solutions to these challenges, we believe it has extremely large growth potential. Currently, only approximately one-tenth of one percent of the world’s power is generated from solar energy sources. Between

2000 and 2006, manufacturers’ shipments of solar PV modules have increased at a compound annual growth rate of 41%,

according to Navigant Consulting. The global solar energy market is estimated to grow to between $19 billion and $32 billion

Business

by 2011, with annual solar energy installations reaching between 4.2 and 7.6 gigawatts, or GW, by 2011, compared to 1.7 GW in 2006, according to Solarbuzz.

Drivers of Solar Energy Industry Growth

We expect a number of factors will contribute to growth in the solar energy industry, including the following:

Business

Challenges to the Solar Energy Industry

We believe growth in the solar energy industry faces the following challenges:

Business

Services

We offer turnkey services to our solar energy customers, including design, procurement, permitting, build-out, grid connection, financing referrals and warranty and customer satisfaction activities. We install residential and small commercial systems that are generally between 1 kW and 500 kW output, with the average residential installation being approximately 4 kW output.

We design and build our solar energy systems to meet each customer’s individual needs and circumstances. We assess a customer’s annual power requirements and average daily consumption rates in different seasons of the year to size the solar energy system and engineer its wiring. We assess the customer’s roof size, configuration, and composition to determine the optimum location for the solar PV modules. We factor in information about the customer’s electrical service territory and its rate structures, and we identify the customer’s budget and preferred financing method, as well as the customer’s aesthetic preferences. We also identify the relevant federal, state and local regulations, including building codes, that are important to the cost, operation and return on investment of the customer’s solar energy system, as well as relevant tax rates and various other factors. We assess this data using solar monitoring tools and analytical calculations, which enable us to design a solar energy system to a size and configuration that maximizes energy efficiency for each customer’s circumstances.

We prepare final construction plans to obtain a building permit which is necessary for rebate processing. We also provide customers with a return on investment analysis and determine the rebates and performance-based incentives that are available to each customer. As soon as the building permit is approved, our installation professionals begin the installation by placing metal racking on the customer’s roof (or by building a ground mount if indicated), followed by installation of the solar PV modules, inverter(s) and the balance of systems components and safety equipment. We do not custom manufacture solar PV modules or inverters. Rather, we purchase these manufactured components for incorporation into our constructed solar energy systems.

After the solar PV modules and inverter(s) are installed on the customer’s home or business, we obtain a final inspection of the installation by the local building department, prepare and submit all rebate applications to the appropriate rebating jurisdiction and at the same time apply for the local utility company to interconnect the customer’s solar energy system to the utility grid. The entire process from signing of the contact through final inspection by the local building department typically takes between 30 to 60 days, with the actual installation work usually requiring two to three days.

Solar Energy Systems

A basic solar energy system has no moving parts and consists of a number of solar PV modules wired together and mounted on a metal framing structure, an inverter and the balance of systems and safety equipment necessary to connect the system to the customer’s existing utility service.

Business

Typical Grid-Tied Residential Solar Energy System Installation

Warranty Terms

Most manufacturers of solar PV modules currently offer a 20- to 25-year transferable warranty of their products. As required by these states, we offer a 10-year parts and labor warranty in California and a five-year parts and labor warranty in Colorado, which may also involve claims of property damage arising from the installation. We generally handle manufacturer warranty claims for solar PV modules as part of our customer service offerings and are reimbursed by the manufacturers for our labor and materials. Historically, our costs associated with warranty claims have been minimal.

Financing

While a majority of our customers choose to purchase their solar energy systems without the use of financing, we connect our customers with preferred third-party financing sources as requested. We handle some of the administrative processing for our customers that choose to use third-party financing.

Business

Working Capital Items

For purchases of a solar energy system, we typically require a deposit upon execution of the purchase contract, payment of 80% of the balance upon delivery of materials and the balance upon building department sign off. The price we invoice customers for solar energy systems is net of any available incentive or rebate which is assigned to us and which we then process and collect. We typically hold enough solar energy system components in inventory at one of our warehouse facilities to supply our delivery requirements. Payment terms with component vendors are typically on revolving credit limits that generally range from 45 to 90 day terms. Gaiam fulfills approximately 80% of our catalog and Internet sales through its central distribution center. We pay Gaiam through our Intercorporate Services Agreement, supplier product costs, order fulfillment fees, and freight charges to drop-ship these sales to our customers.customers, which payments will be made through our Intercorporate Services Agreement upon the completion of this offering.

Sales and Marketing

Our conventional marketing program includes presentation booths at tradeshows and consumer shows, inserts or an advertising page in our catalogs, of which we distribute more than 1.6 million copies annually, postcard mailings to targeted consumer markets (including portions of Gaiam’s 8 million customer base), Internet search engine optimization, pay-per-click ad words, affiliate marketing programs, radio advertising and customer referral programs.

To enhance our solar energy integration business by generating leads of potential solar energy system customers and promoting our brand awareness, we operate our Solar Living Center, distribute our catalog nationally and maintain our website. Our mail order catalog and website also provide pricing tools, media programming, in-depth articles and product information as well as how-to instructional content. In order to generate leads for potential solar energy system sales in a more cost effective manner than by using conventional marketing methods, we offer a broad array of products focused on renewable energy and sustainable living. These products include solar PV modules, inverters, books and DVDs on renewable energy and sustainable living, products for solar and other water heating, green building products and systems, air purification products and water conservation and purification products. Through these efforts, we are able to market our solar energy systems to potential customers who have likely purchased other renewable energy and sustainable living products and resources. Our customer service staff is trained in cross-selling all of our products, including solar energy systems, and they help us achieve a full integration of our cross-marketing efforts. We also receive new customer leads from the referrals of our satisfied customers, through our customer rewards and affinity programs, from designers and architects with whom we have worked on previous projects and through the strength and longevity of our Real Goods brand name and reputation. We use these channels to offer renewable energy and sustainable living products and resources, as well as to create a “community of customers.” We believe that our business model gives us a significant cross-marketing advantage by providing us access to potential purchasers of solar energy systems through a variety of existing sales channels and selective customer bases, through which we are able to market to a highly targeted group of potential customers who have likely purchased other renewable energy and sustainable living products and resources in the past. We believe that this cross-marketing ability lowers our customer acquisition costs to below what we estimate they would be if we were to rely solely on traditional marketing methods such as print, radio, television and Internet search words.

After we receive these high-quality leads, our sales representatives conduct an extensive telephone interview of the potential customer during which we determine, among other things, information about the customer’s site, location, and solar exposure, and that the customer and any relevant family member or co-owner is genuinely interested in and able to finance the purchase of a solar energy system. We use this focused customer qualification process to identify which potential customers are most likely to respond positively to our direct sales efforts before we make a site visit to the customer’s location. We then utilize our direct sales force to pursue these qualified leads. This qualification process lowers our customer acquisition costs because it narrows our customer leads and allows us to focus our direct sales efforts on highly targeted customers.

Business

Focused Customer Acquisition Model

Business

We own a 12-acre campus located in Hopland, California, approximately 95 miles north of San Francisco, called the Real Goods Solar Living Center. The Solar Living Center is a demonstration site for the technology and culture of solar living, with interactive educational displays. In addition, the site features a 132 kW grid-tied solar energy system that generates more than 175,000 kilowatt-hours of electricity annually. In 2007, the Solar Living Center had approximately 220,000 visitors. Since it opened in 1996, nearly 2 million people have visited the Solar Living Center, and it has become one of the largest tourist attractions in Northern California throughout the year and especially during SolFest, the premier solar and renewable energy trade show held annually at the Solar Living Center campus.

We have been honored for our ethical and environmental business standards, having received Corporate Conscience Awards from the Council on Economic Priorities. Our founder and Chief Executive Officer, John Schaeffer, received the 2007 Green Power Pioneer Award from the Center for Resource Solutions in conjunction with the Department of Energy. We are a member of California Solar Energy Industries Association (CAL SEIA), Northern California Solar Energy Association (NorCal Solar), American Solar Energy Society (ASES), Redwood Empire Solar Living Association (RESLA), and Colorado Solar Energy Industries Association (CoSEIA). Our Vice President of Commercial Sales and founder of Marin Solar, Roy Phillips, is a board member on CAL SEIA and advocates both in California and nationally for the solar energy industry.

Customers

Our residential customers have historically shared a number of characteristics. They tend to be college-educated homeowners, 30 to 65 years in age, high-income earners who are generally motivated both by environmental and economic reasons to install a solar energy system. Our residential solar energy systems are generally 10kW or smaller in size, and our commercial solar energy systems are generally no larger than 500 kW in size. Our typical residential customer is connected to the utility grid. Our commercial customers have included wineries, schools, apartment buildings, churches and retail facilities.

Suppliers

We do not manufacture solar PV modules, inverters or other components used in our solar energy systems, but purchase those components directly from manufacturers or, in some cases, from third-party distributors. We purchase solar PV modules manufactured by Sharp, SunPower, Kyocera Solar and others. Silicon is one of the primary materials used in the manufacture of solar PV modules. The worldwide market for silicon from time to time experiences a shortage of supply, primarily because of demand for silicon by the semiconductor industry. Shortages of silicon could adversely affect the availability and cost of the solar PV modules we use in our solar energy systems. We purchase inverters manufactured by Xantrex, Fronius, PVPowered, SMA and others. We currently purchase the components we use in our solar energy systems on a purchase order basis from a select group of manufacturers or suppliers. If we are unable to purchase from any of these sources in the future, we do not believe we would have difficulty in securing alternative supply sources, because all of the components we use in our solar energy systems are readily available from a number of different sources.

Competition

The solar energy industry is in its early stages of development and is highly fragmented, consisting of many small, privately held companies with limited resources and operating histories but some of which benefit from operating efficiencies or low overhead requirements. A number of competitors exist in the California market, including companies such as REC Solar, Akeena Solar and Solar City. Several of our competitors have expanded their market share in the California market by opening multiple offices within the state. According to data published by the California Energy Commission, as of the end of 2007, we were one of the top two solar energy system installers in California both in terms of total sales (installed system price) and cumulative watts (installed system size). Based upon other information, we estimate that we are currently in the top three solar energy system installers in California. In Colorado our competitors include Namaste Solar Electric and REC Solar, but there is no published data regarding competitive positions in Colorado. We compete on factors such as brand recognition, quality of services and products, pricing, speed and quality of installation.

Business

Regulations

Solar integrator services are subject to oversight and regulation by national and local ordinances, including building, zoning and fire codes, environmental protection regulations, utility interconnection requirements for metering and other rules and regulations. Our design and engineering teams design and install solar energy systems to comply with these varying standards as well as to minimize the installation and operating costs of each system. Our operations are also subject to generally applicable laws and regulations relating to discharge of materials into the environment and protection of the environment; however, because our operations do not typically involve any such discharge, there are no material effects on our business relating to our compliance with such environmental laws and regulations.

Intellectual Property

We have registered the trademarks “Real Goods” (effective in 1993 and renewed once) and “Own Your Power” (effective in 2008) with the U.S. Patent & Trademark Office. These trademark registrations are each valid for ten years and we endeavor to keepmaintain such registrations as valid and current by filing all required renewal forms when due. We have also registered the trade names “Real Goods Solar” and “Real Goods Renewables” in Colorado and “Own Your Power” in California. Our trademarks and trade names are important assets because of the value we derive from the Real Goods brand, and because of our company’s reputation that is associated with these trademarks and trade names. In addition, we hold the copyright for most of the contents of the “Solar Living Sourcebook.”

Seasonality

Our solar energy integration business has not been seasonal to date, but may become more seasonal as we expand our business into new markets.

Employees

As of January 22, 2008, we had 83 full-time employees, including installation personnel.

Facilities and Locations

We own a 12-acre campus in Hopland, California, which includes offices, our retail store, and the Solar Living Center. We sublease office space from Gaiam in Broomfield, Colorado, from which we manage our Colorado solar energy integration business and perform other management and customer service functions. We sublease warehouse space from Gaiam in Cincinnati, Ohio from which we distribute products. We also lease the following facilities from unrelated third parties: an office and warehouse facility in San Rafael, California; an office facility in Hemet, California, and a warehouse facility in Ukiah, California.

Legal Proceedings

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

Management

The following tables set forth information regarding our directors, officers and key employees. All of our directors and officers were elected or appointed to their current positions effective February 1, 2008, unless otherwise specified.

Officers and Key Employees

Management

Management

We have also entered into an agreement with Erik Zech, age 36, by which Mr. Zech has consented to become our President and Chief Financial Officer upon the completion of this offering.offering, at which time Ms. Valentine will resign as our Chief Financial Officer. From February 2001 until March 2008, Mr. Zech worked with the investment banking firm Thomas Weisel Partners LLC, most recently as a Principal of the firm. From June 1999 until December 2000, Mr. Zech was Chief Financial Officer of Creditland, Inc., from 1995 until 1997 he was in investment banking with Merrill Lynch and from 1993 until 1995 he was a certified public accountant with Price Waterhouse.

Structure of the Board of Directors and Director Independence

We have a board of directors consisting of five directors. Our bylaws provide that the number of directors is fixed by a majority vote of the board of directors. Our articles of incorporation and bylaws provide that the board of directors consists of a single class, with our directors being elected each year by a plurality of the votes cast at our annual meeting of shareholders. Our board of directors may be removed with or without cause by a majority vote of shareholders. Our board of directors has determined that three of our non-employee directors, namely Messrs. Argyropoulos and Nark and Ms. Mowry, each satisfy Nasdaq Global Market standards to qualify as independent directors as well as any additional independence standards that may be established by the board. Membership on the audit committee is limited to independent directors.

Our board of directors has adopted corporate governance guidelines that, along with the charters of our board committees and our code of ethics, provide the framework for the governance of our company.

Committees of the Board of Directors

Our board of directors has two standing committees: audit and compensation. Assignments to, and chairs of, the committees are selected by the board of directors. Each of these committees operates under a charter approved by the board of directors, which describes the principal functions of the committees. Our board of directors has determined that each of the members of our audit committee satisfies all of the independence requirements of the Nasdaq Global Market as well as all independence requirements of the SEC. We will be exempt from certain of the Nasdaq Global Market rules, for example those relating to nominating committees, because we will be deemed to be a controlled company on the basis of Gaiam’s control of more than 50% of our voting power. Accordingly, we do not have a standing nominating committee.

Compensation Committee Interlocks and Insider Participation

The salary and bonus amounts for 2007 reflect payments made by Gaiam or one of its subsidiaries for all services rendered by our executive officers. In the case of Mr. Rysavy and Ms. Valentine, only a portion of these services were rendered to our company. Accordingly, the Gaiam compensation committee determined the compensation of each of our executive officers during fiscal 2007. None of the members of our compensation committee has formerly been an officer or, within the last fiscal year, an employee, of our company or any of its subsidiaries, or had any relationship required to be disclosed under the section entitled “Relationships with Gaiam” below. None of our executive officers

Directors’ Compensation

Directors who are not employees of our company or its affiliates receive a fee of $3,000 for each meeting of our board that they attend and a fee of $1,000 for each telephonic meeting attended. In addition, non-employee directors receive a fee of $500 for attendance at each committee meeting and $250 for each telephonic committee meeting attended. Non-employee chairpersons of each standing committee receive an annual fee of $2,000. Directors may also be awarded stock options from time to time. All directors may elect to receive their compensation in shares of Class A common stock. None of our directors received compensation from us during 2007.

Executive compensation

Compensation Discussion and Analysis

Overview of Our Compensation Program and Philosophy

Our compensation program is intended to meet three principal objectives: (1) attract, reward and retain qualified, energetic officers and other key employees; (2) motivate these individuals to achieve short-term and long-term corporate goals that enhance shareholder value; and (3) support our corporate values by promoting internal equity and external competitiveness.

Our executive compensation program will be overseen and administered by our compensation committee, which will have the ultimate authority to make decisions with respect to the compensation of our named executive officers, but may, if it chooses, delegate any of its responsibilities to subcommittees. The compensation committee will operate under a written charter adopted by our board of directors and is empowered to review and approve the annual compensation for our executive officers.

The principal objectives that will guide the compensation committee in assessing our executive and other compensation programs will include the proper allocation among current cash compensation, short-term bonus compensation and long-term compensation. Other considerations will include our business objectives, our fiduciary and corporate responsibilities (including internal considerations of fairness and affordability), competitive practices and trends and regulatory requirements.

In determining the particular elements of compensation that will be used to implement our overall compensation objectives, the compensation committee will take into consideration a number of factors related to our performance, such as our earnings per share, profitability, revenue growth, and the specific operational and financial performance of certain groups, as well as the competitive environment for our business. Stock price performance is not expected to be a factor in determining annual compensation because the market price of our Class A common stock will be subject to a variety of factors outside of our control.

The compensation committee may, when appropriate as determined on an annual basis, identify individual performance goals for executive and other officers which will play a significant role in determining such officers’ incentive compensation for that year and which will be taken into consideration in setting base salary for the next year.

The compensation committee may meet with certain of our executive officers to obtain recommendations with respect to our compensation programs, practices and packages for executives, other employees and directors. The compensation committee may ask management for its recommendations regarding the base salary, bonus targets and equity compensation for the executive team and other employees. The compensation committee will consider, but will not be bound by and may not always accept, management’s recommendations with respect to executive compensation. Our Chief Executive Officer does not determine the compensation of any of our named executive officers. The compensation committee may also seek input from one or more independent compensation consultants prior to making determinations on material aspects of our compensation programs, practices and packages.

Elements of Our Compensation Program

The compensation committee believes that compensation paid to our executive officers and other members of our senior management should be closely aligned with our performance on both a short-term and a long-term basis and that such compensation should assist us in attracting and retaining talented persons who are committed to our mission and critical to our long-term success. To that end, the compensation committee believes that the compensation packages for executive officers should consist of three principal components:

Executive compensation

Stock option grants are typically expected to be made when a new executive officer is hired, and in determining the size of stock option grants, the compensation committee will base its determinations on such subjective considerations as the individual’s position within management, experience, market value of the executive’s skill set, and historical grant amounts to similarly positioned executives of our company. All stock options granted during fiscal 2007 will vest at 50% upon completion of this offering, and thereafter approximately 2.0% will vest monthly over the 25 months following completion of this offering.

We have selected these elements because each is considered useful or necessary to meet one or more of the principal objectives of our compensation policy. For instance, base salary and bonus target percentages are set with the goal of attracting employees and adequately compensating and rewarding them on a day-to-day basis for the time spent and the services they perform, while our equity programs are geared toward providing an incentive and reward for the achievement of long-term business objectives and retaining key talent. We believe that these elements of compensation, when combined, are effective, and will continue to be effective, in achieving the objectives of our compensation program.

The compensation committee will review our compensation program on an annual basis. In setting compensation levels for a particular executive, the compensation committee will take into consideration the proposed compensation package as a whole and each element individually, but will not be expected to apply any specific formula in doing so. While the importance of one compensation element to another may vary among executive officers, the compensation committee will attempt to correlate the overall compensation package to each executive officer’s past and expected future contributions to our business. We do not have any employment or severance agreements with our current executive officers.

Executive compensation

Summary Compensation Table

The table below presents the compensation for services in all capacities to our company and its subsidiaries for the periods shown, for our principal executive officer, principal financial officer and the other named executive officer of our company for the year ended December 31, 2007.