PTOS 10-Q Quarter ended Dec. 31, 2009

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2009

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

For the transition period from ___________ to ______________

Commission File Number: 333-91190

P2 SOLAR, INC.

(Exact name of registrant as specified in its charter)

Delaware		98-0234680
(State or other jurisdiction of incorporation)		(IRS Employer Identification Number)
Unit 204, 13569 – 76 Avenue Surrey, British Columbia, Canada, V3W 2W3
(Address of principal executive offices)
(888) 945-4440
Registrant’s telephone number, including area code:

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Not Applicable.

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

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]  (Do not check if a smaller reporting Company)	Smaller reporting Company [ X ]

Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act). [ ]Yes [X ] No

As of February 2, 2010 the Issuer had 32,647,589 shares of common stock issued and outstanding.

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PART I-FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

The financial statements of P2 Solar, Inc., a Delaware corporation, included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission.  Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the Company in the Company's Form 10-K for the fiscal year ended March 31, 2009, and all amendments thereto.

P2 SOLAR, INC.

(A DEVELOPMENT STAGE COMPANY)

INTERIM FINANCIAL STATEMENTS

PERIOD ENDED DECEMBER 31, 2009

INDEX TO FINANCIAL STATEMENTS:	Page
Balance Sheet	3-4
Statements of Operations	5-6
Statements of Stockholders’ Equity (Deficit)	7
Statements of Cash Flows	8-9
Notes to Unaudited Financial Statements	10 - 17

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P2 Solar, Inc.

Formerly Natco International Inc.

Development Stage Company

Notes to Interim Financial Statements

For the Nine Months Ended December 31, 2009

Expressed in US Dollars

1.

Basis of Presentation, Nature of Operations and Going Concern

The accompanying unaudited condensed financial statements have been prepared in accordance with both generally accepted accounting principles for interim financial information, and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited condensed financial statements reflect all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

The condensed financial statements and related disclosures have been prepared with the presumption that users of the interim financial information have read or have access to our annual audited financial statements for the preceding fiscal year. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes thereto contained in the Annual Report on Form 10-K for the year ended March 31, 2009.

The Company was incorporated as Spectrum Trading Inc. under the laws of the Province of British Columbia, Canada, on November 21, 1990. On May 14, 1999, the Company was discontinued in British Columbia and was reincorporated as Spectrum International Inc. in the State of Delaware, U.S.A.  Effective September 3, 2004, the Company changed its name from Spectrum International Inc. to Natco International Inc. On March 11, 2009, the Company changed its name from the Natco International Inc. to P2 Solar, Inc.

The Company had two products, jewelry cleaner and a tire sealant. During the fiscal year ended March 31 2007, the Company discontinued its production of both lines. The Company had signed a binding letter of agreement with Photo Violation Technologies Corp. (PVT), which would have lead PVT to take over the Company in a reverse merger. However, this agreement was cancelled in December 2007.  The Company signed another letter of agreement in February 2008 with Lassen Energy, Inc to do a share exchange merger. On November 28, 2008, the Company cancelled the merger agreement with Lassen and instead signed a Licensing agreement with Lassen that gives the company rights to their products in India, Canada, and Hawaii. On July 13, 2009, the Company signed a Memorandum of Understanding (MOU) with Punjab Energy Development Agency (PEDA). Pursuant to the terms of the MOU, the company is authorized to prepare and submit a pre-feasibility report for the proposed development and construction of a 25 Megawatt Solar Power Station within the Indian State of Punjab.  The Company has been in the development stage in the solar business since February 2008.  The current financial statements represent the Company’s results since it entry into the solar business.

These financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes that the company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. The Company has incurred significant operating losses over the past three years and has a substantial stockholders' deficiency and a working capital deficiency. The Company's continued existence is dependent upon its

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ability to raise additional capital and to achieve profitable operations through the Licensing agreement with Lassen Energy, Inc. and the construction of the power plant in Punjab, India.

If the going concern assumption were not appropriate for these financial statements, then adjustments would be necessary in the carrying values of assets and liabilities, the reported revenues and expenses and the balance sheet classifications used.

2.

Summary of Significant Accounting Policies

Recently issued accounting standards

FASB Accounting Standards Codification

(Accounting Standards Update (“ASU”) 2009-01)

In June 2009, FASB approved the FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative nongovernmental GAAP. All existing accounting standard documents, such as FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and other related literature, excluding guidance from the Securities and Exchange Commission (“SEC”), have been superseded by the Codification. All other non-grandfathered, non-SEC accounting literature not included in the Codification has become nonauthoritative. The Codification did not change GAAP, but instead introduced a new structure that combines all authoritative standards into a comprehensive, topically organized online database. The Codification is effective for interim or annual periods ending after September 15, 2009, and impacts the Company’s financial statements as all future references to authoritative accounting literature will be referenced in accordance with the Codification. There have been no changes to the content of the Company’s financial statements or disclosures as a result of implementing the Codification during the quarter ended December 31, 2009.

As a result of the Company’s implementation of the Codification during the quarter ended December, 2009, previous references to new accounting standards and literature are no longer applicable. In the current quarter financial statements, the Company will provide reference to both new and old guidance to assist in understanding the impacts of recently adopted accounting literature, particularly for guidance adopted since the beginning of the current fiscal year but prior to the Codification.

S ubsequent Events

(Included in Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165 “Subsequent Events”)

SFAS No. 165 established general standards of accounting for and disclosure of events that occur after the balance sheet date, but before the financial statements are issued or available to be issued (“subsequent events”). An entity is required to disclose the date through which subsequent events have been evaluated and the basis for that date. For public entities, this is the date the financial statements are issued. SFAS No. 165 does not apply to subsequent events or transactions that are within the scope of other GAAP and did not result in significant changes in the subsequent events reported by the Company. SFAS No. 165 became effective for interim or annual periods ending after June 15, 2009 and did not impact the Company’s financial statements. The Company evaluated for subsequent events through the issuance date of the Company’s financial statements. No recognized or non-recognized subsequent events were noted.

Determination of the Useful Life of Intangible Assets

(Included in ASC 350 “Intangibles — Goodwill and Other”, previously FSP SFAS No. 142-3 “Determination of the Useful Lives of Intangible Assets”)

FSP SFAS No. 142-3 amended the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under previously issued

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goodwill and intangible assets topics. This change was intended to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset under topics related to business combinations and other GAAP. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. FSP SFAS No. 142-3 became effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of FSP SFAS No. 142-3 did not impact the Company’s financial statements.

Noncontrolling Interests

(Included in ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51”)

SFAS No. 160 changed the accounting and reporting for minority interests such that they will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS No. 160 became effective for fiscal years beginning after December 15, 2008 with early application prohibited. The Company implemented SFAS No. 160 at the start of fiscal 2009

The adoption of SFAS No. 160 did not have any other material impact on the Company’s financial statements.

Consolidation of Variable Interest Entities — Amended

(To be included in ASC 810 “Consolidation”, SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”)

SFAS No. 167 amends FASB Interpretation No. 46(R) “Consolidation of Variable Interest Entities regarding certain guidance for determining whether an entity is a variable interest entity and modifies the methods allowed for determining the primary beneficiary of a variable interest entity. The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS No. 167 is effective for the first annual reporting period beginning after November 15, 2009, with earlier adoption prohibited. The Company will adopt SFAS No. 167 in fiscal 2010 and does not anticipate any material impact on the Company’s financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards or pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

3.

Solar Panel License and Share Exchange

On November 28, 2008, the Company cancelled the April 18, 2008 agreement and signed a new Licensing agreement with Lassen.  This agreement gives the Company the rights to Manufacture and setup power plants in the countries of India, Canada, and State of Hawaii. The consideration to be paid by the Company to Lassen for the Licenses is an initial fee of US $1,000,000 (the “License Fee”) together with a 2% royalty on gross revenues received by the Company from future sales of Lassen Solar Panels. The license does not have defined term and will not be amortized until it is used to the benefit of the Company.

Simultaneously with execution of the License Agreement, the Company also executed a Share Transfer Agreement with Lassen pursuant to which it agreed to issue Lassen a total of 8,915,871 shares of its common stock, representing approximately 25% of the Company’s issued and outstanding common stock, in exchange for the issuance by Lassen to the Company of approximately 25,252,500 shares of

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common stock of Lassen, representing approximately 25% of the issued and outstanding common stock of Lassen.  The shares had been valued at par value ($0.001) for reporting purposes.

As disclosed on a Form 8-K filed with the Securities and Exchange Commission on May 13, 2009, on May 7, 2009, the Company and Lassen entered into an Agreement pursuant to which the parties agreed to terminate the Share Transfer Agreement and return the shares that were transferred under the Share Transfer Agreement. Upon return of the share certificate from Lassen representing such shares, it was cancelled on Dec 31, 2009, and the 8,915,871 shares represented thereby were returned to the status of authorized but unissued shares of common stock. Additionally, once the Company received the share certificate from Lassen, the Company returned the share certificate representing 25,252,500 shares of Lassen common stock to Lassen.    A copy of the Agreement terminating the Share Transfer Agreement was attached as Exhibit 10.15 to the Form 8-K filed by the Company on May 13, 2009 and is hereby incorporated by reference.

4.   Loan to Photo Violation Technologies Inc

P2 Solar (“P2”) lent Photo Violation Technologies Corp., (“PVT”) $1,485,000.00 USD (the “Loan”). The Loan is the subject of a Loan Agreement and a Promissory Note. PVT has failed to pay any principal or interest on the Loan. P2 has sued PVT for $1,485,000.00 USD. P2 has also sued the Directors of PVT. P2’s action against the PVT Directors had been stayed pending posting of security for costs. $100,000 security for cost was paid on December 9, 2009.  P2’s action against PVT and Directors is continuing. Despite the fact that P2 lent PVT $1,485,000.00, PVT is disputing that it owes P2 the $1,485,000.00 it was lent by P2. PVT has filed a Counterclaim, purporting to have claims against P2 and others. PVT made no purported claims against P2 until after P2 sued PVT and PVT's Directors.  P2 was awarded a summary judgment of $1,485,000.00 plus interest by the courts on July 22, 2009.  The company is vigorously attempting to collect on the judgment.  P2 also commenced a second action against PVT for defamation after PVT published what was alleged to be a verbatim ruling from the Court, when, in fact, the ruling had been altered by PVT.  The Company believes that this debt is collectable and will be collected.

On December 10, 2009, the Company paid the sum of $95,147USD ($1,000,000 CAD) into Court for Security for Cost pursuant to the order of the Honourable Madam Justice Griffin pronounced on November 7, 2009.

5.    Bank Indebtedness

Details are as follows:

		December 31, 2009		March 31, 2009
Checks written in excess of funds on deposit		$       -		$       -
HSBC demand revolving loan for a maximum amount of CDN$20,000 (US$15,857), secured by a General Security Agreement on all assets of the company (first charge) and by personal guarantees made by a director and officer of the company, interest at bank prime plus 2%		US$           -		(14,010)
		-		(14,010)
Less: Current Portion		-		(14,010)

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Long-term portion		$       -		$       -

6.    Related Party Transactions

Other than as disclosed elsewhere in these financial statements, the following amounts have been recorded as transactions with related parties:

a) Amounts due to related parties are as follows:

		December 31, 2009		March 31, 2009
Loans payable to relatives of a director and officer of the company.  The loans are unsecured, are due on demand, and bear no interest		$           14,419		$            12,015
Loans payable to a director and officer of the company.  The loans are unsecured, do not have fixed terms of repayment, and bear interest at 8.33% to 11% (2008 - 8.33% to 11%).  It is expected that these loans will be repaid within the next 12 months.		163,644		201,457
Wages and bonus payable to a director and officer of the company.  This liability is unsecured, due on demand and non-interest bearing (2008 - nil%).		698,796		483,297
Loan payable to a relative of a director and officer of the company. The loan is unsecured, due on demand, bears no interest		6,132		5,110
		$         882,991		$          701,879
Less: Current portion		(882,991)		(701,879)
Long-term portion		$                     -		$                      -

7.    Capital Stock

a) Authorized Stock

The Company has authorized 500,000,000 common shares with a par value of $0.001 per share. Each common share shall entitle the holder to one vote, in person or proxy on any matter on which action of the stockholder of the corporation is sought. The company has authorized 5,000,000 shares of preferred stock with a par value of $0.001 per share. The holders of preferred stock have no rights except as determined by the Board of Directors of the company and/or provided by Delaware General Corporate Law.

b) Share Issuances

On January 13, 2009, the Company signed a Compensation Agreement with Capital Group Communications (“CGC”) of Sausalito, California, pursuant to which the Company agreed to compensate CGC for past consulting services rendered by CGC and for introduction to and assistance with the negotiations with Lassen Energy with the issuance of 500,000 shares of restricted common stock.  The 500,000 shares of common stock were recorded at $0.34 per share (market price at the agreement date) in total amount of $170,000 and issued on May 12, 2009.

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On March 12, 2009, signed a Consulting Agreement with CGC, pursuant to which CGC agreed to provide consulting services to the Company for an initial one year period.  Pursuant to the terms of the Consulting Agreement, the Company agreed to compensate CGC with an initial issuance of a total of 500,000 shares of restricted common stock.  Under the terms of the Consulting Agreement, the Company has the option to extend the agreement for an additional 12 month period by issuing another 500,000 shares of restricted common stock to CGC. The initial 500,000 shares of common stock were recorded at $0.46 per share (market price at the agreement date) in total amount of $230,000 and issued on May 12, 2009.

On December 12, 2009, the company issued 384,454 shares of restricted common stock for outstanding Share Subscriptions.

c) Share Subscriptions

At December 31, 2009 there were no Share Subscriptions outstanding.

d) Warrants

In conjunction with the Private placement, 718,332 warrants were issued to individuals and companies that participated in the private placement done in January 2009. There are further 384,454 warrants to be issued for subscriptions received in June 2009.

e)    Stock Options

There were 200,000 options issued to a company consultant for services.  As to the total number of Shares with respect to which the Option is granted, the Option shall be exercisable as follows:  (i) 50% of the Option (100,000 Shares) in the aggregate may be exercised on or after November 21, 2009 at an Exercise Price of $0.20 per Share; and (ii) 50% of the Option (100,000 Shares) in the aggregate may be exercised on or after November 1, 2010 at an Exercise Price  in an amount per Share that is 25% less than the ten day moving average of the Company’s Common Stock immediately prior to November 1, 2010.

The Company has committed to issue to the Chief Executive Officer 67,000 share purchase options every April.  These options will be exercisable at $0.10 per share and will expire five years after the date of grant.  Further bonus options are available to the Chief Executive Officer.  These bonus options entitle the Chief Executive Officer to purchase shares at 20% below the market price up to a value determined by 5% of the amount of annual profits from sales in excess of $2,500,000 up to $3,999,999 and 8% of the amount of annual profits from sales in excess of $4,000,000.  To date, sales have not exceeded $2,500,000 and thus no bonus options have been issued.

Under the black-scholes pricing model to calculate the fair value of the warrants as of the issuance date and charge it as warrants expense for $ 322,759, option expense $38,667 in nine month ended December 31, 2009 and $0 in nine month ended December 31, 2008. The fair value of each option granted is estimated at the respective grant date using the Black-Scholes Option Module. The following assumptions were made in estimating fair value:

		Warrants & options
Expected volatility		1.59
Expected life		2.02-9.89
Risk-free interest rate		0.31~0.37%

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Dividend yield		-

The following table summarizes stock options and warrants outstanding as of December 31, 2009, as well as activity during the nine months then ended:

		Warrants		Options
Balance, March 31, 2009		718,332		0
Issued		384,454		200,000
Exercised & expired		0		0
Balance, December 31, 2009		1,102,786		200,000

The following table provides certain information with respect to the above referenced warrants and options outstanding at December 31, 2009:

f)    Debt Conversion

From March 31, 2008 through September 21, 2009, the Company borrowed a total of $379,719.26 from certain holders (collectively referred to herein as the “Holders”) pursuant to the terms of Convertible Promissory Notes (collectively referred to herein as the “Notes”).  Pursuant to the terms of the Notes, the Holders were provided with the option of converting the outstanding balance of the Notes into shares of the Company’s Common Stock at a conversion price of $.10 per share.  On November 19 ^th and November 20 ^th , 2009, the Holders elected to exercise their conversion rights under the Notes.  In accordance with the terms of the Notes, on February 2, 2010, the Company caused the Company’s transfer agent to issue the Holders a total of 3,797,189 shares of the Company’s common stock.

8.  Other Significant and Subsequent events

On April 20, 2009, the Company paid additional $30,000 towards the remaining License fee of $800,000.  As a result, the current balance of the License Fee is $770,000

On May 7, 2009, the Company, Lassen and DBK entered into an Agreement removing the Licenses from suspension and providing the Company with an extension in which to make the remaining payment of the $770,000 due and owing under the License Agreement.  Pursuant to the Agreement, the Company is now required to pay the remaining $770,000, ninety (90) days after the Company receives a report from Lassen indicating that the Lassen Solar Panel has received Intertek Certification and has a power output of a minimum of 1500 watts.

On May 7, 2009, the Company and Lassen entered into an Agreement pursuant to which the parties

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agreed to terminate the Share Transfer Agreement and return the shares that were transferred under the Share Transfer Agreement.  The Company has returned the 25,252,500 shares of Lassen common stock.  Upon return of the share certificate from Lassen representing such shares, it was cancelled, and the 8,915,871 shares represented thereby were returned to the status of authorized but unissued shares of common stock.

In June, 2009, the Company has signed two share subscription agreements with third parties. Pursuant to these agreements, the subscribers agree to purchase total 384,454 Units at $0.30 per Unit in total amount of $115,336. Each Unit consists of one share of common stock and one Warrant. One Warrant entitles the holder thereof to purchase one share of common stock at $0.42 per share at anytime during the period of 36 months from the date of closing. These shares were issued in December 2009.

On July 13, 2009, the Company’s subsidiary, Solarise, Inc. signed a Memorandum of Understanding (MOU) with Punjab Energy Development Agency (PEDA). Pursuant to the terms of the MOU, the Company is authorized to prepare and submit a pre-feasibility report for the proposed development and construction of a 25 Megawatt Solar Power Station within the Indian State of Punjab.

On July 13, 2009, the Company signed a Letter of Intent (LOI) with LDK Solar Europe Holding SA. (LDK).  Pursuant to the terms of the LOI, the parties were exploring a possible business relationship pursuant to which LDK would assist the Company with the production and manufacture of solar panels and manufacture and assembly of the above described 25 mega watt power plant in Punjab, India. The term of the LOI has expired; the parties did not reach any definitive agreement and elected not to pursue a business relationship.

On September 24, 2009, the British Columbia Supreme Court has awarded judgment in favor of P2 Solar, Inc. against Photo Violation Technologies Corp. ("PVT") in the amount of $1,485,000.00 CAD plus interest.

On January 22, the Company has signed a Letter of Intent (LOI) with Osolar, Inc., a Korean corporation(“Osolar”), regarding a potential business arrangement pursuant to which Osolar will assist P2 Solar with planning, construction and operation of a 25 mega watt power plant (30 mega watt direct current) in Punjab, India.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS "FORWARD LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS," "INTENDS," "WILL," "HOPES," "SEEKS," "ANTICIPATES," "EXPECTS "AND THE LIKE OFTEN IDENTIFY SUCH FORWARD LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD LOOKING STATEMENT. SUCH FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO THE PRESENT AND FUTURE OPERATIONS OF THE COMPANY, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE THE COMPANY TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE, THE READER IS ADVISED THAT THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS REPORT ON FORM 10-Q AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.

Background and Overview

P2 Solar, Inc., ( hereinafter referred to as “we”, “us”, the “Company”, or the “Registrant”) has been in existence as a Company (including our predecessor British Columbia Corporation) since 1990. We began to concentrate on chemical manufacturing business activities in 1997; prior to that time we had few shareholders and were primarily dormant. We never made a profit on chemical manufacturing operations.  The Company has phased out its chemical manufacturing operations.  As discussed more fully below, the Company’s current business operations are focused on the manufacturing, distribution and sales of solar panels and the potential construction of a solar power plant located in Punjab, India.

As disclosed on a Form 8-K filed with the Securities and Exchange Commission on November 26, 2008, on November 21, 2008, in furtherance of its business operations focused on the manufacture, distribution and sales of solar panels, the Company entered into: i) an Agreement (the “Share Transfer Agreement”) with Lassen Energy, Inc. “(Lassen”) a California corporation, for the transfer of shares of common stock; and ii) an Intellectual Property License Agreement (the “License Agreement”) with Lassen, DBK Corporation (“DBK Corp”), a Nevada corporation, and Darry Boyd (“Boyd”) (DBK Corp and Boyd are collectively referred to herein as (“DBK”)).

Share Transfer Agreement

On November 21, 2008, the Company entered into a Share Transfer Agreement with Lassen, pursuant to which, the Company agreed to issue to Lassen a total of 8,915,871 shares of its common stock, representing approximately 25% of the issued and outstanding common stock of the Company, in exchange for the issuance by Lassen to the Company of approximately 25,252,500 shares of common

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stock of Lassen, representing approximately 25% of the issued and outstanding common stock of Lassen. Closing under the Share Transfer Agreement occurred on January 15, 2009.

As disclosed on a Form 8-K filed with the Securities and Exchange Commission on May 13, 2009, on May 7, 2009, the Company and Lassen entered into an Agreement pursuant to which the parties agreed to terminate the Share Transfer Agreement and return the shares that were transferred under the Share Transfer Agreement.  During the period ended December 31, 2009, Lassen returned the share certificate representing 8,915,871 shares of common stock to the Company; upon receipt of the share certificate, the Company caused its Transfer Agent to cancel the 8,915,871 shares of common stock represented by the share certificate.  Furthermore, upon receipt of the share certificate from Lassen, the Company returned the share certificate representing 25,252,500 shares of Lassen common stock to Lassen.    A copy of the Agreement terminating the Share Transfer Agreement was attached as Exhibit 10.15 to the Form 8-K filed by the Company on May 13, 2009 and is hereby incorporated by reference.

License Agreement

On November 21, 2008, pursuant to the License Agreement, Lassen and DBK agreed to provide the Company with several Licenses relating to the use of certain intellectual property necessary for the manufacturing, distribution and sale of the Lassen Solar Panel throughout the Nations of India and Canada, and the State of Hawaii.  The consideration to be paid by the Company to Lassen for the Licenses is a fee of US $1,000,000 together with a 2% royalty on gross revenues received by the Company from future sales of Lassen Solar Panels.  The current amount due an owing under the License Agreement is $770,000.  The Company is required to pay the remaining $770,000, ninety (90) days after the Company receives a report from Lassen indicating that the Lassen Solar Panel has received Intertek Certification and has a power output of a minimum of 1500 watts.

The Lassen Solar Panel is still in the developmental stage.  Once the Lassen Solar Panels receives Underwriters Laboratories, Inc. (“UL”) Certification indicating that the Lassen Solar Panel is ready for commercial distribution, the Company will begin the process of establishing assembly facilities for the Lassen Solar Panel in the Licensed Territories.  The Company anticipates that the facilities will be established and operational within approximately one (1) year of the receipt of UL Certification.

Additional Business Operations

In addition to the Company’s business operations relating to the manufacturing, distribution and sales of solar panels, the Company is currently in negotiations with the government of Punjab, India to build a 200 mega watt power plant in that state.  On July 13, 2009, the Company entered into a Memorandum of Understanding (“MOU”) with the Punjab Energy Development Agency (“PEDA”) regarding the construction of a 25 mega watt power plant, which will serve as the first phase of the larger 200 mega watt plant in Punjab, India.  No material definitive agreement has been signed regarding the construction of either power plant.  Pursuant to the terms of the MOU, the Company is only authorized to prepare and submit a pre-feasibility report for the proposed solar power project to PEDA; the MOU does not provide the Company with the authority to construct the solar power project.  Under the terms of the MOU, the Company was required to supply the pre-feasibility report to PEDA within 120 days of the execution of the MOU.  On November 5, 2009, the Company received an extension from PEDA until January 31, 2010 in which to submit its pre-feasibility report. On January 30, 2010, the Company submitted the pre-feasibility report to PEDA.  The Company is currently waiting for a response from PEDA regarding its determination about the feasibility of the proposed solar power project.  In the event that PEDA determines that the solar power project is viable, the Company and PEDA will enter into a separate agreement memorializing the terms for the construction of the 25 mega watt power plant.

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In conjunction with the entry into the MOU, the Company has paid a refundable interest free security deposit to PEDA of RS 62.5 Lakhs (approximately US $145,790) in the form of a bank guarantee / demand draft in favor of PEDA.  The performance security deposit shall be refunded upon either the commission of the solar power project, or the PEDA’s failure to accept the Company’s pre-feasibility report.

In anticipation of moving forward with the solar power project in Punjab, the Company formed a wholly-owned subsidiary corporation named Solarise, Inc. in the State of Nevada (“Solarise”) for the purposes of facilitating the construction of the 25 Mega Watt power plant.  The Company and its subsidiary have entered into two non-binding letters of intent relating to the construction and manufacture of the 25 mega watt power plant in Punjab, India.

On July 13, 2009, the Company signed a Letter of Intent (the “LDK LOI”) with LDK Solar Europe Holding SA. (“LDK”).  Pursuant to the terms of the LOI, the parties were exploring a possible business relationship pursuant to which LDK would assist the Company with the production and manufacture of solar panels and manufacture and assembly of the above described 25 mega watt power plant in Punjab, India. The term of the LDK LOI has expired; the parties did not reach any definitive agreement and elected not to pursue a business relationship.

On January 22, 2010, the Company entered into a non-binding Letter of Intent (the “Osolar LOI”) with Osolar, Inc., a corporation organized under the laws of South Korea (“Osolar”) regarding a potential joint venture between Osolar and the Company pursuant to which Osolar, would, following the execution of necessary agreements, assist the Company with the manufacture and assembly of the 25 mega watt power plant in Punjab, India.

As noted above, no material definitive agreements have been entered into regarding the construction of the 25 mega watt power plant in Punjab, India; the Company and its subsidiary have only entered into a non-binding MOU and LOIs.  The MOU and the LOIs are both conditional and there is no guarantee that the Company will be able to meet the conditions of either the MOU or LOIs. The foregoing is an explanation of the preliminary steps that the Company has taken with regards to the potential entry into material definitive agreements and construction of the power plant in Punjab, India.

During the fiscal year ending March 31, 2010, and the subsequent twelve months, the Company anticipates that it will continue to pursue the development of the solar power plant in Punjab, India.  Additionally, in the event that the Lassen Solar Panel is ready for commercial applications when the Company begins construction on the power plant, and the Company is able to meet the financial requirements of the License Agreement, the Company anticipates utilizing the Lassen Solar Panel in the project.  However, if the Lassen Solar Panel is not yet ready for commercial applications, the Company will utilize currently available commercial solar panels for the construction of the project.

Results of Operation

As of December 31, 2010, the Company remained in the development stage and had not generated any revenue from operations.  As a result, no meaningful comparison is possible regarding results of operation for the three or nine months ended December 31, 2010 as compared to the three or nine months ended December 31, 2008.

Liquidity and Capital Resources

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our financial condition for the nine months ended December 31, 2009.

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The following summary should be read in conjunction with the financial statements and accompanying notes to them included elsewhere in this report.  Our financial statements are stated in US Dollars and are prepared in accordance with generally accepted accounting principals of the United States (“GAAP”).

During the nine months ended December 31, 2009, the Company did not have any sales or generate any revenues.  As of December 31, 2009, the Company’s unaudited balance sheet reflects total assets of $3,017,023 which primarily consist of: i) a Loan to Photo Violations Technology Inc. in the principal amount of $1,485,000; ii) the License Agreement with Lassen valued at $1,000,000; iii) an interest receivable on the loan to Photo Violations Technology Inc. in the amount of $214,971; and iv) a Performance Bond with the Punjab Government in the amount of $145,790.  As of December 31, 2009, the Company’s unaudited balance sheet reflects total liabilities of $2,271,874.  The Company has cash on hand of $8,560 and a deficit accumulated during the development stage of $2,848,122.

The Company does not have sufficient assets or capital resources to pay its on-going expenses.  Additionally, the Company does not currently have the $770,000 to cover the final payment that will need to be paid pursuant to the terms of the License Agreement, or the funds necessary to proceed with the development of the power plant in Punjab. To date, the Company has primarily financed its operations through equity investment from investors, shareholder loans, and credit facilities from Canadian chartered banks and increases in payables and share subscriptions. Most of the financing has been debt financing from related and un-related parties.  Currently, our estimated fixed costs at this time are approximately $5400 per month; that figure includes $900 for lease payments, $500 for utilities, $3,000 for loan interest and principle payments, and $1,000 for miscellaneous expenses. We will have to raise approximately $5400 per month to cover operating expenses, and an additional $770,000 to cover the payment under the License Agreement, and, if PEDA approves the Company’s feasibility report, approximately $112,000,000 to cover expenses associated with the development of the power plant in Punjab, India.

In an effort to enhance it liquidity, as discussed more fully in Part II, Item 1, below, we are currently pursuing PVT for the money it owes us ($1,485,000) plus interest and damages. Additionally, the Company anticipates that it will attempt to raise approximately 2 to 3 million dollars through the sale of the Company’s securities to cover the Company’s operating expenses and to make the $770,000 payment pursuant to the License Agreement.  Furthermore, if PEDA approves the Company’s feasibility report, and authorizes the construction of the 25 mega watt power plant in Punjab India, the Company anticipates that it will pursue a combination of debt and equity financing in an effort to raise the necessary funds to cover the estimated $112,000,000 in expenses associated with the development of the power plant.  We have had preliminary discussions with a number of groups regarding both a smaller and larger financing; we are hopeful that we will be able to obtain financing.  However, there is no guarantee that we will be successful in raising any additional capital.  If we are unable to finance the Company by debt or equity financing, or a combination of the two, we will have to look for other sources of funding to meet our requirements.  That source has not been identified as yet.

Our financial statements have been prepared on the going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary course of business. Operations to date have been primarily financed by long-term debt and equity transactions as well as increases in payables and related party loans. Our future operations are dependent upon the identification and successful completion of additional long-term or permanent equity financing, the continued support of creditors and shareholders, and, ultimately, the achievement of profitable operations. There can be no assurance that we will be successful. If we are not, we will be required to reduce operations or liquidate assets. We will continue to evaluate our projected expenditures relative to our available cash and to seek additional means of financing in order to satisfy working capital and other cash requirements.

Off Balance Sheet Arrangements

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The Company does not have any off-balance sheet arrangements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 4T.

CONTROLS AND PROCEDURES .

Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a Company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are designed to provide reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported within the time periods specified.  Our chief executive officer and chief financial officer also concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance of the achievement of these objectives.

Changes in Internal Control over Financial Reporting

There was no change in the Company's internal control over financial reporting during the period ended December 31, 2009, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II-OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

On December 12, 2007, the Company commenced legal proceedings in British  Columbia

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Supreme Court against Photo Violation Technologies Corp. ("PVT") and its president, Fred Mitschele (aka Fred Marlatt), claiming punitive, exemplary and consequential damages and other remedies arising from breach of contract and wrongful conduct on the part of Mitschele.  In the Action, the Company claimed PVT had breached the agreement among the Company, PVT and Mitschele entered into on or about March 16, 2007, which provided for the completion of a reverse merger between the Company and PVT.   The Company also claimed in Court documents that Mitschele engaged in a number of wrongful acts, including inducing breach of contract, attempting to divert prospective investors from Company to PVT, failing to provide financial statements and other necessary documents. In February 2008, the Company extended the law suit to include, the other two directors and one employee.  On July 22, 2009, the Company was awarded a judgment in its legal proceeding against PVT in the amount of $1,485,000, plus interest.  The Company is in the process of pursuing all available options to collect on its judgment against PVT.  Additionally, in November 2008, the Company launched another law suit against PVT for spreading misinformation about the Company through a number of websites; this legal proceeding is currently ongoing.

ITEM 1A.

RISK FACTORS.

Not Applicable.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS .

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 5.

OTHER INFORMATION.

None.

ITEM 6.

EXHIBITS.

(a)

The following exhibits are filed herewith:

31.1

Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

In accordance with Section 13 of the exchange act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

P2 Solar, Inc.

By: /s/ Raj-Mohinder S. Gurm

-----------------------------------

Name: Raj-Mohinder S. Gurm

Date: February 16, 2010

Title: Chief Executive Officer  & Chief Financial Officer

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