4. BUSINESS COMBINATION

3 Months Ended

Sep. 30, 2015

Business Combination

BUSINESS COMBINATION

On August 17, 2015 (the "Closing Date"), Holu Energy LLC ("Holu"), the Company's 85%-owned subsidiary, entered into an Asset Purchase Agreement under which Holu acquired substantially all of the assets of Tian Shan Renewable Energy LLC ("Seller").  The transaction was accounted for as a business combination under US GAAP.  The primary reason for the business acquisition was to penetrate the Hawaii and Pacific market in general, by acquiring a local team of respected expertise, solid projects, and healthy pipeline.

The aggregate purchase consideration has been allocated to the assets acquired, including customer intangible assets, based on their respective fair values.  The fair values of the assets purchased approximate the unbilled portion of each contract per the original terms of the contracts.  This resulted in excess fair value of the net assets acquired over the purchase consideration of $244,406.

The fair value of total consideration paid includes (1) $225,829 of cash, and (2) $18,577 of contingent consideration.  The contingent consideration is comprised of 20% of the value of the unbilled portions of certain purchased assets.  Holu will pay immediately to the Seller any amount of the contingent consideration collected in full after the closing date.  Holu is not obligated to pay the Seller any amount not collected in full after six months after the date of a project's completion.  All acquired projects are expected to be completed and billed within the next 12 months.  As of September 30, 2015, none of the contingent liability has been settled and the Company expects to pay the entire contingent consideration.

Key assumptions that were used by management are as follows:

Project assets	$	151,522
Customer intangible assets		169,321
Identifiable net assets	$	320,843

The Company recognized a gain on the bargain purchase.  The gain is presented separately in the "Other Income" section of the Company's condensed consolidated statements of operations.  Calculation of the bargain purchase was measured as follows:

Identifiable net assets acquired	$	320,843
Less: Fair value of the consideration transferred		244,406
Gain on bargain purchase	$	76,437

The Company was able to obtain a bargain purchase on the business combination due to the timing of the transaction.  At the time of closing, the fair value of certain contracts purchased was unknown and subsequent to the Closing Date, new information became available regarding the facts and circumstances around these customer contracts.

In addition to the consideration paid for the assets identified above, the Company settled pre-existing transactions that were accounted for separately in the amount of $171,205.  These transactions related to development and consulting services provided to the Company by the Seller prior to the acquisition date.  $159,205 of the development fees are capitalized within the "Project assets" line of the Company's balance sheet and $12,000 has been recognized in the "Selling, general, and administrative" expense line of the Company's condensed consolidated statements of operations.  The development and consulting services were settled with cash based on the original contract prices.

For financial reporting purposes, Holu's assets and liabilities are consolidated with those of the Company and the minority shareholder's 15% interest in Holu is included in the Company's condensed consolidated financial statements as a noncontrolling interest.

Acquisition Related Expenses

Included in the condensed consolidated statement of operations for the period from August 17, 2015 to September 30, 2015 were transaction expenses totaling approximately $33,700 for advisory and legal costs incurred in connection with the business acquisition.