Fair Value Measurement

3 Months Ended

Mar. 31, 2015

11. Fair value measurement

As discussed in Note 7— Project Assets, the Company issued contingent consideration as part of a transaction to acquire assets from HPL in September 2014. The Company issued the third party $3,300 to be paid with shares of the Company’s Common Stock at a price per share equal to $1.10 or 3,000,000 shares of Common Stock, subject to an adjustment which indicates that if the dollar volume-weighted average price (“VWAP”) for the Company’s Common Stock is less than $1.00 per share for the five trading days prior to March 30, 2015, then the Company shall issue HPL additional shares of Common Stock so that the total number of shares issued by the Company under the agreement multiplied by the five day VWAP will have a value of at least $3,000 on March 30, 2015. The contingent consideration meets the definition of a derivative and the Company has recorded the fair value of such derivative as a derivative liability which is included in other current liabilities in the Consolidated Balance Sheet as of December 31, 2014 and the change in fair value was recorded in the Condensed Consolidated Statement of Operations for the three months ended March 31, 2015. This derivative was expired on March 30, 2015.

In arriving at fair-value estimates, the Company utilizes the most observable inputs available for the valuation technique employed. If a fair-value measurement reflects inputs at multiple levels within the fair value hierarchy, the fair-value measurement is characterized based upon the lowest level input. For the Company, recurring fair-value measurements are performed for the derivative liability.

The derivative liability is recognized in the balance sheet at fair value. Changes in the fair value of the derivative liability are reported in the Condensed Consolidated Statement of Operations. The Company does not have any derivative liabilities that reduce risk associated with hedging exposure and has not designated the derivative liability as a hedge instrument.

The Company did not have any derivatives valued using Level 1 and Level 2 inputs as of March 31, 2015 and December 31, 2014. The fair values and corresponding classifications under the appropriate levels of the fair value hierarchy of the outstanding derivative liability recorded as recurring liabilities in the Condensed Consolidated Balance Sheet consisted of the following:


	Level		March 31, 2015		December 31, 2014
Included in other current liabilities: Derivative liability		3	$	—	$	11

The following table presents quantitative information for Level 3 measurements:


	Fair value at December 31, 2014		Valuation technique	Unobservable input
Liabilities:
Derivative liability	$	11	Black-Scholes option pricing model	Prevailing interest rates, Company’s stock price volatility, expected term

There have been no transfers between Level 1, Level 2, or Level 3 categories.

Financial instruments classified as Level 3 in the fair value hierarchy represents the derivative liability in which management has used at least one significant unobservable input in the valuation model. The following table represents a reconciliation of activity for the derivative liability in order to arrive at the current derivative liability recorded at fair value as of March 31, 2015:


Derivative Liability
Opening balance – December 31, 2014	$	11
Purchases, sales, issuances, and settlements		—
Transfers into and (or) out of Level 3		—
Change in fair value		(11	)
Closing balance – March 31, 2015	$	—

Change in fair value of $11 is recorded as fair value change of derivative liability under other income in the Condensed Consolidated Statement of Operations.

There were no assets or liabilities measured on a non-recurring basis as of March 31, 2015 and December 31, 2014.

For financial instruments that are not required to be measured at fair value, the following method and assumptions were used to estimate the fair value as at March 31, 2015 and December 31, 2014:

Cash and cash equivalents, restricted cash, accounts receivable and payable, short term investments, bank deposits with maturity over three months, accrued liabilities, advance from customers and other current liabilities –costs approximates fair value because of the short maturity period.

Notes receivable, current, Notes receivable, noncurrent - The fair value of Notes receivable, current were based on anticipated cash flows, which approximates carrying value, and were classified in Level 2 of the fair value hierarchy. The fair value of Notes receivable, noncurrent were classified in Level 3 of the fair value hierarchy. The Company used multiple techniques, including an income approach applying discounted cash flows approach, to measure the fair value using Level 3 inputs; the results of each technique have been reasonably weighted based upon management’s judgment applying qualitative considerations to determine the fair value at the measurement date. The fair value of notes receivable is determined to approximate its carrying value.

Convertible bonds. The estimated fair value was $40,551 and $39,423 as of March 31, 2015 and December 31, 2014. The fair value of convertible bonds was classified in Level 2 of the fair value hierarchy. The Company determines the fair value using binomial model with significant input on prices and votes observable in the market.

Short term borrowings. The carrying amount approximates fair due to the short maturity and their variable market rates of interest that change with current Prime and no change in counterparty credit risk and were classified as Level 2 of the fair value hierarchy.

Other noncurrent liabilities. The Company used discounted cash flow approach to determine the fair value, which was classified in Level 3 of the fair value hierarchy. The fair value of other noncurrent liabilities is determined to approximate its carrying value.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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