4. Goodwill and Intangible Assets

The Company is in the process of completing the valuation of certain assets and liabilities from the Ilioss acquisition discussed in Note 3, Acquisitions, including the gross amounts of certain intangible assets presented in the table below amounting to $6.4 million. Such amounts are preliminary and subject to change. There were no material changes recorded in the year ended December 31, 2015 related to the amounts reported in the Company’s Form 10-K for the year ended December 31, 2014, except for the periodic amortization of the intangible assets.

Intangible Assets

The following is a summary of intangible assets as of December 31, 2015 (in thousands):


	Weighted-
	average
	useful life				Accumulated
	(in years)		Gross		amortization			Net
Developed technology - Silevo		10	$	115,000	$	(14,596	)	$	100,404
Developed technology - Zep Solar		7		60,100		(17,664	)		42,436
Trademarks and trade names		7		24,700		(7,256	)		17,444
Marketing database		5		17,427		(9,953	)		7,474
PowerSaver agreement		10		17,077		(3,961	)		13,116
Non-compete agreements		5		7,189		(3,272	)		3,917
Customer relationships		6		6,190		(542	)		5,648
Other		6		10,028		(5,223	)		4,805
Total		8.26	$	257,711	$	(62,467	)	$	195,244

The following is a summary of intangible assets as of December 31, 2014 (in thousands):

								Transfers to
	Weighted-							solar energy
	average							systems,			Write-offs
	useful life				Accumulated			leased and to be			and
	(in years)		Gross		amortization			leased			cancellations			Net
Developed technology - Silevo		10	$	115,000	$	(3,096	)	$	—		$	—			111,904
Developed technology - Zep Solar		7		60,100		(9,070	)		—			—			51,030
Trademarks and trade names		7		24,700		(3,728	)		—			—			20,972
Marketing database		5		17,427		(4,599	)		—			—			12,828
PowerSaver agreement		10		17,077		(2,253	)		—			—			14,824
Solar energy systems backlog		30		12,434		—			(10,755	)		(1,679	)		—
Non-compete agreements		5		6,959		(1,836	)		—			—			5,123
Other		6		10,028		(3,072	)	—			—				6,956
Total		9.35	$	263,725	$	(27,654	)	$	(10,755	)	$	(1,679	)	$	223,637

Developed Technology – Silevo

Silevo developed technology represents high performance solar cell technology acquired through the Silevo acquisition. The high performance technology would allow the Company to achieve improved solar energy system performance and reduce the overall deployment cost per watt of the solar energy systems sold or leased. In addition, the high performance technology would increase the Company’s market opportunity to a broader customer base who would benefit economically from more efficient solar energy systems.

Developed Technology – Zep Solar

Zep Solar developed technology represents solar panel interlocking technology that includes a rail-free installation system, auto-grounding connections and a rapid, drop-in module installation design. These features allow solar energy systems to be installed easily and produce significant performance-based and aesthetic improvements compared to other solar energy system installation technologies.

Trademarks and Trade Names

Trademarks and trade names are related to established market recognition from acquired businesses and are expected to be retired at the end of their estimated useful lives.

Marketing Database

The marketing database is a comprehensive platform for targeted marketing, including a prospective customer scoring engine, a marketing campaign manager and monthly updates. The prospective customer scoring engine improves the results of marketing initiatives by predicting which customer leads in the marketing database will respond favorably to a particular marketing campaign. The marketing campaign manager monitors the results of marketing campaigns and provides feedback for optimizing future marketing campaigns.

PowerSaver Agreement

Under the PowerSaver program, Fannie Mae makes available additional loans of up to $25,000 to eligible Fannie Mae borrowers. The additional loan amounts can only be used for energy efficiency projects that include the installation of solar energy systems. The PowerSaver program provides an additional source of financing for customers and therefore helps broaden the Company’s customer base. Under the PowerSaver agreement, the Company is provided with the exclusive right to market solar energy systems to the customers of Paramount Mortgage, an affiliate of Paramount Energy.

Solar Energy Systems Backlog

Solar energy systems backlog represents the value attributable to the contractual arrangements entered into between Paramount Energy and its customers to install solar energy systems for which the installation had not commenced as of the acquisition date. The arrangements were acquired by the Company. This balance was transferred to solar energy systems, leased and to be leased, as the solar energy systems are installed and placed in service and subsequently depreciated as cost of solar energy systems over the estimated useful lives of the solar energy systems of 30 years.

Non-Compete Agreements

Certain former key employees of businesses acquired by the Company became employees of the Company and executed non-compete agreements with the Company.

Customer Relationships

Ilioss had a pre-existing relationship with a leading chain of Mexican retail stores.

Other

Other intangible assets include a mortgage database, which contains data pertaining to households that the Company can directly market to. In addition, there is a build-to-suit lease arrangement with an affiliate of the State of New York whereby the affiliate will construct a facility to manufacture photovoltaic panels, procure manufacturing equipment for use in the facility and subsequently lease the facility and the manufacturing equipment to the Company. The build-to-suit lease arrangement is further discussed in Note 22, Commitments and Contingencies. Furthermore, there is internally developed software, which consists of Zep Solar’s Zepulator System Designer, or Zepulator, online application. Zepulator can project the size, scope, layout, materials and costs of potential solar energy system installations, which assists with optimizing solar energy system installations.

All intangible assets, with the exception of the solar energy systems backlog, are amortized over their estimated useful lives. The changes to the carrying value of intangible assets were as follows (in thousands):

	Year Ended December 31,
	2015			2014
Balance - beginning of the period	$	223,637		$	129,290
Acquisitions		6,420			119,000
Amortization		(34,813	)		(24,263	)
Transfers to solar energy systems, leased and to be leased		—			(140	)
Write-offs and cancellations		—			(250	)
Balance - end of the period	$	195,244		$	223,637

Amortization expense for intangible assets for the years ended December 31, 2015, 2014 and 2013 was allocated as follows (in thousands):

	Year Ended December 31,
		2015	2014		2013
Included in operating leases and solar energy incentives cost of revenue	$	17,428	$	9,962	$	582
Included in solar energy systems and components sales cost of revenue		3,337		2,605		—
Total included in cost of revenue		20,765		12,567		582
Included in sales and marketing		14,048		11,696		2,809
Total amortization expense	$	34,813	$	24,263	$	3,391

No intangible assets were impaired during the years ended December 31, 2015, 2014 and 2013. However, the Company wrote-off $0.3 million and $1.4 million of solar energy systems backlog related to contracts cancelled after acquisition, during the years ended December 31, 2014 and 2013, respectively, which was recorded in sales and marketing expense in the consolidated statements of operations.

As of December 31, 2015, total future amortization expense for intangible assets was as follows (in thousands):

	Cost of Revenue		Operating Expense		Total
2016	$	20,697	$	11,689	$	32,386
2017		20,541		10,609		31,150
2018		20,541		9,237		29,778
2019		20,541		6,329		26,870
2020		19,821		6,129		25,950
Thereafter		44,532		4,578		49,110
Total	$	146,673	$	48,571	$	195,244

Goodwill

The changes to the carrying value of goodwill were as follows (in thousands):

	Year Ended December 31,
	2015		2014
Balance - beginning of the period	$	315,920	$	148,879
Acquisitions		5,945		167,041
Balance - end of the period	$	321,865	$	315,920

The Company did not recognize any impairment of goodwill during the years ended December 31, 2015, 2014 or 2013.