Note 3. Acquisitions

Acquisition of Residential Business

In February 2014, the Company acquired the residential business of MEC pursuant to an Agreement and Plan of Merger dated January 19, 2014. The residential business acquired engages in designing, installing and selling solar energy systems to residential customers, wholesale distributions as well as assembling of mounting systems and hardware for solar energy systems.

The purchase consideration for the assets acquired and liabilities assumed was approximately $78.8 million consisting of $75.0 million in the issuance of 12,762,894 shares of common stock, $1.8 million in cash, $1.8 million in settlement of balances under a pre-existing relationship and $0.2 million in the form of 576,878 stock options. The settlement of the pre-existing relationship was related to the partner installation agreement between the Company and MEC, which existed prior to the acquisition date.

The Company has included the results of operations of the acquired business in the consolidated statements of operations from the acquisition date. The assets acquired and liabilities assumed in the MEC acquisition have been recorded based on their fair value at the acquisition date. Goodwill represents the excess of the purchase price over the net tangible and intangible assets acquired and is not deductible for tax purposes. Goodwill recorded is primarily attributable to the acquired assembled workforce and the synergies expected to arise after the acquisition of the residential business, such as lowering the Company’s overall cost of the Company’s solar energy systems by enabling it to procure and build some of the solar energy systems themselves, ensuring access to MEC installation capacity, and scaling the Company’s growth by adding direct-to-consumer sales and installation activities. In addition, the Company is able to provide customers the option to purchase solar energy systems outright, as compared to offering leasing and PPA options. Transaction costs related to the acquisition were expensed as incurred.

The following table summarizes the fair value of assets acquired and liabilities assumed (in thousands):

Cash	$	5,440
Accounts receivable		8,881
Inventory		23,886
Prepaid expenses		2,028
Property and equipment		6,113
Intangible assets		15,380
Other long-term assets		200
Accounts payable and accrued liabilities		(24,975	)
Deferred revenue		(768	)
Capital lease obligation		(2,869	)
Other liabilities		(1,509	)
Deferred tax liabilities		(4,843	)
Indentifiable assets and liabilities assumed		26,964
Goodwill		51,786
Total	$	78,750

In 2014, the contribution of the acquired business to the Company’s total revenues was $114.2 million as measured from the date of the acquisition. The portion of total expenses and net income associated with the acquired business was not separately identifiable due to the integration with the Company’s operations.

Unaudited Pro Forma Information

The following table summarizes the unaudited pro forma total revenue and net loss of the combined company for the years ended December 31, 2014 and 2013 assuming that the acquisition occurred as of January 1, 2013 (in thousands, except per share):

	For the year ended December 31,
	2014			2013
Revenue	$	205,355		$	143,614
Net loss		(164,974	)		(88,326	)
Net loss attributable to common stockholders		(78,336	)		(24,032	)
Net loss per share attributable to common stockholders, basic and diluted		(3.44	)		(1.07	)

The pro forma financial information is based on the combined results of operations of MEC and the Company with adjustments for MEC’s sales to the Company, the amortization of the acquired intangibles assets and the timing of acquisition expenses. The pro forma financial information is not necessarily indicative of the actual consolidated results of operations in prior or future periods had the acquisition actually been consummated on January 1, 2013.

Clean Energy Experts, LLC

In April 2015, the Company acquired Clean Energy Experts, LLC, a consumer demand and solar lead generation company, for $25.0 million in cash and 1.9 million shares of common stock valued at $19.1 million, net of settlement of a preexisting payable to CEE. Of this amount, $15.0 million in cash was paid and 1.4 million shares were issued in April 2015. The remaining $10.0 million in cash and 500,000 shares are due in two equal installments: $5.0 million which was paid and 250,000 shares were issued in October 2015 and the second installment of $5.0 million and 250,000 shares is due in April 2016.

An additional $9.1 million in cash and 600,000 shares of common stock may be issued on April 1, 2017, subject to the achievement of certain sales targets as well as continued employment of certain key employees acquired in the transaction, which will be recorded as compensation expense over a two-year period unless and until the Company assesses that the achievement of sales targets is not probable. The acquisition is expected to enhance the Company’s efficient and consistent access to high-quality leads in existing and new markets.

The following table summarizes the fair value of assets acquired and liabilities assumed (in thousands):

Cash	$	424
Accounts receivable		639
Intangible assets		13,290
Accounts payable and accrued liabilities		(1,247	)
Deferred tax liability		(5,146	)
Identifiable assets and liabilities assumed		7,960
Goodwill		35,757
Total	$	43,717

The fair value of acquired intangible assets and their estimated useful life are as follows (in thousands, except estimated useful life):

	Fair Value		Estimated Useful Life
Developed technology	$	5,910	5
Customer relationships		4,390	8
Trade names		2,990	8
Total	$	13,290

For the year ending December 31, 2015, the contribution of the acquired business to the Company’s total revenues was $16.9 million, as measured from the date of the acquisition. The portion of total expenses and net income associated with the acquired business was not separately identifiable due to the integration with the Company’s operations.

Acquisition of Solar Projects with the Associated Leases

In March 2014, the Company entered into a Backlog Lease Assignment and Assumption Agreement and Channel Agreement with an installation partner and purchased certain solar projects with the associated leases already originated by the installation partner. The Company paid $39.4 million to acquire 2,924 solar projects and the associated leases with an average remaining lease term of 20 years. The Company has accounted for the acquisition under ASC 805 and recorded the assets acquired at fair value at the acquisition date. As the terms of the acquired leases associated with these projects were at market terms at the acquisition date, no lease premiums or discounts were recorded. No goodwill was recognized from this acquisition as the Company paid fair value for the assets acquired.