On May 17, 2021, the Company acquired all of the issued and outstanding membership interests of World Energy Efficiency Services, LLC (“World Energy”), a privately-held, Massachusetts-based entity, and retained its principals and all of its employees. World Energy is a direct-install energy efficiency services company serving commercial, industrial and institutional customers. World Energy enables utilities to meet their energy savings mandates by developing and executing energy efficiency projects.

•An obligation to issue 244,956 shares of the Company’s common stock to certain of the sellers and their advisors of World Energy, in three equal installments on the sixth, twenty-fourth and the thirtieth monthly anniversaries of the closing date. The closing date fair value was recorded at an aggregate amount of $1.5 million;

•An obligation for an earnout cash payment of $1.0 million upon World Energy’s achievement for the calendar year 2021 of minimum annual revenues of $19.5 million. World Energy met the revenue requirements and the Company paid the contingent consideration of $1.0 million in March 2022.


Cash	$	8,000
Working capital adjustments	496
Fair value of 231,002 shares issued at closing	1,439
Fair value of the earnout	1,000
Portion of deferred obligation to issue shares of common stock	1,526
Total consideration	12,461

Less the fair value of assets acquired less liabilities assumed	(4,344)
Goodwill	$	8,117

In connection with the acquisition of World Energy, the Company incurred an initial additional obligation to issue shares of its common stock to the three sellers, two of which also entered into employment agreements with the Company. Pursuant to the terms of the agreement, the Company was initially obligated to issue an aggregate of 448,050 shares of its common stock, issuable in three equal installments on November 17, 2021, on May 17, 2023 and on November 17, 2023, provided that seller/employee is employed by the Company at the date of issuance. If the seller/employee is not employed at such issuance date, the shares attributable to that seller/employee are forfeited. The Company determined that this obligation should be accounted for as compensation as opposed to purchase price consideration. Accordingly, the fair values of each of the three compensation share obligations are accreted as compensation expense over each relevant compensation period. The accrued obligation is marked to market each period based on the price of the underlying shares. For the years ended December 31, 2022 and 2021, the Company recognized a benefit of $0.1 million and a charge of $1.0 million, respectively, for compensation expense within Selling, General and Administrative Expenses.

The initial transaction with World Energy included an outstanding PPP loan of $0.5 million that was incorporated in the liabilities assumed. During the third quarter of 2021, the PPP loan was forgiven in full which resulted in an additional payment to the sellers of World Energy. Consequently, the fair value of assets acquired less liabilities assumed was adjusted by the entire amount of the PPP loan that was forgiven, with a corresponding reduction in goodwill.


(Amounts in thousands)	Amount
Cash	$	308
Accounts receivable	3,585
Inventory, net	1,282
Prepaid expenses and other current assets	100
Property and equipment, net	173
Intangible assets, net	1,560
Right-of-use asset	145
Goodwill	8,117
Other assets	12
Accounts payable	(1,096)
Lease liability, current	(56)
Accrued expenses and other current liabilities	(1,297)
Deferred revenue	(283)
Lease liability, non-current	(89)
Total purchase consideration	$	12,461

The estimated fair value of the intangible asset acquired was determined based on the income approach to measure the fair value of the customer relationships. This fair value measurement was based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy.

Goodwill represents the excess of the purchase consideration over the estimated acquisition date fair value of the net tangible and intangible assets acquired. Goodwill is primarily attributable to expected post-acquisition synergies from integrating World Energy’s assembled workforce, products and processes into the Company’s product offerings. Goodwill recorded is not deductible for income tax purposes.

On September 9, 2022, the Company acquired Legacy Spruce Power for $32.6 million which consisted of cash payments of $61.8 million less cash and restricted cash acquired of $29.2 million. Management evaluated which entity should be considered the acquirer in the transaction by giving consideration to the form of consideration transferred, the composition of the equity holders, the composition of voting rights of the Board of Directors, continuity of management structure, and size of the respective organizations. Based on the evaluation of the applicable factors, Management noted that all factors, with the exception of relative size of organization, were indicators that the Company was the acquiring entity resulting in Management’s conclusion that the Company acquired Legacy Spruce Power.

The acquisition was accounted for as a business combination. The Company allocated the Legacy Spruce Power purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, September 9, 2022. The excess of the purchase price over those fair values was recorded to goodwill. The Company's evaluations of the facts and circumstances available as of September 9, 2022, to assign fair values to assets acquired and liabilities assumed are ongoing. As we complete further analysis of assets including solar systems, intangible assets, as well as noncontrolling interests and debt, additional information on the assets acquired and liabilities assumed

becomes available. A change in information related to the net assets acquired may change the amount of the purchase price assigned to goodwill, and as a result, the preliminary fair values set forth below are subject to adjustment as additional information is obtained and valuations are completed. Provisional adjustments are recognized during the reporting period in which the adjustments are determined. The Company expects to finalize the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.


(Amounts in thousands)	Initial Purchase Price Allocation		Measurement Period Adjustments		Updated Purchase Price Allocation
Total purchase consideration:
Cash, net of cash acquired, and restricted cash	$	32,585	$	—	$	32,585
Allocation of consideration to assets acquired and liabilities assumed:
Accounts receivable, net	10,995		—		$	10,995
Prepaid expenses and other current assets	6,768		(2,405)		$	4,363
Solar energy systems	406,298		(2,081)		$	404,217
Other property and equipment	337		—		$	337
Interest rate swap assets	26,698		—		$	26,698
Right-of-use asset	3,279		(328)		$	2,951
Other assets	358		—		$	358
Goodwill	158,636		(30,088)		$	128,548
Accounts payable	(2,620)		(23)		$	(2,643)
Accrued expenses	(13,061)		(243)		$	(13,304)
Lease liability	(3,382)		41		$	(3,341)
Long-term debt	(510,002)		2,772		$	(507,230)
Other liabilities	(335)		294		$	(41)
Redeemable noncontrolling interests and noncontrolling interests	(51,384)		32,061		$	(19,323)

Goodwill represents the excess of the purchase consideration over the estimated acquisition date fair value of the net assets acquired. Goodwill is primarily attributable to the Company's ability to leverage and use its existing capital and access to capital markets along with Spruce Power's established operations and mergers and acquisition capabilities to grow the Spruce Power business.

The following unaudited pro forma financial information presents the combined results of the operations of the Company, World Energy, and Legacy Spruce Power as if the acquisition of World Energy on May 17, 2021 and Legacy Spruce Power on September 9, 2022 had occurred as of January 1, 2021. The results of operations related to the Company’s Drivetrain and XL Grid businesses, which were determined to be discontinued operations in the fourth quarter of 2022, are presented as net loss from discontinued operations. The unaudited pro forma revenues and pro forma net (loss) income reflect the continuing operational results of the Company’s corporate functions and the results of operations for Legacy Spruce Power. The unaudited pro forma financial information is not necessarily indicative of what the consolidated results of operations actually would have been had the respective acquisitions been completed on January 1, 2021. In addition, the


(Amounts in thousands, except share and per share data)	2022		2021
Revenues	$	79,253	$	79,163
Net (loss) income from continuing operations	$	(28,870)	$	66,212
Net loss from discontinued operations	(40,112)		(24,236)
Net (loss) income	$	(68,982)	$	41,976
Per share amounts:
Net (loss) income from continuing operations - basic	$	(0.20)	$	0.48
Net (loss) income from continuing operations - diluted	$	(0.20)	$	0.45
Net loss from discontinued operations - basic	$	(0.28)	$	(0.18)
Net loss from discontinued operations - diluted	$	(0.28)	$	(0.16)


i.			Eliminate the effect of transaction expenses related to the acquisition of World Energy of approximately $498,000 for the year ended December 31, 2021.
ii.			Eliminate interest expense associated with debt that was repaid in the acquisition of World Energy of approximately $37,000 for the year ended December 31, 2021.
iii.			Eliminate the effect of transaction expenses related to the acquisition of Legacy Spruce Power of $15.0 million for the year ended December 31, 2022.