BUSINESS COMBINATION, GOODWILL AND INTANGIBLE ASSETS

Acquisition

On December 12, 2014, the Company acquired substantially all of the assets of NPS. Founded in 2009 and based in Berkeley, California, NPS is a provider of services designed specifically for the solar industry. The acquisition is expected to complement the Company’s existing asset management and operations and maintenance service offering.

The following table summarizes the allocation of the total purchase price to acquired tangible and identifiable intangible assets based on their estimated fair values as of the date of acquisition (in thousands):



Cash consideration	$	2,535
Contingent consideration	2,300
Total purchase consideration	$	4,835

Property and equipment	$	190
Customer relationships	900
Goodwill	3,745
Net assets acquired	$	4,835

This acquisition has been accounted for as a business combination. The total purchase consideration of $4.8 million consisted of $2.5 million in cash (of which $0.3 million was held back for potential breaches of representations and warranties) and $2.3 million of contingent consideration (described below). The indemnity hold back will be paid one year from the date of closing of the acquisition subject to any deductions for indemnity conditions and was recorded as restricted cash with an offsetting obligation in other accrued liabilities.

The fair values assigned to the net assets acquired are based on management’s estimates and assumptions. The goodwill of $3.7 million is attributable to the value of the synergies expected to arise upon the integration of NPS into the Company’s operations and the value of the acquired workforce. A portion of goodwill related to this acquisition is deductible for income tax purposes.

The fair value of the acquired customer relationships was calculated by discounting the projected discrete after-tax cash flows from these existing customers (less an anticipated customer attrition rate) to its present value.

The purchase consideration includes a contingent consideration arrangement that requires additional cash payments by the Company based on certain defined 2015 and 2016 revenue targets. Amounts are payable in early 2016 and 2017. The range of the undiscounted amounts the Company could pay under the contingent consideration arrangement is between zero and $5.5 million. The fair value of the contingent consideration was estimated based on significant inputs not observed in the market and thus represents a Level 3 input as defined in connection with the fair value hierarchy. See Note 8, “Fair Value Measurements” for further discussion. Any future change in the estimated fair value of the contingent consideration will be recognized in the consolidated statements of operations for the period in which the estimated fair value changes.

The acquisition was not material to the Company’s financial position or results of operations, and therefore proforma operating results for NPS have not been presented. The results of operations of NPS have been included in the Company’s consolidated results prospectively from the date of acquisition. The Company recognized approximately $0.2 million of acquisition related costs in 2014, which were recorded in general and administrative expenses in the Company’s consolidated statements of operations.

Goodwill and Intangible Assets



	December 31, 2014							December 31, 2013
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization		Net
Goodwill	$	3,745	$	—		$	3,745	$	—	$	—	$	—

Other indefinite-lived intangibles	$	286	$	—		$	286	$	286	$	—	$	286
Intangibles assets with finite lives:
Customer relationships	900		—			900		—		—		—
Patents	750		(125		)	625		—		—		—
Total purchased intangibles	$	1,936	$	(125	)	$	1,811	$	286	$	—	$	286

In July 2014, the Company purchased certain patents related to system interconnection and photovoltaic AC module construction. The patents are being amortized over their legal life of 3 years. The customer relationship intangible resulted from the Company’s NPS acquisition and is being amortized on a straight-line basis over its estimated useful life of 5 years.

As of December 31, 2014, estimated future amortization expense related to finite-lived intangible assets was as follows:



Year	(In thousands)
2015	$	430
2016	430
2017	305
2018	180
2019	180
Total	$	1,525