Description of Business and Basis of Presentation | 3 Months Ended |
Mar. 31, 2015 |
Accounting Policies [Abstract] | |
Description of Business and Basis of Presentation | 1. Description of Business and Basis of Presentation |
Description of Business |
Solar Power, Inc. (“SPI”) and its subsidiaries (collectively the “Company”) is a provider of PV solutions for business, residential, government and utility customers and investors. The Company provides a full spectrum of EPC services to third party project developers, as well as develop, own and operate solar projects that sell electricity to the grid in multiple countries, including China, the U.S., the U.K., Panama, Greece, Japan and Italy. |
Prior to 2014, the Company was primarily engaged in providing EPC services to developers in the U.S. Since 2014, the Company commenced its global project development business by ramping up its portfolio of global solar projects, including projects that the Company intends to hold in the long term and derive electricity generation revenue. |
As of March 31, 2015, SPI’s major subsidiaries include Xinwei Solar Engineering and Construction (Suzhou) Co., Ltd. (“Xinwei Suzhou”), Xinyu Xinwei New Energy Co., Ltd. (“Xinyu Xinwei”), Sinsin Renewable Investment Limited (“Sinsin”), Gonghe County Xinte Photovoltaic Co., Ltd. (“Xinte”), CECEP Solar Energy (Luxembourg) Private Limited Company (S.a.r.l.) & Italsolar S.r.l (collectively as “CECEP”), Solarbao E-commerce (HK) Limited (“Solarbao E-commerce”), Jiangsu Solarbao Leasing Co. Ltd. (“Jiangsu Solarbao”), Yanhua Network Technology (Shanghai) Co., Ltd. (“Yanhua Network”), SPI Solar Japan G.K. and Solar Power Inc UK Service Limited. |
Xinwei Suzhou and Xinyu Xinwei were incorporated in the PRC in 2014 in connection with the expansion of the Company’s full spectrum EPC service business in the PRC. Sinsin and Xinte were acquired by the Company in 2014, and CECEP was acquired by the Company in 2015 (see Note 4), for ramping up its portfolio of global solar projects. |
Solarbao E-commerce, Jiangsu Solarbao and Yanhua Network were incorporated by the Company in 2015 for raising funds from individual investors and leasing of solar panels through an online platform owned by Solar Energy E-Commerce (Shanghai) Limited (“Solar Energy”). Solar Energy was incorporated in China on December 8, 2014 by Xiaofeng Peng (“Mr. Peng”), Min Xiahou and Jing Liu, who are the chairman of the Company’s board of directors, chief executive officer and chief financial controller of the Company respectively. Solar Energy operates the “www.solarbao.com” e-commerce and investment platform which primarily targets retail customers residing in the PRC. On March 26, 2015, the Company, through Yanhua Network, entered into a series of contractual arrangements (“VIE Agreements”) with Solar Energy and its shareholders. The contractual arrangements include power of attorney, call option agreement, equity pledge agreement, and a consulting services agreement as follows: |
Power of attorney: Solar Energy’s Nominee Equity Holders signed proxy agreement, with Yanhua Network to exclusively assign their rights as equity holders of Solar Energy to Yanhua Network, including voting right, right to transfer any or all equity interest in Solar Energy and right to appoint director and executive management. Solar Energy’s Nominee The proxy agreement will remain effective without any course. Solar Energy or its Nominee Equity Holders do not have the right to terminate the agreement unless Yanhua Network commits default. |
Call option agreement: Through the exclusive option agreement entered into among Yanhua Network, Solar Energy and its Nominee Equity Holders, Yanhua Network has an exclusive purchase option to acquire all of the equity interest or assets in Solar Energy from its Nominee Equity Holders at any time when permitted by applicable Chinese laws and regulations. Yanhua Network has the sole discretion as to when to exercise such options, either in part or in full. Without Yanhua Network’s prior written consent, Solar Energy’s Nominee Equity Holders shall not transfer their equity interests in Solar Energy, and Solar Energy shall not transfer its assets. The transfer price will be the minimum amount of consideration permitted under PRC law at the time of such share transfer. The agreement will remain effective until all of Solar Energy’s equity interest and assets are transferred to Yanhua Network. Yanhua Network may terminate the agreement at any time with a 30-day prior written notice to Solar Energy and its Nominee Equity Holders. |
Equity pledge agreement: To guarantee Solar Energy’s performance of its obligations under the exclusive consultancy and service agreement, the exclusive option agreement, and the shareholders’ voting rights proxy agreement, Solar Energy’s Nominee Equity Holders have pledged their entire equity interests in Solar Energy to Yanhua Network. The share pledge agreement can only be terminated upon the fulfillment of all obligation under the VIE Agreements. |
Consulting services agreement: Solar Energy irrevocably appoints and designates Yanhua Network as its exclusive service provider to provide services, including but not limited to relevant technical and consulting service to Solar Energy. The service fees are determined based on actual services provided by Yanhua Network and up to the net income of Solar Energy during the relevant period. The term of this agreement is 3 years, and the agreement may be automatically extended upon the expiration. Yanhua Network may terminate the agreement at any time with a three-month prior written notice to Solar Energy to terminate this agreement. |
As of the date of these condensed consolidated financial statements, the Company has not established the legal enforceability of these contractual agreements described above including the registration of the equity pledge agreement in the relevant government bureau in the PRC. The financial results of Solar Energy are expected to be consolidated by the Company once the legal enforceability of the contractual agreements is established. |
Through the on-line platform of Solar Energy, the Company raised funds from individual investors on PV projects basis. For each fund raising PV project launched on the on-line platform, individual investors may subscribe the purchasing of solar module which will then be leased to the project developer of the PV project over a specified period. These PV projects may represent the Company’s self developed projects or third party developed projects, Although a tri-party lease agreement is signed among the individual investors, the Company and the project developer of the project launched, the purchase of any solar panels from vendors are solely contracted by the Company and the Company bears full credit risk in respect of the collection of the lease payments from project developers. The lock-up period for investment made by the individual investors for each fund raising project normally ranges from 0-720 days. Individual investors are guaranteed by the Company with an investment return for their investments, which ranges from an annual rate of 8% to 10.3% for the three months ended March 31, 2015, and are guaranteed by the Company in respect of the repayment of funds at the end of the Investment Period. Solar Energy collects the funds provided by the individual investors and settles with the Company on a bi-weekly basis. For the service provided through the on-line platform, Solar Energy charged the Company commission fee based on 1% of the fund principal (see Note 22— Related Party Transactions). The interest bearing funds provided by individual investors to the Company are recorded on the condensed consolidated balance sheet as either short term or long term borrowings. Lease accounting is adopted for any solar panels purchased by the Company for leasing to third party project developers. During the three months ended March 31, 2015, all leases of solar module to third party developer under the above arrangement are classified as finance lease with the Company as lessor and third party project developer as lessee. Finance lease income of $3 was earned and recorded as interest income for the three months ended March 31, 2015. |
In connection with the launch of the above financing and leasing products, the Company issued coupons with total face value of $2,881 to third party vendors and two related parties during the three-month period ended March 31, 2015. These coupons are freely transferrable between holders but could not be redeemed in cash. Each coupon has an expiry date for redemption. Prior to the expiry date, when the holders subscribe the purchasing and leasing of solar modules through the on-line platform owned by Solar Energy described above, the holders could redeem the coupons such that the purchase price to be paid would be reduced by the face value of the coupons. As of March 31, 2015, all coupons issued to these vendors and related parties had been redeemed. In respect of the coupons issued above, coupons totaling $219 were recorded as settlement of trade payable balances in the same amount as agreed with the corresponding third party vendors receiving the coupons. For the remaining amounts, the Company recognized other receivable due from third party vendors and a related party of $1,301 and $779, respectively, and recorded selling expenses of $582 in the condensed consolidated financial statements for the three months ended March 31, 2015. |
Basis of Presentation |
The condensed consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information. They should be read in conjunction with the financial statements and related notes to the financial statements of Solar Power, Inc. for the years ended December 31, 2014 and 2013 appearing in Solar Power, Inc.’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 31, 2015. The Company’s March 31, 2015 and 2014 unaudited interim condensed consolidated financial statements on Form 10-Q have been prepared pursuant to the rules and regulations of the SEC for smaller reporting companies and include the accounts of Solar Power, Inc. and its subsidiaries. |
Certain information and note disclosures normally included in the annual financial statements on Form 10-K have been condensed or omitted pursuant to those rules and regulations, although the Company’s management believes the disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting of normal recurring adjustments and reclassifications, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for all periods presented have been reflected herein. The Company’s financial position, operating results, cash flows and trends in these unaudited condensed consolidated financial statements are not necessarily indicative of future results that may be expected for any other interim period or for the full year. |
The preparation of unaudited interim condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited interim consolidated financial statements as well as the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates used in the preparation of the Company’s consolidated condensed financial statements include: allowance made for doubtful accounts receivable, inventory write-downs, the estimated useful lives of long-lived assets, the impairment of goodwill, long-lived assets and project assets, fair value of derivative liability, valuation allowance of deferred income tax assets, accrued warranty expenses, the grant-date fair value of share-based compensation awards and related forfeiture rates, and fair value of financial instruments. Actual results could differ from those estimates upon subsequent resolution of identified matters. |
The unaudited interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. |