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 photovoltaic (“PV”) solutions for business, residential, government and utility customers and investors. The Company provides a full spectrum of engineering, procurement and construction services (“EPC”) to third party project developers, as well as develop, own and operate solar PV 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 June 30, 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.), and Italsolar S.r.l, (collectively the “CECEP”), Solar Juice Pty Ltd (“Solar Juice”), SPI Energiebau Renewables GmbH (“SPI Energiebau”), SPI Energy Co., Ltd. (“SPI Energy”), 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. CECEP and Solar Juice were acquired by the Company in February and May 2015 respectively. CECEP owned and operated a number of PV plants in Italy. Solar Juice was engaged in the distribution of PV related products including solar panels in Australia. Refer to Note 4 for details of these acquisitions. SPI Energy was incorporated by SPI as a wholly-owned subsidiary in the Cayman Islands in May 4, 2015. On May 11, 2015, SPI Energy filed a registration statement on Form F-4 in connection with seeking shareholder consent for the approval of a certain agreement and plan of reorganization and related redomicile of SPI to the Cayman Islands. 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, deputy chairman of the Company’s board of directors 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 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. Therefore, the financial results of Solar Energy could not be consolidated by the Company before the legal enforceability of the contractual agreements is established. Through the on-line platform of Solar Energy, the Company has raised funds from individual investors, who need to register as a member on the platform, through certain on-line products launched by the Company since January 2015. Each on-line products launched on the platform are set with a targeted amount of funds in renminbi to be raised for that product, which is divided into units (“Investment Unit”) with unit value ranging from RMB16.7 to RMB2,500. Individual investors may subscribe for Investment Unit of these on-line products which are generally structured in the way of using the funds from individual investors to purchase solar module or PV related products (“Underlying PV Products”) for leasing to the PV project developers on PV project basis over a specified period. These PV projects may represent the Company’s self developed projects or third party developed projects. Investments made into each on-line product are subject to lock-up period, which ranges from 0-1,080 days, depending on the terms of each on-line product. During the lock-up period, the individual investors could not transfer or redeem their subscribed Investment Units. Anytime after the lock-up period, individual investors are permitted either to transfer their investments in respect of the principal portion to other investors through the on-line platform or request the Company to redeem their subscribed Investments Units. Any Investments Units so redeemed by the Company could be put on the on-line platform for re-sale to other investors. Once Investment Units are subscribed and funds are provided, individual investors are guaranteed by the Company with an minimum investment return for their investments, which ranges from an annual rate of 5.25% to 11.9% for the six-month period ended June 30, 2015, and are guaranteed by the Company in respect of the repayment of funds principal at the end of the investment period. Any funds provided by individual investors without subscribing for any on-line products are not entitled to any interest. For each investments into these On-line products by the individual investors, although a tri-party lease agreement is signed among the individual investors, the Company and the PV project developer with individual investors as legal lessor and the PV project developers as legal lessee, the Company is considered as the accounting lessor in substance because 1) the lease terms, rate of return on the investment funds from individual investors, the initial purchase price and the lease rental of the Underlying PV products payable by the PV developers and the purchase contract of the Underlying PV Products entered with manufacturer are negotiated and concluded by the Company without any involvement by the individual investors; and 2) individual investors are entitled to a minimum interest rate as return that are guaranteed by the Company in respect of their funds provided and does not take credit risk in respect of any default payment by the lessee nor risk of claim on the leased assets; 3) the Company is subject to the credit risk as a principal of the lease transaction and has unconditional commitment to return the funds to the individual investors and assume the title of the leased asset after the lock-up period. Based on the above, the individual investors purely provided funds (as lender) to finance the Company (as borrower) for its purchases of the Underlying PV Products for leasing to a solar PV developer in return for a fixed return. In this regard, lease accounting is adopted with the Company as lessor and third party PV developer as lessee for any Underlying PV Products purchased by the Company for leasing to third party project developers. For those on-line products of which the PV project developer (i.e the legal lessee) is one of SPI’s subsidiaries, the related leasing transactions are eliminated in the condensed consolidated financial statements. Regardless as to whether a SPI’s subsidiaries or a third party PV developer is deemed to be the accounting lessor, all interest bearing funds provided by individual investors are recorded on the condensed consolidated balance sheet as either short term borrowings or long term borrowings included in other noncurrent liability. Funds provided with the lock-up period over one year are classified as long term borrowings and funds with a lock-up period of less than one year are classified as short-term borrowings. Funds that are provided without any on-line products subscribed are non-interest bearing and are reclassified as amount due to individual investors under other current liabilities (See Note 14-Other liabilities). During the six-month period ended June 30, 2015, substantially all of the on-line products launched through the on-line platform are related to the Company self-owned PV projects with SPI’s subsidiaries being the lessee. For those on-line products of which the lessee is third party developer, such leases are classified as finance lease in the Company’s condensed consolidated financial statements. In connection with the launch of the above financing and leasing products, the Company issued to certain third party vendors, Jiangxi LDK Solar Hi-Tech Co., Ltd. (“LDK Jiangxi”) and Suzhou Liuxin Industry Ltd. (“Liuxin”) coupons with total face value of $3,828, $779 and $582 respectively during the six-month period ended June 30, 2015. Both LDK Jiangxi and Liuxin are related parties of the Company. These coupons are freely transferable between holders but could not be redeemed in cash. Each coupon has an expiry date for redemption. Prior to the expiry date, when the holder subscribe the on-line products through the on-line platform owned by Solar Energy described above, the holders could redeem the coupons and reduce the original purchase price for the on-line products by the face value of the coupons. For the coupons issued to the third party vendors and LDK Jiangxi, the Company is entitled to the face value in cash or, if mutually agreed between the Company and LDK Jiangxi or between the Company and the relevant third party vendor, to apply the face value as of offset to outstanding accounts payables to these counterparties. Accordingly, the face values of these coupons, totaling $4,607, were recorded as other receivables upon issuance of the coupons. During the six-month period ended June 30, 2015, other receivable balances related to such coupons totaling $219 and $779 were setoff against the related accounts payable balances when mutual agreement with the counterparties had been reached and the legal right to setoff had been established. As of June 30, 2015, other receivable balances due from third party vendors arising from the coupons amounted to $3,609. The coupons issued to Liuxin were for promotional purposes and Liuxin was not required to pay for the coupons. Accordingly, the Company recorded selling expenses of $582 and nil in the condensed consolidated statement of operation for the six-month and three-month periods ended June 30, 2015 respectively. The face values of the coupons are recorded in other payables upon issuance which were reclassified as the Company’s borrowings when the coupons are redeemed through the purchase of on-line products. As of June 30, 2015, all coupons issued to these counterparties had been redeemed. In order to promote the above on-line products on the platform, the Company offered, from time to time, discount from 5% to 20% on the unit value for Investment Units subscribed by individual investors. The discount offered for on-line products subscribed by individual investors is amortized as interest expense using the effective interest rate method through the end of the lock-up period, which is the earliest date that the Company could be required to repay the unit value in respect of the investment made by individual investors. The Company has also started a series of promotion activities targeting on new member (i.e new individual investors). In 2015, the Company launched the first series of such promotion program pursuant to which any new member registered on-line during the promotion period could be paid back in 3 days with RMB17.26 by paying RMB1 into their newly opened account maintained with the Company. By participating in this program, these new members are not obliged to subscribe for any on-line products at that time or in the future in order to get the amount of RMB17.26 in 3 days. The difference between the amount paid by new members and the amount to be paid back by the Company under this promotion activity is recorded as selling expenses as incurred, which amounted to $1,291 during the six-month and three-month periods ended June 30, 2015. Through its on-line platform, Solar Energy serves as a service agent of the Company to collect funds from and repay funds to individual investors. For the funds collected and repaid through Solar Energy, the Company makes settlement with Solar Energy on a regular basis, which normally does not exceed two-weeks. From June 17, 2015 onwards, the Company has made repayment of borrowings to individual investors directly while Solar Energy still continues to collect the funds from individual investors and settle with the Company within 2 weeks. For the service provided through the on-line platform, Solar Energy generally charges the Company commission fee at 1% of the fund principal invested into the on-line products by individual investors (see Note 22— Related Party Transactions) except for those resale of redeemed on-line products by the Company where no commission will be charged to the Company. Such commission fees were expensed as interest expenses as incurred on the condensed consolidated statement of operation. During the six-month period ended June 30, 2015, the total fund raised from individual investors through Solar Energy amounted to $45,806, of which $5,189 was settled by the coupon issued by the Company to the third party vendors and two related parties without cash inflow as described above and $28,782 had been received by the Company from Solar Energy as of June 30, 2015. The Company recorded the remaining funds to be received from Solar Energy in other receivable- due from related party on the condensed consolidated balance sheet as at June 30, 2015, after the reduction of its commission fee of $133 (See Note 22—Related Party Transactions ) . 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 June 30, 2015 and 2014 unaudited interim condensed consolidated financial statements 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. |