2.	Acquisitions:

Energy Source – On August 5, 2015, the Company completed its acquisition of Energy Source, LLC (“Energy Source”), a provider of turnkey comprehensive energy savings projects (principally LED fixtures and lamps) within the commercial, industrial, hospitality, retail, education and municipal sectors. The purchase consideration aggregated $31.5 million, which consisted of $10 million in cash, $9.7 million in common stock, $10 million in promissory notes due at the one year anniversary of the acquisition and contingent consideration initially valued at $1.8 million based on projected EBITDA during 2015, 2016 and 2017. The cash portion of the acquisition was funded through the issuance of 8,695,652 shares of common stock to a third party investor for $10 million. The promissory notes are supported by an irrevocable letter of credit from RVL. The Company acquired Energy Source for its management team, its client base and operational and business development synergies.

 

The following amounts represent the determination of the fair value of identifiable assets acquired and liabilities assumed in the Energy Source acquisition:

 

(in thousands)
Tangible assets		$	5,379
Goodwill			21,276
Intangible assets			8,768
Assets acquired			35,423
Liabilities assumed			3,921
Purchase price		$	31,502

The acquired intangible assets are being amortized consistent with the period the underlying cash flows are generated. Goodwill is expected to be deductible for income tax purposes.

E-Lighting – On February 5, 2015, the Company acquired the assets of DPI Management, Inc. d/b/a E Lighting for $0.6 million. The purchase price consists of cash paid at closing of $0.1 million, $0.15 million paid in cash on September 1, 2015, $0.15 million payable in cash on March 1, 2016, and $0.2 million payable on September 1, 2016 in cash or common stock, at the Company’s option. The aggregate purchase price of $0.6 million was assigned to inventories.

All Around – On December 18, 2014, the company acquired All Around, a supplier of lighting fixtures, for $5.0 million. The purchase price consisted of $0.9 million cash, 1,600,000 unregistered shares of the Company’s restricted common stock, and additional cash consideration if certain revenue targets are achieved in 2015 and 2016 (initially valued at $0.3 million). The unregistered shares of restricted common stock have been valued at $1.8 million, and are being issued in eleven installments beginning in June 2015. The shares are subject to a price floor of $2.00 per share (initially valued at $1.9 million), which will terminate when total share consideration received is equal to $3.2 million. The aggregate purchase price of $5.0 million has been allocated to $1.7 million of tangible assets, $2.2 million of identifiable intangible assets and $2.8 million of goodwill, reduced by $1.7 million of liabilities assumed. The acquired intangibles are being amortized consistent with the period the underlying cash flows are generated. The Company acquired All Around for its presence in the multifamily residential market and construction, the experience of the management team, its customer base, operational and business development synergies. Goodwill is not expected to be deductible for income tax purposes.

Value Lighting – On April 17, 2014, the Company completed the acquisition of Value Lighting, a supplier of lighting solutions to the multifamily residential market. The purchase consideration aggregated $39.3 million and consisted of cash of $10.6 million funded with a loan from an affiliate, an unconditional obligation to issue an aggregate of 8,468,192 shares of common stock in four installments at six, twelve, eighteen and twenty-four months from the acquisition date, valued at $20.9 million, and contingent consideration payable in cash or common stock at the option of the Company aggregating up to a total of $11 million, valued at $7.8 million, if certain revenue and EBITDA targets are achieved by Value Lighting during 2014 and 2015. The Company acquired Value Lighting for its presence in the multifamily residential and construction markets, the experience of the management team, its customer base, operational and business development synergies.

The following amounts represent the determination of the fair value of identifiable assets acquired and liabilities assumed from the Value Lighting acquisition. The excess of the purchase price over the estimated fair value of the net tangible assets acquired was allocated to intangible assets of $20.0 million and goodwill of $18.6 million.

 

(in thousands)
Current Assets		$	16,260
Goodwill			18,635
Intangible Assets			19,951
Other assets			2,901
Assets acquired			57,747
Accounts payable and other liabilities			12,613
Deferred income tax liability			5,825
Liabilities assumed			18,438
Purchase price		$	39,309

 

The acquired intangibles are being amortized consistent with the period the underlying cash flows are generated. Goodwill is not expected to be deductible for income tax purposes.

Value Lighting achieved its 2014 performance targets, and as a result, during the quarter ended March 31, 2015, the Company issued 4.9 million shares of its common stock (valued at $5.5 million) in payment of the 2014 contingent purchase consideration. Value Lighting achieved its 2015 performance targets and earned $5.5 million. Payment in common stock or cash, at the Company’s option, is expected to be made by March 31, 2016.

Other – On March 8, 2013, LIT, a wholly owned subsidiary of the Company, acquired certain assets of Elite LED Solutions. The purchase resulted in a gain on bargain purchase of $0.7 million in 2013.

Pro forma information – The following unaudited supplemental pro forma information assumes the Energy Source acquisition and the 2014 acquisitions referred to above had been completed as of January 1, 2014 and is not indicative of the results of operations that would have been achieved had the transactions been consummated on such date or of results that might be achieved in the future. The pro forma effect of the E-Lighting acquisition was not significant.

 

		Year Ended December 31,
(in thousands)		2015				2014
Revenues		$	138,524			$	115,900
Operating loss		$	(1,223	)		$	(8,931	)
Net loss		$	(2,993	)		$	(4,063	)

The pro forma results for the years ended December 31, 2015 and 2014, include the amortization of the customer backlog of $0.4 million and $2.4 million, respectively, and acquisition, severance and transition costs of $2.0 million and $2.5 million, respectively. The pro forma results for the year ended December 31, 2014 also include an income tax benefit of $6.6 million. These non-recurring charges and credits are directly related to the acquisitions but do not have a continuing impact on the results of operations.

The revenue of the 2015 acquisitions included in the Company’s 2015 actual results of operations from their respective acquisition dates through December 31, 2015 totaled $16.3 million. The net income of the 2015 acquisitions included in the Company’s 2015 actual results of operations from their respective acquisition dates through December 31, 2015 totaled $2.9 million. The revenue of the 2014 acquisitions, included in the Company’s 2014 actual results operations from their respective acquisition dates through December 31, 2014 totaled $46.2 million. The net income of the 2014 acquisitions, included in the Company’s 2014 actual results of operations, from their respective acquisition dates through December 31, 2014 totaled $1.6 million.