SOLARCITY CORP (Form: 10-Q, Received: 10/30/2015 09:13:41)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35758

SolarCity Corporation

(Exact name of registrant as specified in its charter)

Delaware

02-0781046

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3055 Clearview Way

San Mateo, California

94402

(Address of principal executive offices)

(Zip Code)

(650) 638-1028

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of the registrant’s common stock as of September 30, 2015 was 97,588,595.

TABLE OF CONTENTS

		Page

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	50

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	52
Item 6.	Exhibits	75

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The discussion in this quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are any statements that look to future events and consist of, among other things, our business strategies; anticipated future financial results; expected trends in certain financial and operating metrics; our belief that the aggregate megawatt, or MW, production capacity of our systems is an indicator of the growth rate of our solar energy systems business; the calculation of estimated nominal contracted payments remaining, and certain other metrics based on forward-looking projections; projections on growth in the markets that we operate and our growth rates; pricing trends, including our ability to achieve economies of scale in both installation and capital costs; our ability to successfully integrate acquired businesses, operations and personnel; our ability to achieve manufacturing economies of scale and associated cost reductions; our expectations regarding the Riverbend Agreement and the development and construction of the Riverbend facility, including expected capital and operating expenses and the performance of our manufacturing operations; our belief that adequate surplus capacity of non-tariff solar panels is available to suit our future needs and the costs of solar energy system components; our beliefs regarding future regulations and policies affecting our business, such as net energy metering policies; projections relating to our use of and reliance on U.S. Treasury grants and federal, state and local incentives and tax attributes; our regulatory status as a non-utility; our ability to continue to meet the regulatory requirements of a public company; domestic and international expansion, including throughout Mexico and Central America, and hiring plans; product development efforts and customer preferences; the fair market value of our solar energy systems, including amounts potentially payable to our fund investors as a result of decreased fair market value determinations by the U.S. Treasury Department; the life and durability of our solar systems and equipment, anticipated contract renewals and warranty obligations; the success of our sales and marketing efforts; our internal control environment; pending litigation; the payment of future dividends; and our belief as to the sufficiency of our existing cash and cash equivalents, funds available under our secured credit facilities and funds available under existing financing funds to meet our working capital and operating resource requirements for the next 12 months.

The forward-looking statements are contained principally in, but not limited to, the sections titled “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In addition, forward-looking statements also consist of statements involving trend analyses and statements including such words as “may,” “believe,” “will,” “could,” “anticipate,” “would,” “might,” “potentially,” “estimate,” “continue,” “plan,” “expect,” “intend,” and similar expressions or the negative of these terms or other comparable terminology that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. These forward-looking statements speak only as of the date of this quarterly report on Form 10-Q and are subject to business and economic risks. As such, our actual results could differ materially from those set forth in the forward-looking statements as a result of a number of factors, including those set forth below in “Risk Factors,” and in our other reports filed with the U.S. Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this report may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. We undertake no obligation to revise or publically release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

P ART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SolarCity Corporation

Condensed Consolidated Balance Sheets

(In Thousands, Except Share Par Values)

	September 30,			December 31,
	2015			2014
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	372,750		$	504,383
Short-term investments		45,616			138,311
Restricted cash		20,312			20,875
Accounts receivable (net of allowances for doubtful accounts of $3,610 and $1,941 as of September 30, 2015 and December 31, 2014, respectively)		38,572			22,708
Rebates receivable (net of reserves of $2,523 and $7,860 as of September 30, 2015 and December 31, 2014, respectively)		15,044			30,021
Inventories		309,190			217,223
Deferred income tax asset		30,500			13,149
Prepaid expenses and other current assets		103,624			55,729
Total current assets		935,608			1,002,399
Solar energy systems, leased and to be leased - net		3,869,719			2,796,796
Property, plant and equipment - net		243,843			75,464
Build-to-suit lease asset under construction		238,050			26,450
Goodwill and intangible assets - net		527,418			539,557
MyPower customer notes receivable, net of current portion		362,840			34,544
MyPower deferred costs		162,810			13,147
Other assets		172,055			97,854
Total assets(1)	$	6,512,343		$	4,586,211
Liabilities and equity
Current liabilities:
Accounts payable	$	296,196		$	237,809
Distributions payable to noncontrolling interests and redeemable noncontrolling interests		12,336			8,552
Current portion of deferred U.S. Treasury grant income		15,336			15,330
Accrued and other current liabilities		242,434			152,408
Customer deposits		5,095			10,560
Current portion of deferred revenue		100,381			86,238
Current portion of long-term debt		44,471			11,781
Current portion of solar bonds		10,797			820
Current portion of solar bonds issued to related parties		165,340			330
Current portion of solar asset-backed notes		14,259			13,574
Current portion of financing obligation		31,690			29,689
Total current liabilities	$	938,335			567,091
Deferred revenue, net of current portion		885,726			557,408
Long-term debt, net of current portion		833,154			287,621
Solar bonds, net of current portion		34,333			2,593
Solar bonds issued to related parties, net of current portion		200			200
Convertible senior notes		796,000			796,000
Solar asset-backed notes, net of current portion		410,779			304,393
Long-term deferred tax liability		32,298			13,194
Financing obligation, net of current portion		64,211			73,379
Deferred U.S. Treasury grant income, net of current portion		386,121			397,486
Build-to-suit lease liability		238,050			26,450
Other liabilities and deferred credits		271,594			218,024
Total liabilities(1)		4,890,801			3,243,839
Commitments and contingencies (Note 14)
Redeemable noncontrolling interests in subsidiaries		313,302			186,788
Stockholders' equity:
Common stock, $0.0001 par value - authorized, 1,000,000 shares as of September 30, 2015 and December 31, 2014; issued and outstanding, 97,589 and 96,521 shares as of September 30, 2015 and December 31, 2014, respectively		10			10
Additional paid-in capital		1,136,121			1,003,992
Accumulated deficit		(321,318	)		(258,360	)
Total stockholders' equity		814,813			745,642
Noncontrolling interests in subsidiaries		493,427			409,942
Total equity		1,308,240			1,155,584
Total liabilities and equity	$	6,512,343		$	4,586,211

(1)

SolarCity Corporation’s, or the Company’s, consolidated assets as of September 30, 2015 and December 31, 2014 include $2,506,342 and $1,672,370, respectively, being assets of variable interest entities, or VIEs, that can only be used to settle obligations of the VIEs. These assets include solar energy systems, leased and to be leased-net, of $2,405,158 and $1,581,459 as of September 30, 2015 and December 31, 2014, respectively; property, plant and equipment-net, of $23,056 and $24,286 as of September 30, 2015 and December 31, 2014, respectively; cash and cash equivalents of $37,636 and $27,820 as of September 30, 2015 and December 31, 2014, respectively; inventory, of $1,146 and $614 as of September 30, 2015 and December 31, 2014, respectively; restricted cash, current, of $531 and $106 as of September 30, 2015 and December 31, 2014, respectively; accounts receivable, net, of $17,578 and $6,769 as of September 30, 2015 and December 31, 2014, respectively; prepaid expenses and other current assets of $2,706 and $1,839 as of September 30, 2015 and December 31, 2014, respectively; rebates receivable of $9,261 and $25,397 as of September 30, 2015 and December 31, 2014, respectively; and other assets of $9,270 and $4,080 as of September 30, 2015 and December 31, 2014, respectively. The Company’s consolidated liabilities as of September 30, 2015 and December 31, 2014 include $19,340 and $27,808, respectively, being liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include distributions payable to noncontrolling interests in subsidiaries and redeemable noncontrolling interests in subsidiaries of $12,336 and $8,552 as of September 30, 2015 and December 31, 2014, respectively; accounts payable of $2,404 and $2,748 as of September 30, 2015 and December 31, 2014, respectively; customer deposits of $2,572 and $6,405 as of September 30, 2015 and December 31, 2014, respectively; accrued liabilities and other payables of $2,028 and $969 as of September 30, 2015 and December 31, 2014, respectively; and current portion of long-term debt of $0 and $9,134 as of September 30, 2015 and December 31, 2014, respectively.

See further description in Note 7, VIE Arrangements .

See accompanying notes.

SolarCity Corporation

Condensed Consolidated Statements of Operations

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Revenue:
Operating leases and solar energy systems incentives	$	85,059		$	52,178		$	218,113		$	124,431
Solar energy systems and components sales		28,798			6,165			66,026			58,792
Total revenue		113,857			58,343			284,139			183,223
Cost of revenue:
Operating leases and solar energy systems incentives		46,015			25,728			115,667			62,533
Solar energy systems and components sales		42,554			6,640			78,101			57,057
Total cost of revenue		88,569			32,368			193,768			119,590
Gross profit		25,288			25,975			90,371			63,633
Operating expenses:
Sales and marketing		129,284			56,472			329,115			159,093
General and administrative		69,423			39,608			168,288			111,006
Research and development		17,652			4,235			42,173			9,158
Total operating expenses		216,359			100,315			539,576			279,257
Loss from operations		(191,071	)		(74,340	)		(449,205	)		(215,624	)
Interest expense - net		25,862			16,321			64,880			37,192
Other expense - net		16,851			2,961			21,723			4,293
Loss before income taxes		(233,784	)		(93,622	)		(535,808	)		(257,109	)
Income tax (provision) benefit		(482	)		23,506			(1,128	)		23,315
Net loss		(234,266	)		(70,116	)		(536,936	)		(233,794	)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests		(215,193	)		(89,352	)		(473,978	)		(181,315	)
Net (loss) income attributable to stockholders	$	(19,073	)	$	19,236		$	(62,958	)	$	(52,479	)
Net (loss) income attributable to common stockholders
Basic	$	(19,073	)	$	19,236		$	(62,958	)	$	(52,479	)
Diluted	$	(19,073	)	$	19,236		$	(62,958	)	$	(52,479	)
Net (loss) income per share attributable to common stockholders
Basic	$	(0.20	)	$	0.21		$	(0.65	)	$	(0.57	)
Diluted	$	(0.20	)	$	0.19		$	(0.65	)	$	(0.57	)
Weighted-average shares used to compute net (loss) income per share attributable to common stockholders
Basic		97,384,949			93,323,687			97,027,412			92,335,789
Diluted		97,384,949			99,380,397			97,027,412			92,335,789

See accompanying notes.

SolarCity Corporation

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

	Nine Months Ended September 30,
	2015			2014
Operating activities:
Net loss	$	(536,936	)	$	(233,794	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		118,091			66,602
Non cash interest and other expense		12,554			8,607
Stock-based compensation, net of amounts capitalized		61,010			45,660
Loss on extinguishment of long-term debt		1,093			1,504
Deferred income taxes		(102	)		(23,696	)
Non-cash reduction in financing obligation		(36,431	)		(36,407	)
Loss on disposal of property, plant and equipment and construction in progress		92			1,227
Changes in operating assets and liabilities:
Restricted cash		(19,814	)		(3,834	)
Accounts receivable		(15,623	)		722
Rebates receivable		14,977			(6,182	)
Inventories		(91,624	)		(66,325	)
Prepaid expenses and other current assets		(42,305	)		(15,186	)
MyPower deferred costs		(150,267	)		—
Other assets		(12,769	)		(12,092	)
Accounts payable		56,695			80,651
Accrued and other liabilities		110,356			(17,283	)
Customer deposits		(5,465	)		(560	)
Deferred revenue		10,151			128,054
Net cash used in operating activities		(526,317	)		(82,332	)
Investing activities:
Payments for the cost of solar energy systems, leased and to be leased		(1,134,929	)		(793,713	)
Purchase of property, plant and equipment		(147,784	)		(13,420	)
Investment in promissory notes receivable and other advances		(1,189	)		(15,750	)
Purchases of short-term investments		(44,592	)		(46,543	)
Proceeds from sales and maturities of short-term investments		136,560			9,600
Acquisition of business, net of cash acquired		(9,509	)		1,874
Payments to acquire redeemable noncontrolling interest in a subsidiary		—			(450	)
Net cash used in investing activities		(1,201,443	)		(858,402	)

	Nine Months Ended September 30,
	2015			2014
Financing activities:
Investment fund financings, bank and other borrowings:
Borrowings under long-term debt		783,123			256,090
Repayments of long-term debt		(211,976	)		(246,726	)
Proceeds from issuance of solar bonds		41,594			—
Proceeds from issuance of solar bonds issued to related parties		165,010			—
Proceeds from issuance of solar asset-backed notes		119,790			263,551
Repayments of borrowings under solar asset-backed notes		(13,859	)		(3,962	)
Payment of deferred purchase consideration		(3,747	)		(957	)
Proceeds from financing obligation		26,398			30,124
Repayments of financing obligation		(5,136	)		(6,557	)
Repayment of capital lease obligations		(3,223	)		(1,153	)
Proceeds from investment by noncontrolling interests and redeemable noncontrolling interests in subsidiaries		754,916			428,061
Distributions paid to noncontrolling interests and redeemable noncontrolling interests in subsidiaries		(67,154	)		(107,254	)
Proceeds from U.S. Treasury grants		—			342
Net cash provided by financing activities before equity and convertible notes issuances		1,585,736			611,559
Equity issuances:
Proceeds from issuance of convertible senior notes		—			488,713
Purchase of capped call options		—			(57,600	)
Proceeds from exercise of stock options		10,391			17,498
Net cash provided by equity issuances		10,391			448,611
Net cash provided by financing activities		1,596,127			1,060,170
Net (decrease) increase in cash and cash equivalents		(131,633	)		119,436
Cash and cash equivalents, beginning of period		504,383			577,080
Cash and cash equivalents, end of period	$	372,750		$	696,516
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	34,418		$	15,583
Cash paid during the period for taxes, net of refunds	$	257		$	1,881

See accompanying notes.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements

1. Organization

SolarCity Corporation, or the Company, was incorporated as a Delaware corporation on June 21, 2006. The Company is engaged in the design, manufacture, installation and sale or lease of solar energy systems to residential and commercial customers, or sale of electricity generated by solar energy systems to customers. The Company’s headquarters are located in San Mateo, California.

2. Summary of Significant Accounting Policies and Procedures

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles, or GAAP, and reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. In accordance with the provisions of Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, 810, Consolidation , the Company consolidates any variable interest entity, or VIE, of which it is the primary beneficiary. The Company and fund investors form VIEs in the ordinary course of business in order to facilitate funding and monetization of solar energy systems. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling voting interests. ASC 810 requires a variable interest holder to consolidate a VIE if that party has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company does not consolidate a VIE in which it has a majority ownership interest when the Company is not considered the primary beneficiary. The Company has determined that it is the primary beneficiary of a number of VIEs (see Note 7, VIE Arrangements ). The Company evaluates its relationships with all the VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.

The Company and its subsidiaries’ fiscal quarters and years are the same as calendar quarters and years except for one subsidiary, Silevo, LLC, or Silevo, which continues to have fiscal quarters based on 13-week periods and fiscal years based on 52-week periods. Silevo’s third fiscal quarter of 2015 began on June 28, 2015 and ended on September 26, 2015, and this timing difference and the related activity did not materially impact the condensed consolidated financial statements.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

Use of Estimates

The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Management regularly makes significant estimates and assumptions regarding the selling price of undelivered elements for revenue recognition purposes, the collectability of accounts and rebates receivable, the valuation of inventories, the labor costs for long-term contracts used as a basis for determining the percentage of completion for such contracts, the fair values and residual values of solar energy systems subject to leases, the accounting for business combinations, the fair values and useful lives of acquired tangible and intangible assets, the fair value of debt assumed under business combinations, the fair value of contingent consideration payable under business combinations, the fair value of short-term investments, the useful lives of solar energy systems, property, plant and equipment, the determination of accrued warranty, the determination of accrued liability for solar energy systems performance guarantees, the determination of lease pass-through financing obligations, the discount rates used to determine the fair values of investment tax credits, the valuation of stock-based compensation , the determination of valuation allowances associated with deferred tax assets, asset impairment, the valuation of build-to-suit lease assets, the fair value of interest rate swaps and other items. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates.

Short-Term Investments

The Company’s short-term investments are comprised of corporate debt securities and asset-backed securities. The Company classifies short-term investments as available-for-sale and carries them at fair value, with any unrealized gains or losses recognized as other comprehensive income or loss in the condensed consolidated balance sheets. The specific identification method is used to determine the cost of any securities disposed of, with any realized gains or losses recognized as other income or expense in the

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

condensed consolidated statements of operations. Short-term investments are anticipated to be used for current operations and are, therefore, classified as current assets even though their maturities may extend beyond one year. The Company periodically reviews short-term investments for impairment. In the event a d ecline in value is determined to be other-than-temporary, an impairment loss is recognized. When determining if a decline in value is other-than-temporary, the Company takes into consideration the current market conditions and the duration and severity of and the reason for the decline, as well as the likelihood that it would need to sell the security prior to a recovery of par value.

As of September 30, 2015, short-term investments were comprised of $38.7 million of corporate debt securities and $6.9 million of asset-backed securities. The costs of these securities approximated their fair values, and there were no material gross realized or unrealized gains, gross realized or unrealized losses or impairment losses recognized for the three and nine months ended September 30, 2015. As of September 30, 2015, all short-term investments were scheduled to mature within the next twelve months.

Interest Rate Swaps

The Company enters into fixed-for-floating interest rate swap agreements to reduce the potential impact of future changes in interest rates on certain variable rate debt. All interest rate swaps are recognized at fair value on the condensed consolidated balance sheets within other assets or other liabilities and deferred credits, with any changes in fair value recognized as other income or expense in the condensed consolidated statements of operations. The Company has not designated any interest rate swaps as hedging instruments. As of and for the periods ended September 30, 2015, the Company had interest rate swaps outstanding as follows (in thousands):

					Gross Losses
	Aggregate		Gross		Three Months Ended		Nine Months Ended
	Notional		Liability at		September 30,		September 30,
	Amount		Fair Value		2015		2015
Interest rate swaps	$	356,812	$	12,570	$	12,253	$	12,570

Fair Value of Financial Instruments

ASC 820 , Fair Value Measurements , clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

ASC 820 requires that the valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes inputs that may be used to measure fair value as follows:

Level 1—Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

As of September 30, 2015, the Company’s assets and liabilities carried at fair value on a recurring basis included cash equivalents, short-term investments, interest rate swaps and contingent consideration, as follows (in thousands):

	Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	34,756	$	—	$	—
Short-term investments:
Corporate debt securities	$	—	$	38,708	$	—
Asset-backed securities	$	—	$	6,908	$	—
Liabilities:
Interest rate swaps	$	—	$	12,570	$	—
Contingent consideration	$	—	$	—	$	121,749

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

The Company classified its money market funds within Level 1 because their fair values are based on their quoted market prices. The Company classified its corporate debt securities , asset-backed securities and interest rate swaps within Level 2 because their fair values are determined using alt ernative pricing sources or models that utilized market observable inputs , including current and forward interest rates, to determine their fair values. The Company classified its contingent consideration within Level 3 because their fair values are determ ined using unobservable probability estimates and unobservable estimated discount rates applicable to the acquisition to determine the fair value. D uring the nine months ended September 30 , 2015, there were no transfers between the levels of the fair value hierarchy.

The contingent consideration is dependent on the achievement of specified production milestones for the acquired business. The fair value of the contingent consideration is directly proportional to the estimated probabilities of achievement of these milestones. As of September 30, 2015, the estimated probabilities ranged from 90% to 95%, the estimated discount rates ranged from 5.0% to 7.0%, $42.9 million was included under accrued and other current liabilities on the condensed consolidated balance sheets and $78.8 million was included under other liabilities and deferred credits on the condensed consolidated balance sheets.

The following table summarizes the activity of the Level 3 contingent consideration balance in the nine months ended September 30, 2015 (in thousands):

Balance - beginning of the period	$	117,197
Change in fair value recorded in other expense - net		4,552
Balance - end of the period	$	121,749

The Company’s financial instruments that are not re-measured at fair value include accounts receivable, customer notes receivable, rebates receivable, accounts payable, customer deposits, distributions payable to noncontrolling interests and redeemable noncontrolling interests, the participation interest, solar asset-backed notes, convertible senior notes, Solar Bonds and long-term debt. The carrying values of these financial instruments other than customer notes receivable, the participation interest, solar asset-backed notes, convertible senior notes, Solar Bonds and long-term debt approximated their fair values due to the fact that they were short-term in nature at September 30, 2015 and December 31, 2014 (Level 1).

The Company estimates the fair value of convertible senior notes based on their last actively traded prices (Level 1). The Company estimates the fair value of customer notes receivable, the participation interest, solar asset-backed notes, Solar Bonds and long-term debt based on rates currently offered for instruments with similar maturities and terms (Level 3).

The following table presents the estimated fair values and the carrying values of the participation interest, solar asset-backed notes and convertible senior notes (in thousands):

	September 30, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
Participation interest	$	15,648	$	14,435	$	15,556	$	14,102
Solar asset-backed notes	$	425,038	$	431,342	$	317,967	$	328,313
Convertible senior notes	$	796,000	$	630,330	$	796,000	$	752,176

The Company has estimated the fair values of customer notes receivable, Solar Bonds and long-term debt to approximate their carrying values based on rates currently offered for instruments with similar maturities and terms.

Customer Notes Receivable

In determining the allowance and credit quality for customer loans under MyPower, the Company identifies significant customers with known disputes or collection issues and also considers its historical level of credit losses and current economic trends that might impact the level of future credit losses. Customer notes receivable that are individually impaired are charged-off as a write-off of allowance for losses. As of September 30, 2015, there were no significant customers with known disputes or collection issues, and the amount of potentially uncollectible amounts was insignificant. Accordingly, the Company did not establish an allowance for losses against customer notes receivable. In addition, there were no material non-accrual or past due customer notes receivable as of September 30, 2015.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

Deferred Revenue and Deferred Costs under MyPower Contracts

For solar energy systems sold under a MyPower contract, the Company has determined that the arrangement consideration is not currently fixed or determinable. In making this determination, the Company considered (i) the MyPower arrangement is unique and the Company does not have company-specific or market history for similar financing arrangements with similar asset classes over an extended term; (ii) customer preferences and satisfaction during the life of these long-term contracts, including as a result of technological advances in solar energy systems over time, may change, and the Company may be incented to offer future inducements or concessions to ensure customers remain satisfied during the life of these long-term contracts; and (iii) possible future decreases in the retail prices of electricity from utilities or from other renewable energy sources that may make the purchase of the solar energy systems less economically attractive and may cause the Company to amend the terms of its contracts to ensure continued performance and remain competitive. Accordingly, the Company initially defers the revenue associated with the sale of a solar energy system under a MyPower contract when it delivers the system that has passed inspection by the utility or the authority having jurisdiction. In instances where there are multiple deliverables in a single MyPower contract, the Company allocates the arrangement consideration to the various elements in the contract based on the relative selling price method. Then, the Company recognizes revenue for the system over the term of the contract as cash payments are received for the loan’s principal and interest. The deferred revenue is included in the condensed consolidated balance sheets under the current portion of deferred revenue for the portion expected to be recognized as revenue in the next 12 months, and the non-current portion is included under deferred revenue, net of current portion. The Company records a note receivable when the customer secures the loan from a subsidiary of the Company to finance the purchase.

MyPower deferred revenue activity was as follows (in thousands):

	As of and for the
	Nine Months Ended
	September 30,
	2015
Balance - beginning of the period	$	33,651
MyPower systems delivered under executed contracts		319,239
MyPower revenue recognized within solar energy systems and components sales		(15,327	)
Balance - end of the period	$	337,563

Of the balance outstanding as of September 30, 2015, $4.1 million is included in the condensed consolidated balance sheet under current portion of deferred revenue. The balances in the table above do not include $28.5 million allocated to remote monitoring service revenue and $5.3 million allocated to accrued sales taxes.

The costs associated with solar energy systems sold under MyPower contracts, including the costs of acquisition of solar energy systems component, personnel costs associated with system installations and costs to originate the contracts such as sales commissions, referral fees and some incremental contract administration costs, are initially capitalized as deferred costs. Subsequently these costs are recognized as a component of cost of revenue from solar energy systems and components sales for the costs associated with system components and installation, or as a component of operating expenses for costs associated with contract origination, generally in proportion to the reduction of the MyPower loan’s outstanding principal over 30 years. The deferred cost is included in the condensed consolidated balance sheets under prepaid expenses and other current assets for the portion expected to be recognized in the condensed consolidated income statement in the next twelve months, and the non-current portion is included under other assets. MyPower deferred costs activity was as follows (in thousands):

	As of and for the
	Nine Months Ended
	September 30,
	2015
Balance - beginning of the period	$	13,571
MyPower systems delivered under executed contracts(1)		158,098
Recognized in cost of revenue within solar energy systems and components sales		(6,734	)
Recognized in operating expenses		(248	)
Balance - end of the period	$	164,687

(1)	Included in MyPower systems delivered under executed contracts was $20.4 million of MyPower contract origination costs incurred in the nine months ended September 30, 2015.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

Of the balance outstanding as of September 30, 2015, $1.9 million is included in t he condensed consolidated balance sheet under prepaid and other current assets.

Warranties

The Company generally provides a warranty on the installation and components of the solar energy systems that it sells, including sales under MyPower contracts, of typically between 10 to 30 years. The manufacturer’s warranty on the solar energy systems’ components, which is typically passed-through to customers, ranges from 1 to 25 years. However, for the solar energy systems under lease contracts or power purchase agreements, the Company does not accrue a warranty liability because it owns those solar energy systems. Instead, any repair costs on those solar energy systems are expensed when they are incurred.

The changes in the accrued warranty balance, recorded as a component of accrued and other current liabilities on the condensed consolidated balance sheets, consisted of the following (in thousands):


	As of and for the
	Nine Months Ended
	September 30, 2015
Balance - beginning of the period	$	8,607
Change in estimate		(3,158	)
Increase in liability (including $18,535 related to MyPower contracts)		19,950
Less warranty claims		(231	)
Balance - end of the period	$	25,168

Solar Energy Systems Performance Guarantees

The Company guarantees certain specified minimum solar energy production output for certain solar energy systems leased or sold to customers generally for a term up to 30 years. The Company monitors the solar energy systems to ensure that these outputs are being achieved. The Company evaluates if any amounts are due to its customers and makes any payments periodically as specified in the customer contracts. As of September 30, 2015 and December 31, 2014, the Company had recorded liabilities of $2.8 million and $1.6 million, respectively, under accrued and other current liabilities in the condensed consolidated balance sheets, relating to these guarantees based on the Company’s assessment of its current exposure.

Comprehensive Income (Loss)

The Company accounts for comprehensive income (loss) in accordance with ASC 220 , Comprehensive Income . Under ASC 220, the Company is required to report comprehensive income (loss), which includes net income (loss) as well as other comprehensive income (loss). There were no significant other comprehensive income (losses) and no significant differences between comprehensive loss as defined by ASC 220 and net loss as reported in the condensed consolidated statements of operations, for the periods presented.

Segment Information

Operating segments are defined as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the executive team, which is comprised of the Chief Executive Officer, Chief Technology Officer, Chief Revenue Officer, Chief Operating Officer and Chief Financial Officer. Based on the financial information presented to and reviewed by the executive team in deciding how to allocate resources and in assessing the performance of the Company, the Company has determined that it has a single operating and reporting segment: solar energy products and services. The Company’s principal operations, revenue and decision-making functions are located in the United States.

Basic and Diluted Net Income (Loss) Per Share

The Company’s basic net income (loss) per share attributable to common stockholders is calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

The diluted net income (loss) per share attributable to common stockholders is computed by giving effect to all potential common stock equivalents outstanding for the period determined using the treasury stock method or the if-converted method, as applicable. In periods when the Company incurred a net loss attributabl e to common stockholders, stock options, restricted stock units and convertible senior notes are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as thei r effect is antidilutive.

Recently Issued Accounting Standards

In May 2014, the FASB issued Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers , to replace the existing revenue recognition criteria for contracts with customers and to establish the disclosure requirements for revenue from contracts with customers. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date , to defer the effective date of ASU No. 2014-09 to interim and annual periods beginning after December 15, 2017, with early adoption permitted. Adoption of the ASUs is either retrospective to each prior period presented or retrospective with a cumulative adjustment to retained earnings or accumulated deficit as of the adoption date. The Company is currently assessing the impact of the ASUs on its condensed consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern , to provide guidance within GAAP requiring management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and requiring related disclosures. The ASU is effective for annual periods ending after December 15, 2016. The Company believes that the ASU will have no impact on its condensed consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015-02, Amendments to the Consolidation Analysis , to amend the criteria for consolidation of certain legal entities. The ASU is effective for interim and annual periods beginning after December 15, 2015. Adoption of the ASU is either retrospective to each prior period presented or retrospective with a cumulative adjustment to retained earnings or accumulated deficit as of the adoption date. The Company is currently assessing the impact of the ASU on its condensed consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs , to require debt issuance costs to be presented as an offset against debt outstanding as opposed to an asset. The ASU is effective for interim and annual periods beginning after December 15, 2015. Adoption of the ASU is retrospective to each prior period presented. Upon adoption of the ASU, the Company will offset its debt issuance costs, which were $29.6 million as of September 30, 2015, against debt outstanding.

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory , to specify that inventory should be subsequently measured at the lower of cost or net realizable value, which is the ordinary selling price less any completion, transportation and disposal costs. However, the ASU does not apply to inventory measured using the last-in-first-out or retail methods. The ASU is effective for interim and annual periods beginning after December 15, 2016. Adoption of the ASU is prospective. The Company does not anticipate that the adoption of the ASU will have a material impact on its condensed consolidated financial statements.

3. Acquisition

Ilioss

On August 7, 2015, the Company acquired all of the outstanding shares of ILIOSSON, S.A. de C.V., or Ilioss, a designer and marketer of commercial and industrial solar energy systems in Mexico. Historically, Ilioss subcontracted the installation of its solar energy systems and sold them to financing companies along with the related customer power purchase agreements. The Company expects to vertically integrate Ilioss’ operations and expand throughout Mexico.

The purchase consideration was comprised of $9.7 million payable in cash. Additionally, the Company would pay earn-outs comprising of: (i) $5.0 million in cash upon the successful achievement of a commercial battery storage deployment milestone on or before June 30, 2016 and (ii) additional cash consideration based on the number of megawatts deployed by Ilioss in Mexico from the acquisition date through December 31, 2019. The terms of the earn-out payments require the sellers to remain employed to receive the earn-out payments. No amounts would be payable for any earn-outs not achieved. The Company has determined that these earn-out payments are compensation for post-acquisition services, and the Company will, therefore, recognize the amounts as they are earned.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

The following table summarizes the prelim in ary assessment of the fair values of the assets acquired and the liabilities assumed as of the acquisition date (in thousands). The Company is in the process of complet ing the valuatio n of the assets acquired and the liabilities assumed. Accordingly, the preliminary fair values reflected in the following table are subject to change .

Cash	$	145
Accounts receivable		241
Prepaid and other assets		307
Property, plant and equipment		18
Accounts payable and other liabilities		(1,015	)
Deferred revenue		(553	)
Deferred tax liabilities		(1,855	)
Intangible assets		6,420
Total identifiable net assets at fair value		3,708
Goodwill		5,945
Total purchase consideration	$	9,653

The goodwill recognized was primarily attributable to Ilioss’ assembled workforce and their knowledge and experience with the Mexican solar energy market that would enable the Company to grow its presence there. The full amount of the goodwill is not deductible for tax purposes.

The following table summarizes the acquired intangible assets as of the acquisition date:

			Weighted-
			Average
	Fair Value		Useful Life
	(in thousands)		(in years)
Customer relationships	$	6,190		6
Non-compete agreements		230		3
Total	$	6,420

Pro forma financial information and the historical revenue and earnings of the acquiree are not presented as they were not material to the condensed consolidated statements of operations.

4. Goodwill and Intangible Assets

The Company is in the process of completing the valuation of certain assets and liabilities from the Ilioss acquisition discussed in Note 3, Acquisition , including the gross amounts of certain intangible assets presented in the table below amounting to $6.4 million. Such amounts are preliminary and subject to change. There were no material changes recorded in the nine months ended September 30, 2015 related to the amounts reported in the Company’s Form 10-K for the year ended December 31, 2014, except for the periodic amortization of the intangible assets.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

Intangible Assets

The following is a summary of intangible assets as of September 30, 2015 (in thousands):


	Weighted-
	average
	useful life				Accumulated
	(in years)		Gross		amortization			Net
Developed technology - Silevo		10	$	115,000	$	(11,720	)	$	103,280
Developed technology - Zep Solar		7		60,100		(15,510	)		44,590
Trademarks and trade names		7		24,700		(6,374	)		18,326
Marketing database		5		17,427		(7,213	)		10,214
PowerSaver agreement		10		17,077		(3,534	)		13,543
Non-compete agreements		5		7,189		(2,897	)		4,292
Customer relationships		6		6,190		(226	)		5,964
Other		6		10,028		(4,684	)		5,344
Total		8.26	$	257,711	$	(52,158	)	$	205,553

The following is a summary of intangible assets as of December 31, 2014 (in thousands):

								Transfers to
	Weighted-							solar energy
	average							systems,			Write-offs
	useful life				Accumulated			leased and to be			and
	(in years)		Gross		amortization			leased			cancellations			Net
Developed technology - Silevo		10	$	115,000	$	(3,096	)	$	—		$	—			111,904
Developed technology - Zep Solar		7		60,100		(9,070	)		—			—			51,030
Trademarks and trade names		7		24,700		(3,728	)		—			—			20,972
Marketing database		5		17,427		(4,599	)		—			—			12,828
PowerSaver agreement		10		17,077		(2,253	)		—			—			14,824
Solar energy systems backlog		30		12,434		—			(10,755	)		(1,679	)		—
Non-compete agreements		5		6,959		(1,836	)		—			—			5,123
Other		6		10,028		(3,072	)		—			—			6,956
Total		9.35	$	263,725	$	(27,654	)	$	(10,755	)	$	(1,679	)	$	223,637

All intangible assets, with the exception of the solar energy systems backlog, are amortized over their estimated useful lives.

The changes to the carrying values of the intangibles assets were as follows (in thousands):

	September 30, 2015
Balance - beginning of the period	$	223,637
Acquisition of Ilioss		6,420
Amortization		(24,504	)
Balance - end of the period	$	205,553

Amortization expense for intangible assets for the nine months ended September 30, 2015 and 2014 was allocated as follows (in thousands):

	Nine Months Ended September 30,
		2015	2014
Included in operating leases and solar energy incentives cost of revenue	$	12,924	$	5,283
Included in solar energy systems and components sales cost of revenue		2,627		2,121
Total included in cost of revenue		15,551		7,404
Included in sales and marketing		8,953		8,772
Total amortization expense	$	24,504	$	16,176

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

No intangible assets were impaired during the nine months ended September 30, 2015.

The total future amortization expense for intangible assets is expected to be (in thousands):

	Cost of Revenue		Operating Expense		Total
Three months ending December 31, 2015	$	5,206	$	3,225	$	8,431
2016		20,652		12,386		33,038
2017		20,495		11,306		31,801
2018		20,495		9,711		30,206
2019		20,495		6,329		26,824
Thereafter		64,546		10,707		75,253
Total	$	151,889	$	53,664	$	205,553

Goodwill

The carrying value of goodwill increased from $315.9 million to $321.9 million in the nine months ended September 30, 2015 as a result of the Ilioss acquisition (see Note 3, Acquisition ).

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

5 . Selected Balance Sheet Components

Selected components of the condensed consolidated balance sheets were as follows (in thousands):


	September 30, 2015			December 31, 2014
Inventories:
Raw materials	$	299,015		$	209,251
Work in progress		10,175			7,972
Total	$	309,190		$	217,223

Solar Energy Systems, Leased and To Be Leased - Net:
Solar energy systems leased to customers	$	3,295,232		$	2,388,548
Initial direct costs related to solar energy systems leased to customers		327,978			207,537
		3,623,210			2,596,085
Less accumulated depreciation and amortization		(241,469	)		(159,160	)
		3,381,741			2,436,925
Solar energy systems under construction		276,574			131,048
Solar energy systems to be leased to customers		211,404			228,823
Solar energy systems, leased and to be leased - net(1)(2)	$	3,869,719		$	2,796,796

Property, plant and equipment - net
Vehicles	$	46,411		$	28,815
Computer hardware and software		34,605			28,724
Furniture and fixtures		9,465			5,501
Leasehold improvements - manufacturing facilities		47,592			—
Leasehold improvements - other		17,911			13,992
Manufacturing and lab equipment		102,173			21,677
Other		32,832			7,280
		290,989			105,989
Less accumulated depreciation and amortization		(47,146	)		(30,525	)
Property, plant and equipment - net	$	243,843		$	75,464

Accrued and Other Current Liabilities:
Accrued compensation	$	75,770		$	50,414
Current portion of contingent consideration		42,905			41,978
Accrued expenses		79,462			34,298
Accrued sales and use taxes		8,429			10,438
Accrued warranty		25,168			8,607
Current portion of capital lease obligation		7,457			3,430
Current portion of deferred gain on sale-leaseback transactions		3,243			3,243
Total	$	242,434		$	152,408

Other Liabilities and Deferred Credits:
Deferred gain on sale-leaseback transactions, net of current portion	$	52,358		$	54,790
Capital lease obligation, net of current portion		37,926			27,791
Contingent consideration, net of current portion		78,844			75,219
Participation interest		15,648			15,556
Other noncurrent liabilities		86,818			44,668
Total	$	271,594		$	218,024

(1)	Included in solar energy systems leased to customers as of September 30, 2015 and December 31, 2014 was $66.4 million related to capital leased assets with an accumulated depreciation of $10.0 million and $7.9 million, respectively.

( 2 )

Included in solar energy systems leased to customers as of September 30, 2015 and December 31, 2014 was $4.9 million and $3.5 million, respectively, related to energy storage systems with an accumulated depreciation of $0.4 million and $0.1 million, respectively.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

6. Indebtedness

The following is a summary of the Company’s debt as of September 30, 2015 (dollars in thousands):

	Unpaid						Unused
	Principal		Carrying Value, Net of Fees				Borrowing
	Balance		Current		Long-Term		Capacity		Interest Rate	Maturity Dates
Recourse debt:
Secured revolving credit facility	$	295,000	$	—	$	291,392	$	18,820	3.4%-5.5%	December 2016
Vehicle and other loans		16,129		10,960		5,169		—	2.5%-4.4%	April 2015 - June 2019
2.75% convertible senior notes due in 2018		230,000		—		230,000		—	2.8%	November 2018
1.625% convertible senior notes due in 2019		566,000		—		566,000		—	1.6%	November 2019
Solar Bonds		45,354		10,797		34,333	*		1.1%-5.8%	January 2016 - September 2030
Solar Bonds issued to related parties		165,540		165,340		200	*		2.0%-4.0%	October 2015 - October 2021
Total recourse debt		1,318,023		187,097		1,127,094		18,820
Non-recourse debt:
Term loan due in May 2016		34,622		33,511		—		—	3.7%	May 2016
Term loan due in December 2016		108,776		—		107,427		65,549	3.4%	December 2016
MyPower revolving credit facility		123,083		—		120,863		76,917	3.3%-5.3%	January 2017
Revolving aggregation credit facility		317,977		—		308,303		332,023	2.9%	December 2017
Solar Asset-backed Notes, Series 2013-1		46,956		3,410		43,546		—	4.8%	November 2038
Solar Asset-backed Notes, Series 2014-1		65,325		2,904		62,420		—	4.6%	April 2044
Solar Asset-backed Notes, Series 2014-2		193,755		6,517		186,534		—	4.0%-Class A 5.4%-Class B	July 2044
Solar Asset-backed Notes, Series 2015-1		122,295		1,428		118,279		—	4.2%-Class A 5.6%-Class B	August 2045
Total non-recourse debt		1,012,789		47,770		947,372		474,489
Total debt	$	2,330,812	$	234,867	$	2,074,466	$	493,309

*	Out of the $350.0 million authorized to be issued by the Company’s board of directors, $139.1 million remained available to be issued.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

The following is a summary of the Company’s debt as of December 31, 2014 (dollars in thousands):

	Unpaid						Unused
	Principal		Carrying Value, Net of Fees				Borrowing
	Balance		Current		Long-Term		Capacity		Interest Rate	Maturity Date
Recourse debt:
Secured revolving credit facility	$	130,000	$	—	$	126,939	$	54,935	3.4%	December 2016
Vehicle loans		9,724		2,647		7,077		—	1.9%-7.5%	March 2015 - June 2019
2.75% convertible senior notes due in 2018		230,000		—		230,000		—	2.8%	November 2018
1.625% convertible senior notes due in 2019		566,000		—		566,000		—	1.6%	November 2019
Solar Bonds		3,413		820		2,593	#		2.0%-4.0%	October 2015 - October 2018
Solar Bonds issued to related parties		530		330		200	#		2.0%-4.0%	October 2015 - October 2018
Total recourse debt		939,667		3,797		932,809		54,935
Non-recourse debt:
Term loan assumed from Silevo acquisition		9,134		9,134		—		—	7.8%	June 2015
Term loan due in May 2016		34,195		—		33,497		90,805	3.2%	May 2016
Term loan due in December 2016		122,655		—		120,108		127,345	3.4%-3.5%	December 2016
Solar Asset-backed Notes, Series 2013-1		49,519		3,291		46,228		—	4.8%	November 2038
Solar Asset-backed Notes, Series 2014-1		67,676		2,779		64,897		—	4.6%	April 2044
Solar Asset-backed Notes, Series 2014-2		201,494		7,504		193,268		—	4.0%-Class A 5.4%-Class B	July 2044
Total non-recourse debt		484,673		22,708		457,998		218,150
Total debt	$	1,424,340	$	26,505	$	1,390,807	$	273,085

#	Out of the $200.0 million authorized to be issued by the Company’s board of directors, $196.1 million remained available to be issued.

Recourse debt refers to debt that is recourse to the Company’s general assets. Non-recourse debt refers to debt that is recourse to only specified assets or subsidiaries of the Company. The Company’s debt is described further below.

Recourse Debt Facilities:

Secured Revolving Credit Facility

The Company has a revolving credit agreement with a syndicate of banks to obtain funding for working capital, letters of credit and funding for general corporate needs. On June 29, 2015, the committed amount under the secured revolving credit facility was increased to $260.0 million. On July 24, 2015, the committed amount under the secured revolving credit facility was increased to $333.5 million. Borrowed funds bear interest, at the Company’s option, at an annual rate of (a) 3.25% plus LIBOR or (b) 2.25% plus the highest of (i) the federal funds rate plus 0.50%, (ii) Bank of America’s published “prime rate” or (iii) LIBOR plus 1.00%. The fee for undrawn commitments is 0.375% per annum. The secured revolving credit facility is secured by certain of the Company’s machinery and equipment, accounts receivable, inventory and other assets. The secured revolving credit facility is scheduled to expire on December 31, 2016. The Company was in compliance with all financial covenants as of September 30, 2015.

Vehicle and Other Loans

The Company has entered into various vehicle and other loan agreements with various financial institutions. The vehicle loans are secured by the vehicles financed. The Company was in compliance with all financial covenants as of September 30, 2015.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

2.75% Convertible Senior Notes Due in 2018

In October 2013, the Company issued $230.0 million in aggregate principal of 2.75% convertible senior notes due on November 1, 2018 through a public offering. The net proceeds from the offering, after deducting transaction costs, were $222.5 million. The Company debt issuance costs were recorded in other assets and are being amortized to interest expense over the contractual term of the convertible senior notes.

Each $1,000 of principal of the convertible senior notes is initially convertible into 16.2165 shares of the Company’s common stock, which is equivalent to an initial conversion price of $61.67 per share, subject to adjustment upon the occurrence of specified events set forth in the applicable indenture. Holders of the convertible senior notes may convert their convertible senior notes at their option at any time up to and including the second scheduled trading day prior to maturity. If certain events that would constitute a make-whole fundamental change under the applicable indenture occur prior to the maturity date, the Company would increase the conversion rate for a holder who elects to convert its convertible senior notes in connection with such an event in certain circumstances. The convertible senior note holders may require the Company to repurchase their convertible senior notes for cash only under certain defined fundamental changes. The Company was in compliance with all financial covenants as of September 30, 2015.

1.625% Convertible Senior Notes Due in 2019

In September 2014, the Company issued $500.0 million in aggregate principal of 1.625% convertible senior notes due on November 1, 2019 through a private placement. The net amount from the issuance, after deducting transaction costs, was $488.3 million. On October 10, 2014, the Company issued an additional $66.0 million in aggregate principal of the 1.625% convertible senior notes, pursuant to the exercise of an option by the initial purchasers. The net amount from the additional issuance, after deducting transaction costs, was $64.5 million. The debt issuance costs were recorded in other assets and are being amortized to interest expense over the contractual term of the convertible senior notes.

Each $1,000 of principal of the convertible senior notes is initially convertible into 11.972 shares of the Company’s common stock, which is equivalent to an initial conversion price of $83.53 per share, subject to adjustment upon the occurrence of specified events set forth in the applicable indenture. Holders of the convertible senior notes may convert their convertible senior notes at their option at any time up to and including the second scheduled trading day prior to maturity. If certain events that would constitute a make-whole fundamental change under the applicable indenture occur prior to the maturity date, the Company would increase the conversion rate for a holder who elects to convert its convertible senior notes in connection with such an event in certain circumstances. The convertible senior note holders may require the Company to repurchase their convertible senior notes for cash only under certain defined fundamental changes. The Company was in compliance with all financial covenants as of September 30, 2015.

In connection with the issuance of the convertible senior notes in September 2014, the Company paid $57.6 million to enter into capped call option agreements to reduce the potential dilution to holders of the Company’s common stock after a conversion of the convertible senior notes. In connection with the additional issuance of the convertible senior notes on October 10, 2014, the Company paid $7.6 million to enter into additional capped call option agreements. Specifically, upon the exercise of the capped call options, the Company would receive shares of its common stock equal to 6,776,152 shares multiplied by (a) (i) the lower of $126.08 or the then market price of its common stock less (ii) $83.53 and divided by (b) the then market price of its common stock. The results of this formula are that the Company would receive more shares as the market price of its common stock exceeds $83.53 and approaches $126.08, but the Company would receive fewer shares as the market price of its common stock exceeds $126.08. Consequently, if the convertible senior notes are converted, then the number of shares to be issued by the Company would be effectively partially offset by the shares received by the Company under the capped call options as they are exercised.The Company can also elect to receive the equivalent value of cash in lieu of shares. The capped call options expire on various dates ranging from September 4, 2019 to October 29, 2019, and the formula above would be adjusted in the event of a merger; a tender offer; nationalization, insolvency or delisting of the Company’s common stock; changes in law; failure to deliver; insolvency filing; stock splits, combinations, dividends, repurchases or similar events; or an announcement of certain of the preceding actions. Although intended to reduce the net number of shares issued after a conversion of the convertible senior notes, the capped call options were separately negotiated transactions, are not a part of the terms of the convertible senior notes, do not affect the rights of the convertible senior note holders and will take effect regardless of whether the convertible senior notes are actually converted. The capped call options met the criteria for equity classification because they are indexed to the Company’s common stock and the Company always controls whether settlement will be in shares or cash. As a result, the amounts paid for the capped call options were recorded as reductions to additional paid-in capital. The capped call options are excluded from the calculation of diluted net income (loss) per share attributable to common stockholders as their effect is antidilutive.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

Solar Bonds

In October 2014, the Company commenced issuing Solar Bonds, which are senior unsecured obligations that are structurally subordinate to the indebtedness and other liabilities of the Company’s subsidiaries. Solar Bonds have been issued under multiple series that have various fixed terms and interest rates. In September 2015, the Company commenced issuing Solar Bonds with variable interest rates that reset quarterly and that can be redeemed quarterly at the option of the bondholder or the Company, with 30 days’ advance notice. The Company intends to continue to issue Solar Bonds from time to time depending on market conditions. In March 2015, Space Exploration Technologies Corporation, or SpaceX, purchased $90.0 million in aggregate principal amount of 2.00% Solar Bonds due in March 2016. In June 2015, SpaceX purchased an additional $75.0 million in aggregate principal amount of 2.00% Solar Bonds due in June 2016. SpaceX is considered a related party (see Note 13, Related Party Transactions ). The Company was in compliance with all debt covenants as of September 30, 2015.

Non-Recourse Debt Facilities:

Term Loan Assumed From Silevo Acquisition

Through the Silevo acquisition, the Company assumed a pre-existing term loan with an outstanding principal balance of $9.1 million. The term loan bore interest at a fixed rate of 7.8% per annum and was denominated in the Chinese Yuan. The term loan was a liability of a subsidiary of Silevo only and was non-recourse to the Company or its other subsidiaries. In June 2015, the Company fully paid-off the term loan.

Term Loan Due in September 2015

In March 2015, a subsidiary of the Company entered into an agreement with a bank for a term loan of $79.0 million. The term loan bore interest, at the Company’s option, at an annual rate of (a) 3.50% plus LIBOR or (b) 3.50% plus the highest of (i) the Federal Funds Rate plus 0.50%, (ii) Bank of America’s published “prime rate” or (iii) LIBOR plus 1.00%. The term loan was secured by certain assets and cash flows of certain subsidiaries of the Company and was non-recourse to the Company’s other assets or cash flows. On May 4, 2015, the Company fully paid-off the term loan using a portion of the proceeds from the revolving aggregation credit facility (see below).

Term Loan Due in May 2016

On May 23, 2014, a subsidiary of the Company entered into an agreement with a syndicate of banks for a term loan of $125.0 million. The term loan bears interest at an annual rate of 3.00% to 4.00%, depending on the cumulative period the term loan has been outstanding, plus LIBOR or, at the Company’s option, plus the highest of (i) the Federal Funds Rate plus 0.50%, (ii) Bank of America’s published “prime rate” or (iii) LIBOR plus 1.00%. The term loan is secured by certain assets and cash flows of the subsidiary and is non-recourse to the Company’s other assets or cash flows. The Company was in compliance with all financial covenants as of September 30, 2015.

Term Loan Due in December 2016

On February 4, 2014, a subsidiary of the Company entered into an agreement with a syndicate of banks for a term loan of $100.0 million. On February 20, 2014, the agreement was amended to increase the maximum term loan availability to $220.0 million. On March 20, 2014, the agreement was further amended to increase the maximum term loan availability to $250.0 million. The term loan bears interest at an annual rate of LIBOR plus 3.25% or, at the Company’s option, 3.25% plus the highest of (i) the Federal Funds Rate plus 0.50%, (ii) Bank of America’s published “prime rate” or (iii) LIBOR plus 1.00%. In August 2015, the Company used $75.7 million of the proceeds from the issuance of the Solar Asset-backed Notes, Series 2015-1, to partially prepay the principal outstanding under the term loan (see below). The term loan is secured by the assets and cash flows of the subsidiary and is non-recourse to the Company’s other assets. The Company was in compliance with all financial covenants as of September 30, 2015.

MyPower Revolving Credit Facility

On January 9, 2015, a subsidiary of the Company entered into a $200.0 million revolving credit agreement with a syndicate of banks to obtain funding for the MyPower customer loan program. The MyPower revolving credit facility provides up to $160.0 million of Class A notes and up to $40.0 million of Class B notes. The Class A notes bear interest at an annual rate of 2.50% plus (a) the commercial paper rate or (b) 1.50% plus adjusted LIBOR. The Class B notes bear interest at an annual rate of 5.00% plus LIBOR. The fee for undrawn commitments is 0.50% per annum. The MyPower revolving credit facility is secured by the payments owed to the Company or its subsidiaries under MyPower customer loans and is non-recourse to the Company’s other assets. The Company was in compliance with all financial covenants as of September 30, 2015.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

The Company has entered into forward interest rate swaps, in order to fix the variable interest rate, for each draw under the MyPower revolving credit facilit y. The Company accounts for the interest rate swaps as non-hedging derivatives (see Note 2, Summary of Significant Accounting Policies and Procedures ) .

Revolving Aggregation Credit Facility

On May 4, 2015, a subsidiary of the Company entered into an agreement with a syndicate of banks for a revolving aggregation credit facility with a total committed amount of $500.0 million. On the same date, the subsidiary drew $113.1 million under the revolving aggregation credit facility and used a portion of the proceeds to fully pay-off the term loan due in September 2015 (see above). On July 13, 2015, the total committed amount was increased to $650.0 million. The revolving aggregation credit facility bears interest at an annual rate of 2.75% plus, at the Company’s option, LIBOR or the commercial paper rate. The revolving aggregation credit facility is secured by certain assets and cash flows of certain subsidiaries of the Company and is non-recourse to the Company’s other assets. The Company was in compliance with all financial covenants as of September 30, 2015.

The Company has entered into forward interest rate swaps, in order to fix the variable interest rate, for each draw under the revolving aggregation credit facility. The Company accounts for the interest rate swaps as non-hedging derivatives (see Note 2, Summary of Significant Accounting Policies and Procedures ).

Solar Asset-backed Notes, Series 2013-1

In November 2013, the Company pooled and transferred qualifying solar energy systems and the associated customer contracts into a special purpose entity, or SPE, and issued $54.4 million in aggregate principal of Solar Asset-backed Notes, Series 2013-1, backed by these solar assets to certain investors. The SPE is wholly owned by the Company and is consolidated in the Company’s financial statements. Accordingly, the Company did not recognize a gain or loss on the transfer of these solar assets. As of September 30, 2015, these solar assets had a carrying value of $139.8 million and are included under solar energy systems, leased and to be leased — net, in the condensed consolidated balance sheets. The Solar Asset-backed Notes were issued at a discount of 0.05%. The cash flows generated by these solar assets are used to service the monthly principal and interest payments on the Solar Asset-backed Notes and satisfy the SPE’s expenses, and any remaining cash is distributed to a wholly owned subsidiary of the Company. The Company recognizes revenue earned from the associated customer contracts in accordance with the Company’s revenue recognition policy. The assets and cash flows generated by the qualifying solar energy systems are not available to the other creditors of the Company, and the creditors of the SPE, including the Solar Asset-backed Note holders, have no recourse to the Company’s other assets. The Company contracted with the SPE to provide operations and maintenance and administrative services for the qualifying solar energy systems. The Company was in compliance with all financial covenants as of September 30, 2015.

Solar Asset-backed Notes, 2014-1

In April 2014, the Company pooled and transferred qualifying solar energy systems and the associated customer contracts into a SPE and issued $70.2 million in aggregate principal of Solar Asset-backed Notes, Series 2014-1, backed by these solar assets to certain investors. The SPE is wholly owned by the Company and is consolidated in the Company’s financial statements. Accordingly, the Company did not recognize a gain or loss on the transfer of these solar assets. As of September 30, 2015, these solar assets had a carrying value of $130.8 million and are included under solar energy systems, leased and to be leased — net, in the condensed consolidated balance sheets. The Solar Asset-backed Notes were issued at a discount of 0.01%. The cash flows generated by these solar assets are used to service the monthly principal and interest payments on the Solar Asset-backed Notes and satisfy the SPE’s expenses, and any remaining cash is distributed to a wholly owned subsidiary of the Company. The Company recognizes revenue earned from the associated customer contracts in accordance with the Company’s revenue recognition policy. The assets and cash flows generated by the qualifying solar energy systems are not available to the other creditors of the Company, and the creditors of the SPE, including the Solar Asset-backed Note holders, have no recourse to the Company’s other assets. The Company contracted with the SPE to provide operations and maintenance and administrative services for the qualifying solar energy systems. The Company was in compliance with all financial covenants as of September 30, 2015.

Solar Asset-backed Notes, Series 2014-2

In July 2014, the Company pooled and transferred qualifying solar energy systems and the associated customer contracts into a SPE and issued $160.0 million in aggregate principal of Solar Asset-backed Notes, Series 2014-2, Class A, and $41.5 million in aggregate principal of Solar Asset-backed Notes, Series 2014-2, Class B, to certain investors. The SPE is wholly owned by the Company and is consolidated in the Company’s financial statements. Accordingly, the Company did not recognize a gain or loss on the transfer of these solar assets. As of September 30, 2015, these solar assets had a carrying value of $278.1 million and are included under solar energy systems, leased and to be leased — net, in the condensed consolidated balance sheets. The Solar Asset-backed

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

Notes were issued at a discount of 0.01%. These solar assets and the associated customer contracts are lea sed to an investor under a lease pass-through arrangement that the Company has accounted for as a borrowing. The rent paid by the investor under the lease pass-through arrangement is used (and, following the expiration of the lease pass-through arrangement , the cash generated by these solar assets will be used) to service the monthly principal and interest payments on the Solar Asset-backed Notes and satisfy the SPE’s expenses, and any remaining cash is distributed to a wholly owned subsidiary of the Compan y. The Company recognizes revenue earned from the associated customer contracts in accordance with the Company’s revenue recognition policy. The assets and cash flows generated by these solar assets are not available to the other creditors of the Company, and the creditors of the SPE, including the Solar Asset-backed Note holders, have no recourse to the Company’s other assets. The Company contracted with the SPE to provide operations and maintenance and administrative services for the qualifying solar ener gy systems. The Company was in compliance with all financial covenants as of September 30 , 201 5 .

Solar Asset-backed Notes, Series 2015-1

In August 2015, the Company pooled and transferred its interests in certain financing funds into a SPE and issued $103.5 million in aggregate principal of Solar Asset-backed Notes, Series 2015-1, Class A, and $20.0 million in aggregate principal of Solar Asset-backed Notes, Series 2015-1, Class B, to certain investors. The Company used a portion of the proceeds to partially prepay the principal outstanding under the term loan due in December 2016 (see above). The SPE is wholly owned by the Company and is consolidated in the Company’s financial statements. Accordingly, the Company did not recognize a gain or loss on the transfer of these controlling interests and continues to consolidate the underlying financing funds (see Note 7, VIE Arrangements ). The Solar Asset-backed Notes were issued at a discount of 0.05% for Class A and 1.46% for Class B. The cash distributed by the underlying financing funds to the SPE are used to service the semi-annual principal and interest payments on the Solar Asset-backed Notes and satisfy the SPE’s expenses, and any remaining cash is distributed to a wholly owned subsidiary of the Company. The SPE’s assets and cash flows are not available to the other creditors of the Company, and the creditors of the SPE, including the Solar Asset-backed Note holders, have no recourse to the Company’s other assets. The Company was in compliance with all financial covenants as of September 30, 2015.

7. VIE Arrangements

The Company has entered into various arrangements with investors to facilitate funding and monetization of solar energy systems. These arrangements include those described in this Note 7, VIE Arrangements , as well as those described in Note 8, Financing Obligations .

VIE Fund Arrangements

Wholly owned subsidiaries of the Company and fund investors formed and contributed cash or assets to various solar financing funds and entered into related agreements. The following table shows the number of current VIE funds by classification of investor, the carrying value of solar energy systems in the funds, the total investor contributions received and undrawn investor contributions as of September 30, 2015 under these funds (in thousands, except for number of funds):

			Total				Carrying
			Investor		Undrawn		Value of
Investor	Number		Contributions		Investor		Solar Energy
Classification	of Funds		Received		Contributions		Systems
Financial institutions		21	$	1,266,615	$	333,412	$	1,487,769
Corporations		6		654,515		169,891		673,095
Utilities		3		259,020		30,000		241,052
Various other investors		1		3,607		—		3,242
Total		31	$	2,183,757	$	533,303	$	2,405,158

The Company has determined that the funds are VIEs and it is the primary beneficiary of these VIEs by reference to the power and benefits criterion under ASC 810, Consolidation . The Company has considered the provisions within the contractual agreements, which grant it power to manage and make decisions that affect the operation of these VIEs, including determining the solar energy systems and associated customer contracts to be sold or contributed to these VIEs and the redeployment of solar energy systems. The Company considers that the rights granted to the fund investors under the contractual agreements are more protective in nature rather than participating.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

As the primary beneficia ry of these VIEs, the Company consolidates in its financial statements the financial position, results of operations and cash flows of these VIEs, and all intercompany balances and transactions between the Company and these VIEs are eliminated in the conde nsed consolidated financial statements.

Cash distributions of income and other receipts by a fund, net of agreed upon expenses, estimated expenses, tax benefits and detriments of income and loss and tax credits, are allocated to the fund investor and the Company’s subsidiary as specified in contractual agreements.

Generally, the Company’s subsidiary has the option to acquire the fund investor’s interest in the fund for an amount based on the market value of the fund or the formula specified in the contractual agreements.

As of September 30, 2015 the Company was contractually required to make payments to a fund investor in order to ensure the investor is projected to achieve a specified minimum return annually. The amounts of any potential future payments under this guarantee are dependent on the amounts and timing of future distributions to the investor from the fund, the tax benefits that accrue to the investor from the fund’s activities and the amount and timing of the Company’s purchase of the investor’s interest in the fund or the amount and timing of the distributions to the investor upon liquidation of the fund. Due to uncertainties associated with estimating the amount and timing of distributions to the investor and the possibility and timing of the liquidation of the fund, the Company is unable to determine the potential maximum future payments that it would have to make under this guarantee.

Upon the sale or liquidation of a fund, distributions would occur in the order and priority specified in the contractual agreements.

Pursuant to management services, maintenance and warranty arrangements, the Company has been contracted to provide services to the funds, such as operations and maintenance support, accounting, lease servicing and performance reporting. In some instances, the Company has guaranteed payments to the investors as specified in the contractual agreements. A fund’s creditors have no recourse to the general credit of the Company or to that of other funds. None of the assets of the funds had been pledged as collateral for their obligations.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

The Company presents the solar energy systems in the VIEs under solar energy systems, leased and to be leased – net in the condensed consolidated balance sheets. The aggregate carrying values of the VIE s’ assets and liabilities, after elimination of intercompany transactions and balances, in the condensed consolidated balance sheets were as follows (in thousands):

	September 30, 2015		December 31, 2014
Assets
Current assets:
Cash and cash equivalents	$	36,392	$	26,419
Restricted cash		44		106
Accounts receivable - net		17,578		6,769
Rebates receivable		9,261		25,397
Prepaid expenses and other current assets		1,354		615
Total current assets		64,629		59,306
Solar energy systems, leased and to be leased - net		2,405,158		1,581,459
Other assets		9,179		4,080
Total assets	$	2,478,966	$	1,644,845
Liabilities
Current liabilities:
Distributions payable to noncontrolling interests and redeemable noncontrolling interests	$	12,336	$	8,552
Current portion of deferred U.S. Treasury grant income		6,506		6,502
Accrued and other current liabilities		444		336
Customer deposits		2,572		6,405
Current portion of deferred revenue		22,209		16,746
Total current liabilities		44,067		38,541
Deferred revenue, net of current portion		294,211		256,200
Deferred U.S. Treasury grant income, net of current portion		165,818		170,548
Other liabilities and deferred credits		22,691		10,825
Total liabilities	$	526,787	$	476,114

Silevo’s Joint Venture in China

The Company, through its subsidiary, Silevo, operates a joint venture, Silevo China Company Limited, or the JV, with three other Chinese legal entities, or the JV Partners, to develop, manufacture and market high performance solar cells. Silevo owns approximately 65.7% of the outstanding capital of the JV, and the rest is owned by the JV Partners. Silevo has a Manufacturing Services and Technology Licensing Agreement with the JV to acquire solar cells on a “cost-plus” basis. The JV is required to obtain Silevo’s consent to sell products to any third-party. The agreement had an initial term of one year and automatically renews for successive one-year periods.

The Company has determined that the JV is a VIE and that Silevo is the primary beneficiary of the JV since the variable interests held by Silevo empower it to direct the activities that most significantly impact the joint venture’s economic performance. In reaching this determination, the Company considered the significant control exercised by Silevo over the JV’s Board of Directors, management and the daily operations of the JV.

Silevo has the right to acquire the JV Partners’ interests in the JV at any time within five years from the date of their initial capital contribution. The JV Partners have the right to sell all or part of their interests in the JV to Silevo if the JV does not meet certain conditions set out in the JV contract, which include meeting set production targets within a specified time frame. The JV did not meet some of those targets, and as such, the option is currently exercisable. The amount that the Company would pay the JV Partners upon the exercise of either option is equal to the JV Partners’ accumulated capital contributions plus interest at specified rates. As of September 30, 2015, this amount was $13.9 million. The JV is not allowed to make a profit distribution to investors prior to the full exit of JV Partners from their investments in the JV. During the three months ended June 30, 2015, the JV Partners informed the Company of their intention to exercise the put option. The Company and the JV Partners are currently in the process of finalizing the exercise of the put option.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

Since Silevo has been determined to be the primary beneficiary of the JV, the JV’s assets, liabilities and results of operations are included in the Company’s condensed consolidated financial statements. The JV Partners’ interests in the JV are reflected in redeemable noncontrolling interests on the condensed consolidated balance sheets. The JV Partners’ in terests in the JV is recorded at fair value , which takes into account the JV Partners’ share of the JV’s enterprise value and the value of the JV Partners’ option to sell their interests in the JV to Silevo.

The aggregate carrying values of the JV’s assets and liabilities in the condensed consolidated balance sheets were as follows (in thousands):

	September 30, 2015		December 31, 2014
Assets
Current assets:
Cash and cash equivalents	$	1,244	$	1,401
Restricted cash		487		—
Inventories		1,146		614
Prepaid expenses and other current assets		1,352		1,224
Total current assets		4,229		3,239
Property, plant and equipment - net		23,056		24,286
Other assets		91		—
Total assets	$	27,376	$	27,525
Liabilities
Current liabilities:
Accounts payable	$	2,404	$	2,748
Accrued and other current liabilities		1,584		633
Current portion of long-term debt		—		9,134
Total current liabilities		3,988		12,515
Total liabilities	$	3,988	$	12,515

8. Financing Obligations

Lease Pass-Through Financing Obligation

In the first quarter of 2015, the Company entered into a new lease pass-through fund arrangement. Under this arrangement, the Company and an investor formed a partnership whereby the Company contributes solar energy systems and the investor contributes cash to the partnership. Contemporaneously, the partnership entered into a master lease arrangement to lease the solar energy systems and the associated customer lease or power purchase agreements to the investor. The Company has concluded that the partnership is a VIE that is consolidated by the Company as the primary beneficiary. The assets and liabilities of this partnership are included under Note 7, VIE Arrangements . The partnership also makes a tax election to pass-through the investment tax credits, or ITCs, that accrue to the solar energy systems to the investor, who as the legal lessee of the property is allowed to claim the ITCs under Section 50(d)(5) of the Internal Revenue Code and the related regulations. The solar energy systems are included under solar energy systems, leased and to be leased – net, in the condensed consolidated balance sheets, and as of September 30, 2015, the net carrying value of the solar energy systems was $66.7 million.

Under the arrangement, the investor makes a large upfront payment to the partnership and subsequent periodic payments. The Company allocates a portion of the aggregate payments received from the investor to the estimated fair value of the assigned ITCs, and the balance to the future customer lease payments that are also assigned to the investors. The estimated fair value of the ITCs are determined by discounting the estimated cash flows impact of the ITCs using an appropriate discount rate that reflects a market interest rate. The partnership has an obligation to ensure the solar energy system is in service and operational for a term of five years to avoid any recapture of the ITCs. Accordingly under the Company’s accounting policy for ITCs, the Company recognizes revenue as the recapture provisions lapse assuming all other revenue recognition criteria under ASC 605-10-S99, Revenue Recognition-Overall-SEC Materials , have been met. The amounts allocated to ITCs are initially recorded as deferred revenue on the condensed consolidated balance sheet, and subsequently, one-fifth of the amounts allocated to ITCs is recognized as revenue from operating leases and solar energy systems incentives in the condensed consolidated statements of operations on each anniversary of the solar energy system’s placed in service date over the next five years.

The Company accounts for the residual of the payments received from the investors, net of amounts allocated to ITCs, as a borrowing by recording the proceeds received as a lease pass-through financing obligation, which would be repaid through customer

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

payments and incentive rebates that would be received by the investors. Under this approach, the Company continues to account for the arrangement with the customers in its condensed consolidated financial statements, whether the cash generated from the customer arrangements is received by the lessor or paid directly to the investors. A portion of the amounts received by the investors from customer payments and incent ive rebates associated with the leases assigned to the investors is applied to reduce the lease pass-through financing obligation, and the balance is allocated to interest expense. The incentive rebates and host customer payments are recognized into revenu e consistent with the Company’s revenue recognition accounting policy. Interest is calculated on the lease pass-through financing obligation using the effective interest rate method. The effective interest rate is the interest rate that equates the present value of the cash amounts to be received by an investor over the master lease term with the present value of the cash amounts paid by the investor to the Company, adjusted for any payments made by the Company. The lease pass-through financing obligation i s nonrecourse once the associated assets have been placed in service and all the customer arrangements have been assigned to the investors.

The investor is responsible for services such as warranty support, accounting, lease servicing and performance reporting, which have been outsourced to the Company under an operations and maintenance agreement.

9. Redeemable Noncontrolling Interests in Subsidiaries

Noncontrolling interests in subsidiaries that are redeemable at the option of the holder are classified as redeemable noncontrolling interests in subsidiaries between liabilities and stockholders’ equity in the condensed consolidated balance sheets. The redeemable noncontrolling interests in subsidiaries balance is determined using the hypothetical liquidation at book value method for the VIE funds or allocation of share of income or losses in other subsidiaries, subsequent to initial recognition, however, the noncontrolling interests balance cannot be less than the estimated redemption value. The activity of the redeemable noncontrolling interests in subsidiaries balance was as follows (in thousands):

Balance at December 31, 2014	$	186,788
Contributions from redeemable noncontrolling interests		322,503
Net loss		(172,454	)
Distributions to redeemable noncontrolling interests		(23,535	)
Balance at September 30, 2015	$	313,302

10. Equity

The changes in total stockholders’ equity and noncontrolling interests in subsidiaries were as follows (in thousands):

	Total			Noncontrolling
	Stockholders'			Interests in			Total
	Equity			Subsidiaries			Equity
Balance, December 31, 2014	$	745,642		$	409,942		$	1,155,584
Contributions from noncontrolling interests		—			432,413			432,413
Stock-based compensation expense		83,173			—			83,173
Issuance of common stock upon exercise of stock options for cash		10,391			—			10,391
Tax benefit of stock option exercises		38,565			—			38,565
Net loss		(62,958	)		(301,525	)		(364,483	)
Distributions to noncontrolling interests		—			(47,403	)		(47,403	)
Balance, September 30, 2015	$	814,813		$	493,427		$	1,308,240

11. Equity Award Plans

Stock Options

Under the Company’s 2012 Equity Incentive Plan, the Company may grant incentive stock options and nonstatutory stock options for common stock to employees, directors and consultants. Stock options may be granted at an exercise price per share not less than 100% of the fair market value per share on the grant date. If an incentive stock option is granted to a 10% or greater stockholder, then the exercise price per share shall not be less than 110% of the fair market value per share on the grant date. Stock options granted are exercisable over a maximum term of 10 years from the date of grant and generally vest over a period of four years.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

In September 2012, the Company adopted a director compensation plan for future non-employee directors. Under the director compensation plan, each individual who joins the board of directors as a non-employee director following the adoption of the plan receives an initial stock option grant to purchase 30,000 shares of common stock at the time of initial election or appointme nt and additional triennial stock option grants to purchase 15,000 shares of common stock, as well as an annual cash retainer of $15 ,000 , all of which are subject to continued service on the board of directors. Such non-employee directors who serve on comm ittees of the board of directors receive various specified additional equity awards and cash retainers.

Effective as of June 2015, the Company revised the director compensation plan, pursuant to which non-employee directors receive an initial stock option grant to purchase 33,333 shares of common stock at the time of initial election or appointment and additional triennial stock option grants to purchase 30,000 shares of common stock, as well as an annual cash retainer of $20,000, all of which are subject to continued service on the board of directors. Such non-employee directors who serve on committees of the board of directors receive various specified additional equity awards and cash retainers.

On September 15, 2015, the Chief Executive Officer and the Chief Technology Officer, the Company founders, were granted non-statutory stock option awards, or Founder Awards, with both market and performance vesting conditions. The exercise price per share of the Founder Awards is $48.97. Specifically, the Chief Executive Officer’s Founder Award covers up to 3.0 million shares of the Company’s common stock and the Chief Technology Officer’s Founder Award covers up to 2.0 million shares of the Company’s common stock. The Founder Awards have a maximum term of 10 years from the date of grant and vest in ten equal tranches based on the achievement of specific operational goals and the 90 day trading average price of the Company’s common stock achieving certain targets based on specific measurement dates. In the event of a change in control or a termination of employment, all vesting under the related Founder Award would cease, and any unvested portion would be cancelled.

A summary of stock option activity is as follows (in thousands, except per share amounts and terms):

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
	Stock			Exercise		Contractual		Intrinsic
	Options			Price		Term (Years)		Value
Outstanding - December 31, 2014		13,950		$	32.89		7.64	$	342,293
Granted (weighted-average fair value of $27.74)		5,986			50.44
Exercised		(846	)		12.28				35,157
Canceled		(979	)		55.81
Outstanding - September 30, 2015		18,111		$	38.41		7.93	$	221,147
Options vested and exercisable - September 30, 2015		7,582		$	19.52		6.13	$	205,899
Options vested and expected to vest - September 30, 2015		13,324		$	34.29		7.23	$	220,843

As of September 30, 2015, 42% of the non-vested stock options outstanding had a performance feature that is required to be satisfied before they become vested and exercisable, including 5.0 million non-vested stock options outstanding under the Founder Awards. The grant date fair market value of the stock options that vested in the three months ended September 30, 2015 and 2014 was $15.9 million and $12.9 million, respectively, and the grant date fair market value of the stock options that vested in the nine months ended September 30, 2015 and 2014 was $55.0 million and $29.6 million, respectively.

As of September 30, 2015 and December 31, 2014, there was $243.1 million and $242.9 million, respectively, of total unrecognized stock-based compensation expense, net of estimated forfeitures, related to non-vested stock options, which are expected to be recognized over the weighted-average period of 3.17 years and 2.76 years, respectively; including $77.5 million as of September 30, 2015 from the Founder Awards.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

Under ASC 718, the Company estimates the fair value of stock options granted on each grant date using the Black-Scholes option valuation model , except for the Founder Awards for which the Company use s a M onte Carlo simulation, and applies the straight-line method of expense attribution. The fair values were estimated on each grant date with the following weighted-average assumptions:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Dividend yield		0	%		0	%		0	%		0	%
Annual risk-free rate of return		2.27	%		1.92	%		2.16	%		1.97	%
Expected volatility		55.88	%		83.51	%		58.72	%		84.51	%
Expected term (years)		4.97			6.08			5.16			6.07

The expected volatility was calculated based on the average historical volatilities of the Company and publicly traded peer companies determined by the Company. The risk-free interest rate used was based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the stock options to be valued. The expected dividend yield was zero, as the Company does not anticipate paying a dividend within the relevant time frame. The expected term has been estimated using the simplified method allowed under ASC 718.

Restricted Stock Units

The Company began granting restricted stock units, or RSUs, to employees, directors and consultants in 2012 under the Company’s 2012 Equity Incentive Plan. A summary of RSU activity is as follows (in thousands, except per share amounts):

				Weighted-
	Restricted			Average
	Stock			Fair
	Units			Value
Outstanding - December 31, 2014		1,029			61.16
Granted		2,468			55.49
Vested		(221	)		62.31
Cancelled		(275	)		58.19
Outstanding - September 30, 2015		3,001		$	56.68
Expected to vest - September 30, 2015		2,471		$	56.89

The grant date fair value of RSUs vested was $8.1 million and $0.2 million for the three months ended September 30, 2015 and 2014, respectively, and $13.8 million and $0.4 million for the nine months ended September 30, 2015 and 2014, respectively. Under ASC 718, the Company determines the fair value of RSUs granted on each grant date based on the fair value of the Company’s common stock on the grant date and applies the straight-line method of expense attribution. As of September 30, 2015 and December 31, 2014, there was $124.1 million and $55.2 million, respectively, of total unrecognized stock-based compensation expense, net of estimated forfeitures, from RSUs, which are expected to be recognized over the weighted-average period of 3.36 years and 3.30 years, respectively.

Stock-Based Compensation Expense

As part of the requirements of ASC 718, the Company is required to estimate potential forfeitures of equity awards and adjust stock-based compensation expense accordingly. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized in the period of change and will also impact the amount of stock-based compensation expenses to be recognized in future periods.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

The amount of stock-based compensation expense recognized was $33.4 million and $2 3.4 million for the three months ended September 30 , 201 5 and 201 4 , respectively , and $83.4 million and $ 62.8 million for the nine months ended September 30, 2015 and 2014, respectively . The amount of stock-based compensation expense that has been capitalized is as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Capitalized under:
Inventories	$	253	$	44	$	253	$	44
Other assets	$	848	$	—	$	2,462	$	—
Property, plant and equipment - net	$	711	$	1,401	$	2,096	$	4,223
Solar energy systems, leased and to be leased - net	$	6,902	$	5,204	$	17,555	$	12,872

Stock-based compensation expense is included in cost of revenue and operating expenses as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Total cost of revenue	$	489	$	302	$	1,665	$	1,765
Sales and marketing	$	7,048	$	3,968	$	17,266	$	10,929
General and administrative	$	13,305	$	10,725	$	31,325	$	29,919
Research and development	$	3,866	$	1,756	$	10,754	$	3,047

12. Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based upon the difference between the condensed consolidated financial statement carrying amounts and the tax basis of assets and liabilities and are measured using the enacted tax rate expected to apply to taxable income in the years in which the differences are expected to be reversed.

The Company has a full valuation allowance for its net deferred tax assets since the Company has concluded that it is more likely than not that the Company will not realize the benefit of the deferred tax assets. The Company continues to evaluate both positive and negative evidence with respect to its net deferred tax assets.

The income tax expense for the three months ended September 30, 2015 and 2014 was determined based on the Company’s estimated consolidated effective income tax rates of 0% and negative 9.19%, respectively. The income tax expense for the nine months ended September 30, 2015 and 2014 was determined based on the Company’s estimated consolidated effective income tax rates of 0.21% and negative 9.07%, respectively. The differences between the estimated consolidated effective income tax rates and the U.S. federal statutory rates were primarily attributable to valuation allowances and the current amortization of prepaid tax asset and deferred income tax charge due to inter-company sales held within the consolidated group.

As part of its asset monetization strategy, the Company has agreements to sell solar energy systems to financing funds. The gain on the sale of the assets has been eliminated in the condensed consolidated financial statements. These transactions are treated as inter-company sales, and as such, income taxes are not recognized on the sales until the Company no longer benefits from the underlying assets. Since the assets remain within the consolidated group, the income tax expense incurred related to the sales is being deferred and amortized over the estimated useful life of the assets, which has been estimated to be 30 years. The deferral of income tax expense results in recording of a prepaid tax expense that is included in the condensed consolidated balance sheets as other assets. The amortization of the prepaid tax expense in each period makes up the major component of income tax expense.

Uncertain Tax Positions

The Company applies a two-step approach with respect to uncertain tax positions. This approach involves recognizing any uncertain tax positions that are more-likely-than-not of being ultimately realized and then measuring those positions to determine the amounts to be recognized.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

The Company is subject to taxation and files income tax returns in the U.S., various state, local and foreign jurisdictions. Due to the Company’s net losses, substantially all of its federal, state, local and foreign income tax returns since inception are still subject to audit.

13. Related Party Transactions

The Company’s operations included the following related party transactions (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Revenue:
Solar energy systems sales to related parties	$	—	$	—	$	79	$	2,479
Expenditures:
Purchases of inventories or equipment from related parties	$	2,450	$	1,113	$	4,147	$	3,083
Fees paid or payable to related parties (included in sales and marketing expense)	$	—	$	—	$	—	$	92
Interest paid or payable to related parties (included in interest expense — net)	$	828	$	—	$	1,298	$	—

Related party balances were comprised of the following (in thousands):

	September 30, 2015		December 31, 2014
Due from related parties (included in accounts receivable)	$	30	$	30
Due to related parties (included in accounts payable)	$	2,150	$	300
Due to related parties (included in solar bonds)	$	165,540	$	530
Due to related parties (included in accrued and other current liabilities)	$	423	$	3

The related party transactions were primarily purchases of batteries from Tesla Motors, Inc., or Tesla, and issuances of Solar Bonds to SpaceX and the Company’s Chief Technology Officer. Tesla is considered a related party because the Chairman of the Company’s board of directors is the Chief Executive Officer and Chairman of Tesla, other members of the Company’s board of directors also serve as members of the board of directors of Tesla, the Company’s Chief Financial Officer also serves as a member of the board of directors of Tesla and some members of the Company’s board of directors and executive management are also investors in Tesla. SpaceX is considered a related party because the Chairman of the Company’s board of directors is the Chief Executive Officer, Chief Designer, Chairman and a significant stockholder of SpaceX, other members of the Company’s board of directors also serve as members of the board of directors of SpaceX and some members of the Company’s board of directors and executive management are also investors in SpaceX.

14. Commitments and Contingencies

Noncancelable Leases

The Company leases offices, manufacturing and warehouse facilities, equipment, vehicles and solar energy systems under noncancelable leases.

Build-to-Suit Lease Arrangement

In September 2014, a subsidiary of the Company entered into a build-to-suit lease arrangement, as latest amended on October 26, 2015, with the Research Foundation for the State University of New York, or the Foundation, for the construction of an approximately one-million square foot manufacturing facility with the capacity to produce at least one gigawatt of solar panels annually on an approximately 88.24-acre site located in Buffalo, New York. Under the terms of the agreement, as latest amended on

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

October 26, 2015 , the Foundation will construct the manufacturing facility and install certain utilities and other improvements, with partic ipation by the Company as to the design and construction of the manufacturing facility, and acquire certain manufacturing equipment designated by the Company to be used in the manufacturing facility. The Foundation will cover (i) construction costs related to the manufacturing facility in an amount up to $350.0 million , (ii) the acquisition and commissioning of the manufacturing equipment in an amount up to $ 348.1 million and (iii) $51.9 million for additional specified scope costs , in case s (i) and (ii) on ly , subject to the maximum funding allocation from the State of New York, and the Company will be responsible for any construction and equipment costs in excess of such amounts. The Foundation will own the manufacturing facility and manufacturing equipment purchased by the Foundation . Following completion of the manufacturing facility, the Company will lease the manufacturing facility and the manufacturing equipment owned by the Foundation from the Foundation for an initial period of 10 years, with an optio n to renew, for $ 2 per year plus utilities.

Under the terms of the build-to-suit lease arrangement, the Company is required to achieve specific operational milestones during the initial term of the lease, which include employing a certain number of employees at the facility, within Western New York and within the State of New York within specified time periods following the completion of the facility. The Company is also required to spend or incur approximately $5.0 billion in combined capital, operational expenses and other costs in the State of New York over the 10 years following full production. On an annual basis during the initial lease term, as measured on each anniversary of the commissioning of the facility, if the Company fails to meet its specified investment and job creation obligations, then it would be obligated to pay a $41.2 million “program payment” to the Foundation for each year that it fails to meet these requirements. Furthermore, if the agreement is terminated due to a material breach by the Company, then additional amounts might be payable by the Company.

Due to the Company’s involvement with the construction of the facility, its exposure to any potential cost overruns and its other commitments under the agreement, the Company is deemed to be the owner of the facility and the manufacturing equipment owned by the Foundation for accounting purposes during the construction phase. Accordingly, as of September 30, 2015 and December 31, 2014, the Company had recorded a non-cash build-to-suit lease asset under construction of $238.1 million and $26.5 million, respectively, which is a component of property, plant and equipment – net, and a corresponding build-to-suit lease liability, which is a component of other liabilities and deferred credits, on the condensed consolidated balance sheets.

Indemnification and Guaranteed Returns

The Company is contractually committed to compensate certain fund investors for any losses that they may suffer in certain limited circumstances resulting from reductions in U.S. Treasury grants or ITCs. Generally, such obligations would arise as a result of reductions to the value of the underlying solar energy systems as assessed by the U.S. Treasury Department for purposes of claiming U.S. Treasury grants or as assessed by the IRS for purposes of claiming ITCs or U.S. Treasury grants. For each balance sheet date, the Company assesses and recognizes, when applicable, the potential exposure from this obligation based on all the information available at that time, including any guidelines issued by the U.S. Treasury Department on solar energy system valuations for purposes of claiming U.S. Treasury grants and any audits undertaken by the IRS. The Company believes that any payments to the fund investors in excess of the amount already recognized by the Company for this obligation are not probable based on the facts known at the reporting date.

The maximum potential future payments that the Company could have to make under this obligation would depend on the difference between the fair values of the solar energy systems sold or transferred to the funds as determined by the Company and the values that the U.S. Treasury Department would determine as fair value for the systems for purposes of claiming U.S. Treasury grants or the values the IRS would determine as the fair value for the systems for purposes of claiming ITCs or U.S. Treasury grants. The Company claims U.S. Treasury grants based on guidelines provided by the U.S. Treasury department and the statutory regulations from the IRS. The Company uses fair values determined with the assistance of independent third-party appraisals commissioned by the Company as the basis for determining the ITCs that are passed-through to and claimed by the fund investors. Since the Company cannot determine future revisions to U.S. Treasury Department guidelines governing system values or how the IRS will evaluate system values used in claiming ITCs or U.S. Treasury grants, the Company is unable to reliably estimate the maximum potential future payments that it could have to make under this obligation as of each balance sheet date.

The Company is eligible to receive certain state and local incentives that are associated with renewable energy generation. The amount of incentives that can be claimed is based on the projected or actual solar energy system size and/or the amount of solar energy produced. The Company also currently participates in one state’s incentive program that is based on either the fair market value or the tax basis of solar energy systems placed in service. State and local incentives received are allocated between the Company and fund investors in accordance with the contractual provisions of each fund. The Company is not contractually obligated to indemnify any fund investor for any losses they may incur due to a shortfall in the amount of state or local incentives actually received.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

As disclosed in Note 7 , VIE Arrangements , the Company is contractually required to make payments to one fund investor to ensure that the fund investor achieves a specified minimum internal rate of return. The fund investor has already received a significant portion of the projected economic benefits from U.S. Treasury grant distributions and tax depreciatio n benefits. The contractual provisions of the fund state that the fund has an indefinite term unless the members agree to dissolve the fund. Based on the Company’s current financial projections regarding the amount and timing of future distributions to the fund investor, the Company does not expect to make any payments as a result of this guarantee and has not accrued any liabilities for this guarantee. The amount of potential future payments under this guarantee is dependent on the amount and timing of fut ure distributions to the fund investor and future tax benefits that accrue to the fund investor. Due to the uncertainties surrounding estimating the amounts of these factors, the Company is unable to estimate the maximum potential payments under this guara ntee. As of September 30 , 201 5 , the fund investor has achieved the specified minimum internal rate of return as determined in accordance with the contractual provisions of the fund.

The lease pass-through funds have a one-time lease payment reset mechanism that occurs after the installation of all solar energy systems in a fund. As a result of this mechanism, the Company may be required to refund master lease prepayments previously received from investors. Any refunds of master lease prepayments would reduce the lease pass-through financing obligation.

Letters of Credit

As of September 30, 2015, the Company had $19.7 million of unused letters of credit outstanding, which carry a fee of 3.375% per annum.

Other Contingencies

In July 2012, the Company, along with other companies in the solar energy industry, received a subpoena from the U.S. Treasury Department’s Office of the Inspector General to deliver certain documents in the Company’s possession that were dated, created, revised or referred to after January 1, 2007 and that relate to the Company’s applications for U.S. Treasury grants or communications with certain other solar energy development companies or with certain firms that appraise solar energy property for U.S Treasury grant application purposes. The Inspector General and the Civil Division of the U.S. Department of Justice are investigating the administration and implementation of the U.S Treasury grant program, including possible misrepresentations concerning the fair market value of the solar energy systems submitted by the Company in U.S. Treasury grant applications. If the Inspector General concludes that misrepresentations were made, the U.S. Department of Justice could decide to bring a civil action to recover amounts it believes were improperly paid to the Company. If the U.S. Department of Justice is successful in asserting this action, the Company could then be required to pay material damages and penalties for any funds received based on such misrepresentations, which, in turn, could require the Company to make indemnity payments to certain fund investors. The Company is unable to estimate the possible loss, if any, associated with this ongoing investigation.

On March 28, 2014, a purported stockholder class action lawsuit was filed in the United States District Court for the Northern District of California against the Company and two of its officers. The complaint alleges claims for violations of the federal securities laws, and seeks unspecified compensatory damages and other relief on behalf of a purported class of purchasers of our securities from March 6, 2013 to March 18, 2014. On April 16, 2015, the District Court dismissed the complaint. The plaintiffs have filed an amended complaint in an attempt to remedy the defects in the original complaint. The Company filed a renewed motion to dismiss on August 7, 2015. The Company believes that the claims are without merit and intends to defend itself vigorously. The Company is unable to estimate the possible loss, if any, associated with this lawsuit.

On June 5 and 11, 2014, stockholder derivative actions were filed in the Superior Court of California for the County of San Mateo, purportedly on behalf of the Company and against the board of directors, alleging that the board of directors breached its duties to the Company by failing to prevent the conduct alleged in the pending purported stockholder class action lawsuit. The Company and the individual board member defendants have filed a motion to dismiss the complaint, which the Superior Court has proposed to set for hearing in December 2015. The Company is reviewing the claims asserted by the stockholders and is unable to estimate the possible loss, if any, associated with this lawsuit.

On September 18, 2015, a stockholder derivative action was filed in the Court of Chancery of the State of Delaware, purportedly on behalf of the Company and against the board of directors, alleging that the board of directors breached its duties to the Company by approving stock-based compensation to the non-employee directors that the plaintiff claims is excessive compared to the compensation paid to directors of peer companies. The Company is reviewing the claim and is unable to estimate the possible loss, if any, associated with this lawsuit.

SolarCity Corporation

Notes to Condensed Consolidated Financial Statements (Continued)

15. Basic and Diluted Net Loss per Share

The following table sets forth the computation of basic and diluted net loss per share for the periods presented (in thousands, except share and per share amounts):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2015			2014		2015			2014
Net (loss) income attributable to stockholders	$	(19,073	)	$	19,236	$	(62,958	)	$	(52,479	)
Net (loss) income attributable to common stockholders, basic	$	(19,073	)	$	19,236	$	(62,958	)	$	(52,479	)
Net (loss) income attributable to common stockholders, diluted	$	(19,073	)	$	19,236	$	(62,958	)	$	(52,479	)
Weighted-average shares used to compute net (loss) income per share attributable to common stockholders, basic		97,384,949			93,323,687		97,027,412			92,335,789
Dilutive effect of common stock options		—			5,993,333		—			—
Dilutive effect of restricted stock units		—			63,377		—			—
Weighted-average shares used to compute net (loss) income per share attributable to common stockholders, diluted		97,384,949			99,380,397		97,027,412			92,335,789
Net (loss) income per share attributable to common stockholders, basic	$	(0.20	)	$	0.21	$	(0.65	)	$	(0.57	)
Net (loss) income per share attributable to common stockholders, diluted	$	(0.20	)	$	0.19	$	(0.65	)	$	(0.57	)

The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Common stock options		14,197,584		4,888,417		13,852,111		14,459,576
Restricted stock units		2,763,268		174,342		2,082,446		194,177
Convertible senior notes		10,505,947		3,794,860		10,505,947		3,751,722

16. Subsequent Event

On October 26, 2015, the Company and the Foundation amended the build-to-suit lease arrangement in Buffalo, New York to reallocate the Foundation’s spending limits between the manufacturing facility and the manufacturing equipment and also amend certain of the operational milestones that the Company is required to achieve.

I TEM 2 . MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the accompanying notes to those statements included elsewhere in this quarterly report on Form 10-Q and with our annual report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on February 24, 2015. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” and elsewhere in this quarterly report on Form 10-Q.

Overview

We integrate the sales, engineering, manufacturing, installation, monitoring, maintenance and financing of our distributed solar energy systems. This allows us to offer long-term energy solutions to residential, commercial, government and other customers. We make it possible for our customers to buy renewable energy or solar energy systems from us for less than they currently pay for electricity from utilities with little to no up-front cost or down payment, as applicable. Our long-term contractual arrangements typically generate recurring customer payments, provide our customers with insight into their future electricity costs and minimize their exposure to rising retail electricity rates. We also offer energy-related products and services to our customers, such as energy storage solutions. To date, revenue attributable to our energy-related products and services has not been material.

We offer our customers the choice to either purchase and own solar energy systems or to purchase the energy that our solar energy systems produce through various contractual arrangements. These contractual arrangements include long-term leases and power purchase agreements. In both structures, we install our solar energy systems at our customer’s premises and charge the customer a monthly fee for the power that our system produces. In the lease structure, this monthly payment is fixed with a production guarantee. In the power purchase agreement structure, we charge customers a fee per kWh based on the amount of electricity the solar energy system actually produces. The leases and power purchase agreements are typically for 20 years with a renewal option, and generally when there is no upfront prepayment, the specified monthly fees are subject to annual escalations.

Initially, we only offered our solar energy systems on an outright purchase basis. During 2008, we began offering leases and power purchase agreements. In the fourth quarter of 2014, we began offering MyPower. Under MyPower, one of our wholly-owned subsidiaries provides qualified residential customers with a 30-year loan to finance the purchase of a solar energy system. The interest rate on the loan is fixed at inception and ranges from 4.50% to 5.49% per annum, depending on the geographic market. The interest rates are reduced by 0.50% per annum for customers who elect to have their payments automatically withdrawn. The monthly loan repayments are variable based on the amount of electricity generated by the systems. The customers are eligible to receive a federal income tax credit equal to 30% of the value of the solar energy system, which the customers can, and in certain cases are contractually obligated to, use to pay down the loan principal, and lower future monthly loan payments. This in turn translates to a lower effective cost per kWh of electricity to these customers. Our ability to offer leases, power purchase agreements and the financing of systems under MyPower depends in part on our ability to monetize the resulting customer receivables and any related investment tax credits, or ITCs, accelerated tax depreciation and other incentives.

We compete mainly with the retail electricity rate charged by the utilities in the markets we serve, and our strategy is to price the energy and/or services we provide and payments under MyPower below that rate. As a result, the price our customers pay varies depending on the state where the customer is located and the local utility. The price we charge also depends on customer price sensitivity, the need to offer a compelling financial benefit and the price other solar energy companies charge in the region. Our commercial rates in a given region are also typically lower than our residential rates in that region because utilities’ commercial retail rates are generally lower than their residential retail rates.

We generally recognize revenue from solar energy systems sold to our customers on an outright purchase basis when we install the solar energy system and it passes inspection by the utility or the authority having jurisdiction. We recognize revenue from MyPower financed sales over the term of the loan contract as the customer pays the loan’s outstanding principal and interest. We account for our leases and power purchase agreements as operating leases. We recognize the revenue that these arrangements generate on a straight-line basis over the term for leases, and as we generate and deliver energy for power purchase agreements. We recognize revenue from our energy-related products and services when we complete the services or when we earn a referral fee. Substantially all of our revenue is attributable to customers located in the United States.

We monetize certain government incentives in the form of ITCs under lease pass-through structures by assigning the ITCs to investors in exchange for upfront cash payments. We record the amounts we receive from the investors for the ITCs as a liability, which is subsequently recognized as revenue as the five-year ITC recapture period expires.

The amount of operating lease revenue that we recognize in a given period is d ependent in part on the amount of electricity generated by solar energy systems under power purchase agreements and by systems with energy output performance based incentives, which is in turn dependent on the amount of sunlight received by these solar ene rgy systems . Additionally, a portion of the revenue that we recognize in any given period for sales financed under MyPower is derived from the cash receipts from periodic customer billings. The periodic customer billings are based on the amount of electric ity generated by these systems, which in turn is dependent in part on the amount of sunlight received by these systems . As a result, operating lease revenue and revenue from sales financed under MyPower are impacted by seasonally shorter daylight hours and inclement weather in winter months. As the relative percentage of our revenue attributable to power purchase agreements, performance-based incentives or financed sales under MyPower increases, this seasonality may become more significant to our quarterly financial results .

Various state and local agencies offer incentive rebates for the installation and operation of solar energy systems. For solar energy systems we sell, we typically have the customer assign the incentive rebate to us. For outright sales, we record the incentive rebate as a component of proceeds from the solar energy system sale. For incentive rebates associated with solar energy systems under leases or power purchase agreements, we initially record the incentive rebate that is paid upfront as deferred revenue and recognize the deferred revenue as revenue over the term of the lease or power purchase agreement. For incentives that are paid based on the performance of the solar energy systems, we recognize revenue as the solar energy systems produce electricity.

Component materials, direct labor and third-party appliances comprise the substantial majority of the costs of our solar energy systems and energy-related products and services. Under U.S. generally accepted accounting principles, or GAAP, the cost of revenue from our leases and power purchase agreements are primarily comprised of the depreciation of the cost of the solar energy systems, which are depreciated over their estimated useful lives of 30 years, reduced by amortization of U.S. Treasury grants income. The cost of revenue from our leases and power purchase agreements also include the amortization of initial direct costs, which generally include the incremental costs of contract administration, referral fees and sales commissions, which are amortized over the minimum contractual term of the lease or power purchase agreement, which is typically 20 years. The costs associated with sales financed under MyPower, with the exception of warranty costs, are initially deferred as other assets on the balance sheet and subsequently recognized as a component of cost of revenue from solar energy systems and component sales, generally in proportion to the reduction of the principal balance of the customer’s loan.

The estimated warranty costs associated with sales under MyPower are recognized as an expense upon the delivery of the solar energy systems, while any actual cash payments for these warranty costs would be made in future periods if and when component parts fail and then need to be repaired or replaced. We price our solar energy systems such that we will realize an overall gross profit on the systems over the 30-year terms of the MyPower contracts. However, since the revenue associated with sales under MyPower is recognized over the terms of the MyPower contracts, recognizing the estimated warranty costs as an expense upfront results in a gross loss being recognized at the inception of the MyPower contracts. As sales under MyPower continue to increase, we expect that the impact of recognizing the warranty expense upfront will continue to adversely affect our gross margins.

We have structured different types of financing funds to implement our asset monetization strategy. One such structure is a joint venture structure where we and our fund investors both contribute funds or assets into the joint venture. In accordance with GAAP, we recognize the impact of a hypothetical liquidation of these joint ventures on our condensed consolidated statements of operations. Therefore, after we determine our consolidated net income (loss) for a given period, we allocate a portion of our consolidated net income (loss) to the fund investors in our joint ventures (referred to as the “noncontrolling interests and redeemable noncontrolling interests” in our condensed consolidated financial statements) and allocate the remainder of the consolidated net income (loss) to our stockholders. These income or loss allocations, reflected on our condensed consolidated statements of operations, can have a significant impact on our reported results of operations. For example, for the three months ended September 30, 2015 and 2014, our consolidated net loss was $234.3 million and $70.1 million, respectively, and for the nine months ended September 30, 2015 and 2014, our consolidated net loss was $536.9 million and $233.8 million, respectively. However, after applying the required allocations to arrive at the consolidated net loss attributable to our stockholders, the result was a loss of $19.1 million and an income of $19.2 million for the three months ended September 30, 2015 and 2014, respectively, and a loss of $63.0 million and $52.5 million for the nine months ended September 30, 2015 and 2014, respectively. For a more detailed discussion of this accounting treatment, see “Results of Operations—Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests.”

On August 7, 2015, we acquired all of the outstanding shares of ILIOSSON, S.A. de C.V., or Ilioss, a designer and marketer of commercial and industrial solar energy systems in Mexico. Historically, Ilioss subcontracted the installation of its solar energy systems and sold them to financing companies along with the related customer power purchase agreements. We expect to vertically integrate Ilioss’ operations and expand throughout Mexico.

Financing Funds

Our lease and power purchase agreements in conjunction with the associated solar energy systems create ITCs, accelerated tax depreciation deductions and other incentives. Our current financial strategy is to monetize these attributes or ‘assets’ to generate cash.

Through this monetization process, we are able to share the economic benefits generated by the solar energy system w ith our customers by lowering the price they pay for energy. Historically, we have monetized the assets created by substantially all of our leases and power purchase agreements via funds we have formed with fund investors. Depending on the structure of the fund, we may contribute or sell solar energy systems to the fund and assign certain of the tax attributes and other incentives associated with the solar energy systems to the investors and in return we receive upfront cash payments from investors.

We also enter into arrangements that allow us to borrow against the future recurring customer payments under the solar system leases and power purchase agreements. Through the financing funds, we are able to retain the residual value in leases and the solar energy systems themselves. We use the cash received from the investors to cover our operating and capital costs including the variable and fixed costs associated with installing the related solar energy systems. Because these recurring customer payments are from individuals or commercial businesses with high credit scores, and because electricity is a necessity, our fund investors perceive these as high-quality assets with a relatively low loss rate. We invest any excess cash in the growth of our business.

Joint Ventures. Under joint venture structures, we and our fund investors contribute assets or cash into a joint venture. Then, the joint venture acquires solar energy systems from us and leases the solar energy systems to customers. Prior to the fund investor receiving its contractual rate of return or for a time period specified in the contractual arrangements, the fund investors receive substantially all of the value attributable to the long-term recurring customer payments, ITCs, accelerated tax depreciation and, in some cases, other incentives. After the fund investor receives its contractual rate of return or after the specified time period, we receive substantially all of the value attributable to the long-term recurring customer payments and the other incentives.

We have determined that we are the primary beneficiary in these joint venture structures. Accordingly, we consolidate the assets and liabilities and operating results of these joint ventures, including the solar energy systems and operating lease revenue, in our condensed consolidated financial statements. We recognize the fund investors’ share of the net assets of the joint ventures as noncontrolling interests in subsidiaries or redeemable noncontrolling interests in subsidiaries in our condensed consolidated balance sheets. We recognize the amounts that are contractually payable to these investors in each period as distributions to noncontrolling interests or redeemable noncontrolling interests in subsidiaries. Our condensed consolidated statements of cash flows reflect cash received from these fund investors as proceeds from investments by noncontrolling interests and redeemable noncontrolling interests in subsidiaries. Our condensed consolidated statements of cash flows also reflect cash paid to these fund investors as distributions paid to noncontrolling interests and redeemable noncontrolling interests in subsidiaries. We reflect any unpaid distributions to these fund investors as distributions payable to noncontrolling interests and redeemable noncontrolling interests in subsidiaries in our condensed consolidated balance sheets.

Lease Pass-Through. Under lease pass-through structures, we lease solar energy systems to fund investors under a master lease agreement, and these investors in turn sublease the solar energy systems to customers. We receive all of the value attributable to the accelerated tax depreciation and some or all of the value attributable to the other incentives. We assign to the fund investors the value attributable to the ITCs, the right to receive U.S. Treasury Department grants, where applicable, and, for the duration of the master lease term, the long-term recurring customer payments. The investors typically make significant upfront cash payments that we classify and allocate between the right to the ITCs, where applicable, and the future customer lease payments and other benefits assigned to the investor, which are recorded as a lease pass-through financing obligation. After the master lease term expires, we receive the customer payments, if any. We record the solar energy systems on our condensed consolidated balance sheets as a component of solar energy systems, leased and to be leased—net. We record the amounts allocated to the ITCs as deferred revenue on our condensed consolidated balance sheets as the associated solar energy systems are placed in service. We then recognize the deferred revenue in our condensed consolidated statements of operations as revenue from operating leases and solar energy systems incentives, by reducing the deferred revenue balance at each reporting date as the five-year recapture period expires. We record the balance of the amounts received from fund investors as financing obligation on our condensed consolidated balance sheets and subsequently reduce these obligations by the amounts received by the fund investors from U.S. Treasury Department grants, where applicable, customer payments and the associated incentive rebates. We in turn recognize the incentive rebates and customer payments as revenue over the customer lease term and amortize U.S. Treasury Department grants as a reduction to depreciation of the associated solar energy systems over the estimated life of these systems.

Sale-Leaseback. Under sale-leaseback structures, we generate cash through the sale of solar energy systems to fund investors, and we then lease these systems back from the investors and sublease them to our customers. For the duration of the lease term, we may, for some of the structures, receive the value attributable to the incentives and the long-term recurring customer payments, and we make leaseback payments to the fund investors. The fund investors receive the customer payments after the lease term. They also receive the value attributable to the ITCs, accelerated depreciation and other incentives. At the end of the lease term, we have the option to purchase the solar energy systems from the fund investors. Typically, our customers make monthly lease payments that we recognize as revenue over the term of the subleases on a straight-line basis. Depending on the design, size and construction of the individual systems and the leaseback terms, we may recognize a portion of the revenue from the sale of the systems or we may treat the cash received from the sale as financing received from the fund investors and reflect the cash received as a financing obligation on our condensed consolidated balance sheets.

Securitization. Under securitization arrangements, we pool and transfer qualifying solar energy sy stems and the associated customer contracts or our interests in specified financing funds into a special purpose entity, or SPE, and issue notes backed by these solar assets to investors. The SPE is wholly owned by us and is consolidated in our condensed c onsolidated financial statements. Accordingly, we do not recognize a gain or loss on transfer of these assets. The notes bear interest at a rate determined on the issuance of the notes. The cash flows generated by the assets in the SPEs are used to service the principal and interest payments of the notes and meet the SPE’s expenses, and any remaining cash is distributed to us. We recognize the revenue earned from the associated customer contracts in our condensed consolidated financial statements. The asset s and cash flows generated by the SPE are not available to our other creditors and the creditors of the SPE, including the notes holders, have no recourse to our other assets.

Key Operating Metrics

We regularly review a number of metrics, including the following key operating metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.

Customers

We track the number of residential, commercial, government and other customers where we have installed or contracted to install a solar energy system, or performed or contracted to perform an energy-related consultation or other energy efficiency services. We believe that the relationship we establish with building owners, together with the energy-related information we obtain about the buildings, position us to provide the owners with additional solutions to further lower their energy costs. We track the cumulative number of customers as of the end of a given period as an indicator of our historical growth and as an indicator of our rate of expected growth from period to period. The following table sets forth our cumulative number of customers as of the dates presented:

		September 30, 2015				December 31, 2014
Cumulative customers			298,030				189,657

Energy Contracts

We define an energy contract as a residential, commercial or government lease, power purchase agreement or MyPower contract pursuant to which consumers use or will use energy generated by a solar energy system that we have installed or have been contracted to install. For landlord-tenant structures in which we contract with the landlord or development company, we include each residence as an individual contract. For commercial customers with multiple locations, each location is deemed a contract if we maintain a separate contract for that location. We track the cumulative number of energy contracts as of the end of a given period as an indicator of our historical growth and as an indicator of our rate of growth from period to period. The following table sets forth our cumulative number of energy contracts as of the dates presented:

		September 30, 2015				December 31, 2014
Cumulative energy contracts			288,992				177,455

Megawatts Deployed and Megawatts Installed

We track megawatts deployed, or the megawatt production capacity of our solar energy systems that have had all required building department inspections completed during the applicable period. This metric includes solar energy systems deployed under energy contracts, as well as solar energy system direct sales. Because the size of our solar energy systems varies greatly, we believe that tracking the megawatt production capacity of deployed systems is an indicator of our growth rate and cost efficiency of our solar energy system business. We track the megawatts deployed in a given period as an indicator of asset growth and efficiency of the scale of our operations in the period. We track cumulative megawatts deployed as of the end of a given period as an indicator of our historical growth and our future opportunity to provide customers with additional solutions to further lower their energy costs. The following table sets forth the megawatt production capacity of solar energy systems that we have deployed during the periods presented and the cumulative megawatts deployed as of the end of each period presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Megawatts deployed		205		137		525		326
Cumulative megawatts deployed		1,594		894		1,594		894

In addition, we track megawatts installed, or the megawatt production capacity of solar energy systems for which (i) all solar panels, inverters, mounting and racking hardware and system wiring have been installed, (ii) the system inverter is connect ed and a successful direct current string test has been completed confirming the production capacity of the system and (iii) the system is capable of being grid connected (including pending a utility disconnect procedure) , in each case, as of the latest of which criteria is completed during the applicable period . This metric includes solar energy systems installed under e nergy c ontracts , as well as solar energy system direct sales. The following table sets forth the megawatt production capacity of solar ene rgy systems that we have installed during the periods presented and the cumulative megawatts installed as of the end of each period presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Megawatts installed		256		138		598		327
Cumulative megawatts installed		1,674		899		1,674		899

Nominal Contracted Payments

Our energy contracts create long-term recurring customer payments. We use a portion of the value created by these contracts, which we refer to as “nominal contracted payments,” together with the value attributable to ITCs, accelerated depreciation, solar renewable energy credits, performance-based incentives, state tax benefits and rebates to cover the fixed and variable costs associated with installing solar energy systems.

We track the estimated nominal contracted payments of our energy contracts entered into as of specified dates. Nominal contracted payments represent our estimate of the sum of the cash payments that our customer is obligated to pay under our energy contracts. When calculating nominal contracted payments, we include only those energy contracts for solar energy systems already deployed and in backlog over the remaining term of such contracts. Backlog represents the aggregate megawatt capacity of solar energy systems not yet deployed as of the date specified pursuant to energy contracts and contracts for solar energy system direct sales executed as of such date. For a lease, we include the monthly fee and the upfront fee as set forth in the lease. As an example, the nominal contracted payments for a 20-year lease with monthly payments of $200 and an upfront payment of $5,000 is $53,000. For a power purchase agreement, we multiply the contract price per kWh by the estimated annual energy output of the associated solar energy system to determine the nominal contracted payments. For MyPower contracts, we include the total payments during the full 30-year term of the loan. The nominal contracted payments of a particular lease, power purchase agreement or MyPower contract decline as the payments are received by us or a fund investor, as applicable. Aggregate nominal contracted payments include leases and power purchase agreements that we have contributed to financing funds, aggregation facilities or solar-asset backed notes. Currently, fund investors have contractual rights to a portion of these nominal contracted payments.

Estimated nominal contracted payments remaining is a forward-looking number, and we use judgment in developing the assumptions used to calculate it. Those assumptions may not prove to be accurate over time. Cancellation of signed contracts, underperformance of the solar energy systems, payment defaults by our customers or other factors described under the heading “Risk Factors” could cause our actual results to differ materially from our calculation of nominal contracted payments.

The following table sets forth, with respect to our energy contracts, the estimated aggregate nominal contracted payments remaining as of the dates presented (in thousands):

September 30, 2015

December 31, 2014

Estimated aggregate nominal contracted payments

remaining

8,855,997

4,951,429

In addition to nominal contracted payments, our leases and power purchase agreements provide us with a significant post-contract renewal opportunity. Because our solar energy systems have an estimated life of 30 years, they will continue to have a useful life after the term of their leases or power purchase agreements. At the end of an original contract term, we intend to offer our customer a renewal contract. The solar energy systems have already been installed on the customer’s building, which will facilitate the customer’s acceptance of our renewal offer and will result in limited additional costs to us. No amounts attributed to the expected renewal period are included in the estimated aggregate nominal contracted payments remaining as detailed in the above table.

Critical Accounting Policies and Estimates

There were no material changes to our critical accounting policies or estimates during the nine months ended September 30, 2015 from those disclosed in our annual report on Form 10-K for the year ended December 31, 2014.

Results of Operations

The following table sets forth selected condensed consolidated statements of operations data for each of the periods indicated (in thousands, except share and per share data).

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Revenue:
Operating leases and solar energy systems incentives	$	85,059		$	52,178		$	218,113		$	124,431
Solar energy systems and components sales		28,798			6,165			66,026			58,792
Total revenue		113,857			58,343			284,139			183,223
Cost of revenue:
Operating leases and solar energy systems incentives		46,015			25,728			115,667			62,533
Solar energy systems and components sales		42,554			6,640			78,101			57,057
Total cost of revenue		88,569			32,368			193,768			119,590
Gross profit		25,288			25,975			90,371			63,633
Operating expenses:
Sales and marketing		129,284			56,472			329,115			159,093
General and administrative		69,423			39,608			168,288			111,006
Research and development		17,652			4,235			42,173			9,158
Total operating expenses		216,359			100,315			539,576			279,257
Loss from operations		(191,071	)		(74,340	)		(449,205	)		(215,624	)
Interest expense - net		25,862			16,321			64,880			37,192
Other expense - net		16,851			2,961			21,723			4,293
Loss before income taxes		(233,784	)		(93,622	)		(535,808	)		(257,109	)
Income tax (provision) benefit		(482	)		23,506			(1,128	)		23,315
Net loss		(234,266	)		(70,116	)		(536,936	)		(233,794	)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests		(215,193	)		(89,352	)		(473,978	)		(181,315	)
Net (loss) income attributable to stockholders	$	(19,073	)	$	19,236		$	(62,958	)	$	(52,479	)
Net (loss) income attributable to common stockholders
Basic	$	(19,073	)	$	19,236		$	(62,958	)	$	(52,479	)
Diluted	$	(19,073	)	$	19,236		$	(62,958	)	$	(52,479	)
Net (loss) income per share attributable to common stockholders
Basic	$	(0.20	)	$	0.21		$	(0.65	)	$	(0.57	)
Diluted	$	(0.20	)	$	0.19		$	(0.65	)	$	(0.57	)
Weighted-average shares used to compute net (loss) income per share attributable to common stockholders
Basic		97,384,949			93,323,687			97,027,412			92,335,789
Diluted		97,384,949			99,380,397			97,027,412			92,335,789

Three Months Ended September 30, 2015 and 2014

Revenue

	Three Months Ended September 30,				Change
(Dollars in thousands)	2015		2014		$		%
Operating leases and solar energy systems incentives	$	85,059	$	52,178	$	32,881		63	%
Solar energy systems and components sales		28,798		6,165		22,633		367	%
Total revenue	$	113,857	$	58,343	$	55,514		95	%

Total revenue increased by $55.5 million, or 95% , for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014.

Operating leases and solar energy systems incentives revenue increased by $32.9 million, or 63%, for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. This increase was primarily attributable to the increase in solar energy systems placed in service under leases and power purchase agreements between October 1, 2014 and September 30, 2015. The in-period average of the aggregate megawatt production capacity of solar energy systems placed in service under leases and power purchase agreements during the three months ended September 30, 2015 increased by 82% as compared to the in-period average during the three months ended September 30, 2014. This significant growth was attributable to our continued success in the installation and operation of solar energy systems under lease and power purchase agreements in new and existing markets. In addition, revenue from the monetization of ITCs increased by $4.2 million for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014, as we recognized such revenue from more solar energy systems in the three months ended September 30, 2015. We recognize revenue from the monetization of ITCs on the anniversary date of each solar energy system’s placed in service date as recapture provisions expire.

Revenue from sales of solar energy systems and components increased by $22.6 million, or 367%, for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. This increase was primarily due to the $9.1 million increase in revenue from MyPower contracts, the $5.4 million increase in revenue from long-term solar energy system sales contracts recognized on the percentage-of-completion basis, the $3.6 million increase in revenue from sales to commercial customers, the $3.0 million increase in revenue from outright sales to residential customers and the $0.6 million increase in revenue from sales to government entities. Revenue from sales of solar energy systems and components has varied considerably and will continue to vary considerably from period to period due to the successful adoption of our MyPower product and the unpredictability of sales to commercial customers, long-term solar energy system sales contracts recognized on the percentage-of-completion basis and sales to government entities.

Cost of Revenue, Gross Profit and Gross Profit Margin

	Three Months Ended September 30,						Change
(Dollars in thousands)	2015			2014			$			%
Cost of operating leases and solar energy systems incentives	$	46,015		$	25,728		$	20,287			79	%
Gross profit of operating leases and solar energy systems incentives		39,044			26,450			12,594			48	%
Gross profit margin of operating leases and solar energy systems incentives		46	%		51	%
Cost of solar energy systems and component sales	$	42,554		$	6,640		$	35,914			541	%
Gross (loss) profit of solar energy systems and component sales		(13,756	)		(475	)		(13,281	)		2,796	%
Gross (loss) profit margin of solar energy systems and component sales		(48	)%		(8	)%
Total cost of revenue	$	88,569		$	32,368		$	56,201			174	%
Total gross profit		25,288			25,975			(687	)		-3	%
Total gross profit margin		22	%		45	%

Cost of operating leases and solar energy systems incentives revenue increased by $20.3 million, or 79%, for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. This increase was primarily due to greater depreciation expense arising from the higher aggregate cost of solar energy systems placed in service and generating revenue under solar energy system leases and power purchase agreements.

Cost of solar energy systems and component sales increased by $35.9 million, or 541%, for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. This increase was primarily due to higher sales of solar energy systems and components and also the recognition of $18.1 million of warranty expenses associated with sales under MyPower contracts. The warranty expense for a sale under a MyPower contract is recorded upon the delivery of the solar energy system while the associated revenue and cost of revenue are recognized over the term of the MyPower contract as the customer pays-down the principal balance of the MyPower loan. We expect to continue to record negative gross margins in future periods as sales under MyPower contracts increase and revenue is recognized over the term of the MyPower contracts. If we had recognized the warranty expense for a sale under a MyPower contract over the term of the MyPower contract, then the gross margin of solar energy systems and component sales would have been a gross profit of 14% for the three months ended September 30, 2015.

Operating Expenses

	Three Months Ended September 30,				Change
(Dollars in thousands)	2015		2014		$		%
Sales and marketing	$	129,284	$	56,472	$	72,812		129	%
General and administrative		69,423		39,608		29,815		75	%
Research and development		17,652		4,235		13,417		317	%
Total operating expenses	$	216,359	$	100,315	$	116,044		116	%

Sales and marketing expense increased by $72.8 million, or 129%, for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. This increase was primarily due to more expansive sales and marketing efforts, which have resulted in increases in the number of customers, system installations and system deployments. This initiative increased the average number of personnel in sales and marketing departments by 102% for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. As a result of this growth in headcount, employee compensation costs increased by $42.0 million (of which $3.1 million was non-cash and related to stock-based compensation), and facilities and operations costs increased by $7.1 million. In addition, promotional marketing costs increased by $23.8 million as part of this broadening of the scope of our marketing activities, including enhanced digital marketing activities to increase brand awareness and customer reach. Furthermore, the expense from the amortization of intangible assets increased from $2.9 million for the three months ended September 30, 2014 to $3.1 million for the three months ended September 30, 2015. We expect that our increased investment in sales and marketing efforts in current and new markets will continue to drive customer acquisitions and the future growth of our business.

General and administrative expense increased by $29.8 million, or 75%, for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. This increase was primarily due to the increase in the average number of personnel in general and administrative departments, which grew by 100% for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. As a result of this growth in headcount, employee compensation costs increased by $13.5 million (of which $2.6 million was non-cash and related to stock-based compensation), and facilities and operations costs increased by $3.8 million. In addition, professional services fees increased by $12.5 million primarily due to increased legal costs and accounting services fees.

Research and development expense increased by $13.4 million, or 317%, for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. This increase was primarily due to the greater level of research and development activities undertaken by Silevo, which we acquired in September 2014, and the corresponding increase in the average number of personnel in research and development departments, which grew by 244% for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014.

Other Income and Expenses

	Three Months Ended September 30,				Change
(Dollars in thousands)	2015		2014		$		%
Interest expense, net	$	25,862	$	16,321	$	9,541		58	%
Other expense, net		16,851		2,961		13,890		469	%
Total interest and other expenses, net	$	42,713	$	19,282	$	23,431		122	%

Interest expense, net, increased by $9.5 million, or 58%, for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. This increase was primarily due to the higher average carrying balances on our various borrowing facilities for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014.

Other expense, net, increased by $13.9 million, or 469%, for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. This increase was mainly due to the $12.3 million loss from interest rate swaps and the $1.1 million of deferred financing costs written-off upon the partial prepayment of the term loan due in December 2016, in the three months ended September 30, 2015. We have entered into forward interest rate swaps, in order to fix the variable interest rates, for each draw under the MyPower revolving credit facility and the revolving aggregation credit facility. We account for interest rate swaps as non-hedging derivatives and record any changes in their fair values as a component of other expense, net.

Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests

Three Months Ended September 30,

Change

(Dollars in thousands)

2015

2014

Net loss attributable to noncontrolling

interests and redeemable noncontrolling

(215,193

)

(89,352

)

(125,841

)

(141

The net loss attributable to noncontrolling interests and redeemable noncontrolling interests represents the share of net loss that was allocated to the investors in the joint venture financing funds. This amount was determined as the change in the investors’ interests in the joint venture financing funds between the beginning and end of each reported period calculated primarily using the HLBV method, less any capital contributions net of any capital distributions. The calculation depends on the specific contractual liquidation provisions of each joint venture financing fund and is generally affected by, among other factors, the tax attributes allocated to the investors including tax bonus depreciation and investment tax credits or U.S. Treasury grants in lieu of the investment tax credits, the existence of guarantees of minimum returns to the investors by us, and the allocation of tax income or losses including provisions that govern the level of deficits that can be funded by the investors in a liquidation scenario. The calculation is also affected by the cost of the assets sold to the joint venture financing funds, which forms the book basis of the net assets allocated to the investors assuming a liquidation scenario. Generally, significant loss allocations to the investors have arisen in situations where there was a significant difference between the fair value and the cost of the assets sold to the joint venture financing funds in a particular period accompanied by the absence of guarantees of minimum returns to the investors by us, since the capital contributions by the investors were based on the fair value of the assets while the calculation is based on the cost of the assets. The existence of guarantees of minimum returns to the investors by us and limits on the level of deficits that the investors are contractually obligated to fund in a liquidation scenario reduce the amount of losses that could be allocated to the investors. In addition, the redeemable noncontrolling interests balance is at least equal to the redemption amount.

The net loss attributable to noncontrolling interests and redeemable noncontrolling interests for the three months ended September 30, 2015 was $215.2 million while the net loss attributable to noncontrolling interests and redeemable noncontrolling interests for the three months ended September 30, 2014 was $89.4 million. The net loss allocation to noncontrolling interests and redeemable noncontrolling interests for the three months ended September 30, 2015 was primarily due to the $214.0 million loss allocation from new financing funds into which we are selling or contributing assets. The net loss allocation to noncontrolling interests and redeemable noncontrolling interests for the three months ended September 30, 2014 was primarily due to the $95.5 million loss allocation from financing funds into which we were selling or contributing assets. This loss allocation was partially offset by a $6.1 million income allocation related to financing funds that were fully funded and that we were not selling or contributing additional assets.

Nine Months Ended September 30, 2015 and 2014

Revenue

	Nine Months Ended September 30,				Change
(Dollars in thousands)	2015		2014		$		%
Operating leases and solar energy systems incentives	$	218,113	$	124,431	$	93,682		75	%
Solar energy systems and components sales		66,026		58,792		7,234		12	%
Total revenue	$	284,139	$	183,223	$	100,916		55	%

Total revenue increased by $100.9 million, or 55%, for the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014.

Operating leases and solar energy systems incentives revenue increased by $93.7 million, or 75%, for the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. This increase was primarily attributable to the increase in solar energy systems placed in service under leases and power purchase agreements between October 1, 2014 and September 30, 2015. The in-period average of the aggregate megawatt production capacity of solar energy systems placed in service under leases and power purchase agreements during the nine months ended September 30, 2015 increased by 84% as compared to the in-period average during the nine months ended September 30, 2014. This significant growth was attributable to our continued success in the installation and operation of solar energy systems under lease and power purchase agreements in new and existing markets. In addition, revenue from the monetization of ITCs increased by $19.3 million for the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014, as we recognized such revenue from more solar energy systems in the nine months ended September 30, 2015. We recognize revenue from the monetization of ITCs on the anniversary date of each solar energy system’s placed in service date as recapture provisions expire.

Revenue from sales of solar energy systems and components increased by $7.2 million, or 12% , for the nine months ended September 30 , 201 5, as compared to the nine months ended September 30 , 201 4 . This increase was primarily due to the $18.4 million increase in revenue from MyPower contracts, the $8.3 million increase in revenue from outright sales to residential customers, the $2.2 million increase in revenue from sales to government entities, the $1.5 million increase in revenue from sales of Silevo products as we fulfilled open customer orders following our acquisition of Silevo and the $0.7 million increase in revenue from sales of battery storage products. These increases were partially offset by the $12.2 million decrease in revenue from long-term solar energy system sal es contracts recognized on the percentage-of-completion basis and the $3.5 million decrease in revenue from sales to commercial customers. In addition, in the nine months ended September 30, 2014, we recognized $9.0 million of revenue from sales of Zep Sol ar products as we fulfilled open customer orders following our acquisition of Zep Solar. Revenue from sales of solar energy systems and components has varied considerably and will continue to vary considerably from period to period due to the successful adoption of our MyPower product and the unpredictability of sales to commercial customers, long-term solar energy system sales contracts recognized on the percentage-of-completion basis and sales to government entities.

Cost of Revenue, Gross Profit and Gross Profit Margin

	Nine Months Ended September 30,						Change
(Dollars in thousands)	2015			2014			$			%
Cost of operating leases and solar energy systems incentives	$	115,667		$	62,533		$	53,134			85	%
Gross profit of operating leases and solar energy systems incentives		102,446			61,898			40,548			66	%
Gross profit margin of operating leases and solar energy systems incentives		47	%		50	%
Cost of solar energy systems and component sales	$	78,101		$	57,057		$	21,044			37	%
Gross (loss) profit of solar energy systems and component sales		(12,075	)		1,735			(13,810	)		(796	)%
Gross (loss) profit margin of solar energy systems and component sales		(18	)%		3	%
Total cost of revenue	$	193,768		$	119,590		$	74,178			62	%
Total gross profit		90,371			63,633			26,738			42	%
Total gross profit margin		32	%		35	%

Cost of operating leases and solar energy systems incentives revenue increased by $53.1 million, or 85%, for the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. This increase was primarily due to greater depreciation expense arising from the higher aggregate cost of solar energy systems placed in service and generating revenue under solar energy system leases and power purchase agreements.

Cost of solar energy systems and component sales increased by $21.0 million, or 37%, for the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. This increase was partly due to higher sales of solar energy systems and components and also the recognition of $18.5 million of warranty expenses associated with sales under MyPower contracts. The warranty expense for a sale under a MyPower contract is recorded upon the delivery of the solar energy system while the associated revenue and cost of revenue are recognized over the term of the MyPower contract as the customer pays-down the principal balance of the MyPower loan. We expect to continue to record negative gross margins in future periods as sales under MyPower contracts increase and revenue is recognized over the term of the MyPower contracts. If we had recognized the warranty expense for a sale under a MyPower contract over the term of the MyPower contract, then the gross margin of solar energy systems and component sales would have been a gross profit of 9% for the nine months ended September 30, 2015.

Operating Expenses

	Nine Months Ended September 30,				Change
(Dollars in thousands)	2015		2014		$		%
Sales and marketing	$	329,115	$	159,093	$	170,022		107	%
General and administrative		168,288		111,006		57,282		52	%
Research and development		42,173		9,158		33,015		361	%
Total operating expenses	$	539,576	$	279,257	$	260,319		93	%

Sales and marketing expense increased by $170.0 million, or 107% , for the nine months ended September 30 , 201 5, as compared to the nine months ended September 30 , 201 4 . This increase was primarily due to more expansive sales and marketing efforts, which have resulted in increases in the number of customers, system installations and system deployments. This initiative increased the average number of personnel in sales and marketing departments by 105% for the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. As a result of this growth in headcount, employee compensation costs increased by $105.5 million (of which $ 6.3 million was non-cash and related to stock-based compensation) , and facilities and operations costs increased by $19.2 million. In addition, promotional marketing costs increased by $46.2 million as part of this broadening of the scope of our marketing activities, including enhanced digital marketing activities to increase brand awareness and customer reach. Furthermore, the expense from the amortization of intangible assets increased from $8.8 million for the nine months ended September 30, 2014 to $9.0 million for the nine months ended September 30, 2015. We expect that o ur increased investment in sales and marketing efforts will continue to drive customer acquisitions and the future growth of our business.

General and administrative expense increased by $57.3 million, or 52%, for the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. This increase was primarily due to the increase in the average number of personnel in general and administrative departments, which grew by 97% for the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. As a result of this growth in headcount, employee compensation costs increased by $28.0 million (of which $1.4 million was non-cash and related to stock-based compensation), and facilities and operations costs increased by $9.2 million. In addition, professional services fees increased by $18.6 million primarily due to increased legal costs and accounting services fees.

Research and development expense increased by $33.0 million, or 361%, for the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. This increase was primarily due to the greater level of research and development activities undertaken by Silevo, which we acquired in September 2014, and the corresponding increase in the average number of personnel in research and development departments, which grew by 228% for the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014.

Other Income and Expenses

	Nine Months Ended September 30,				Change
(Dollars in thousands)	2015		2014		$		%
Interest expense, net	$	64,880	$	37,192	$	27,688		74	%
Other expense, net		21,723		4,293		17,430		406	%
Total interest and other expenses, net	$	86,603	$	41,485	$	45,118		109	%

Interest expense, net, increased by $27.7 million, or 74%, for the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. This increase was primarily due to the higher average carrying balances on our various borrowing facilities for the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014.

Other expense, net, increased by $17.4 million, or 406%, for the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. This increase was mainly due to the $12.6 million loss from interest rate swaps related to our debt facilities, the $1.1 million of deferred financing costs written-off upon the partial prepayment of the term loan due in December 2016 and the $5.3 million of accretion on the contingent consideration payable related to the Silevo acquisition, in the nine months ended September 30, 2015. We have entered into forward interest rate swaps, in order to fix the variable interest rates, for each draw under the MyPower revolving credit facility and the revolving aggregation credit facility. We account for interest rate swaps as non-hedging derivatives and record any changes in their fair values as a component of other expense, net.

Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests

Nine Months Ended September 30,

Change

(Dollars in thousands)

2015

2014

Net loss attributable to noncontrolling

interests and redeemable noncontrolling

(473,978

)

(181,315

)

(292,663

)

(161

liquidation provisions of each joint venture financing fund and is generally affected by, among other factors, the tax attributes allocated to the investors including tax bonus depreciation and investment tax credits or U.S. Treasury grants in li eu of the investment tax credits, the existence of guarantees of minimum returns to the investors by us, and the allocation of tax income or losses including provisions that govern the level of deficits that can be funded by the investors in a liquidation scenario. The calculation is also affected by the cost of the assets sold to the joint venture financing funds, which forms the book basis of the net assets allocated to the investors assuming a liquidation scenario. Generally, significant loss allocations to the investors have arisen in situations where there was a significant difference between the fair value and the cost of the assets sold to the joint venture financing funds in a particular period accompanied by the absence of guarantees of minimum retu rns to the investors by us, since the capital contributions by the investors were based on the fair value of the assets while the calculation is based on the cost of the assets. The existence of guarantees of minimum returns to the investors by us and limi ts on the level of deficits that the investors are contractually obligated to fund in a liquidation scenario reduce the amount of losses that could be allocated to the investors. In addition, the redeemable noncontrolling interests balance is at least equa l to the redemption amount.

The net loss attributable to noncontrolling interests and redeemable noncontrolling interests for the nine months ended September 30, 2015 was $474.0 million while the net loss attributable to noncontrolling interests and redeemable noncontrolling interests for the nine months ended September 30, 2014 was $181.3 million. The net loss allocation to noncontrolling interests and redeemable noncontrolling interests for the nine months ended September 30, 2015 was primarily due to the $466.4 million loss allocation from new financing funds into which we are selling or contributing assets. The net loss allocation to noncontrolling interests and redeemable noncontrolling interests for the nine months ended September 30, 2014 was primarily due to the $204.0 million loss allocation from financing funds into which we were selling or contributing assets. This loss allocation was partially offset by a $10.8 million income allocation related to financing funds that were fully funded and that we were not selling or contributing additional assets. Additionally, $11.9 million of income was allocated to noncontrolling interests and redeemable noncontrolling interests in an entity that has a lease pass-through joint venture arrangement with us that included $8.5 million of income allocation due to an adjustment in the carrying amount of the redeemable noncontrolling interest balance to its redemption amount following amendments to the contractual agreements of this fund that granted the investor redemption rights of its investment in the fund in conjunction with termination of the lease pass-through arrangement.

Liquidity and Capital Resources

The following table summarizes our condensed consolidated cash flows:

	Nine Months Ended September 30,
	2015			2014
	(in thousands)
Consolidated cash flow data:
Net cash used in operating activities	$	(526,317	)	$	(82,332	)
Net cash used in investing activities		(1,201,443	)		(858,402	)
Net cash provided by financing activities		1,596,127			1,060,170
Net decrease in cash and cash equivalents	$	(131,633	)	$	119,436

We finance our operations, including the costs of acquisition and installation of solar energy systems, mainly through a variety of financing fund arrangements that we have formed with tax equity fund investors, credit facilities from banks, solar asset-backed notes, convertible notes, Solar Bonds and cash generated from our operations. As described below under “—Financing Activities— Debt and Financing Fund Commitments,” as of September 30, 2015, we had $935.1 million of available commitments from our fund investors that could be drawn based on the available capacity under our credit facilities through our asset monetization strategy and $493.3 million of unused borrowing capacity available under our debt agreements that could be drawn based on the available capacity under our credit facilities. The amount of our liquidity and capital resources as of a given date is also dependent upon, among other things, the relative timing of our investments in solar energy systems and the timing of subsequent draws on our financing funds. As a result, the amount of our liquidity and capital resources may significantly fluctuate within a fiscal quarter by amounts that are not reflected by comparing our cash and cash equivalent balances at each quarter-end balance sheet date. For example, solar energy systems deployed towards the end of a fiscal quarter may not be transferred to a financing fund in sufficient time for the funds to be received and reflected in our cash and cash equivalent balance as of the quarter end. In addition, downward revisions to our installation projections for a fiscal period are also likely to impact our liquidity and capital resources, for example in situations where we have already spent funds to purchase components for solar energy systems that are installed in subsequent periods. As our business grows and the amounts of megawatts we deploy increases, the amounts by which our liquidity and capital resources may fluctuate within a quarter are likely to increase.

While we had a net loss for the n ine months ended September 30 , 201 5 , we believe that the aggregate of our existing cash and cash equivalents and short-term investments of $418.4 million, in addition to the funds available under our debt agreements and the funds available in our existing financing funds that can be drawn-down through our asset monetization strategy, will be sufficient to meet our cash requirements for at least the next 12 months. However, if, in the future, we are unable to comply with all of the covenants contained in our debt agreements or we are unable to obtain waivers of any non-compliance, then we might be considered in default under our debt agreements. In t hat circumstance, the payments due under our debt agreements could be accelerated, which would negatively impact our liquidity and capital resources. Under the terms of our secured r evolving c redit f acility, we are subject to the following financial covena nts:

Interest Coverage Ratio : We are obligated to maintain an interest coverage ratio of 1.5-to-1 as of the end of each fiscal quarter. The interest coverage ratio is measured by dividing (a) an amount equal to the excess of (i) our trailing 12-month consolidated gross profit over (ii) 20% of our trailing 12-month consolidated general and administrative expenses by (b) our unconsolidated trailing 12-month cash interest charges.

Unencumbered Liquidity : We are obligated to maintain unencumbered liquidity at an amount equal to at least 20% of the sum of (a) the committed amount under the secured revolving credit facility plus (b) the aggregate principal outstanding of Solar Bonds that mature prior to the secured revolving credit facility’s maturity date, as of the end of each month. However, unencumbered liquidity can never be less than $50.0 million, as of the end of each month. Unencumbered liquidity is defined as our average daily cash and cash equivalents, excluding certain of our subsidiaries.

Operating Activities

In the nine months ended September 30, 2015, we utilized $526.3 million in net cash from operations due to our continued rapid growth. This cash outflow primarily resulted from a net loss of $536.9 million, reduced by non-cash items such as depreciation and amortization of $118.1 million, stock-based compensation of $61.0 million and non-cash interest and other expense of $12.6 million mainly related to financing obligations and deferred contingent consideration and increased by a reduction in financing obligations of $36.4 million. The cash outflow also increased in part due to an increase in restricted cash of $19.8 million, an increase in inventories of $91.6 million, an increase of $150.3 million for MyPower deferred costs, an increase in prepaid expenses and other current assets of $42.3 million, an increase in other assets of $12.8 million and an increase in accounts receivable of $15.6 million. This cash outflow was offset by an increase in deferred revenue under our joint venture and lease pass-through structures of $10.2 million relating to upfront lease payments received from customers, solar energy system incentive rebate payments received from various state and local governments and deferred investment tax credits revenue, an increase in accounts payable of $56.7 million, an increase in accrued and other liabilities of $110.4 million and a decrease in rebates receivable of $15.0 million.

In the nine months ended September 30, 2014, we utilized $82.3 million in net cash from operations. This cash outflow primarily resulted from a net loss of $233.8 million, reduced by non-cash items such as depreciation and amortization of $66.6 million, stock-based compensation of $45.7 million and interest on lease pass-through financing obligations of $8.7 million and increased by a reduction in lease pass-through financing obligation of $36.4 million and a change in deferred income taxes of $23.7 million. The cash outflow also increased in part due to an increase in restricted cash of $3.8 million, an increase in rebates receivable of $6.2 million, an increase in inventories of $66.3 million, an increase in prepaid expenses and other current assets of $15.2 million and a decrease in accrued and other liabilities of $17.3 million. This cash outflow was offset by an increase in deferred revenue under our joint venture and lease pass-through structures of $128.1 million relating to upfront lease payments received from customers, solar energy system incentive rebate payments received from various state and local governments and deferred investment tax credits revenue and an increase in accounts payable of $80.7 million.

Investing Activities

Our investing activities consist primarily of purchases of solar energy systems and capital purchases for our module research and development and panel production as well as general corporate purchases to support our standard operations.

In the nine months ended September 30, 2015, we used $1,201.4 million in investing activities. Of this amount, we used $1,134.9 million on the design, acquisition and installation of solar energy systems under operating leases with our customers, and $147.8 million in the acquisition of solar panel manufacturing equipment, vehicles, office equipment, leasehold improvements and furniture. We also invested $44.6 million in short-term investments in highly rated corporate debt securities and asset-backed securities. These expenditures were offset by $136.6 million from sales and maturities of short-term investments. As we increase our solar panel manufacturing operations, including the start of operations at our one-gigawatt manufacturing facility in Buffalo, New York and our research and development focused California Technology Center, we estimate investing approximately an additional $60.0 million in the remainder of the 2015 and approximately an additional $120.0 million in 2016 related to the acquisition of solar panel manufacturing equipment.

In the nine months ended September 30, 2014, we used $858.4 million in investing activities. Of this amount, we used $793.7 million on the design, acquisition and installation of solar energy systems under operating leases with our customers and $13.4 million in the acquisition of vehicles, office equipment, leaseh old improvements and furniture and $0.5 million for the acquisition of the redeemable noncontrolling interest related to a single joint venture financing fund. We also invested $15.8 million in promissory notes receivable from and other advances to a third -party and $46.5 million in short-term investments in highly rated corporate debt securities. These expenditures were offset by $1.9 million net cash inflow from the acquisition of Silevo and $9.6 million from sales of short-term investments.

Financing Activities

In the nine months ended September 30, 2015, we generated $1,596.1 million from financing activities. We received $783.1 million, net of lender fees, from long-term debt and repaid $212.0 million of long-term debt. We received $206.6 million from the issuance of solar bonds. We received $119.8, net of issuance costs, from the issuance of solar asset-backed notes and repaid $13.9 million of solar asset-backed notes. We received $26.4 million from fund investors in our financing funds and paid $5.1 million to fund investors in our financing funds. We also generated $754.9 million from proceeds from investments by various fund investors in our joint ventures and paid distributions to fund investors of $67.2 million.

In the nine months ended September 30, 2014, we generated $1,060.2 million from financing activities. We received $488.7 million, net of issuance costs, from the issuance of convertible senior notes, and in conjunction with this issuance, we paid $57.6 million to enter into a capped call option agreement. We received $256.1 million, net of lender fees, from long-term debt and repaid $246.7 million of long-term debt. We received $263.6 million, net of issuance costs, from the issuance of solar asset-backed notes and repaid $4.0 million related to these solar asset-backed notes. We also repaid $1.2 million of our capital lease obligation. We received $0.3 million from the U.S. Treasury Department for grants associated with solar energy systems that we had leased to customers. We received $30.1 million from fund investors in our lease pass-through financing funds and paid $6.4 million to fund investors in our lease pass-through financing funds. We also generated $428.1 million from proceeds from investments by various fund investors in our joint ventures and paid distributions to fund investors of $107.3 million. Additionally, we received $17.5 million from the issuance of common stock upon the exercise of stock options for cash.

Debt and Financing Fund Commitments

Debt

In August 2015, we pooled and transferred our interests in certain financing funds into a SPE and issued $103.5 million in aggregate principal of Solar Asset-backed Notes, Series 2015-1, Class A, and $20.0 million in aggregate principal of Solar Asset-backed Notes, Series 2015-1, Class B, to certain investors. The Solar Asset-backed Notes, Series 2015-1, Class A, were issued at a discount of 0.05%, bear interest at 4.18% per annum and mature on August 21, 2045. The Solar Asset-backed Notes, Series 2015-1, Class B, were issued at a discount of 1.46%, bear interest at 5.58% per annum and mature on August 21, 2045. We used a portion of the proceeds to partially prepay the principal outstanding under a term loan that is due in December 2016. For a detailed discussion of the terms of this and our other indebtedness and the changes thereto in the period, refer to Note 6, Indebtedness , to our condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

Financing Fund Commitments

We have financing fund commitments from several fund investors that we can draw upon in the future upon the achievement of specific funding criteria. As of September 30, 2015, we had entered into 45 financing funds that had a total of $935.1 million of undrawn committed capital. From our significant customer backlog, we allocate to our financing funds leases, power purchase agreements and the related economic benefits associated with the solar energy systems, in accordance with the criteria of each fund. Upon such allocation and upon our satisfaction of the conditions precedent to drawing upon such commitments, we are able to draw down on the financing fund commitments. Once received, these proceeds provide working capital to deliver solar energy systems to our customers and form part of our general working capital.

Off-Balance Sheet Arrangements

We include in our condensed consolidated financial statements all assets and liabilities and results of operations of financing fund arrangements that we have entered into. We have not entered into any other transactions that have generated relationships with unconsolidated entities or financial partnerships or special purpose entities. Accordingly, we do not have any off-balance sheet arrangements.

Recent Accountin g Pronouncements

See Note 2, Summary of Significant Accounting Policies and Procedures , to our condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks as part of our ongoing business operations. Our primary exposures include changes in interest rates because certain borrowings bear interest at floating rates plus a specified margin. For fixed-rate debt, interest rate changes do not affect our earnings or cash flows. Conversely, for floating-rate debt, interest rate changes generally impact our earnings and cash flows, assuming other factors are held constant. Pursuant to our risk management policies, in certain cases, we utilize derivative instruments to manage some of our exposures to fluctuations in interest rates on certain floating-rate debt. We do not enter into any derivative instruments for trading or speculative purposes. In addition, we entered into capped call option agreements to reduce the potential dilution to holders of our common stock upon the conversion of our convertible senior notes.

Changes in economic conditions could result in higher interest rates, thereby increasing our interest expense and reducing our funds available for capital investments, operations or other purposes. In addition, we must use a substantial portion of our cash inflows to service our borrowings, which may affect our ability to make future acquisitions or capital expenditures. A hypothetical 10% change in our interest rates would have increased our interest expense for the nine months ended September 30, 2015 and 2014 by $1.4 million and $0.7 million, respectively.

I TEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on our evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, 2015, our disclosure controls and procedures were designed at a reasonable assurance level and were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

P ART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In June 2014, the Company along with Sunrun, Inc., or Sunrun, filed a lawsuit in the Superior Court of Arizona against the Arizona Department of Revenue, or DOR, challenging DOR’s interpretation of Arizona state law to impose property taxes on solar energy systems that are leased by customers. On June 1, 2015, the Superior Court issued an order rejecting the interpretation of the Arizona state law under which the DOR had sought to tax leased solar energy systems. In that same order, the Superior Court held that a separate Arizona statute, which provides that such systems are deemed to have no value for purposes of calculating property tax, violated certain provisions of the Arizona state constitution. The Company will continue to vigorously pursue its claims, including a stay of any property tax obligations pending appeal.

On March 2, 2015, the Company filed a lawsuit in the United States District Court for the District of Arizona against the Salt River Project Agricultural Improvement and Power District and the Salt River Valley Water Users’ Association, or SRP, alleging that SRP’s imposition of distribution charges and demand charges on new solar energy customers in its territory violates state and federal antitrust laws. On June 23, 2015, SRP moved to dismiss the complaint. On October 27, 2015, the District Court denied SRP’s motion to dismiss in part and granted it in part. In particular, the District Court held that the Company may proceed on its antitrust claims against SRP to seek an injunction blocking SRP’s new charges and may proceed with claims for damages under state laws other than antitrust laws. Furthermore, the District Court held that the Company may not recover monetary damages on its antitrust theories and dismissed two of its antitrust claims while allowing the others to proceed. Discovery has commenced, and the Company intends to pursue its claims vigorously.

On September 21, 2015, the Company filed a lawsuit in the United States District Court for the District of Massachusetts against Seaboard Solar Operations LLC, or Seaboard, and its principal, Matthew G. Longman, alleging breaches of the various written contracts between the Company and Seaboard, fraud, conversion and unfair business practices. The Company is seeking a declaratory judgment that it owns and has the right to develop the specified projects and of damages of $16.0 million. The Company intends to pursue its claims vigorously.

From time to time, claims have been asserted, and may in the future be asserted, including claims from regulatory authorities related to labor practices and other matters. Such assertions arise in the normal course of the Company’s operations. The resolution of any such assertions or claims cannot be predicted with certainty . If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the Company’s results of operations, prospects, cash flows, financial position and brand.

ITEM 1A. RISK FACTORS

You should carefully consider the risks described below, together with the other information contained in this quarterly report on Form 10-Q, including our consolidated financial statements and related notes, before investing in our common stock. The risks described below are not the only risks facing our company. Any of the following risks and additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition, results or operations. In such case, you may lose all or part of your original investment.

Risks Related to our Operations

Existing electric utility industry regulations, and changes to regulations, may present technical, regulatory and economic barriers to the purchase and use of solar energy systems that may significantly reduce demand for our solar energy systems.

Federal, state and local government regulations and policies concerning the electric utility industry, utility rate structures, interconnection procedures, internal policies and regulations promulgated by electric utilities, heavily influence the market for electricity generation products and services. These regulations and policies often relate to electricity pricing and the interconnection of customer-owned electricity generation. In the United States, governments and utilities continuously modify these regulations and policies. These regulations and policies could deter potential customers from purchasing renewable energy, including solar energy systems. This could result in a significant reduction in demand for our solar energy systems. For example, utilities commonly charge fees to large, industrial customers for disconnecting from the electric grid or for having the capacity to use power from the electric grid for back-up purposes. These fees could increase our customers’ cost to use our systems and make our product offerings less desirable, thereby harming our business, prospects, financial condition and results of operations. In addition, depending on the region, electricity generated by solar energy systems competes most effectively with higher priced peak-hour electricity from the electric grid, rather than the lower average price of electricity. Modifications to the utilities’ peak-hour pricing policies or rate design, such as a flat rate, would require us to lower the price of our solar energy systems to compete with the price of electricity from the electric grid.

Future changes to government or internal utility regulations and policies that favor electric utilities could also reduce our competitiveness and cause a significant reduction in demand for our products and services. For example, in October 2015, the Hawaii Public Utilities Commission capped the state’s net metering program at existing levels. In addition, the three largest utilities in California recently filed proposals that would significantly reduce the economic benefits of net metering for new solar customers when the utilities reach their existing net metering program caps. In other jurisdictions, it has been proposed that additional fees and other charges be assessed on customers purchasing energy from solar energy systems. In particular, the Salt River Project (SRP) in Arizona has imposed anticompetitive penalties on new solar customers in an attempt to exclude rooftop solar, and in response in March 2015 we filed a lawsuit in federal court in Arizona, asking the court to stop SRP’s anti-competitive behavior. In the event that effective net metering programs are limited in California and other key markets or any such fees or charges are imposed, our ability to attract new customers and compete with the price of electricity generated by local utilities in these jurisdictions may be severely limited, and such unaccounted for increases in the fees or charges applicable to existing customer agreements may increase the cost of energy to those customers and result in an increased rate of defaults under our customer agreements. Any of these results could reduce demand for our solar energy systems, harm our business, prospects, financial condition and results of operations.

We rely on net metering and related policies to offer competitive pricing to our customers in some of our key markets.

Forty-four states, Washington, D.C. and Puerto Rico have a regulatory policy known as net energy metering, or net metering. Each of the states where we currently serve customers has adopted a net metering policy except for Texas, where certain individual utilities have adopted net metering or a policy similar to net metering. Net metering typically allows our customers to interconnect their on-site solar energy systems to the utility grid and offset their utility electricity purchases by receiving a bill credit at the utility’s retail rate for energy generated by their solar energy system that is exported to the grid in excess of the electric load used by the customers. At the end of the billing period, the customer simply pays for the net energy used or receives a credit at the retail rate if more energy is produced than consumed. Utilities operating in states without a net metering policy may receive solar electricity that is exported to the grid when there is no simultaneous energy demand by the customer without providing retail compensation to the customer for this generation.

Our ability to sell solar energy systems and the electricity they generate may be adversely impacted by the failure to expand existing limits on the amount of net metering in states that have implemented it, the failure to adopt a net metering policy where it currently is not in place, the imposition of new charges that only or disproportionately impact customers that utilize net metering or

reductions in the amount or value of credit that customers receive through net metering. Our ability to sell solar energy systems and the electricity they generate may also be adversely impacted by the unavailability of expedited or simplifi ed interconnection for grid-tied solar energy systems or any limitation on the number of customer interconnections or amount of solar energy that utilities are required to allow in their service territory or some part of the grid. For example, in October 2 015, the Hawaii Public Utilities Commission capped the state’s net metering program at existing levels. In addition, utilities in some states, such as SRP in Arizona , have proposed imposing additional monthly charges on customers who interconnect solar energy systems installed on their homes. If such charges are imposed, the cost savings associated with switching to solar energy may be significantly reduced and our ability to attract future customers and compete with traditional utility providers could b e impacted.

Limits on net metering, interconnection of solar energy systems and other operational policies in key markets could limit the number of solar energy systems installed in those markets. For example, California utilities limit net metering credit to 5% of the utilities’ aggregate customer peak demand. California is implementing legislation that establishes a process and timeline for developing a new net metering successor program for its three largest utilities with no cap on participation. Although recently, California’s three largest utilities filed proposals that would significantly reduce the economic benefits of net metering for new solar customers when the utilities reach their existing net metering program caps. In addition to California, New York is considering a net metering successor program through the Reforming the Energy Vision docket at the state Public Service Commission, and Nevada is developing a new net metering successor program. If the caps on net metering in California, New York, Nevada and other key markets are reached or if the amount or value of credit that customers receive for net metering is significantly reduced, future customers will be unable to recognize the current cost savings associated with net metering. We rely substantially on net metering when we establish competitive pricing for our prospective customers and the absence of net metering for new customers could greatly limit demand for our solar energy systems.

Regulatory limitations associated with technical considerations may significantly limit our ability to sell electricity from our solar energy systems in certain markets.

Regulatory limits associated with technical considerations may curb our growth in certain key markets. For example, the Federal Energy Regulatory Commission has promulgated small generator interconnection procedures that recommend limiting customer-sited intermittent generation resources, such as our solar energy systems, to a certain percentage of peak load on a given electrical feeder circuit. Similar limits have been adopted by various states and could constrain our ability to market to customers in certain geographic areas where the concentration of solar installations exceeds the limit. For example, Hawaiian electric utilities have adopted certain policies that limit distributed electricity generation in certain geographic areas. While these limits have constrained our growth in certain parts of Hawaii, policy developments in Hawaii generally have allowed distributed electricity generation penetration despite the electric utility-imposed limitations. Furthermore, in certain areas, we benefit from policies that allow for expedited or simplified procedures related to connecting solar energy systems to the power grid. If such procedures are changed or cease to be available, our ability to sell the electricity generated by solar energy systems we install may be adversely impacted. As adoption of solar distributed generation increases, along with the operation of large-scale solar generation in key markets such as California, the amount of solar energy being fed into the power grid will surpass the amount planned for relative to the amount of aggregate demand. Some utilities claim that within several years, solar generation resources may reach a level capable of causing an over-generation situation that could require some solar generation resources to be curtailed to maintain operation of the grid. The adverse effects of such curtailment without compensation could adversely impact our business, results of operations and future growth.

Our business currently depends on the availability of rebates, tax credits and other financial incentives. The expiration, elimination or reduction of these rebates, credits and incentives would adversely impact our business.

U.S. federal, state and local government bodies provide incentives to end users, distributors, system integrators and manufacturers of solar energy systems to promote solar electricity in the form of rebates, tax credits and other financial incentives such as system performance payments, payments for renewable energy credits associated with renewable energy generation and the exclusion of solar energy systems from property tax assessments. We rely on these governmental rebates, tax credits and other financial incentives to lower our cost of capital and to encourage fund investors to invest in our funds. These incentives enable us to lower the price we charge customers for energy and for our solar energy systems. However, these incentives may expire on a particular date, end when the allocated funding is exhausted or be reduced or terminated as solar energy adoption rates increase. These reductions or terminations often occur without warning.

The federal government currently offers a 30% investment tax credit under Section 48(a)(3) and Section 25D of the Internal Revenue Code, or the Federal ITC, for the installation of certain solar power facilities until December 31, 2016. Additionally, under Section 48, energy storage systems that are installed at the time of the solar power facility and, as required by IRS guidelines, store the energy of the solar power facility, are also eligible for the Federal ITC. The credit under Section 48(a)(3) is due to adjust to 10% in 2017 for commercial installations and residential systems owned by corporate third parties, and to be completely eliminated for residential installations owned by the homeowner pursuant to Section 25D, which is the major end market we serve. Solar energy systems that began construction prior to the end of 2011 were eligible to receive a 30% federal cash grant paid by the U.S. Treasury

Department under Section 1603 of the American Recovery and Reinvestment Act of 2009, or the U.S. Treasury grant, in lieu of the Federal ITC. Pursuant to the Budget Control Act of 2011, U.S. Treasury grants are subject to sequestration beginning in 2013. Specifically, U.S. Treasur y grants made on or after October 1, 2013 through September 30 , 2015 will be reduced by approximately 7.2%, regardless of when the U.S. Treasury received the application. As a result, for all applications pending or submitted prior to September 30 , 2015, w e expect to suffer grant shortfalls of approximately $1.2 million associated with our financing funds. Applicable authorities may adjust or decrease incentives from time to time or include provisions for minimum domestic content requirements or other requi rements to qualify for these incentives.

Reductions in, eliminations of, or expirations of, governmental incentives could adversely impact our results of operations and ability to compete in our industry by increasing our cost of capital, causing us to increase the prices of our energy and solar energy systems and reducing the size of our addressable market. In addition, this would adversely impact our ability to attract investment partners and to form new financing funds and our ability to offer attractive financing to prospective customers. For the quarter ended September 30, 2015, approximately 98% of new customers chose to enter into financed lease, power purchase agreements or customer loans rather than buying a solar energy system for cash.

Our business depends in part on the regulatory treatment of third-party owned solar energy systems.

Our leases and power purchase agreements are third-party ownership arrangements. Sales of electricity by third parties face regulatory challenges in some states and jurisdictions. Other challenges pertain to whether third-party owned systems qualify for the same levels of rebates or other non-tax incentives available for customer-owned solar energy systems, whether third-party owned systems are eligible at all for these incentives and whether third-party owned systems are eligible for net metering and the associated significant cost savings. In some states and utility territories, third parties that own solar energy systems are limited in the way that they may deliver solar energy to their customers. In jurisdictions such as Arizona, Florida, Georgia, Iowa, Kentucky, North Carolina, Oklahoma and the Los Angeles Department of Water and Power service territory, laws have been interpreted to prohibit the sale of electricity pursuant to our standard power purchase agreement. This has led us and other solar energy system providers that utilize third-party ownership arrangements to offer leases rather than power purchase agreements in such jurisdictions. Imposition of such limitations in additional jurisdictions or reductions in, or eliminations of, incentives for third-party owned systems could reduce demand for our systems, adversely impact our access to capital and cause us to increase the price we charge our customers for energy.

The Office of the Inspector General of the U.S. Department of Treasury has issued subpoenas to a number of significant participants in the solar energy installation industry, including us. The subpoena we received requires us to deliver certain documents in our possession relating to our participation in the U.S. Treasury grant program. These documents are being delivered to the Office of the Inspector General of the U.S. Department of Treasury, which is investigating the administration and implementation of the U.S. Treasury grant program.

In July 2012, we and other companies that are significant participants in both the solar industry and the cash grant program under Section 1603 of the American Recovery and Reinvestment Act of 2009 received subpoenas from the U.S. Department of Treasury’s Office of the Inspector General to deliver certain documents in our respective possession. In particular, our subpoena requested, among other things, documents dated, created, revised or referred to since January 1, 2007 that relate to our applications for U.S. Treasury grants or communications with certain other solar companies or certain firms that appraise solar energy property for U.S. Treasury grant application purposes. The Inspector General is working with the Civil Division of the U.S. Department of Justice to investigate the administration and implementation of the U.S. Treasury grant program, including possible misrepresentations concerning the fair market value of the solar power systems submitted for grant under that program made in grant applications by solar companies, including us. We intend to cooperate fully with the Inspector General and the Department of Justice and continue to produce documents and testimony as requested by the Inspector General. We anticipate that the Inspector General will require at least another six months to conclude its review. If, at the conclusion of the investigation, the Inspector General concludes that misrepresentations were made, the Department of Justice could bring a civil action to recover amounts it believes were improperly paid to us. If the Department of Justice were successful in asserting such an action, we could then be required to pay damages and penalties for any funds received based on such misrepresentations (which, in turn, could require us to make indemnity payments to certain of our fund investors). Such consequences could have a material adverse effect on our business, liquidity, financial condition and prospects. Additionally, the period of time necessary to resolve the investigation is uncertain and this matter could require significant management and financial resources that could otherwise be devoted to the operation of our business.

If the Internal Revenue Service or the U.S. Treasury Department makes additional determinations that the fair market value of our solar energy systems is materially lower than what we have claimed, we may have to pay significant amounts to our financing funds or to our fund investors and such determinations could have a material adverse effect on our business, financial condition and prospects.

We and our fund investors claim the Federal ITC or the U.S. Treasury grant in amounts based on the fair market value of our solar energy systems. We have obtained independent appraisals to support the fair market values we report for claiming Federal ITCs

and U.S. Treasury grants. The Internal Revenue Service and the U.S. Treasury Department review these fair market values. With respect to U.S. Treasury grants, the U.S. Treasury Department reviews the reported fair market value in determining the amount initially awarded. Th e Internal Revenue Service and the U.S. Treasury Department may subsequently audit the fair market value and determine that amounts previously awarded must be repaid to the U.S. Treasury Department or that excess awards constitute taxable income for U.S. f ederal income tax purposes. A small number of our financing funds are undergoing such audits. With respect to Federal ITCs, the Internal Revenue Service may review the fair market value on audit and determine that the tax credits previously claimed must be reduced. If the fair market value is determined to be less than we reported, we may owe our financing fund or fund investors an amount equal to this difference, plus any costs and expenses associated with a challenge to that valuation. We could also be su bject to tax liabilities, including interest and penalties.

The U.S. Treasury Department has previously determined to award U.S. Treasury grants for some of our solar energy systems at a materially lower value than we had established in our appraisals. As a result, we have been required to pay our fund investors a true-up payment or contribute additional assets to the associated financing funds. It is possible that the U.S. Treasury Department will make similar determinations in the future. In response to such shortfalls, two of our financing funds filed a lawsuit in the United States Court of Federal Claims to recover the difference between the U.S. Treasury grants they sought and the amounts the U.S. Treasury paid; to the extent that these lawsuits are successful, any recovery would be used to repay us for amounts we previously reimbursed those funds. Our fund investors have contributed to our financing funds at the amounts the U.S. Treasury Department most recently awarded on similarly situated energy systems in order to reduce or eliminate the need for us to subsequently pay those fund investors true-up payments or contribute additional assets to the associated financing funds.

The Internal Revenue Service or the U.S. Treasury Department may object to the fair market value of solar energy systems that we have constructed, or will construct, including any systems for which grants have already been paid, as a result of:

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any pending or future audit,

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the outcome of the Department of Treasury Inspector General investigation, or

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changes in guidelines or otherwise.

If the Internal Revenue Service or the U.S. Treasury Department were to object to amounts we have claimed as too high of a fair market value on such systems, it could have a material adverse effect on our business, financial condition and prospects. For example, a hypothetical 5% downward adjustment in the fair market value in the approximately $501.3 million of U.S. Department of Treasury grant applications that have been awarded from the beginning of the U.S. Treasury grant program through September 30, 2015 would obligate us to repay up to $25.1 million to our fund investors.

We need to enter into additional substantial financing arrangements to facilitate our customers’ access to our solar energy systems, and if this financing is not available to us on acceptable terms, if and when needed, our ability to grow our business would be materially adversely impacted.

Our future success depends on our ability to raise capital from third-party fund investors to help finance the deployment of our residential and commercial solar energy systems. In particular, our strategy is to reduce the cost of capital through these arrangements to improve our margins, offset future reductions in government incentives and maintain the price competitiveness of our solar energy systems. If we are unable to establish new financing funds when needed, or on desirable terms, to enable our customers’ access to our solar energy systems with little or no upfront cost, we may be unable to finance installation of our customers’ systems, or our cost of capital could increase, either of which would have a material adverse effect on our business, financial condition and results of operations. If we are unable to establish new financing funds when needed or at all, or on desirable terms, to enable our customers’ access to our solar energy systems with little or no upfront cost, we may encounter difficulty financing installation of our customers’ systems, or our cost of capital could increase, either of which would have a material adverse effect on our business, financial condition and results of operations. To date, we have raised capital sufficient to finance installation of our customers’ solar energy systems from a number of financial institutions and other large companies. Our ability to draw on financing commitments is subject to the conditions of the agreements underlying our financing funds. If we do not satisfy such conditions due to events related to our business or a specific financing fund, developments in our industry (including related to the Department of Treasury Inspector General investigation) or otherwise, and as a result we are unable to draw on existing commitments, it could have a material adverse effect on our business, liquidity, financial condition and prospects. If any of the financial institutions or large companies that currently invest in our financing funds decide not to invest in future financing funds to finance our solar energy systems due to general market conditions, concerns about our business or prospects, the pendency of the Department of Treasury Inspector General investigation or any other reason, or materially change the terms under which they are willing to provide future financing, we will need to identify new financial institutions and companies to invest in our financing funds and negotiate new financing terms.

In the past, challenges raising new funds have caused us to delay deployment of a substantial number of solar energy systems for which we had alrea dy signed leases or power purchase agreements with customers. For example, in late 2008 and early 2009, as a result of the state of the capital markets, our ability to finance the installation of solar energy systems was limited and resulted in a significa nt backlog of signed sales orders for solar energy systems. Our future ability to obtain additional financing depends on the continued confidence of banks and other financing sources in our business model and the solar energy industry as a whole. It could also be impacted by the liquidity needs of such financing sources. In addition, attracting future financing could be more difficult or costly to secure if the quality of our customer contracts, as perceived by our fund investors, were to decrease as a resu lt of an increase in customer default rates, lower credit rating requirements for new customers or other factors . Solar energy has yet to achieve broad market acceptance and depends on continued support in the form of performance-based incentives, rebates, tax credits and other incentives from federal, state , local and foreign governments. If this support diminishes, our ability to obtain external financing, on acceptable terms or otherwise could be materially adversely affected. In addition, we face compet ition for these third-party investor funds. If we are unable to continue to offer a competitive investment profile, we may lose access to these funds or they may only be available on less favorable terms than are available to our competitors. Our current f inancing sources may be inadequate to support the anticipated growth in our business plans. Moreover, w e will require additional capital in the near term, and we continue to look for opportunities to optimize our capital structure. We plan to pursue source s of such capital through various financing transactions and arrangements . Our inability to secure financing could lead to cancellations and could impair our ability to accept new projects and customers. In addition, our borrowing costs could increase, whi ch would have a material adverse effect on our business, financial condition and results of operations.

We have historically benefited from the declining cost of solar panels, and our business and financial results may be harmed as a result of increases in the cost of solar panels or tariffs on imported solar panels imposed by the U.S. government.

The declining cost of solar panels and the raw materials necessary to manufacture them has been a key driver in the pricing of our solar energy systems and customer adoption of this form of renewable energy. With an increase of solar panel and raw materials prices, our growth could slow, and our financial results could suffer. Further, the cost of solar panels and raw materials could potentially increase in the future due to a variety of factors which we cannot control, including the imposition of duties, subsidies and/or safeguards or other trade-related costs or penalties or shortages of essential components.

The U.S. government imposes antidumping and countervailing duties on solar cells manufactured in China and/or Taiwan. Based on determinations by the U.S. government, the antidumping and countervailing duty rates range from approximately 33%-255%. Such antidumping and countervailing duties are subject to annual review and may be increased or decreased.

In addition, the U.S. government imposed additional tariffs on solar modules manufactured in China (with solar cells manufactured in other countries) and solar cells manufactured in Taiwan. In early January 2015, the U.S. government announced its affirmative final determinations in both the countervailing duty and antidumping cases against China and in the antidumping case against Taiwan.

Since these tariffs are reflected in the purchase price of the solar panels and cells, these tariffs are a cost associated with purchasing these solar products. In the past, we purchased a significant number of the solar panels used in our solar energy systems from manufacturers that were based in China. We continue to be affected by these tariffs/duties and any changes to them as many of the solar panels we currently purchase contain components, including solar cells, from China and Taiwan.

If additional tariffs are imposed or other negotiated outcomes occur, our ability to purchase these products on competitive terms or to access specialized technologies from countries like China and Taiwan could be limited. Further, foreign suppliers in other countries could also be the subject of these or future trade cases. Any of these events could harm our financial results by requiring us to account for the cost of trade penalties or to purchase and integrate solar panels or other system components from alternative and potentially higher-priced sources.

In September 2014, we acquired Silevo, a solar panel technology and manufacturing company. In May 2015, we were contacted by the U.S. Customs and Border Protection (CBP) to provide information regarding our importation of solar panels manufactured by Silevo in China. In response to CBP’s request for information, we provided applicable documentation to CBP and engaged in a review with their staff. Following this review, we reached an informal consensus with CBP that Silevo’s solar panels are exempt from the scope of the antidumping and countervailing duties Orders. In addition, we have submitted a request for a scope ruling with the U.S. Department of Commerce for a determination on this issue. We anticipate receiving a response from the Department of Commerce in late-November, and we have ceased importing Silevo solar panels manufactured in China while we await their decision. We believe that the Silevo solar panels are exempt from these tariffs. However, if the Department of Commerce disagrees with our position, we may be subject to back duties and penalties under the antidumping and countervailing duties orders, which would increase our operating costs and could harm our financial results.

Our ability to provide solar energy systems to new customers on an economically viable basis depends on our ability to finance these systems with fund investors who require particular tax and other benefits.

Our solar energy systems have been eligible for Federal ITCs or U.S. Treasury grants, as well as depreciation benefits. We have relied on, and will continue to rely on, financing structures that monetize a substantial portion of those benefits and provide financing for our solar energy systems. With the lapse of the U.S. Treasury grant program, our reliance on these tax-advantaged financing structures has substantially increased. If, for any reason, we were unable to continue to monetize those benefits through these arrangements, we may be unable to provide and maintain solar energy systems for new customers on an economically viable basis.

The availability of this tax-advantaged financing depends upon many factors, including:

our ability to compete with other renewable energy companies for the limited number of potential fund investors, each of which has limited funds and limited appetite for the tax benefits associated with these financings;

the state of financial and credit markets;

changes in the legal or tax risks associated with these financings; and

non-renewal of these incentives or decreases in the associated benefits.

Under current law, the Federal ITC will be reduced from approximately 30% of the cost of the solar energy systems to approximately 10% for solar energy systems placed in service after December 31, 2016. In addition, U.S. Treasury grants are no longer available for new solar energy systems. Moreover, potential fund investors must remain satisfied that the structures we offer make the tax benefits associated with solar energy systems available to these investors, which depends both on the investors’ assessment of the tax law and the absence of any unfavorable interpretations of that law. Changes in existing law and interpretations by the Internal Revenue Service and the courts could reduce the willingness of fund investors to invest in funds associated with these solar energy system investments. We cannot assure you that this type of financing will be available to us. If, for any reason, we are unable to finance solar energy systems through tax-advantaged structures or if we are unable to realize or monetize depreciation benefits, we may no longer be able to provide solar energy systems to new customers on an economically viable basis. This would have a material adverse effect on our business, financial condition and results of operations.

A material drop in the retail price of utility-generated electricity or electricity from other sources would harm our business, financial condition and results of operations.

We believe that a customer’s decision to buy renewable energy from us is primarily driven by their desire to pay less for electricity. The customer’s decision may also be affected by the cost of other renewable energy sources. Decreases in the retail prices of electricity from the utilities or other renewable energy sources would harm our ability to offer competitive pricing and could harm our business. The price of electricity from utilities could decrease as a result of:

the construction of a significant number of new power generation plants, including nuclear, coal, natural gas or renewable energy technologies;

the construction of additional electric transmission and distribution lines;

a reduction in the price of natural gas, including as a result of new drilling techniques or a relaxation of associated regulatory standards;

the development of energy conservation technologies and public initiatives to reduce electricity consumption; and

the development of new renewable energy technologies that provide less expensive energy.

A reduction in utility electricity prices would make the purchase of our solar energy systems or the purchase of energy under our lease and power purchase agreements less economically attractive. In addition, a shift in the timing of peak rates for utility-generated electricity to a time of day when solar energy generation is less efficient could make our solar energy system offerings less competitive and reduce demand for our products and services. If the retail price of energy available from utilities were to decrease for any reason, we would be at a competitive disadvantage. As a result, we may be unable to attract new customers and our growth would be limited.

A material drop in the retail price of utility-generated electricity would particularly adversely impact our ability to attract commercial customers.

Commercial customers comprise a significant and growing portion of our business, and the commercial market for energy is particularly sensitive to price changes. Typically, commercial customers pay less for energy from utilities than residential customers. Because the price we are able to charge commercial customers is only slightly lower than their current retail rate, any decline in the

retail rate of energy for commercial entities could have a significant impac t on our ability to attract commercial customers. We may be unable to offer solar energy systems in commercial markets that produce electricity at rates that are competitive with the unsubsidized price of retail electricity. If this were to occur, our busi ness would be harmed because we would be at a competitive disadvantage compared to other energy providers and may be unable to attract new commercial customers.

The terms of our agreement with the Research Foundation for the State University of New York, as amended, pertaining to the construction of the Buffalo Riverbend Manufacturing Facility, among other things, require us to comply with a number of covenants during the term of the agreement. Any failure to comply with these covenants could obligate us to pay significant amounts to the Foundation and result in termination of the agreement.

In September 2014, Silevo entered into an amended and restated research and development alliance agreement, as amended from time to time, referred to as the Riverbend Agreement, with the Research Foundation for the State University of New York, referred to as the Foundation, for the construction of an approximately 1 million square foot manufacturing facility capable of producing 1-gigawatt of solar panels annually on an approximately 88.24 acre site located in Buffalo, New York, referred to as the Manufacturing Facility.

Under the terms of the Riverbend Agreement, the Foundation will construct the Manufacturing Facility and install certain utilities and other improvements, with participation by us as to the design and construction of the Manufacturing Facility, and acquire certain manufacturing equipment designated by us to be used in the Manufacturing Facility and other specified items. The Foundation will cover construction costs related to the Manufacturing Facility and certain manufacturing equipment, in each case up to a maximum funding allocation from the State of New York, as well as additional specified items, and we will be responsible for any construction and equipment costs in excess of such amounts. The Foundation will own the Manufacturing Facility and manufacturing equipment it acquires for the project. We are also responsible for the acquisition of certain manufacturing equipment, which equipment we will own. Following completion of the Manufacturing Facility, we will lease the Manufacturing Facility from the Foundation for an initial period of 10 years for $1 per year plus utilities, and the Foundation will grant us the right to use the manufacturing equipment owned by it during the initial lease term at no charge. Currently, we estimate that we will incur capital expenses of approximately $150 million in connection with the construction and commissioning of the Manufacturing Facility and the initial manufacturing equipment, although this amount may increase as we near completion of the Manufacturing Facility. We cannot assure you that these estimated capital expenses related to the construction and commissioning of the Manufacturing Facility and the initial manufacturing equipment will not exceed this estimated amount.

In addition to the other obligations under the Riverbend Agreement, we must (i) use our best commercially reasonable efforts to commission the manufacturing equipment within three months of Manufacturing Facility completion and reach full production output within three months thereafter, (ii) employ at least 1,460 jobs in Western New York, with 500 of such jobs for the manufacturing operation at the Manufacturing Facility, for the initial two years of collaboration commencing after Manufacturing Facility completion, and we have committed to the retention of these jobs for five years, (iii) employ at least 2,000 other personnel in the State of New York for five years after Manufacturing Facility completion, (iv) employ a total of 5,000 people in the State of New York by the tenth anniversary of Manufacturing Facility completion, (v) spend or incur approximately $5 billion in combined capital, operational expenses and other costs in the State of New York during the 10 year period following full production, (vi) make reasonable efforts to provide first consideration to New York-based suppliers, (vii) invest and spend in manufacturing operations at a level that ensures competitive product costs for at least five years from full production, and (viii) negotiate in good faith with the Foundation on an exclusive “first opportunity basis” for 120 days before entering into any agreement for additional solar panel manufacturing capacity that Silevo may wish to develop during the term of the agreement. If we are not able to hire the specified number of employees or identify and qualify local vendors and suppliers, we would face the risk of not only failing to meet the performance criteria under the Riverbend Agreement but also not being capable of running the operations related to the Manufacturing Facility. If we fail in any year over the course of the ten-year term to meet these specified investment and job creation obligations, as described above, we would be obligated to pay a “program payment” of $41.2 million to the Foundation in any such year. In addition, we are subject to other events of defaults, including breach of these program payments and certain insolvency events, that would lead to the acceleration of all of the then unpaid program payments by us to the Foundation. Our failure to meet our contractual obligations under the Riverbend Agreement may result in our obligation to pay significant amounts to the Foundation in scheduled program payments, other contractual damages and/or the termination of our lease of the Manufacturing Facility. Any inability on our part to raise the capital necessary to operate the Manufacturing Facility and meet the specified requirements of the Riverbend Agreement during the 10-year period following full production would also cause a material adverse effect upon our business operations and prospects.

Our expectations as to the cost of building the Manufacturing Facility, acquiring manufactu ring equipment and supporting our manufacturing operations may prove incorrect, which could subject us to significant expenses to achieve the desired benefits under the Riverbend Agreement.

In addition to the funding provided by the Foundation from the State of New York, we currently estimate that we will spend approximately $150 million in connection with the construction and commissioning of the Manufacturing Facility and the initial manufacturing equipment, although this amount may increase as we near completion of the Manufacturing Facility. In the event of any cost overruns in construction, commissioning, acquiring manufacturing equipment or operating the Manufacturing Facility, we may incur additional capital and operating expenses that would have a material adverse effect upon our business operations and prospects.

Our projections as to the time necessary to build the Manufacturing Facility and acquire the manufacturing equipment may prove incorrect and subject us to significant delay and additional expense.

We currently anticipate that the Manufacturing Facility will be completed and ready to commence operations in the second quarter of 2016. To date, we have agreed on seven occasions to extend the time period that the Foundation is to enter into reasonably acceptable construction contracts. There are a number of risks which may delay the completion of the Manufacturing Facility and commencement of operations, including:

failure or delay in obtaining necessary permits, licenses or other governmental support or approvals;

the time necessary for the construction of related utility and infrastructure improvements;

unforeseen engineering problems;

the inability to identify and hire qualified construction and other workers on a timely basis or at all;

construction delays and contractor performance shortfalls;

work stoppages or labor disruptions, including efforts by our employees to enter into collective bargaining agreements;

availability of raw materials and components from suppliers and any delivery delays in such materials or components;

delays resulting from environmental conditions, and any design changes or additions necessary to remediate prior environmental hazards at the site; and

adverse weather conditions, such as an extreme winter, and natural disasters.

Any delay in the completion of the Manufacturing Facility and commencement of our operations will result in us incurring additional expenses and could negatively affect our operating results, financial condition and prospects.

We may not be able to achieve anticipated production yields, efficiencies and quality, which would harm our production volume and increase our costs.

The Manufacturing Facility is expected to be the largest of its kind in the Western Hemisphere. Successfully achieving volume manufacturing of solar cells at our projected yield, efficiency and quality levels will be difficult, and we have little experience in manufacturing at these high volumes. As we expand our manufacturing capacity and qualify additional suppliers to support our projected production volume, we may initially experience lower yields than anticipated. Any deviations in our manufacturing processes may result in significant decreases in production yield, efficiency and quality, and in some cases, may cause production to be suspended or yield no output. If we cannot achieve planned yields over time, our production costs could increase and we may be unable to produce a sufficient amount of our solar panels to meet our installation needs.

In addition, Silevo’s Triex technology is novel and involves proprietary and complex manufacturing techniques, which may result in undetected errors or defects in the solar cells produced. Any defects in our solar panels could cause us to incur significant warranty, non-warranty and re-engineering costs, divert the attention of our engineering personnel, result in indemnification liability to our fund investors and significantly affect our customer relations and business reputation.

If we are unable to achieve our cost projections or otherwise control the costs associated with operating our manufacturing business, our financial condition and operating results will suffer.

As a result of initial production levels that under-utilize the Manufacturing Facility as we ramp up production, we anticipate that our initial production costs (on a per watt basis) will be relatively high. As we work to achieve full utilization of the Manufacturing Facility, we anticipate that the volume of production will reduce our production costs (on a per watt basis). There is no guarantee that we will be able to achieve planned cost targets, some of which will be beyond our control. For example, the costs of our raw materials

and components, su ch as polysilicon and polysilicon wafers, could increase due to shortages as global demand for these products increases. Any failure to achieve our per watt cost projections would cause our financial condition and operating results to suffer. In addition, the pricing of our solar energy systems may become less competitive if our competitors are able to reduce their manufacturing and installation costs faster than we are able to.

Competition in the solar industry is intense, and future success and innovation will require additional research and development expenses.

The Manufacturing Facility is designed to be a high-technology volume-manufacturing facility. In constructing the Manufacturing Facility, including local utility infrastructure upgrades and procurement of manufacturing equipment, the State of New York is making a significant investment in the Buffalo-area economy. However, the solar panel manufacturing market is characterized by continually changing technology that requires improved features, such as increased efficiency, higher power output and enhanced aesthetics. In the time it takes us to achieve volume production of Silevo’s Triex technology, it is possible that additional innovations in solar technology could result in our technology and the Manufacturing Facility becoming less competitive or obsolete, which could harm our costs and adversely affect our business operations. This risk requires us to continuously focus on research and development, and will require significant on-going research and development expenses. If we cannot continually improve the efficiency and power output of our solar panels and reduce the cost of production, we could become less competitive in the market and our financial condition and operating results could be adversely affected.

Rising interest rates could adversely impact our business.

Changes in interest rates could have an adverse impact on our business by increasing our cost of capital. For example:

rising interest rates would increase our cost of capital; and

rising interest rates may negatively impact our ability to secure financing on favorable terms to facilitate our customers’ purchase of our solar energy systems or energy generated by our solar energy systems.

The majority of our cash flows to date have been from solar energy systems under lease and power purchase agreements that have been monetized under various financing fund structures. One of the components of this monetization is the present value of the payment streams from our customers who enter into these leases and power purchase agreements. If the rate of return required by the fund investor rises as a result of a rise in interest rates, it will reduce the present value of the customer payment stream and consequently reduce the total value that we are able to derive from monetizing the payment stream. Interest rates are at historically low levels, partially as a result of intervention by the U.S. Federal Reserve. The U.S. Federal Reserve has taken actions to taper its intervention, and should these actions continue, it is likely that interest rates will rise, which could cause our cost of capital to increase and impede our ability to secure financing. As a result, our business and financial condition could be harmed.

In addition, we evaluate our business with a long-term view based on cash flows relating to our customer agreements, third-party financing funds and other arrangements. To date, we have taken limited actions to mitigate the risk of rising future interest rates. In 2014, we initiated a strategy of purchasing limited long-term derivative securities to hedge the effect of future interest rate increases. We may continue to engage in such transactions and the cost and outcomes of such transactions are currently not known.

We are expanding our international activities and customers, and plan to continue these efforts, which subject us to additional business risks, including compliance with international and trade regulations.

Our long-term strategic plans include international expansion and we intend to sell our solar energy products and services in international markets. For example, in August 2015, we acquired ILIOSS to expand our operations into Mexico.

Risks inherent to our international operations include the following:

multiple, conflicting and changing laws and regulations, including energy regulations, export and import restrictions, tax laws and regulations, environmental regulations, labor laws and other government requirements, approvals, permits and licenses;

trade barriers and trade remedies such as export requirements, tariffs, taxes and other restrictions and expenses, which could increase the prices of our products and make us less competitive in some countries;

potentially adverse tax consequences associated with our permanent establishment of operations in more countries, including repatriation of non-U.S. earnings taxed at rates lower than the U.S. statutory effective tax rate;

difficulties and costs in recruiting and retaining individuals skilled in international business operations;

changes in general economic and political conditions in the countries where we operate, including changes in government incentives relating to power generation and solar electric ity, and availability of capital at competitive rates;

political and economic instability, including wars, acts of terrorism, political unrest, boycotts, curtailments of trade and other business restrictions;

the inability to work successfully with third parties with local expertise to co-develop international projects;

relatively uncertain legal systems, including potentially limited protection for intellectual property rights and laws, changes in the governmental incentives we rely on, regulations and policies which impose additional restrictions on the ability of foreign companies to conduct business in certain countries or otherwise place them at a competitive disadvantage in relation to domestic companies;

international business practices that may conflict with CBP or other legal requirements enforced by partner government agencies;

financial risks, such as longer sales and payment cycles and greater difficulty collecting accounts receivable; and

fluctuations in currency exchange rates relative to the U.S. dollar.

Doing business in foreign markets requires us to be able to respond to rapid changes in market, legal, and political conditions in these countries. The success of our business will depend in part on our ability to succeed in differing legal, regulatory, economic, social and political environments. We recognize that we must understand the risks and opportunities relating to trade remedies so that we can develop and implement policies and strategies that will be effective in each location where we do business.

We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other anti-bribery and anti-money laundering laws in countries in which we conduct activities. We face significant risks if we fail to comply with the FCPA and other anticorruption laws that prohibit companies and their employees and third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to foreign government officials, political parties, and private-sector recipients for the purpose of obtaining or retaining business. In many foreign countries, particularly in countries with developing economies, it may be a local custom that businesses engage in practices that are prohibited by the FCPA or other applicable laws and regulations. We may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. Any violation of the FCPA, other applicable anticorruption laws, and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment from U.S. government contracting, which could have a material adverse effect on our business, financial condition, cash flows and reputation. In addition, responding to any enforcement action may result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees.

Our vertically integrated and our continued international expansion efforts may subject us to additional regulatory risks that may impact our operating results. For example, we will have to ensure we are in compliance with any bilateral and/or multilateral free trade agreements in addition to understanding trade remedies that directly affect those products and components involved in the construction of our solar energy systems, which are procured from vendors and manufacturers outside of the United States. Some of these components, particularly solar panels and mounting hardware made from aluminum extrusions, may be subject to antidumping and countervailing duties.

While conducting an internal review of our supply chain and import practices, we recently identified certain potential instances in which our Zep Solar subsidiaries have imported system components and other products into the United States which were misclassified upon import. In addition, we discovered that certain parts may be subject to antidumping and countervailing duties. In September 2015, we submitted a voluntary disclosure to the CBP of these and other potential misclassifications, and we intend to cooperate with CBP as we finalize this review. As a result of these misclassifications, for the third quarter ended September 30, 2015, we recorded an accrual in the amount of approximately $5.3 million for import duties that we currently anticipate will be owed by our acquired subsidiaries to CBP relating to items imported since January 1, 2014. We are continuing to review information related to imports from prior periods and anticipate that amounts of import duties for these periods will not be significant. If our revised classifications or estimates prove to be incorrect with respect to these import duties, the actual amounts owed may materially increase as we finalize our disclosure with CBP, which we anticipate will occur during the first quarter of 2016. In addition, during the pendency of this review, we may be required to make full antidumping and countervailing duties deposits for imports determined to be inside the scope of the antidumping and countervailing duties Orders. Any increase in the anticipated costs of import duties would increase our operating costs, which could be harmful to our financial results.

In the event that we fail to or are unable to comply with the legal requirements in the jurisdictions in which we operate, we may be subject to significant fines, penalties and other amounts which could materially harm our operations and financial results.

We may not realize the anticipated benefits of past or future acquisitions, and integration of these acquisitions may disrupt our business and management and cause dilution to our stockholders.

In August 2015, we acquired ILIOSSON S.A. de C.V., a commercial and industrial solar project developer in Mexico. In September 2014, we acquired Silevo, LLC, a solar panel technology and manufacturing company. In 2013, we acquired Zep Solar, Common Assets, certain assets of Paramount Solar and completed other smaller acquisitions. In the future, we may acquire additional companies, project pipelines, products or technologies, including additional photovoltaics companies, or enter into joint ventures or other strategic initiatives. Our ability as an organization to integrate acquisitions is unproven. We may not realize the anticipated benefits of our acquisitions or any other future acquisition or the acquisition may be viewed negatively by customers, financial markets or investors.

Any acquisition has numerous risks, including the following:

difficulty in assimilating the operations and personnel of the acquired company;

difficulty in effectively integrating the acquired technologies or products with our current products and technologies;

difficulty in maintaining controls, procedures and policies during the transition and integration;

disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges due to integration issues;

difficulty integrating the acquired company’s accounting, management information and other administrative systems;

inability to retain key technical and managerial personnel of the acquired business;

inability to retain key customers, vendors, and other business partners of the acquired business;

inability to achieve the financial and strategic goals for the acquired and combined businesses;

incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results;

failure of due diligence processes to identify significant issues with product quality, legal and financial liabilities, among other things;

inability to assert that internal controls over financial reporting are effective; and

inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which could delay or prevent such acquisitions.

In connection with our acquisitions of Silevo, Zep Solar and Paramount Solar, we issued approximately 8.8 million shares of our common stock. In connection with our acquisition of Silevo, we may issue additional common stock with an aggregate value of up to $150 million, subject to adjustments, upon the timely achievement of all earnout related milestones. In addition, we typically offer additional equity compensation to continuing employees of these businesses. If we are unable to successfully integrate these businesses and technologies or are unable to otherwise achieve the anticipated benefits of these acquisitions, the related issuances of our securities may be highly dilutive to our existing stockholders.

If we are unable to maintain effective internal controls over financial reporting and disclosure controls and procedures, or if material weaknesses are discovered in future periods, the accuracy and timeliness of our financial and operating reporting may be adversely affected, and confidence in our operations and disclosures may be lost.

In connection with the audit of our consolidated financial statements for the year ended December 31, 2013, we identified four material weaknesses in our internal control over financial reporting relating to (i) the costing of our solar system installations, (ii) accounting for and classification of redeemable noncontrolling interests, (iii) segregation of incompatible duties at our lease administrator and our controls over the data received from our administrator, and (iv) certain areas of our financial statement close process. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. These material weaknesses resulted from separate control deficiencies, as well as our misinterpretation of certain accounting standards, and resulted in the restatement of our consolidated financial statements as of and for the years ended December 31, 2012, 2011, 2010 and 2009 and for certain interim periods in 2012 and 2013.

As a result of significant efforts by us and our Audit Committee, we have successfully remediated these material weaknesses and improved our internal control over finan cial reporting.

In connection with this quarterly report on Form 10-Q, our management has performed an evaluation of our internal control over financial reporting as of September 30, 2015 pursuant to Section 404 of the Sarbanes-Oxley Act, and has concluded that our internal control over financial reporting and our disclosure controls and procedures were effective as of September 30, 2015.

If we are not able to maintain effective internal control over financial reporting and disclosure controls and procedures, or if additional material weaknesses are discovered in future periods, a risk that is significantly increased in light of the complexity of our business and investment funds, we may be unable to accurately and timely report our financial position, results of operations, cash flows or key operating metrics, which could result in additional late filings of our annual and quarterly reports under the Exchange Act, additional restatements of our consolidated financial statements or other corrective disclosures, a decline in our stock price, suspension or delisting of our common stock by The NASDAQ Stock Market, an inability to access the capital and commercial lending markets, defaults under our secured revolving credit facility and other agreements, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity.

We are not currently regulated as a utility under applicable law, but we may be subject to regulation as a utility in the future.

Federal law and most state laws do not currently regulate us as a utility. As a result, we are not subject to the various federal and state standards, restrictions and regulatory requirements applicable to U.S. utilities. In the United States, we obtain federal and state regulatory exemptions by establishing “Qualifying Facility” status with the Federal Energy Regulatory Commission for all of our qualifying solar energy projects. In Canada, we also are generally subject to the regulations of the relevant energy regulatory agencies applicable to all producers of electricity under the relevant feed-in tariff regulations (including the feed-in tariff rates), however we are not currently subject to regulation as a utility. Our business strategy includes the continued development of larger solar energy systems in the future for our commercial and government customers, which has the potential to impact our regulatory position. Any local, state, federal or foreign regulations could place significant restrictions on our ability to operate our business and execute our business plan by prohibiting or otherwise restricting our sale of electricity. If we were subject to the same state, federal or foreign regulatory authorities as utilities in the United States or if new regulatory bodies were established to oversee our business in the United States or in foreign markets, then our operating costs would materially increase.

Servicing our debt requires a significant amount of cash and we may not have sufficient cash flow from our business to pay our substantial debt; other actions we are forced to take to satisfy our obligations under our indebtedness may not be successful.

Our total consolidated indebtedness was $2,309.3 million as of September 30, 2015. Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. In addition, our 2.75% Convertible Senior Notes due 2018 issued in November 2013 (the “2018 Notes”) and our 1.625% Convertible Senior Notes due 2019 issued in September and October 2014 (the “2019 Notes” and together with the 2018 Notes, the “Notes”), are convertible into shares of common stock, and we may engage in similar issuances of convertible securities in the future to fund our operating and expansion plans. Our ability to issue additional securities and to refinance our existing indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

We expect to incur substantially more debt or take other actions which would intensify the risks discussed above.

We and our subsidiaries expect to incur substantial additional debt in the future, subject to the restrictions contained in our debt instruments, some of which may be secured debt. We are not restricted under the terms of the indentures governing the Notes from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that are not limited by the terms of the indenture governing the Notes that could have the effect of diminishing our ability to make payments on the Notes when due. Our existing credit facilities restrict our ability to incur additional indebtedness, including secured indebtedness, but we may be able to obtain amendments and waivers of such restrictions or may not be subject to such restrictions under the terms of any subsequent indebtedness.

We may have trouble refinanci ng our credit facilities or obtaining new financing for our working capital, equipment financing and other needs in the future or complying with the terms of existing credit facilities. If credit facilities are not available to us on acceptable terms, if a nd when needed, or if we are unable to comply with their terms, our ability to continue to grow our business would be adversely impacted.

We have entered into several secured credit agreements, including a working capital facility under which we may currently borrow up to $360.0 million (with $333.5 million currently committed from several lenders and an additional $26.5 million subject to further conditions) that matures in December 2016. As of September 30, 2015, we had the ability to draw up to an additional $493.3 million under our credit facilities. The working capital facility requires us to comply with certain financial, reporting and other requirements. The timing of our commercial projects has on occasion adversely affected our ability to satisfy certain financial covenants under these or prior facilities. While our lenders have given us waivers of certain covenants we have not satisfied in the past, there is no assurance that the lenders will waive or forbear from exercising their remedies with respect to any future defaults that might occur. In addition, we have amended our secured revolving credit facility to engage in transactions such as the issuance of the 2019 Notes and issue Solar Bonds debt securities. While we believe that some of the financial and other covenants are generally more favorable to us following these changes, a breach of our covenants may still occur in the future.

Further, there is no assurance that we will be able to enter into new credit facilities on acceptable terms. If we are unable to satisfy financial covenants and other terms under existing or new facilities or obtain associated waivers or forbearance from our lenders or if we are unable to obtain refinancing or new financings for our working capital, equipment and other needs on acceptable terms if and when needed, our business would be adversely affected.

We may not have the ability to raise the funds necessary to repurchase the Notes, including upon a fundamental change, and one of our current credit facilities prohibits us from repurchasing the issued Notes upon a fundamental change.

Holders of the Notes will have the right to require us to repurchase their Notes upon the occurrence of a fundamental change at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any. However, at such time that we may be required to repurchase the Notes, we may not have sufficient available cash or be able to obtain sufficient financing to allow for repurchase. In addition, one of our existing credit facilities prohibits us from repurchasing the Notes upon a fundamental change. We may enter into agreements in the future that similarly restrict our ability to repurchase the Notes and other securities. Our failure to repurchase the Notes when required would constitute a default which could also result in defaults under other agreements governing our existing or future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or make cash payments upon conversions thereof. Our ability to repurchase the Notes may also be limited by law or by regulatory authority.

A failure to hire and retain a sufficient number of employees in key functions would constrain our growth and our ability to timely complete our customers’ projects.

To support our growth, we need to hire, train, deploy, manage and retain a substantial number of skilled employees. In particular, we need to continue to expand and optimize our sales infrastructure to grow our customer base and our business, and we plan to expand our direct sales force. Identifying, recruiting and training qualified personnel requires significant time, expense and attention. It can take several months before a new salesperson is fully trained and productive. If we are unable to hire, develop and retain talented sales personnel or if new direct sales personnel are unable to achieve desired productivity levels in a reasonable period of time, we may not be able to realize the expected benefits of this investment or grow our business.

To complete current and future customer projects and to continue to grow our customer base, we need to hire a large number of installers in the relevant markets. Competition for qualified personnel in our industry is increasing, particularly for skilled installers and other personnel involved in the installation of solar energy systems. We also compete with the homebuilding and construction industries for skilled labor. As these industries seek to hire additional workers, our cost of labor may increase. The unionization of our labor force could also increase our labor costs. Shortages of skilled labor could significantly delay a project or otherwise increase our costs. Because our profit on a particular installation is based in part on assumptions as to the cost of such project, cost overruns, delays or other execution issues may cause us to not achieve our expected margins or cover our costs for that project. In addition, because we are headquartered in the San Francisco Bay Area, we compete for a limited pool of technical and engineering resources that requires us to pay wages that are competitive with relatively high regional standards for employees in these fields.

If we cannot meet our hiring, retention and efficiency goals, we may be unable to complete our customers’ projects on time, in an acceptable manner or at all. Any significant failures in this regard would materially impair our growth, reputation, business and financial results. If we are required to pay higher compensation than we anticipate, these greater expenses may also adversely impact our financial results and the growth of our business.

In our lease pass-through financing funds, there is a one-time reset of the lease payments, and we may be obligated, in connection with the resetting of the lease payments at true up, to refund lease prepayments or to contribute additional assets to the extent the syst em sizes, costs and timing are not consistent with the initial lease payment model.

In our lease pass-through financing funds, the models used to calculate the lease prepayments will be updated for each fund at a fixed date occurring after placement in service of all solar energy systems in a given fund or on an agreed upon date (typically within the first year of the applicable lease term) to reflect certain specified conditions as they exist at such date, including the ultimate system size of the equipment that was leased, how much it cost and when it went into service. As a result of such a true up, the lease payments are resized and we may be obligated to refund the investor’s lease prepayments or to contribute additional assets to the fund. Any significant refunds or capital contributions that we may be required to make could adversely affect our financial condition.

We have guaranteed a minimum return to be received by an investor in one of our financing funds and could be adversely affected if we are required to make any payments under this guarantee.

We have guaranteed payments to the investor in one of our financing funds to compensate for payments that the investor would be required to make to a certain third party as a result of the investor not achieving a specified minimum internal rate of return in this fund, assessed annually. The amounts of potential future payments under this guarantee depend on the amounts and timing of future distributions to the investor from the funds and the tax benefits that accrue to the investor from the fund’s activities. Because of uncertainties associated with estimating the timing and amounts of distributions to the investor, we cannot determine the potential maximum future payments that we could have to make under this guarantee. We may agree to similar terms in the future if market conditions require it. Any significant payments that we may be required to make under our guarantees could adversely affect our financial condition.

It is difficult to evaluate our business and prospects due to our limited operating history.

Since our formation in 2006, we have focused our efforts primarily on the sales, financing, engineering, installation and monitoring of solar energy systems for residential, commercial and government customers. We launched our pilot commercial and residential energy storage products and services in late 2013, and revenue attributable to this line of business has not been material compared to revenue attributable to our solar energy systems. We may be unsuccessful in significantly broadening our customer base through installation of solar energy systems within our current markets or in new markets we may enter. Additionally, we cannot assure you that we will be successful in generating substantial revenue from our current energy-related products and services or from any additional products and services we may introduce in the future. Our limited operating history, combined with the rapidly evolving and competitive nature of our industry, may not provide an adequate basis for you to evaluate our operating and financing results and business prospects. In addition, we only have limited insight into emerging trends that may adversely impact our business, prospects and operating results. As a result, our limited operating history may impair our ability to accurately forecast our future performance.

We have incurred losses and may be unable to achieve or sustain profitability in the future.

We have incurred net losses in the past, and we had an accumulated deficit of $321.3 million as of September 30, 2015. We may incur net losses from operations as we increase our spending to finance the expansion of our operations, expand our installation , engineering, administrative, sales and marketing staffs, and implement internal systems and infrastructure to support our growth. We do not know whether our revenue will grow rapidly enough to absorb these costs, and our limited operating history makes it difficult to assess the extent of these expenses or their impact on our operating results. Our ability to achieve profitability depends on a number of factors, including:

growing our customer base;

finding investors willing to invest in our financing funds;

maintaining and further lowering our cost of capital;

reducing the cost of components for our solar energy systems; and

reducing our operating costs by optimizing our design and installation processes and supply chain logistics.

Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future.

We face competition from both traditional energy companies and renewable energy companies.

The solar energy and renewable energy industries are both highly competitive and continually evolving as participants strive to distinguish themselves within their markets and compete with large utilities. We believe that our primary competitors are the traditional utilities that supply energy to our potential customers. We compete with these utilities primarily based on price, predictability of price and the ease by which customers can switch to electricity generated by our solar energy systems. If we cannot offer compelling value to our customers based on these factors, then our business will not grow. Utilities generally have substantially greater financial, technical, operational and other resources than we do. As a result of their greater size, these competitors may be able to devote more resources to the research, development, promotion and sale of their products or respond more quickly to evolving industry standards and changes in market conditions than we can. Utilities could also offer other value-added products and services that could help them compete with us even if the cost of electricity they offer is higher than ours. In addition, a majority of utilities’ sources of electricity is non-solar, which may allow utilities to sell electricity more cheaply than electricity generated by our solar energy systems.

We also compete with solar companies in the downstream value chain of solar energy. For example, we face competition from purely finance driven organizations which then subcontract out the installation of solar energy systems, from installation businesses that seek financing from external parties, from large construction companies and utilities and increasingly from sophisticated electrical and roofing companies. Some of these competitors specialize in either the residential or commercial solar energy markets, and some may provide energy at lower costs than we do. Many of our competitors also have significant brand name recognition and have extensive knowledge of our target markets. Competitors have increasingly begun vertically integrating their operations to offer comprehensive products and services offerings similar to ours, and, recently, we have seen increased consolidation of competitors in our primary markets. For us to remain competitive, we must distinguish ourselves from our competitors by offering an integrated approach that successfully competes with each level of products and services offered by our competitors at various points in the value chain. As consolidation in our markets increases and more of our competitors develop an integrated approach similar to ours, our marketplace differentiation may suffer.

We also face competition in the energy-related products and services markets and we expect to face competition in additional markets as we introduce new products and services. As the solar industry grows and evolves, we will also face new competitors who are not currently in the market. Our failure to adapt to changing market conditions and to compete successfully with existing and new competitors could limit our growth and could have a material adverse effect on our business and prospects.

Projects for our significant commercial and government customers involve concentrated project risks that may cause significant changes in our financial results.

During any given financial reporting period, we typically have ongoing significant projects for commercial and governmental customers that represent a significant portion of our potential financial results for such period. For example, Walmart is a significant customer for which we have installed a substantial number of solar energy systems. These larger projects create concentrated operating and financial risks. The effect of recognizing revenue or other financial measures on the sale of a larger project, or the failure to recognize revenue or other financial measures as anticipated in a given reporting period because a project is not yet completed under applicable accounting rules by period end, may materially impact our quarterly or annual financial results. In addition, if construction, warranty or operational issues arise on a larger project, or if the timing of such projects unexpectedly shifts for other reasons, such issues could have a material impact on our financial results. If we are unable to successfully manage these significant projects in multiple markets, including our related internal processes and external construction management, or if we are unable to continue to attract such significant customers and projects in the future, our financial results could be harmed.

We depend on a limited number of suppliers of solar panels and other system components to adequately meet anticipated demand for our solar energy systems. Any shortage, delay or component price change from these suppliers could result in sales and installation delays, cancellations and loss of our ability to effectively compete.

We purchase solar panels, inverters and other system components from a limited number of suppliers, which makes us susceptible to quality issues, shortages and price changes. If we fail to develop, maintain and expand our relationships with existing or new suppliers, we may be unable to adequately meet anticipated demand for our solar energy systems or we may only be able to offer our systems at higher costs or after delays. If one or more of the suppliers that we rely upon to meet anticipated demand ceases or reduces production, we may be unable to satisfy this demand due to an inability to quickly identify alternate suppliers or to qualify alternative products on commercially reasonable terms. In particular, there are a limited number of inverter suppliers. Once we design a system for use with a particular inverter, if that type of inverter is not readily available at an anticipated price, we may incur additional delay and expense to redesign the system.

In addition, production of solar panels involves the use of numerous raw materials and components. Several of these have experienced periods of limited availability, particularly polysilicon, as well as indium, cadmium telluride, aluminum and copper. The manufacturing infrastructure for some of these raw materials and components has a long lead time, requires significant capital investment and relies on t he continued availability of key commodity materials, potentially resulting in an inability to meet demand for these components. The prices for these raw materials and components fluctuate depending on global market conditions and demand and we may experie nce rapid increases in costs or sustained periods of limited supplies.

In addition to purchasing from New York-based suppliers, we anticipate that we will need to purchase supplies globally in order to meet the anticipated production output of the Manufacturing Facility. Despite our efforts to obtain raw materials and components from multiple sources whenever possible, many of our suppliers may be single-source suppliers of certain components. If we are not able to maintain long-term supply agreements or identify and qualify multiple sources for raw materials and components, our access to supplies at satisfactory prices, volumes and quality levels may be harmed. We may also experience delivery delays of raw materials and components from suppliers in various global locations. In addition, we may be unable to establish alternate supply relationships or obtain or engineer replacement components in the short term, or at all, at favorable prices or costs. Qualifying alternate suppliers or developing our own replacements for certain components may be time-consuming and costly and may force us to make modifications to our product designs.

Any decline in the exchange rate of the U.S. dollar compared to the functional currency of our component suppliers could increase our component prices. In addition, the state of the financial markets could limit our suppliers’ ability to raise capital if they are required to expand their production to meet our needs or satisfy their operating capital requirements. Changes in economic and business conditions, wars, governmental changes and other factors beyond our control or which we do not presently anticipate, could also affect our suppliers’ solvency and ability to deliver components to us on a timely basis. Any of these shortages, delays or price changes could limit our growth, cause cancellations or adversely affect our profitability and ability to effectively complete in the markets in which we operate.

Our expanded operations also subject us to risks associated with currency fluctuations.

Our need to purchase supplies globally in order to meet the anticipated production output of the Manufacturing Facility and our continued international expansion further subjects us to risks relating to currency fluctuations. Foreign currencies periodically experience rapid fluctuations in value against the U.S. dollar. A weakened U.S. dollar could increase the cost of procurement of raw materials from foreign jurisdictions and operating expenses in foreign locations, which could have a material adverse effect on our business and financial results.

Our operating results may fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause our operating results for a particular period to fall below expectations, resulting in a severe decline in the price of our common stock.

Our quarterly operating results are difficult to predict and may fluctuate significantly in the future. We have experienced seasonal and quarterly fluctuations in the past. However, given that we are an early-stage public company operating in a rapidly growing industry, those fluctuations may be masked by our recent growth rates and thus may not be readily apparent from our historical operating results. As such, our past quarterly operating results may not be good indicators of future performance.

In addition to the other risks described in this “Risk Factors” section, the following factors could cause our operating results to fluctuate:

expiration or initiation of any rebates or incentives;

significant fluctuations in customer demand for our products and services;

our ability to complete installations in a timely manner due to market conditions resulting in inconsistently available financing;

our ability to continue to expand our operations, and the amount and timing of expenditures related to this expansion;

actual or anticipated changes in our growth rate relative to our competitors;

announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments;

changes in our pricing policies or terms or changes in those of our competitors, including utilities; and

actual or anticipated developments in our competitors’ businesses or the competitive landscape.

For these or other reasons, the results of any prior quarterly or annual periods should not be relied upon as indications of our future performance. In addition, our actual revenue, key operating metrics and other operating results in future quarters may f all short of the expectations of investors and financial analysts, which could have a severe adverse effect on the trading price of our common stock.

We act as the licensed general contractor for our customers and are subject to risks associated with construction, cost overruns, delays, regulatory compliance and other contingencies, any of which could have a material adverse effect on our business and results of operations.

We are a licensed contractor or use licensed subcontractors in every community we service, and we are responsible for every customer installation. For our residential projects, we are the general contractor, construction manager and installer. For our commercial projects, we are the general contractor and construction manager, and we have historically relied on licensed subcontractors to install these commercial systems. We may be liable to customers for any damage we cause to their home or facility and belongings or property during the installation of our systems. For example, we frequently penetrate our customers’ roofs during the installation process and may incur liability for the failure to adequately weatherproof such penetrations following the completion of construction. In addition, shortages of skilled subcontractor labor for our commercial projects could significantly delay a project or otherwise increase our costs. Because our profit on a particular installation is based in part on assumptions as to the cost of such project, cost overruns, delays or other execution issues may cause us to not achieve our expected margins or not cover our costs for that project.

In addition, the installation of solar energy systems and energy-storage systems requiring building modifications are subject to oversight and regulation in accordance with national, state and local laws and ordinances relating to building codes, safety, utility interconnection and metering, environmental protection and related matters. It is difficult and costly to track the requirements of every individual authority having jurisdiction over our installations and to design solar energy systems to comply with these varying standards. Any new government regulations or utility policies pertaining to our systems may result in significant additional expenses to us and our customers and, as a result, could cause a significant reduction in demand for our systems.

Compliance with occupational safety and health requirements and best practices can be costly, and noncompliance with such requirements may result in potentially significant monetary penalties, operational delays and adverse publicity.

The installation of solar energy systems requires our employees to work at heights with complicated and potentially dangerous electrical systems. The evaluation and installation of our energy-related products requires our employees to work in locations that may contain potentially dangerous levels of asbestos, lead or mold. We also maintain a fleet of over 3,000 vehicles that our employees use in the course of their work. There is substantial risk of serious injury or death if proper safety procedures are not followed. Our operations are subject to regulation under the U.S. Occupational Safety and Health Act, or OSHA, and equivalent state laws. Changes to OSHA requirements, or stricter interpretation or enforcement of existing laws or regulations, could result in increased costs. If we fail to comply with applicable OSHA regulations, even if no work-related serious injury or death occurs, we may be subject to civil or criminal enforcement and be required to pay substantial penalties, incur significant capital expenditures or suspend or limit operations. In the past, we have had workplace accidents and received citations from OSHA regulators for alleged safety violations, resulting in fines and operational delays for certain projects. Any such accidents, citations, violations, injuries or failure to comply with industry best practices may subject us to adverse publicity, damage our reputation and competitive position and adversely affect our business.

Problems with product quality or performance may cause us to incur warranty expenses and performance guarantee expenses, may lower the residual value of our solar energy systems and may damage our market reputation and adversely affect our financial performance and valuation.

Our solar energy system warranties are lengthy. Customers who buy energy from us under leases or power purchase agreements are covered by warranties equal to the length of the term of these agreements—typically 20 years for leases and power purchase agreements and 30 years for MyPower loan agreements. Depending on the state where they live, customers who purchase our solar energy systems for cash are covered by a warranty up to 10 years in duration. We also make extended warranties available at an additional cost to customers who purchase our solar energy systems for cash. In addition, we provide a pass-through of the inverter and panel manufacturers’ warranties to our customers, which generally range from 5 to 25 years. One of these third-party manufacturers could cease operations and no longer honor these warranties, leaving us to fulfill these potential obligations to our customers. For example, Evergreen Solar, Inc., one of our former solar panel suppliers, filed for bankruptcy in August 2011. Further, we provide a performance guarantee with our leased solar energy systems that compensates a customer on an annual basis if their system does not meet the electricity production guarantees set forth in their lease.

Because of the limited operating history of our solar energy systems, we have been required to make assumptions and apply judgments regarding a number of factors, including our anticipated rate of warranty claims and the durability, performance and reliability of our solar energy systems. We have made these assumptions based on the historic performance of similar systems or on accelerated life cycle testing. Our assumptions could prove to be materi ally different from the actual performance of our systems, causing us to incur substantial expense to repair or replace defective solar energy systems in the future or to compensate customers for systems that do not meet their production guarantees. Produc t failures or operational deficiencies would also reduce our revenue from power purchase agreements because they are dependent on system production. Any widespread product failures or operating deficiencies may damage our market reputation and adversely im pact our financial results.

In addition, we amortize costs of our solar energy systems over 30 years, which typically exceeds the period of the component warranties and the corresponding payment streams from our operating lease arrangements with our customers. In addition, we typically bear the cost of removing the solar energy systems at the end of the lease term. Furthermore, it is difficult to predict how future environmental regulations may affect the costs associated with the removal, disposal and recycling of our solar energy systems. Consequently, if the residual value of the systems is less than we expect at the end of the lease, after giving effect to any associated removal and redeployment costs, we may be required to accelerate all or some of the remaining unamortized expenses. This could materially impair our future operating results.

Compliance with environmental regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages and fines.

We are required to comply with all foreign, federal, state and local laws and regulations regarding pollution control and protection of the environment. In addition, under some statutes and regulations, a government agency, or other parties, may seek recovery and response costs from operators of property where releases of hazardous substances have occurred or are ongoing, even if the operator was not responsible for such release and not otherwise at fault. While we and the State of New York have performed environmental diligence relating to the construction of the Manufacturing Facility, the site where the Manufacturing Facility is to be located is on the former site of Republic Steel and has been considered a “brownfield.”

The operation of Silevo’s manufacturing and research and development facilities, including in Hangzhou, China, Buffalo, New York and Fremont, California, involves the use of hazardous chemicals and materials which may subject us to liabilities for any releases or other failures to comply with applicable laws, regulations and policies. Any failure by us to maintain effective controls regarding the use of hazardous materials or to obtain and maintain all necessary permits could subject us to potentially significant fines and damages or interrupt our operations.

Product liability claims against us could result in adverse publicity and potentially significant monetary damages.

We would be exposed to product liability claims if one of our solar energy systems or other products injured someone. Because solar energy systems and many of our other current and anticipated products are electricity-producing devices, it is possible that consumers could be injured by our products for many reasons, including product malfunctions, defects or improper installation. We rely on our general liability insurance to cover product liability claims and have not obtained separate product liability insurance. Any product liability claim we face could be expensive to defend and could divert management’s attention. Any product liability claims against us and any resulting adverse outcomes could result in potentially significant monetary damages that could require us to make significant payments, as well as subject us to adverse publicity, damage our reputation and competitive position or adversely affect sales of our systems and other products.

Damage to our brand and reputation would harm our business and results of operations.

We depend significantly on our reputation for high-quality products and services, best-in-class engineering, exceptional customer service and the brand name “SolarCity” to attract new customers and grow our business. Our brand and reputation could be significantly impaired if we fail to continue to deliver our solar energy systems and our other energy products and services within the planned timelines, if our products and services do not perform as anticipated or if we damage any of our customers’ properties or cancel projects. In addition, if we fail to deliver, or fail to continue to deliver, high-quality products and services to our customers through our long-term relationships, our customers will be less likely to purchase future products and services from us, which is a key strategy to achieve our desired growth. In addition to our other marketing efforts, we also depend greatly on referrals from existing customers for our growth. Therefore, our inability to meet or exceed our current customers’ expectations would harm our reputation and growth through referrals.

If we fail to manage our recent and future growth effectively, we may be unable to execute our business plan, maintain high levels of customer service or adequately address competitive challenges.

We have experienced significant growth in recent periods and we intend to continue to expand our business significantly within existing markets and in a number of new foreign and domestic locations in the future. This growth has placed, and any future growth may place, a significant strain on our management, operational and financial infrastructure. In particular, we will be required to expand, train and manage our growing employee base. Our management will also be required to maintain and expand our relationships with customers, suppliers and other third parties and attract new customers and suppliers, as well as to manage multiple geographic locations and regulatory requirements.

In addition, our current and planned operations, personnel, systems and procedures might be inadequate to support our future growth and may require us to make additional unanticipated investments in our infrastructure. Our success and ability to further scale our business will depend in part on our ability to manage these changes in a cost-effective and efficient manner. If we cannot manage our growth, we may be unable to take advantage of market opportunities, execute our business strategies or respond to competitive pressures. This could also result in declines in quality or customer satisfaction, increased costs, difficulties in introducing new products and services or other operational difficulties. Any failure to effectively manage growth could adversely impact our business and reputation.

We may not be successful in leveraging our customer base to grow our business through sales of other energy products and services.

To date, we have derived substantially all of our revenue and cash receipts from the sale of solar energy systems and the sale of energy under our long-term customer agreements. While we continue to develop and offer innovative energy-related products and services, customer demand for these offerings may be more limited than we anticipate. We may not be successful in completing development of these products as a result of research and development difficulties, technical issues, regulatory issues, availability of third-party products or other reasons. Even if we are able to offer these or other additional products and services, we may not successfully generate meaningful customer demand to make these offerings viable. Our growth will be limited if we fail to deliver these additional products and services, if the costs associated with bringing these additional products and services to market is greater than we anticipate, if customer demand for these offerings is smaller than we anticipate or if our strategies to implement new sales approaches and acquire new customers are not successful.

Our growth depends in part on the success of our strategic relationships with third parties.

A key component of our growth strategy is to develop or expand our strategic relationships with third parties. For example, in an effort to generate new customers, we are investing resources in establishing relationships with leaders in other industries, such as trusted retailers and commercial homebuilders. Identifying partners and negotiating relationships requires significant time and resources. Our ability to grow our business could be impaired if we are unsuccessful in establishing or maintaining our relationships with these third parties. Even if we are able to establish these relationships, we may not be able to execute our goal of leveraging these relationships to meaningfully expand our business and customer base. This would limit our growth potential and our opportunities to generate significant additional revenue or cash receipts.

The loss of one or more members of our senior management or key employees may adversely affect our ability to implement our strategy.

We depend on our experienced management team and the loss of one or more key executives could have a negative impact on our business. In particular, we are dependent on the services of our chief executive officer and co-founder, Lyndon R. Rive, and our chief technology officer and co-founder, Peter J. Rive. We also depend on our ability to retain and motivate key employees and attract qualified new employees. Our founders and our key employees are not bound by employment agreements for any specific term, and as a result, we may be unable to replace key members of our management team and key employees in the event we lose their services. Integrating new employees into our management team could prove disruptive to our operations, require substantial resources and management attention and ultimately prove unsuccessful. An inability to attract and retain sufficient managerial personnel who have critical industry experience and relationships could limit or delay our strategic efforts, which could have a material adverse effect on our business, financial condition and results of operations.

The production and installation of solar energy systems depends heavily on suitable meteorological conditions. If meteorological conditions are unexpectedly unfavorable, the electricity production from our solar energy systems may be substantially below our expectations and our ability to timely deploy new systems may be adversely impacted.

The energy produced and revenue and cash receipts generated by a solar energy system depend on suitable solar and weather conditions, both of which are beyond our control. Furthermore, components of our systems, such as panels and inverters, could be damaged by severe weather, such as hailstorms or tornadoes. In these circumstances, we generally would be obligated to bear the expense of repairing or replacing the damaged solar energy systems that we own. Sustained unfavorable weather also could unexpectedly delay our installation of solar energy systems, leading to increased expenses and decreased revenue and cash receipts in the relevant periods. For example, certain states in which we operate, such as New York and Massachusetts, commonly experience inclement winter weather, and California and Mexico are expected to be impacted by significant rainfall from El Niño in the winter of 2015. Weather patterns could change, making it harder to predict the average annual amount of sunlight striking each location where we install. This could make our solar energy systems less economical overall or make individual systems less economical. Any of these events or conditions could harm our business, financial condition and results of operations.

Our business may be harmed if we fail to properly protect our intellectual property.

We believe that the success of our business depends in part on our proprietary technology, including our hardware, software, information, processes and know-how. We rely on many forms of intellectual property rights to secure our technology, including trade secrets and patents. We cannot be certain that we have adequately protected or will be able to adequately protect our technology, that our competitors will not be able to use our existing technology or develop similar technology independently, that any patents or other intellectual property rights held by us will be broad enough to protect our technology or that foreign intellectual property laws will adequately protect us. Moreover, our patents and other intellectual property rights may not provide us with a competitive advantage.

Despite our precautions, it may be possible for third parties to obtain and use our intellectual property without our consent. Reverse engineering, unauthorized use or other misappropriation of our proprietary technology could enable third parties to benefit from our technology without compensating us for doing so. In addition, our proprietary technology may not be adequately protected because:

our systems may be subject to intrusions, security breaches or targeted thefts of our trade secrets;

people may not be deterred from misappropriating our technology despite the existence of laws or contracts prohibiting it;

unauthorized use of our intellectual property may be difficult to detect and expensive and time-consuming to remedy, and any remedies obtained may be inadequate to restore protection of our intellectual property;

the laws of other countries in which we manufacture our solar products, such as Silevo’s joint venture manufacturing company with partners in China and other countries in the Asia/Pacific region, may offer little or no protection for our proprietary technology; and

reports we may be required to file in connection with any government-sponsored research contracts may disclose some of our sensitive confidential information because they are or will be generally available to the public.

Any such activities or any other inabilities to adequately protect our proprietary rights could harm our ability to compete, to generate revenue and to grow our business.

Claims of patent and other intellectual property infringement are complex and their outcomes are uncertain, and the costs associated with such claims may be high and could harm our business.

Our success in operating our business, including operation of the Manufacturing Facility, depends largely on our ability to use and develop our proprietary technologies and manufacturing know-how without infringing or misappropriating the intellectual property rights of third parties, many of whom have robust patent portfolios, greater capital resources and decades of manufacturing experience. In addition, as we have gained greater visibility and market exposure as a public company, we face a higher risk of being the subject of intellectual property infringement claims. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial legal costs defending against the claim and could distract our management and technical personnel from our business. In particular, the validity and scope of claims relating to photovoltaic technology patents may be highly uncertain because they involve complex scientific, legal and factual considerations and analysis. Furthermore, we could be subject to a judgment or voluntarily enter into a settlement, either of which could require us to pay substantial damages. A judgment or settlement could also include an injunction, a court order or other agreement that could prevent us from operating the Manufacturing Facility and producing our products. In addition, we might elect or be required to seek a license for the use of third-party intellectual property, which may not be available on commercially reasonable terms or at all, or if available, the payments under such license may harm our operating results and financial condition. Alternatively, we may be required to develop non-infringing technology, redesign our products or alter our manufacturing techniques and processes, each of which could require significant research and development efforts and expenses and may ultimately not be successful. Any of these events could seriously harm our business, operating results and financial condition.

We are subject to legal proc eedings and regulatory inquiries and we may be named in additional claims or legal proceedings or become involved in regulatory inquiries, all of which are costly, distracting to our core business and could result in an unfavorable outcome or a material ad verse effect on our business, financial condition, results of operations or the trading price for our securities.

We are involved in claims, legal proceedings (such as the class action and derivative lawsuits filed against us) and receive inquiries from government and regulatory agencies (such as the pending Treasury and Department of Labor investigations) that arise from the normal business activities. In addition, from time to time, third parties may assert claims against us. We evaluate all claims, lawsuits and investigations with respect to their potential merits, our potential defenses and counter claims, settlement or litigation potential and the expected effect on us. In the event that we are involved in significant disputes or are the subject of a formal action by a regulatory agency, we could be exposed to costly and time-consuming legal proceedings that could result in any number of outcomes. Although outcomes of such actions vary, any claims, proceedings or regulatory actions initiated by or against us, whether successful or not, could result in expensive costs of defense, costly damage awards, injunctive relief, increased costs of business, fines or orders to change certain business practices, significant dedication of management time, diversion of significant operational resources or some other harm to our business. In any of these cases, our business, financial condition, results of operations or the trading price for our securities could be negatively impacted.

We make a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. In our opinion, resolution of all current matters is not expected to have a material adverse impact on our business, financial condition or results of operations. However, depending on the nature and timing of any such controversy, an unfavorable resolution of a matter could materially affect our future business, financial condition or results of operations, or all of the foregoing, in a particular quarter.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members and officers.

As a public company, we are subject to the reporting requirements of the Exchange Act, the listing requirements of The NASDAQ Stock Market and other applicable securities rules and regulations. Compliance with these rules and regulations subject us to legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results and maintain effective disclosure controls and procedures and internal control over financial reporting. To maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight are required. As a result, management’s attention may be diverted from other business concerns, which could harm our business and operating results. Although we have already hired additional employees to comply with these requirements, we may need to hire more employees in the future, which will increase our costs and expenses.

We typically bear the risk of loss and the cost of maintenance and repair on solar systems that are owned or leased by our fund investors.

We typically bear the risk of loss and are generally obligated to cover the cost of maintenance and repair on any solar systems that we sell or lease to our fund investors. At the time we sell or lease a solar system to a fund investor, we enter into a maintenance services agreement where we agree to operate and maintain the system for a fixed fee that is calculated to cover our future expected maintenance costs. If our solar systems require an above-average amount of repairs or if the cost of repairing systems were higher than our estimate, we would need to perform such repairs without additional compensation. If our solar systems, a majority of which are located in California, are damaged in the event of a natural disaster beyond our control, losses could be excluded, such as earthquake damage, or exceed insurance policy limits, and we could incur unforeseen costs that could harm our business and financial condition. We may also incur significant costs for taking other actions in preparation for, or in reaction to, such events. We purchase Property and Business Interruption insurance with industry standard coverage and limits approved by an investor’s third-party insurance advisors to hedge against such risk, but such coverage may not cover our losses.

Any unauthorized disclosure or theft of personal customer information we gather, store and use could harm our reputation and subject us to claims or litigation.

We receive, store and use personal information of our customers, including names, addresses, e-mail addresses, credit information and other housing and energy use information. Unauthorized disclosure of such personal information could harm our business, whether through breach of our systems by an unauthorized party, employee theft or misuse, or otherwise. If we were subject to an inadvertent disclosure of such personal information or if a third party were to gain unauthorized access to customer personal

information in our possession, our operations could be seriously disrupted and we could be subject to claims or litigation arising from damages suffered by our customers. In addition, we could incur significant costs in complying with the multitude of federal, state and local laws regarding the unauthorized disclosure of personal customer inform ation. Finally, any perceived or actual unauthorized disclosure of such information could harm our reputation, substantially impair our ability to attract and retain customers and have an adverse impact on our business.

Any failure to comply with laws and regulations relating to our interactions with current or prospective residential customers could result in negative publicity, claims, investigations, and litigation, and adversely affect our financial performance.

As the country’s largest residential solar installer, we rely on our ability to engage in transactions with residential customers. In doing so, we must comply with numerous federal, state and local laws and regulations that govern matters relating to our interactions with residential consumers, including those pertaining to privacy and data security, consumer financial and credit transactions, home improvement contracts, warranties and door-to-door solicitation. These laws and regulations change frequently and are interpreted by various federal, state and local regulatory bodies. Changes in these laws or regulations or their interpretation could dramatically affect how and where we conduct our business, acquire customers, and manage and use information we collect from and about current and prospective customers and the costs associated therewith.

Even though we may believe that we maintain effective compliance with all such laws and regulations, we may still be subject to claims, proceedings, litigation and investigations by private parties and regulatory authorities, and could be subject to substantial fines and negative publicity, each of which may materially and adversely affect our business and operations. We have incurred, and will continue to incur, significant expenses to comply with such laws and regulations, and increased regulation of matters relating to our interactions with residential consumers could require us to modify our operations and incur significant additional expenses, which could have an adverse effect on our business, financial condition and results of operations.

In addition, we are subject to federal, state and international laws relating to the collection, use, retention, security and transfer of personal information of our customers. In many cases, these laws apply not only to third-party transactions, but also to transfers of information between one company and its subsidiaries. Several jurisdictions have passed new laws in this area, and other jurisdictions are considering imposing additional restrictions. These laws continue to develop and may be inconsistent from jurisdiction to jurisdiction. Complying with emerging and changing requirements may cause us to incur costs or require us to change our business practices. Any failure by us, our affiliates or other parties with whom we do business to comply with a posted privacy policies or with other federal, state or international privacy-related or data protection laws and regulations could result in proceedings against us by governmental entities or others, which could have a detrimental effect on our business, results of operations and financial condition.

Risks Related to the Ownership of Our Common Stock

Our stock price has been and may continue to be volatile, and the value of your investment could decline.

The trading price of our common stock has been volatile since our initial public offering. Since shares of our common stock were sold in our initial public offering in December 2012 at a price of $8.00 per share, the reported high and low sales prices of our common stock on The NASDAQ Stock Market has ranged from $9.20 to $88.35 per share, through October 29, 2015. The market price of our common stock may fluctuate widely in response to many risk factors listed in this section and others beyond our control, including:

changes in laws or regulations applicable to our industry, products or services, including the effects of tariffs and other anti-competitive actions;

additions or departures of key personnel;

actual or anticipated changes in expectations regarding our performance by investors or securities analysts;

price and volume fluctuations in the overall stock market;

volatility in the market price and trading volume of companies in our industry or companies that investors consider comparable;

share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

addition or loss of significant customers;

our ability to protect our intellectual property and other proprietary rights;

sales of our common stock by us or our stockholders, including as a result of recent, proposed or new offerings and acquisitions;

litigation involving us, our industry or both;

major catastrophic events; and

general economic and market conditions and trends.

Further, in recent years the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. In addition, the stock prices of many renewable energy companies have experienced wide fluctuations that have often been unrelated to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, government shutdowns, interest rate changes or international currency fluctuations, may cause the market price of our common stock to decline. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

We incur significant costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our operating results.

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting and corporate governance requirements. These requirements include compliance with Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the Securities and Exchange Commission, or SEC, and The NASDAQ Stock Market. If these requirements divert our management’s attention from other business concerns, they could have a material adverse effect on our business, prospects, financial condition and operating results. In addition, complying with these rules and regulations has substantially increased our legal and financial compliance expenses, has made some activities more time-consuming and costly and may in the future require us to reduce costs in other areas of our business or increase the prices of our products and services, which could negatively impact our business.

Our stock price could decline due to the large number of outstanding shares of our common stock eligible for future sale and issuance.

Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline. These sales could also make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate. Such sales may occur in connection with our acquisitions, such as our issuance of approximately 8.8 million shares in the aggregate for our acquisitions of Silevo, Zep Solar and certain assets of Paramount Solar. In connection with our acquisition of Silevo, we may issue additional common stock with an aggregate value of up to $150.0 million, subject to adjustments and as determined in connection with the merger agreement, upon the timely achievement of all earnout related milestones. In addition, holders of a substantial amount of our common stock are entitled to rights with respect to registration of these shares under the Securities Act pursuant to an investors’ rights agreement. If these holders of our common stock, by exercising their registration rights, sell a large number of shares, they could adversely affect the market price for our common stock. If we file a registration statement for the purposes of selling additional shares to raise capital and are required to include shares held by these holders pursuant to the exercise of their registration rights, our ability to raise capital may be impaired.

Insiders have substantial control over us, which could limit your ability to influence the outcome of key transactions, including a change of control.

As of September 30, 2015, our directors and executive officers and their affiliates, in the aggregate, owned approximately 36% of the outstanding shares of our common stock. As a result, these stockholders, if acting together, would be able to influence or control matters requiring approval by our stockholders, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. They may have interests that differ from yours and may vote in a way with which you disagree and that may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might affect the market price of our common stock.

Provisions in our certificate of incorporation and bylaws and under Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, d epress the trading price of our common stock.

Our certificate of incorporation and bylaws contain provisions that could depress the trading price of our common stock by discouraging, delaying or preventing a change of control of our company or changes in our management that the stockholders of our company may believe advantageous. These provisions include:

establishing a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors;

authorizing “blank check” preferred stock that our board of directors could issue to increase the number of outstanding shares to discourage a takeover attempt;

limiting the ability of stockholders to call a special stockholder meeting;

limiting the ability of stockholders to act by written consent;

authorizing the board of directors to make, alter or repeal our bylaws; and

establishing advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

If securities or industry analysts cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations regarding our stock, our stock price and trading volume could decline.

The trading market for our common stock, to some extent, depends on the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who cover us adversely change their recommendation regarding our stock, or provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any analyst who covers us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

We do not intend to pay dividends for the foreseeable future.

We have never declared or paid any dividends on our common stock. We intend to retain any earnings to finance the operation and expansion of our business and do not anticipate paying any cash dividends in the future. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases.

ITEM 6. EXHIBITS

The documents listed in the Exhibit Index of this quarterly report on Form 10-Q are incorporated by reference or are filed with this quarterly report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: October 30, 2015

SOLARCITY CORPORATION

By:

/s/ LYNDON R. RIVE

Lyndon R. Rive

Chief Executive Officer

(Principal Executive Officer)

EXHIBIT INDEX

Exhibit Number		Exhibit Description
2.1*		Stock Purchase Agreement, dated August 3, 2015, by and among SolarCity Corporation, Solar Explorer, LLC, Solar Voyager, LLC, Tatiana Alejandra Arelle Caraveo, Manuel Vegara Llanes and ILIOSSON, S.A. de C.V. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on August 5, 2015).

10.10l		Seventh Amendment to the Amended and Restated Credit Agreement, dated as of July 24, 2015, by and among SolarCity Corporation, a Delaware corporation, the Lenders party thereto and Bank of America, N.A., as administrative agent.

10.16f		Sixth Amendment to Amended and Restated Agreement For Research & Development Alliance on Triex Module Technology, effective as of September 1, 2015, by and between The Research Foundation For The State University of New York, on behalf of the College of Nanoscale Science and Engineering of the State University of New York, and Silevo, LLC.

10.16g		Seventh Amendment to Amended and Restated Agreement For Research & Development Alliance on Triex Module Technology, effective as of October 9, 2015, by and between The Research Foundation For The State University of New York, on behalf of the College of Nanoscale Science and Engineering of the State University of New York, and Silevo, LLC.

10.16h		Eighth Amendment to Amended and Restated Agreement For Research & Development Alliance on Triex Module Technology, effective as of October 26, 2015, by and between The Research Foundation For The State University of New York, on behalf of the College of Nanoscale Science and Engineering of the State University of New York, and Silevo, LLC.


10.19c		Majority Group Agent Action No. 3, dated as of July 13, 2015, by and among Megalodon Solar, LLC (an indirect wholly owned subsidiary of the Registrant), as borrower, the Registrant, as limited guarantor, Bank of America, N.A., as collateral agent and administrative agent, and the lenders party thereto.

10.19d		Required Group Agent Action No. 4, dated as of August 25, 2015, by and among Megalodon Solar, LLC (an indirect wholly owned subsidiary of the Registrant), as borrower, the Registrant, as limited guarantor, Bank of America, N.A., as collateral agent and administrative agent, and the lenders party thereto.

10.19e*		Required Group Agent Action No. 5, dated as of August 27, 2015, by and among Megalodon Solar, LLC (an indirect wholly owned subsidiary of the Registrant), as borrower, the Registrant, as limited guarantor, Bank of America, N.A., as collateral agent and administrative agent, and the lenders party thereto.

10.19f*		Required Group Agent Action No. 7, dated as of September 30, 2015, by and among Megalodon Solar, LLC (an indirect wholly owned subsidiary of the Registrant), as borrower, the Registrant, as limited guarantor, Bank of America, N.A., as collateral agent and administrative agent, and the lenders party thereto.

10.20**		Description of Founder Awards (incorporated by reference to Item 5.02 of the Registrant’s Current Report on Form 8-K filed on August 27, 2015).

31.1		Certification of the Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.

32.1†		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

32.2†		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document.

101.SCH		XBRL Taxonomy Schema Linkbase Document.

101.CAL		XBRL Taxonomy Calculation Linkbase Document.

101.DEF		XBRL Taxonomy Definition Linkbase Document.

101.LAB		XBRL Taxonomy Labels Linkbase Document.

101.PRE		XBRL Taxonomy Presentation Linkbase Document.

*	Confidential treatment requested as to certain portions of this exhibit, which portions have been omitted and submitted separately to the Securities and Exchange Commission.

†

The certifications attached as Exhibit 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of SolarCity Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

**	Indicates a management contract or compensatory plan or arrangement.

Exhibit 10.10l

SEVENTH AMENDMENT TO

THE AMENDED AND RESTATED

CREDIT AGREEMENT

THIS SEVENTH AMENDMENT TO THE AMENDED AND RESTATED CREDIT AGREEMENT (this “ Amendment ”), dated as of July 24, 2015 (the “ Amendment Effective Date ”), is by and among SOLARCITY CORPORATION , a Delaware corporation (the “ Borrower ”), the Lenders party hereto and BANK OF AMERICA, N.A. , as administrative agent (in such capacity, the “ Administrative Agent ”). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement.

W I T N E S S E T H

WHEREAS , the Borrower, the Subsidiaries of the Borrower from time to time party thereto (the “ Guarantors ”), certain banks and financial institutions from time to time party thereto as lenders (the “ Lenders ”), the Administrative Agent, and Bank of America Merrill Lynch, as sole lead arranger and sole book manager, are parties to that certain Amended and Restated Credit Agreement dated as of November 1, 2013 (as amended, modified, extended, restated, replaced, or supplemented from time to time, the “ Credit Agreement ”);

WHEREAS , the Loan Parties have requested that the Required Lenders amend certain provisions of the Credit Agreement; and

WHEREAS , the Required Lenders are willing to make such amendments to the Credit Agreement, in accordance with and subject to the terms and conditions set forth herein.

NOW, THEREFORE , in consideration of the agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I.
AMENDMENTS TO CREDIT AGREEMENT

Section 1.01 Amendment to Section 2.16(a) . Clauses (a) of Section 2.16 of the Credit Agreement are hereby amended and restated in their entirety to read as follows:

(a) Request for Increase . Provided there exists no Default, upon notice to the Administrative Agent (which shall promptly notify the Revolving Lenders), the Borrower may from time to time, request an increase in the Facility so long as the Facility (“ Incremental Facility ”), after taking into account all such requests, does not exceed $360,000,000; provided that (i) any such request for an Incremental Facility shall be in a minimum amount of $10,000,000 and in increments of $5,000,000 (or such lesser amount as is acceptable to the Administrative Agent) in excess thereof, and (ii) the Borrower may make a maximum of three (3) such

requests. At the time of sending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period within which each Revolving Lender is requested to respond.

ARTICLE II.
CONDITIONS TO EFFECTIVENESS

Section 2.01 Conditions to Effectiveness . This Amendment shall become effective as of the Amendment Effective Date upon satisfaction of the following conditions (in each case, in form and substance reasonably acceptable to the Administrative Agent):

(a) Administrative Agent shall have received a copy of this Amendment duly executed by the Borrower, the Required Lenders and Administrative Agent.

(b) No Default or Event of Default shall exist.

ARTICLE III.
MiSCELLANEOUS

Section 3.01 Amended Terms . On and after the Amendment Effective Date, all references to the Credit Agreement in each of the Loan Documents shall hereafter mean the Credit Agreement as amended by this Amendment. Except as specifically amended hereby or otherwise agreed, the Credit Agreement is hereby ratified and confirmed and shall remain in full force and effect according to its terms.

Section 3.02 Representations and Warranties of Loan Parties . Each of the Loan Parties represents and warrants as follows:

(a) It has taken all necessary action to authorize the execution, delivery and performance of this Amendment.

(b) This Amendment has been duly executed and delivered by such Person and constitutes such Person’s legal, valid and binding obligation, enforceable in accordance with its terms, except as such enforceability may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).

(c) No consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental authority or third party is required in connection with the execution, delivery or performance by such Person of this Amendment, other than those which have been duly obtained.

(d) Immediately before and after giving effect to this Amendment, no event has occurred and is continuing which constitutes a Default or an Event of Default.

(e) After giving effect to this Amendment, the Collateral Documents continue to create a valid security interest in, and Lien upon, the Collateral, in favor of the Administrative Agent, for the benefit of the Lenders, which security interests and Liens are perfected in accordance with the terms of the Collateral Documents and prior to all Liens other than Permitted Liens.

(f) The Obligations are not reduced or modified by this Amendment and are not subject to any offsets, defenses or counterclaims.

Section 3.03 Reaffirmation of Obligations . Each Loan Party hereby ratifies the Credit Agreement and acknowledges and reaffirms (a) that it is bound by all terms of the Credit Agreement applicable to it and (b) that it is responsible for the observance and full performance of its respective Obligations.

Section 3.04 Loan Document . This Amendment shall constitute a Loan Document under the terms of the Credit Agreement.

Section 3.05 Expenses . The Borrower agrees to pay all reasonable costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment, including without limitation the reasonable fees and expenses of the Administrative Agent’s legal counsel.

Section 3.06 Further Assurances . The Loan Parties agree to promptly take such action, upon the request of the Administrative Agent, as is necessary to carry out the intent of this Amendment.

Section 3.07 Entirety . This Amendment and the other Loan Documents embody the entire agreement among the parties hereto and supersede all prior agreements and understandings, oral or written, if any, relating to the subject matter hereof.

Section 3.08 Electronic Execution . The words “delivery,” “execute,” “execution,” “signed,” “signature,” and words of like import in any Loan Document or any other document executed in connection herewith shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that notwithstanding anything contained herein to the contrary neither the Administrative Agent, the L/C Issuer nor any Lender is under any obligation to agree to accept electronic signatures in any form or in any format unless expressly agreed to by the Administrative Agent, the L/C Issuer or such Lender pursuant to procedures approved by it and provided further without limiting the foregoing, upon the request of any party, any electronic signature shall be promptly followed by a manually executed counterpart.

Section 3.09 Counterparts; Integration; Effectiveness . This Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Amendment, the other Loan Documents, and any separate letter agreements with respect to fees payable to the Administrative Agent or the L/C Issuer, constitute the entire contract among the parties relating to the subject matter hereof and thereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof and thereof . Except as provided in Section 2 .01 , this A mendment shall become effective when executed by the Administrative Agent and when the Administrative Agent has received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or other electronic imaging means (e.g. “pdf” or “tiff”) shall be effective as delivery of a manually executed counterpart of this Amendment .

Section 3.10 No Actions, Claims, Etc . As of the date hereof, each of the Loan Parties hereby acknowledges and confirms that it has no knowledge of any actions, causes of action, claims, demands, damages and liabilities of whatever kind or nature, in law or in equity, against the Administrative Agent, the Lenders, or the Administrative Agent’s or the Lenders’ respective officers, employees, representatives, agents, counsel or directors arising from any action by such Persons, or failure of such Persons to act under the Credit Agreement on or prior to the date hereof.

Section 3.11 GOVERNING LAW . THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Section 3.12 Successors and Assigns . This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

Section 3.13 Consent to Jurisdiction; Service of Process; Waiver of Jury Trial . The jurisdiction, service of process and waiver of jury trial provisions set forth in Sections 11.14 and 11.15 of the Credit Agreement are hereby incorporated by reference, mutatis mutandis.

[ Signature Pages to Follow ]

IN WITNESS WHEREOF the parties hereto have caused this Amendment to be duly executed on the date first above written.

BORROWER : SOLARCITY CORPORATION,

a Delaware corporation


By:	/s/ Brad Buss
Name:	Brad Buss
Title:	Chief Financial Officer

SEVENTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (REVOLVING LOAN)

ADMINISTRATIVE AGENT : BANK OF AMERICA, N.A.,

in its capacity as Administrative Agent


By:	/s/ Dora A. Brown
Name:	Dora A. Brown
Title:	Vice President

LENDERS : BANK OF AMERICA, N.A.,

in its capacity as a Lender, L/C Issuer and Swingline Lender


By:	/s/ Thomas R. Sullivan
Name:	Thomas R. Sullivan
Title:	Senior Vice President

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH , as a Lender


By:	/s/ Mikhail Faybusovich
Name:	Mikhail Faybusovich
Title:	Authorized Signatory


By:	/s/ D. Andrew Maletta
Name:	D. Andrew Maletta
Title:	Authorized Signatory

SILICON VALLEY BANK ,

as a Lender


By:	/s/ Dan Baldi
Name:	Dan Baldi
Title:	Managing Director

SEVENTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (REVOLVING LOAN)

WESTERN ALLIANCE BANK, AN ARIZONA CORPORATION, AS SUCCESSOR IN INTEREST TO BRIDGE BANK, NATIONAL ASSOCIATION

as a Lender


By:	/s/ Randall Lee
Name:	Randall Lee
Title:	Assistant Vice President

ONEWEST BANK, FSB

as a Lender


By:	/s/ Michael MacDonald
Name:	Michael MacDonald
Title:	Executive Vice President

AMERICAN SAVINGS BANK, F.S.B.,

a federal savings bank,

as a Lender


By:	/s/ Kyle J. Shelley
Name:	Kyle J. Shelley
Title:	Vice President

SEVENTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (REVOLVING LOAN)

DEUTSCHE BANK AG, NEW YORK BRANCH,

as a Lender


By:	/s/ Anca Trifan
Name:	Anca Trifan
Title:	Managing Director

SEVENTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (REVOLVING LOAN)

GUARANTOR CONSENT

Each of the undersigned (each a “ Guarantor ”) consents to the foregoing Amendment to Credit Agreement and other Loan Documents (“ Amendment ”) and the transactions contemplated thereby and reaffirms its obligations under Article X (Continuing Guaranty) of the Credit Agreement (as the same may be amended, modified, supplemented or replaced from time to time, the “ Guaranty ”).

Each Guarantor reaffirms, to the extent a party thereto, that its obligations under the Guaranty are separate and distinct from the Borrower’s obligations and reaffirms its waivers, as set forth in the Guaranty, of each and every one of the possible defenses to such obligations.

Furthermore, each Guarantor acknowledges and agrees that any reference to the term “Credit Agreement” in the Guaranty shall mean the Credit Agreement dated of even date with the Guaranty together with all amendments, increases or modifications thereto.

Agreed and Acknowledged:

Dated as of: July ___, 2015

GUARANTORS:

POPPY ACQUISITION LLC


By:
Name:	Lyndon Rive
Title:	President and CEO

ZEP SOLAR LLC


By:
Name:	Lyndon Rive
Title:	President and CEO

SILEVO, LLC


By:
Name:	Lyndon Rive
Title:	President

Exhibit 10.16f

SIXTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT FOR RESEARCH & DEVELOPMENT ALLIANCE ON

TRIEX MODULE TECHNOLOGY

This SIXTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT FOR RESEARCH & DEVELOPMENT ALLIANCE ON TRIEX MODULE TECHNOLOGY (this “Amendment”) is effective as of September 1, 2015 (the “Effective Date”) and is by and between THE RESEARCH FOUNDATION FOR THE STATE UNIVERSITY OF NEW YORK (“FOUNDATION”), a non-profit educational corporation existing under the laws of the State of New York, having an office located at 257 Fuller Road, Albany, New York 12203, on behalf of the Colleges of Nanoscale Science and Engineering of the State University of New York Polytechnic Institute), and SILEVO, LLC (“SILEVO”), a Delaware corporation with its principal office located at 45655 Northport Loop East, Fremont, California 94555. FOUNDATION and SILEVO are each referred to herein sometimes individually as a “Party” or, collectively, as “Parties.”

I. RECITALS

I.1. FOUNDATION and SILEVO entered into that certain Amended and Restated Agreement for Research & Development Alliance on Triex Module Technology effective as of September 2, 2014, as amended by a First Amendment thereto effective as of October 31, 2014, a Second Amendment thereto effective as of December 15, 2014, a Third Amendment thereto effective as of February, 2015, a Fourth Amendment thereto effective as of March 30, 2015 and a Fifth Amendment thereto effective as of June 30, 2015 (as amended, the “Agreement”).

I.2. The parties wish to amend the terms of Section 19.14 of the Agreement as set forth in this Amendment.

THEREFORE, in consideration of the mutual promises and covenants contained in this Amendment and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, and intending to be legally bound hereby, the Parties agree as follows:

II. DEFINED TERMS

In addition to the terms defined elsewhere in this Amendment, capitalized terms that are used but not defined herein shall have the meanings ascribed to such terms in the Agreement .

III. AMENDMENTS

Section 19.14 is amended by deleting the reference to “August 31, 2015” and replacing it with “September 30, 2015”.

IV. MISCELLANEOUS

No amendment or modification of this Amendment shall be valid or binding upon the Parties unless in a writing executed by both of the Parties. This Amendment, together

with the Agreement , is the complete and exclusive statement of the agreement of the Parties in respect of the subject matter described in this Amendment and shall supersede all prior and contemporaneous agreements, communications, representations, and understandings, either oral or written, between the Parties or any officers, agents or representatives thereof. This Amendment may be signed in one or more counterparts, each of which shall be deemed to be an original and all of which when taken together shall constitute the same Amendment . Any signed copy of this Amendment made by photocopy, facsimile or PDF Adobe format shall be considered an original. Except as amended and/or modified by this Amendment, the Agreement is hereby ratified and confirmed and the Agreement and all other terms thereof shall remain in full force and effect, unaltered and unchanged by this Amendment. In the event of any conflict between the provisions of this Amendment and the provisions of the Agreement , the provisions of this Amendment shall prevail. Whether or not specifically amended by this Amendment, all of the terms and provisions of the Agreement are hereby amended to the extent necessary to give effect to the purpose and intent of this Amendment.

IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be executed and delivered by their duly authorized representatives as of the Effective Date.

THE RESEARCH FOUNDATION FOR

THE STATE UNIVERSITY OF NEW YORK


By:	/s/ Christine Waller
Name:	Christine Waller
Title:	Operations Manager

SILEVO, LLC


By:	/s/ Zheng Xu
Name:	Zheng Xu
Title:	CEO, Silevo, LLC

Exhibit 10.16g

SEVENTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT FOR RESEARCH & DEVELOPMENT ALLIANCE ON

TRIEX MODULE TECHNOLOGY

This SEVENTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT FOR RESEARCH & DEVELOPMENT ALLIANCE ON TRIEX MODULE TECHNOLOGY (this “Amendment”) is effective as of October 9, 2015 (the “Effective Date”) and is by and between THE RESEARCH FOUNDATION FOR THE STATE UNIVERSITY OF NEW YORK (“FOUNDATION”), a non-profit educational corporation existing under the laws of the State of New York, having an office located at 257 Fuller Road, Albany, New York 12203, on behalf of the Colleges of Nanoscale Science and Engineering of the State University of New York Polytechnic Institute), and SILEVO, LLC (“SILEVO”), a Delaware corporation with its principal office located at 45655 Northport Loop East, Fremont, California 94555. FOUNDATION and SILEVO are each referred to herein sometimes individually as a “Party” or, collectively, as “Parties.”

I. RECITALS

I.1. FOUNDATION and SILEVO entered into that certain Amended and Restated Agreement for Research & Development Alliance on Triex Module Technology effective as of September 2, 2014, as amended by a First Amendment thereto effective as of October 31, 2014, a Second Amendment thereto effective as of December 15, 2014, a Third Amendment thereto effective as of February, 2015, a Fourth Amendment thereto effective as of March 30, 2015, a Fifth Amendment thereto effective as of June 30, 2015, and a Sixth Amendment thereto effective as of September 1, 2015 (as amended, the “Agreement”).

I.2. The parties wish to amend the terms of Section 19.14 of the Agreement as set forth in this Amendment.

II. DEFINED TERMS

In addition to the terms defined elsewhere in this Amendment, capitalized terms that are used but not defined herein shall have the meanings ascribed to such terms in the Agreement .

III. AMENDMENTS

Section 19.14 is amended by deleting the reference to “September 30, 2015” and replacing it with “November 30, 2015”.

IV. MISCELLANEOUS

No amendment or modification of this Amendment shall be valid or binding upon the Parties unless in a writing e xecuted by both of the Parties. This Amendment , together with the Agreement , is the complete and exclusive statement of the agreement of the Parties in respect of the subject matter described in this Amendment and shall supersede all prior and contemporaneous agreements, communications, representations, and understandings, either oral or written, between the Parties or any officers, agents or representatives thereof. This Amendment may be signed in one or more counterparts, each of which shall be deemed to be an original and all of which when taken together shall constitute the same Amendment . Any signed copy of this Amendment made by photocopy, facsimile or PDF Adobe format shall be considered an original. Except as amended and/or modified by this Amendment, the Agreement is hereby ratified and confirmed and the Agreement and all other terms thereof shall remain in full force and effect, unaltered and unchanged by this Amendment. In the event of any conflict between the provisions of this Amendment and the provisions of the Agreement , the provisions of this Amendment shall prevail. Whether or not specifically amended by this Amendment, all of the terms and provisions of the Agreement are hereby amended to the extent necessary to give effect to the purpose and intent of this Amendment.

IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be executed and delivered by their duly authorized representatives as of the Effective Date.

THE RESEARCH FOUNDATION FOR

THE STATE UNIVERSITY OF NEW YORK


By:	/s/ Christine Waller
Name:	Christine Waller, 10/9/15
Title:	Operations Manager

SILEVO, LLC


By:	/s/ Zheng Xu
Name:	Zheng Xu, 10/9/15
Title:	CEO, Silevo, LLC

Exhibit 10.16h

EIGHTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT FOR RESEARCH &

DEVELOPMENT ALLIANCE ON

TRIEX MODULE TECHNOLOGY

This EIGHTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT FOR RESEARCH & DEVELOPMENT ALLIANCE ON TRIEX MODULE TECHNOLOGY (this “Amendment”) is effective as of October 26, 2015 (the “Effective Date”) and is by and between THE RESEARCH FOUNDATION FOR THE STATE UNIVERSITY OF NEW YORK (“FOUNDATION”), a non-profit educational corporation existing under the laws of the State of New York, having an office located at 257 Fuller Road, Albany, New York 12203, on behalf of the Colleges of Nanoscale Science and Engineering of the State University of New York Polytechnic Institute), and SILEVO, LLC (as successor in interest of SILEVO INC.) (“SILEVO”), , a Delaware limited liability company with its principal office located at 47700 Kato Road, Fremont, California 94538. FOUNDATION and SILEVO are each referred to herein sometimes individually as a “Party” or, collectively, as “Parties.”

I. RECITALS

1.1. FOUNDATION and SILEVO entered into that certain Amended and Restated Agreement for Research & Development Alliance on Triex Module Technology effective as of September 2, 2014, as amended by a First Amendment thereto effective as of October 31, 2014, a Second Amendment thereto effective as of December 15, 2014, a Third Amendment thereto effective as of February 12, 2015, a Fourth Amendment thereto effective as of March 30, 2015, a Fifth Amendment thereto effective as of June 30, 2015, a Sixth Amendment thereto effective as of September 1, 2015, and a Seventh Amendment thereto effective as of October 9, 2015 (as amended, the “Agreement”).

1.2. As FOUNDATION and SILEVO have performed more in depth design and planning for the Manufacturing Facility, additional costs to design and construct the Manufacturing Facility and information regarding operating the Manufacturing Facility have been determined.

1.3. The parties wish to allocate such additional costs and otherwise amend the Agreement as set forth in this Amendment.

II. DEFINED TERMS

In addition to the terms defined elsewhere in this Amendment, capitalized terms that are used but not defined herein shall have the meanings ascribed to such terms in the Agreement.

III. AMENDMENTS

3.1 Scope Changes

(a)

FOUNDATION and SILEVO shall use commercially reasonable best efforts to eliminate construction cost increases due to changes in the scope of the

Manufacturing Facility. References in the Agreement to $400 Million with respect to FOUNDATION’s obligation to acquire Manufacturing Equipment will be reduced to $348.1 Million and instead, notwithstanding anything to the contrary in the Agreement (including references to $350 Million and $750 Million), FOUNDATION will pay for the items described in the summary attached hereto as Exhibit A, in addition to the contributions for which FOUNDATION is responsible under the Agreement. SILEVO shall acquire a portion of the Manufacturing Equipment supplied by Applied Materials costing approximately $51.9 Million, which equipment will be owned by SILEVO.

(b)

Within two (2) business days of execution of this Amendment, FOUNDATION will provide a letter from the State of New York committing to the funding for the amounts allocated to Manufacturing Equipment under the Agreement.

(c)

FOUNDATION will use best efforts not to apply the current contingency for the construction of the Manufacturing Facility of $30.5 Million to any additional costs and instead apply such amount to the cost of the second version of the Total Utility Matrix (TUM2) ($36.7 Million). The FOUNDATION will have no responsibility for the remaining balance of the cost of the TUM2 to the extent the contingency does not cover such amount. In addition, SILEVO in its sole discretion may elect, instead of paying for costs to construct the Manufacturing Facility for which the FOUNDATION is not responsible, to purchase or pay the FOUNDATION for the cost of certain additional Manufacturing Equipment supplied by Applied Materials that is otherwise FOUNDATION’s responsibility to acquire under the Agreement, in which case the reference to the amount to be expended by FOUNDATION with respect to Manufacturing Equipment will be further reduced by such amount, SILEVO shall take title to such Manufacturing Equipment and FOUNDATION shall pay for such construction costs in addition to its contributions under the Agreement.

3.2 SILEVO Employment Targets

(a)

Section 4.4 of the Agreement is deleted and replaced by the following:

(a)

Provided FOUNDATION performs its obligations under Sections 4.1(c) and 5.1(a) - 5.1(c), SILEVO will employ and hire as SILEVO employees personnel for a minimum of 1,460 jobs in Western New York, with SILEVO to employ and hire as SILEVO employees personnel for 500 of such jobs for the Manufacturing Operation at the Manufacturing Facility over the initial two (2) years of the collaboration commencing on the Manufacturing Facility Completion Date.

(b)

If Manufacturing Facility Completion occurs after the Completion Deadline, then the periods set forth above shall be extended one day for each day between the Completion Deadline and the date that Manufacturing Facility Completion occurs. SILEVO commits to the retention of these jobs for a period of no less than five (5) years.

(c)

In addition to the 1,460 jobs under Section 4.4(a), provided FOUNDATION performs its obligations under Sections 4.1(c) and 5.1(a) - 5.1(c), SILEVO agrees to employ personnel for a minimum of 2,000 jobs over the five years of the collaboration following Manufacturing Facility Completion to be located in New York State. SILEVO commits to the retention of these jobs for a period of no less than five (5) years.

(d)

Provided FOUNDATION performs its obligations under Sections 4.1(c) and 5.1(a) - 5.1(c), SILEVO commits to employ 5,000 people in total in New York State (which may include jobs described in Sections 4.4(a) and (b)) by the tenth (10th) anniversary of the Manufacturing Facility Completion Date.

(b)

Exhibit G of the Agreement is amended by changing the reference to SILEVO Cumulative Jobs in Year 1 from “600” to “500”.

(c)

The provisions of Section 4.1(a) and Exhibit A (section entitled Job Creation) of the Agreement are deemed modified to be consistent with the revised Section 4.4 of the Agreement above.

3.3 Manufacturing Facility Completion

The definition of Manufacturing Facility Completion in Section 4.1(b) of the Agreement shall include issuance of all permits required for the installation of the Manufacturing Equipment.

3.4 Force Majeure

Section 19.5 of the Agreement is deleted and replaced by the following:

If either Party is rendered wholly or partially unable by Force Majeure to carry out its obligations under this Agreement, and if that Party gives prompt written notice, including a reasonable description of such Force Majeure, to the other Party, the notifying Party shall be excused from performance of its obligations hereunder during the continuance of any inability so caused, but for no longer period. Such cause shall be remedied by the notifying Party as far as possible with reasonable speed and effort, but neither Party shall have any obligation to settle any labor dispute. For the purposes of this Agreement, “Force Majeure” shall mean Acts of God, labor disputes, acts of public enemies or terrorists, war, other military conflicts, blockades, insurrections, riots, epidemics, quarantine restrictions, landslides, lightning, earthquake, fires, conflagration, storms, floods, washouts, arrests, civil disturbances, restraints by or actions of any governmental body (including export or security restrictions on information, material, personnel, equipment or other changes in laws), changes in federal, state or municipal regulation or policy that materially and adversely affect the business of SILEVO (collectively for this purpose with its parent corporation and affiliates) (including, without limitation, significant increases in tariffs or duties relating to components necessary for the operation of the Manufacturing Facility), industry-wide shortages, industry-wide unavailability, and any other acts or events whatsoever, whether or not similar to the foregoing, not within the control of the Party claiming excuse from performance, which by the exercise of the diligence and reasonable efforts that Party shall not have been able to overcome or

avoid. If the notifying Party cannot remedy the Force Majeure situation and resume satisfactory performance within ninety (90) days after delivery of the notice, the other Party may at their option immediately terminate this Agreement and such notifying Party will be treated as a Terminated Party under Section 11.4 hereof; provided such time limit shall not apply to SILEVO’s inability to perform its obligations under Section IV and Exhibit G. The provisions of this Section 19.5 shall not serve to extend the Completion Deadline or the Milestone Events set forth in Section 4.1(d) or Section 5.1(h).

3.5 Infrastructure

Exhibit B-2 of the Agreement is amended by adding the following new section:

“E. For the avoidance of doubt, the Site improvement work for which the FOUNDATION is solely responsible, in addition to its contributions above, shall include the work covered by the following line items of the concept estimate summaries dated September 18, 2014 prepared by LP Ciminelli, Inc.: onsite improvements (landscaping, parking, circulation roads, loading, etc.); offsite infrastructure (traffic, water, gas); Silane building, miscellaneous facility service structures; site development and infrastructure; pipe piles and pre-drilling through sub-surface obstructions; piles for increase floor load capacity; structured slab premium from 12” slab; structural fill at pad; obstruction removal; offsite infrastructure required by SEQR; emergency generator; waste water treatment plant; 60 MW substation, including site electrical distribution.”

3.6 Notice Address

The first address to which notices to SILEVO should be sent in Section 18.2 of the Agreement is replaced with the following:

Silevo, Inc.

47700 Kato Road

Fremont, CA 94538

Attn.: Zheng Xu

IV. MISCELLANEOUS

No amendment or modification of this Amendment shall be valid or binding upon the Parties unless in a writing executed by both of the Parties. This Amendment, together with the Agreement, is the complete and exclusive statement of the agreement of the Parties in respect of the subject matter described in this Amendment and shall supersede all prior and contemporaneous agreements, communications, representations, and understandings, either oral or written, between the Parties or any officers, agents or representatives thereof. This Amendment may be signed in one or more counterparts, each of which shall be deemed to be an original and all of which when taken together shall constitute the same Amendment. Any signed copy of this Amendment made by photocopy, facsimile or PDF Adobe format shall be considered an original. Except as amended and/or modified by this Amendment, the Agreement is hereby ratified and confirmed and all other terms of the Agreement shall remain in full force and effect, unaltered and unchanged by this Amendment. In the event of any conflict between the provisions of this Amendment and the provisions of the Agreement, the provisions of this Amendment shall prevail. Whether or not specifically amended by

this Amendment, all of the terms and provisions of the Agreement are hereby amended to the extent necessary to give effect to the purpose and intent of this Amendment.

IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be executed and delivered by their duly authorized representatives as of the Effective Date.

THE RESEARCH FOUNDATION FOR

THE STATE UNIVERSITY OF NEW YORK


By:	/s/ Christine Waller
Name:	Christine Waller
Title:	Operations Manager
Date:	October 26, 2015

SILEVO, LLC


By:	/s/ Zheng Xu
Name:	Zheng Xu
Title:	CEO, Silevo, LLC
Date:	October 26, 2015

EXHIBIT A


Silevo Requested Additional Scope Cost Breakdown (approved as of 9/29/15)
in USD

	Item	SCTY Cost to be absorbed by FSMC

	Add Warehouse rack sprinklers	$ 768,000
	Slab load increases	$ 2,816,000
	Add compactor at Wafer Dock	$ 32,461
	Add 1 CVD Crane	$ 416,000
	Add 30 person break room	$ 320,000
	LEED additional Design Fees	$ 79,480
	Trailer parking increased to 60 trailers	$ 402,783
	Add forklift charging stations	$ 70,000
	Add full height walls at Mezzanine Scrubber rooms	$ 1,775,000
	Chemical Loading Dock	$ 165,000
	Extend corridor between CUB and Wafer warehouse	$ 910,000
	Add Jib Crane	$ 54,194
	Admixture for Moisture reduction/barrier or sealer where CRC coatings are required	$ 1,536,000
	Electric car charging stations 2 units	$ 28,900
	Add Fence at Yard Perimeter	$ 164,241
	Add 30 office floor boxes	$ 21,000
	CUB exterior wall changed to Versa wall system	$ 282,030
	LED Light fixtures in Manuf.	$ 209,000
	Chi Town	$ 10,934,000
	Pre Action System at IT Rooms	$ 70,000
	PVAC Credit	$ (642,000)
	I&C Plant PAX	$ 601,000
	Additional Conduit for Teledata ductbank	$ 7,923
	TUM 3 - Design Implementation	$ 31,594


	Full Capacity/TUM 0	$ 16,865,000
	O/H Bridge Crane for PECVD	$ 1,613,674
	WWT/ Recycling	$ 12,400,000

	Total Spend	$ 51,931,280

Exhibit 10.19c

REQUIRED GROUP AGENT ACTION NO. 3

This REQUIRED GROUP AGENT ACTION NO. 3 (this “ Action ”), dated as of July 13, 2015 (the “ Effective Date ”), is entered into by and among Megalodon Solar, LLC, a Delaware limited liability company (“ Borrower ”), Bank of America, N.A., as the Administrative Agent (“ Administrative Agent ”) and the Collateral Agent for the Secured Parties (“ Collateral Agent ”) and each of Bank of America, N.A. (“ BA Agent ”), Credit Suisse AG, New York Branch (“ CS Agent ”) and Deutsche Bank AG, New York Branch (“ DB Agent ”, and collectively with BA Agent and CS Agent, the “ Existing Group Agents ”), as Group Agents party to the Loan Agreement, dated as of May 4, 2015 (as amended, the “ Loan Agreement ”), by and among the Borrower, Administrative Agent, Collateral Agent, the Existing Group Agents, the Lenders and the other parties from time to time parties thereto, on the Effective Date immediately prior to the effectiveness of this Action, and KeyBank National Association, in its capacity as a Group Agent (“ KB Agent ”) and as Committed Lender (“ KB Committed Lender ”), and ING Capital LLC, in its capacity as a Group Agent (“ ING Agent ”, and together with KB Agent, the “ Additional Group Agents ”) and as Committed Lender (“ ING Committed Lender ”, and together with KB Committed Lender, the “ Additional Committed Lenders ”), from and after the Effective Date upon the effectiveness of this Action. As used in this Action, capitalized terms which are not defined herein shall have the meanings ascribed to such terms in the Loan Agreement .

A. The Borrower, the Required Group Agents, the Administrative Agent and the Collateral Agent desire to amend the Loan Agreement as set forth herein.

B. The Borrower has requested an Incremental Loan Commitment Increase of $150,000,000 and has submitted to the Administrative Agent an Incremental Loan Commitment Increase Notice as set forth in Section 2.9(a) of the Loan Agreement and each of the Committed Lenders wishes to decline to participate in such Incremental Loan Commitment Increase pursuant to Section 2.9(b) of the Loan Agreement;

C. The Borrower has invited each of KB Committed Lender and ING Committed Lender, each an Eligible Assignee, to become Committed Lenders under the Loan Agreement;

D. KB Agent, KB Committed Lender, ING Agent and ING Committed Lender desire to become parties to the Loan Agreement, and the Majority Group Agents desire to agree to the accession of KB Committed Lender and ING Committed Lender, each as a Committed Lender under the Loan Agreement, and the designation of KB Agent and ING Agent, respectively, as Group Agents;

E. In connection with the accession of the Additional Committed Lenders and the Additional Group Agents, each of Bank of America, N.A., in its capacity as a Committed Lender (“ BA Committed Lender ”), and Deutsche Bank AG, New York Branch, in its capacity as a Committed Lender (“ DB Committed Lender ”), desires to assign a portion of its Loans to each of the Additional Committed Lenders (the “ Assignment ”);

Kronor Loan Agreement

F. Upon the effectiveness of this Action and subject to the terms and conditions of the Loan Agreement, the Committed Lenders and the Additional Committed Lenders agree to provide Commitments to the Borrower under the Loan Agreement in an aggregate principal amount equal to $650,000,000 and in the respective amounts set forth in the Amended Loan Agreement (as defined below) (the “ Commitment Increase ”);

Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, and subject to the conditions set forth herein, the parties hereto hereby agree as follows:

Section 1. Amendment. Subject to the prior satisfaction of the conditions precedent described in Section 3 hereof, the Loan Agreement will be amended as set forth in Exhibit 1 attached hereto (the “ Amended Loan Agreement ”).

Section 2. Consents to the Loan Agreement . Subject to the prior satisfaction of the conditions precedent described in Section 3 hereof:

(a) the Committed Lenders (excluding the Additional Committed Lenders) hereby decline the offer to participate in Incremental Loan Commitments pursuant to the Incremental Loan Commitment Increase Notice delivered as of the date hereof;

(b) the Required Group Agents (excluding the Additional Group Agents), the Administrative Agent and the Borrower consent to the Commitment Increase and to the accession to the Loan Agreement and the other Financing Documents of KB Committed Lender and ING Committed Lender as Committed Lenders thereunder pursuant to (i) Section 2.9(c) of the Loan Agreement (and notwithstanding any requirements set forth in Section 2.9(c) of the Loan Agreement, but without limiting Section 3 hereof) and (ii) (A) the Accession Agreement, dated as of the date hereof, by and among KB Committed Lender, KB Agent, the Administrative Agent and the Borrower (the “ KB Accession Agreement ”) and (B) the Accession Agreement, dated as of the date hereof, by and among ING Committed Lender, ING Agent, the Administrative Agent and the Borrower (the “ ING Accession Agreement ”), each substantially in the form attached as Exhibit F-1 to the Loan Agreement;

(c) the Required Group Agents (including the Additional Group Agents), consent to the amendments as set forth in the Amended Loan Agreement, with acknowledgement by each of the Administrative Agent and the Collateral Agent (solely with respect to its obligations under Article 9 of the Loan Agreement); and

(d) the Administrative Agent consents to the Assignment by each of BA Committed Lender and DB Committed Lender.

Section 3. Conditions Precedent. This Action shall be effective upon the satisfaction of the following conditions precedent:

(a) Each party to this Action shall have received counterparts of this Action, executed and delivered by each of the other parties hereto.

(b) The Administrative Agent shall have received a duly executed Incremental Loan Commitment Increase Notice.

2 Required Group Agent Action No. 3

(c) The Administrative Agent shall have received counterparts of each the KB Accession Agreement, executed and delivered by each of the parties thereto, and the ING Accession Agreement, executed and delivered by each of the parties thereto.

(d) The Administrative Agent shall have received an Assignment and Acceptance Notice, duly executed and delivered by each of BA Committed Lender, DB Committed Lender, KB Committed Lender, ING Committed Lender and the Administrative Agent.

(e) The Administrative Agent shall have received an Administrative Questionnaire and any tax forms it has requested from the Additional Committed Lenders.

(f) The Administrative Agent shall have received a certificate of the Borrower dated as of the Effective Date signed by a Responsible Officer of the Borrower (i) certifying and attaching the resolutions adopted by the Borrower approving or consenting to the increase in the Commitments provided for in this Action and (ii) certifying that each of the conditions set forth in Section 2.9(e) (except clause (x) thereof) of the Loan Agreement has been met as of the Effective Date.

(g) The Administrative Agent shall have received for its own account, and for the account of each Committed Lender or Additional Committed Lender entitled thereto, all fees due and payable as of the Effective Date pursuant to Section 2.3 of the Loan Agreement and all costs and expenses described in Section 6 of this Action, for which invoices have been presented in connection herewith.

Section 4. Reference to and Effect on Financing Documents. Each of the Loan Agreement and the other Financing Documents is and shall remain unchanged and in full force and effect, and, except as expressly set forth herein, nothing contained in this Action shall, by implication or otherwise, limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Administrative Agent or any of the other Secured Parties, or shall alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in each of the Loan Agreement and any other Financing Document . This Action shall also constitute a “Financing Document” for all purposes of the Loan Agreement and the other Financing Documents.

Section 5. Incorporation by Reference . Sections 10.5 ( Entire Agreement ), 10.6 ( Governing Law ), 10.7 ( Severability ), 10.8 ( Headings ), 10.11 ( Waiver of Jury Trial ), 10.12 ( Consent to Jurisdiction ), 10.14 ( Successors and Assigns ) and 10.16 ( Binding Effect; Counterparts ) of the Loan Agreement are hereby incorporated by reference herein, mutatis mutandis.

Section 6. Expenses. The Borrower agrees to reimburse the Administrative Agent in accordance with Section 10.4(b) of the Loan Agreement for its reasonable and documented out-of-pocket expenses in connection with this Action, including reasonable and documented fees and out-of-pocket expenses of legal counsel.

3 Required Group Agent Action No. 3

Section 7. Construction. The rules of interpretation specified in Section 1.2 of the Loan Agreement also apply to this Action, mutatis mutandis.

[ Signature Pages Follow ]

4 Required Group Agent Action No. 3

IN WITNESS WHEREOF, the parties hereto have caused this Action to be duly executed by their respective authorized officers as of the day and year first written above.


MEGALODON SOLAR, LLC ,
as Borrower

By:	/s/ Brad W. Buss
Name:	Brad W. Buss
Title:	Treasurer


BANK OF AMERICA, N.A. ,
as a Group Agent

By:	/s/ Priscilla Baker
Name:	Priscilla Baker
Title:	Assistant Vice President

CREDIT SUISSE AG, NEW YORK BRANCH ,
as a Group Agent

By:	/s/ Oliver Nisenson
Name:	Oliver Nisenson
Title:	Director

By:	/s/ Eric McCutcheon
Name:	Eric McCutcheon
Title:	Vice President

DEUTSCHE BANK AG, NEW YORK BRANCH ,
as a Group Agent

By:	/s/ Vinod Mukani
Name:	Vinod Mukani
Title:	Director

By:	/s/ Vanessa Lamort De Gail
Name:	Vanessa Lamort De Gail
Title:	Director

[Signature Page to Required Group Agent Action No. 3]


Solely with respect to Sections 2(c), 3, 4, 5 and 7:
ING CAPITAL LLC
as a Group Agent

By:	/s/ Erwin Thomet
Name:	Erwin Thomet
Title:	Managing Director

By:	/s/ Thomas Cantello
Name:	Thomas Cantello
Title:	Director

Solely with respect to Sections 2(c), 3, 4, 5 and 7:
KEYBANK NATIONAL ASSOCIATION
as a Group Agent

By:	/s/ Lisa A. Ryder
Name:	Lisa A. Ryder
Title:	Vice President

Acknowledged by:
BANK OF AMERICA, N.A.
as Administrative Agent and Collateral Agent

By:	/s/ Priscilla Baker
Name:	Priscilla Baker
Title:	Assistant Vice President

[Signature Page to Required Group Agent Action No. 3]

EXHIBIT 1

Amended Loan Agreement

Exhibit 1

Exhibit 1 to Required Group Agent Action No. 3

“Cancelled System” or “Overdue System” (or an equivalent term or designation of similar meaning) pursuant to the applicable Project Document.

“ Total Loan Commitment ” means the aggregate principal amount of the Group Limits hereunder as such amount may be (a) reduced from time to time pursuant to Section 2.2(c) , or (b) increased pursuant to Section 2.9 . The Total Loan Commitment as of the date of this Agreement is ~~Five~~ Six Hundred Fifty Million Dollars ($ ~~500,000,000~~ 650,000,000 ).

“ True-Up Report ” means that report delivered by SolarCity or the applicable Lessor pursuant to the terms of the applicable Project Document of the applicable Subject Fund.

“ Type ” when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term “Rate” shall mean the CP Rate, LIBO Rate and the Base Rate.

“ UCC ” means the Uniform Commercial Code of the jurisdiction the law of which governs the document in which such term is used or which governs the creation or perfection of the Liens granted thereunder.

“ Undrawn Fees ” has the meaning given in Section 2.3(a) .

“ U.S. Tax Compliance Certificate ” has the meaning given in Section 2.4(g)(ii)(B)(3) .

“ U.S. Person ” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

“ Watched Fund ” has the meaning given in Appendix 2 .

1.1 Rules of Interpretation . Except as otherwise expressly provided, the rules of interpretation set forth below shall apply to this Agreement and the other Financing Documents:

(a) The singular includes the plural and the plural includes the singular. The definitions of terms apply equally to the singular and plural forms of the terms defined.

(b) A reference to a Governmental Rule includes any amendment or modification to such Governmental Rule, and all regulations, rulings and other Governmental Rules promulgated under such Governmental Rule.

(d) The words “include,” “includes” and “including” are not limiting.

(e) A reference in a document to an Article, Section, Exhibit, Schedule, Annex or Appendix is to the Article, Section, Exhibit, Schedule, Annex or Appendix of such document unless otherwise indicated. Exhibits, Schedules, Annexes or Appendices to any document shall be deemed incorporated by reference in such document. In the event of any conflict between the provisions of this Agreement (exclusive of the Exhibits, Schedules, Annexes and Appendices

Kronor Loan Agreement

(ii) immediately before and after giving effect to the Incremental Loan Commitment Increase, the Borrower is in pro forma compliance with the Borrowing Base Requirements;

(iii) no Sweep Event or Subject Fund Sweep Event has occurred and remains ongoing;

(iv) since the delivery of the most recent financial statements of the Borrower delivered pursuant to Section 5.3 , no Material Adverse Effect has occurred or is continuing;

(v) the representations and warranties set forth in Section 4.1 and in each other Financing Document shall be true and correct in all material respects as of the Incremental Loan Increase Date (unless such representation or warranty relates solely to an earlier date, in which case it shall have been true and correct in all material respects as of such earlier date);

(vi) the Administrative Agent shall have received a duly executed Incremental Loan Commitment Increase Notice and any fee letters entered into in connection with such Incremental Loan Commitment Increase;

(vii) the Administrative Agent shall have received for its own account, and for the account of each Incremental Loan Lender or New Lender (and any related new Conduit Lender) entitled thereto, all fees due and payable as of the Incremental Loan Increase Date pursuant to Section 2.3 , and all costs and expenses, including costs, fees and expenses of legal counsel, for which invoices have been presented; provided that costs, fees and expenses of legal counsel may be subject to caps as agreed to between the Borrower and the relevant party;

(viii) if requested by an Incremental Loan Lender providing an Incremental Loan Commitment Increase on such Incremental Loan Increase Date, such Incremental Loans shall be evidence by a Note; ~~and~~

(ix) the Borrower shall deliver to the Administrative Agent a certificate of the Borrower dated as of the Incremental Loan Increase Date signed by a Responsible Officer of the Borrower (x) certifying and attaching the resolutions adopted by the Borrower approving or consenting to such increase, and (y) certifying that each of the conditions set forth in this Section 2.9(e) (except clause (x) thereof) have been met as of the Incremental Loan Increase Date . ; and

(x) each Incremental Loan Lender shall have made all payments required pursuant to Section 2.9(f) in connection with such Incremental Loan Commitment Increase.

(f) ~~[Reserved]~~ Upon any Incremental Loan Increase Date on which Incremental Loan Commitments are effected pursuant to this Section 2.9, (i) (A) each of the existing Committed Lenders immediately prior to the effectiveness of the corresponding Incremental Loan Increase shall assign to each of the lenders providing such Incremental Loan Commitments, and each of

Kronor Loan Agreement

(g) the lenders providing such Incremental Loan Commitments shall purchase from each of the Committed Lenders, at the principal amount thereof plus accrued and unpaid interest as of the date of such assignment, such interests in the Base Rate Loans and LIBO Loans made by each such existing Committed Lender outstanding on such Incremental Loan Increase Date and (B) each of the lenders providing such Incremental Loan Commitments shall make Incremental Loans and, upon the making of such Incremental Loans, the Borrower shall repay or be deemed to have repaid outstanding CP Rate Loans (provided that (v) the requirements of Section 2.1(b)(ii)(B) shall not apply to such repayment and instead all accrued and unpaid interest in respect of such CP Rate loans, plus any amounts due under Section 2.7(a)(i) in respect of the repayment thereof on such Incremental Loan Increase Date, shall be payable by the Borrower on the next Scheduled Payment Date; (w) none of the requirements of Section 2.1(f)(iii)(A) or (C) shall apply to any such repayment; (x) for administrative convenience, the proceeds of each such Incremental Loan shall be transferred directly to the account specified by each Conduit Lender to be applied as the foregoing repayment of the CP Rate Loans, and the Borrower shall be deemed to have received the proceeds of such new Incremental Loans for all purposes hereunder immediately upon each such Conduit Lender’s receipt thereof; (y) none of the requirements or conditions of Section 2.1(a)(iii), Section 2.1(a)(iv), Section 2.1(e)(i), Section 2.1(e)(ii) and Section 3.2 shall apply to any such Incremental Loan; and (z) no such Incremental Loan shall be deemed to be a Borrowing for purposes of Section 2.1(a)(i)(B)(x)), in the aggregate (with respect to clauses (A) and (B)) as shall be necessary in order that, after giving effect to all such assignments, purchases, repayments and Incremental Loans, such Loans will be held by existing Lenders and lenders providing such Incremental Loan Commitments ratably in accordance with their Commitments after giving effect to the addition of such Incremental Loan Commitments to the Commitments, (ii) each Incremental Loan Commitment shall be deemed for all purposes a Commitment and each Incremental Loan made thereunder shall be deemed, for all purposes, a Loan and (iii) each lender providing such Incremental Loan Commitments and Incremental Loans shall become a Lender with respect to the Commitments and all matters relating thereto. Notwithstanding anything to the contrary herein, (I) no Borrowing Notice, Borrowing Base Certificate, Aggregate Advance Model or any other notice from, delivery by or consent of the Borrower shall be required in connection with any of the foregoing assignments, purchases, repayments and Incremental Loans, (II) the minimum borrowing requirements in Section 2.1(a)(ii) and the minimum prepayment requirements in Section 2.1(f)(i) shall not apply to the transactions effected pursuant to this Section 2.9(f) and (III) no failure of any Lender (including any lender providing any Incremental Loan Commitment) to observe, perform or otherwise fully comply with the terms of this Section 2.9(f) shall directly or indirectly result in or be deemed to constitute a Default or Event of Default or otherwise prejudice any of the Borrower’s rights under this Agreement and the other Financing Documents (provided any such Lender shall be deemed to be a Defaulting Lender for all purposes hereunder until all such failures have been remedied). For the avoidance of doubt, none of the transactions effected pursuant to this Section 2.9(f) shall reduce or otherwise modify the Commitments of any Lender.

(h) For the avoidance of doubt, no Incremental Loan Commitments (if any) shall result in any change to the Loan Maturity Date, Applicable Margin or fees applicable to the other Commitments of existing Lenders.

(i) Conflicting Provisions . This Section 2.9 shall supersede any provisions in Section 9.10 to the contrary.

Kronor Loan Agreement

ANNEX 3

SCHEDULE OF LENDER COMMITMENTS


Lender	Commitment
Bank of America, N.A.	$175,000,000
Credit Suisse AG, Cayman Islands Branch	$175,000,000
Deutsche Bank AG, New York Branch	$150,000,000
KeyBank National Association	$50,000,000
ING Capital LLC	$100,000,000

Annex

Kronor Loan Agreement

Exhibit 10.19d

REQUIRED GROUP AGENT ACTION NO. 4

This REQUIRED GROUP AGENT ACTION NO. 4 (this “ Action ”), dated as of August 25, 2015 (the “ Effective Date ”), is entered into by and among Megalodon Solar, LLC, a Delaware limited liability company (“ Borrower ”), Bank of America, N.A., as the Administrative Agent (“ Administrative Agent ”), the Collateral Agent for the Secured Parties (“ Collateral Agent ”) and the Depositary for the Secured Parties (the “ Depositary ”) and each of Bank of America, N.A. (“ BA Agent ”), Credit Suisse AG, New York Branch (“ CS Agent ”), Deutsche Bank AG, New York Branch (“ DB Agent ”), ING Capital LLC (“ ING Agent ”) and KeyBank National Association (“ KB Agent ”, and collectively with BA Agent, CS Agent, DB Agent and ING Agent, the “ Group Agents ”), as Group Agents party to the Loan Agreement, dated as of May 4, 2015 (as amended, the “ Loan Agreement ”), by and among the Borrower, Administrative Agent, Collateral Agent, the Group Agents, the Lenders and the other parties from time to time party thereto. As used in this Action, capitalized terms which are not defined herein shall have the meanings ascribed to such terms in the Loan Agreement .

A. The Borrower has requested the Required Group Agents to provide their consent to the extension of the deadline for delivering Tax Loss Policies as required under Section 11.11(a) of the Loan Agreement (the “ Tax Loss Policy Extension ”);

B. The Required Group Agents are willing to provide their consent to the Tax Loss Policy Extension on the terms and subject to the conditions set forth in this Action; and

Section 1. Consents to the Loan Agreement . Subject to the prior satisfaction of the conditions precedent described in Section 2 hereof, the Administrative Agent and the Required Group Agents agree (A) to extend the deadline under Section 11.11(a) of the Loan Agreement with respect to delivery of a Tax Loss Policy to November 25, 2015 (such date, the “ Required Delivery Date ”) and (B) that failure to deliver any Tax Loss Policy before the Required Delivery Date shall not constitute a Default or Event of Default.

Section 2. Conditions Precedent. This Action shall be effective upon the receipt by the Administrative Agent of counterparts of this Action, executed and delivered by each of the other parties hereto.

Section 3. Reference to and Effect on Financing Documents. Each of the Loan Agreement and the other Financing Documents is and shall remain unchanged and in full force and effect, and, except as expressly set forth herein, nothing contained in this Action shall, by implication or otherwise, limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Administrative Agent or any of the other Secured Parties, or shall alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in each of the Loan Agreement and any other Financing Document . This Action shall also constitute a “Financing Document” for all purposes of the Loan Agreement and the other Financing Documents.

Required Group Agent Action No. 4

Section 4. Incorporation by Reference . Sections 10.5 ( Entire Agreement ), 10.6 ( Governing Law ), 10.7 ( Severability ), 10.8 ( Headings ), 10.11 ( Waiver of Jury Trial ), 10.12 ( Consent to Jurisdiction ), 10.14 ( Successors and Assigns ) and 10.16 ( Binding Effect; Counterparts ) of the Loan Agreement are hereby incorporated by reference herein, mutatis mutandis.

Section 5. Construction. The rules of interpretation specified in Section 1.2 of the Loan Agreement also apply to this Action, mutatis mutandis.

[ Signature Pages Follow ]

2 Required Group Agent Action No. 4

IN WITNESS WHEREOF, the parties hereto have caused this Action to be duly executed by their respective authorized officers as of the day and year first written above.


MEGALODON SOLAR, LLC ,
as Borrower

By:	/s/ Brad W. Buss
Name:	Brad W. Buss
Title:	Treasurer

[ Signature Page to Required Group Agent Action No. 4 ]


BANK OF AMERICA, N.A. ,
as a Group Agent

By:	/s/ Sheikh Omer-Farooq
Name:	Sheikh Omer-Farooq
Title:	Director

CREDIT SUISSE AG, NEW YORK BRANCH ,
as a Group Agent

By:	/s/ Oliver Nisenson
Name:	Oliver Nisenson
Title:	Director

By:	/s/ Eric McCutcheon
Name:	Eric McCutcheon
Title:	Vice President

DEUTSCHE BANK AG, NEW YORK BRANCH ,
as a Group Agent

By:	/s/ Evelyn Peters
Name:	Evelyn Peters
Title:	Vice President

By:	/s/ Vanessa Lamort De Gail
Name:	Vanessa Lamort De Gail
Title:	Director

ING CAPITAL, LLC ,
as a Group Agent

By:	/s/ Thomas Cantello
Name:	Thomas Cantello
Title:	Director

By:	/s/ Polina Gerasimova
Name:	Polina Gerasimova
Title:	Director

[ Signature Page to Required Group Agent Action No. 4 ]


KEYBANK NATIONAL ASSOCIATION,
as a Group Agent

By:	/s/ Benjamin C. Cooper
Name:	Benjamin C. Cooper
Title:	Vice President, Portfolio Manager

Acknowledged by:
BANK OF AMERICA, N.A.
as Administrative Agent and Collateral Agent

By:	/s/ Darleen R. DiGrazia
Name:	Darleen R. DiGrazia
Title:	Vice President

[ Signature Page to Required Group Agent Action No. 4 ]

Exhibit 10.19e

CONFIDENTIAL TREATMENT REQUESTED

Certain portions of this document have been omitted pursuant to a request for Confidential Treatment and, where applicable, have been marked with “[***]” to indicate where omissions have been made. The confidential material has been filed separately with the Securities and Exchange Commission.

REQUIRED GROUP AGENT ACTION NO. 5

This REQUIRED GROUP AGENT ACTION NO. 5 (this “ Action ”), dated as of August 27, 2015 (the “ Effective Date ”), is entered into by and among Megalodon Solar, LLC, a Delaware limited liability company (“ Borrower ”), Bank of America, N.A., as the Administrative Agent (“ Administrative Agent ”), the Collateral Agent for the Secured Parties (“ Collateral Agent ”) and the Depositary for the Secured Parties (the “ Depositary ”) and each of Bank of America, N.A. (“ BA Agent ”), Credit Suisse AG, New York Branch (“ CS Agent ”), Deutsche Bank AG, New York Branch (“ DB Agent ”), ING Capital LLC (“ ING Agent ”) and KeyBank National Association (“ KB Agent ”, and collectively with BA Agent, CS Agent and ING Agent, the “ Group Agents ”), as Group Agents party to the Loan Agreement, dated as of May 4, 2015 (as amended, the “ Loan Agreement ”), by and among the Borrower, Administrative Agent, Collateral Agent, the Group Agents, the Lenders and the other parties from time to time party thereto. As used in this Action, capitalized terms which are not defined herein shall have the meanings ascribed to such terms in the Loan Agreement .

A. The Borrower has requested the Required Group Agents to provide their consent to the addition and inclusion to the Loan Agreement and the other Financing Documents of (the “ Subject Fund Transactions ”): [***] (“ [***] ”), as a Subject Fund, and [***] (“ [***] ”), as a Borrower Subsidiary Party (collectively, [***] and [***], the “ New Entities ”);

B. The Required Group Agents are willing to provide their consent to the Subject Fund Transactions on the terms and subject to the conditions set forth in this Action; and

C. The Borrower, the Required Group Agents, the Administrative Agent, the Collateral Agent and the Depositary, as applicable, desire to amend the Loan Agreement as set forth herein.

Section 1. Amendments. Subject to the prior satisfaction of the conditions precedent described in Section 3 hereof, the Loan Agreement will be amended as follows (clauses (a) – (d) below, collectively, the “ Loan Agreement Amendments ”):

(a) Appendix 1 of the Loan Agreement shall be amended and restated as set forth in Exhibit 1 attached hereto;

(b) Appendix 4 of the Loan Agreement shall be amended and restated as set forth in Exhibit 2 attached hereto;

Required Group Agent Action No. 5

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

(d) the proviso in Section 11.11(b) of the Loan Agreement shall be amended and restated as follows:

“ provided , however , no Tax Loss Policy shall be required for any Subject Fund (i) with an Inverted Lease Structure in respect of which (A) such payments to be made by the Lessee to the Lessor as rent on any date under the lease may not be reduced as a result of any Tax Loss and (B) the amount of distributions on any date from the Lessor to the Borrower may not be reduced as a result of any Tax Loss or non-payment of a Tax Loss Indemnity, (ii) in respect of which the Investor has expressly subordinated all payments in respect of any Tax Loss Indemnity to the payment of Obligations under the Financing Documents, (iii) with a Partnership Flip Structure in respect of which (A) the Managing Member has a purchase option with (x) a Purchase Option date that is fixed and not based upon the achievement of a target internal rate of return or otherwise impacted in any way by any Tax Loss or non-payment of a Tax Loss Indemnity and (y) a Purchase Option Price (as defined in the CADA) that is not impacted in any way by any Tax Loss or non-payment of a Tax Loss Indemnity and (B) the amount of distributions on any date from the Partnership to the Partnership Managing Member may not be reduced as a result of any Tax Loss or non-payment of a Tax Loss Indemnity or (iv) that benefits from other credit support covering substantially the same risks as a Tax Loss Policy and otherwise reasonably acceptable to the Administrative Agent.”

Section 2. Consents to the Loan Agreement . Subject to the prior satisfaction of the conditions precedent described in Section 3 hereof:

(a) the Required Group Agents consent to the Loan Agreement Amendments, with acknowledgement by each of the Administrative Agent and the Collateral Agent (solely with respect to its obligations under Article 9 of the Loan Agreement); and

(b) the Administrative Agent and the Required Group Agents consent to the Subject Fund Transactions pursuant to and in accordance with Section 2.10(a) of the Loan Agreement .

Section 3. Conditions Precedent. This Action shall be effective upon the satisfaction of the following conditions precedent:

(a) Each party to this Action shall have received counterparts of this Action, executed and delivered by each of the other parties hereto.

(b) The Administrative Agent shall have received a certificate of the Borrower dated as of the Effective Date signed by a Responsible Officer of the Borrower (i) making the Tax Equity Representations with respect to [***] and (ii) certifying that each representation and warranty of the Borrower contained in Article 4 of the Loan Agreement is true and correct in all material respects as of the Effective Date (unless such representation or warranty relates solely to an earlier date, in which case it shall have been true and correct in all material respects as of such earlier date) other than those representations and warranties that are modified by materiality by their own terms, which shall be true and correct in all respects as of the Effective Date (unless such representation or warranty relates solely to an earlier date, in which case it shall have been true and correct in all respects as of such earlier date).

2 Required Group Agent Action No. 5

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

(c) The Borrower shall have delivered or caused to be delivered to the Administrative Agent a Tax Equity Required Consent from [***] in connection with the Subject Fund Transactions.

(d) Each the Administrative Agent and each Group Agent shall have received an opinion, dated no earlier than the Effective Date, of Wilson Sonsini Goodrich & Rosati, counsel to the Loan Parties, the Borrower Subsidiary Parties and SolarCity, in form and substance reasonably acceptable to the Administrative Agent, the Collateral Agent and the Majority Group Agents, with respect to the Subject Fund Transactions.

(e) Each the Administrative Agent and each Group Agent shall have received opinions, dated no earlier than the Effective Date, of Proskauer Rose LLP, special bankruptcy counsel to the Loan Parties, the Borrower Subsidiary Parties and SolarCity, each in form and substance reasonably acceptable to the Administrative Agent, the Collateral Agent and the Majority Group Agents, with respect to the Subject Fund Transactions.

(f) The Administrative Agent and the Collateral Agent shall have received (i) searches of UCC filings in the jurisdiction of incorporation or formation, as applicable, of each of the New Entities and the Borrower and each jurisdiction where a filing would need to be made in order to perfect the security interest of the Collateral Agent (for the benefit of the Secured Parties) in the Collateral in respect of the New Entities (the “ New Collateral ”), (ii) copies of the financing statements on file in such jurisdictions and evidence that no liens exist on the New Collateral pledged by [***] and the Borrower other than Permitted Liens of the type set forth in clauses (b), (c) or (d) of the definition thereof and (iii) copies of tax lien, judgment and bankruptcy searches in such jurisdictions.

(g) The Collateral Agent shall have received all documentation in connection with the New Collateral, including (i) a Joinder Agreement in the form attached as Exhibit C to the Security Agreement, executed by each of [***], the Collateral Agent and the Borrower, dated as of the Effective Date, (ii) a Joinder Agreement in the form attached as Exhibit B-1 to the CADA, executed by each of [***], the Collateral Agent and the Borrower, dated as of the Effective Date, (iii) a Joinder Agreement in the form attached as Exhibit C to the Borrower Subsidiary Party Security Agreement, executed by each of [***] and the Collateral Agent, dated as of the Effective Date and (iv) any other data, documentation, analysis or report reasonably requested by the Administrative Agent with respect to the New Entities.

(h) (i) The UCC financing statements relating to the New Collateral shall have been duly filed in each office and in each jurisdiction where required in order to create and perfect the first priority Lien and security interest set forth in the Collateral Documents (as supplemented and as such term is defined in the Loan Agreement, as amended) and (ii) the Borrower shall have properly delivered or caused to be delivered to the Collateral Agent all New Collateral in which the Lien and security interest described above is permitted to be perfected by possession or control, including delivery of original certificates representing all issued and outstanding Equity Interests in [***] and the pledged interests in [***] pursuant to the Borrower Subsidiary Party Security Agreement, along with the applicable blank transfer powers and proxies .

(i) Each of the other conditions precedent as set forth in Section 3.4 of the Loan Agreement shall have been satisfied with respect to the Subject Fund Transactions.

3 Required Group Agent Action No. 5

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

(j) The Administrative Agent shall have received for its own account all costs and expenses described in Section 6 of this Action, for which invoices have been presented in connection herewith.

Section 7. Construction. The rules of interpretation specified in Section 1.2 of the Loan Agreement also apply to this Action, mutatis mutandis.

[ Signature Pages Follow ]

4 Required Group Agent Action No. 5

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

IN WITNESS WHEREOF, the parties hereto have caused this Action to be duly executed by their respective authorized officers as of the day and year first written above.


MEGALODON SOLAR, LLC,
as Borrower

By:	/s/ Brad W. Buss
Name:	Brad W. Buss
Title:	Treasurer

[ Signature Page to Required Group Agent Action No. 5 ]

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.


BANK OF AMERICA, N.A. ,
as a Group Agent

By:	/s/ Sheikh Omer-Farooq
Name:	Sheikh Omer-Farooq
Title:	Director

CREDIT SUISSE AG, NEW YORK BRANCH,
as a Group Agent

By:	/s/ Oliver Nisenson
Name:	Oliver Nisenson
Title:	Director

By:	/s/ Eric McCutcheon
Name:	Eric McCutcheon
Title:	Vice President

DEUTSCHE BANK AG, NEW YORK BRANCH ,
as a Group Agent

By:	/s/ Evelyn Peters
Name:	Evelyn Peters
Title:	Vice President

By:	/s/ Gareth John
Name:	Gareth John
Title:	Director

ING CAPITAL, LLC ,
as a Group Agent

By:	/s/ Thomas Cantello
Name:	Thomas Cantello
Title:	Director

By:	/s/ Polina Gerasimova
Name:	Polina Gerasimova
Title:	Director

[ Signature Page to Required Group Agent Action No. 5 ]

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.


KEYBANK NATIONAL ASSOCIATION ,
as a Group Agent

By:	/s/ Benjamin C. Cooper
Name:	Benjamin C. Cooper
Title:	Vice President, Portfolio Manager

Acknowledged by:
BANK OF AMERICA, N.A.
as Administrative Agent and Collateral Agent

By:	/s/ Darleen R. DiGrazia
Name:	Darleen R. DiGrazia
Title:	Vice President

[ Signature Page to Required Group Agent Action No. 5 ]

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

EXHIBIT 1

APPENDIX 1

ADVANCE RATE

The “Advance Rate” means

(i) For a Subject Fund the following percentages:


Subject Fund	Advance Rate	Cash Sweep Fund or Non-Cash Sweep Fund
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]

(ii) In respect of any Potential New Fund that becomes a Subject Fund, a percentage as shall be determined in accordance with this Appendix 1 following the completion of due diligence by the Administrative Agent, which by way of example shall be:


Advance Rate
For each Cash Sweep Fund, Non-Cash Sweep Fund and Other Structure, the Advance Rate will be the percentage determined for each System in such Subject Fund based on the “Type of Fund,” in accordance with the table below.
Type of Fund
Cash Sweep Fund (baseline: CB (see below))	CB
Non Cash Sweep Fund ([***]% baseline)	[***]%

Exhibit 1

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

Other Non-Financed Structure

( [***] % baseline)

[***]%

Other Financed Structure

[***]%

“ CB ” or “ Cash Sweep Fund Baseline ” means, the lesser of (a) [***]% and (b) the percentage obtained by dividing (i) the maximum amount of debt that can be fully supported by Net Cash Flows distributable to the Managing Member(s) of such Subject Fund assuming interest is accruing at the Default Rate when applying the ITC Downside Case to that particular Subject Fund and only that Subject Fund by (ii) the Discounted Solar Asset Balance of such Subject Fund.

“ ITC Downside Case ” means a scenario in which a 30% reduction in fair market value occurs in the first month that a Subject Fund is included in the Available Borrowing Base and the Aggregate Advance Model is adjusted to calculate the Net Cash Flows distributable to the Managing Member(s) of such Subject Fund in light of such reduction in fair market value and any applicable Cash Sweep Event (as defined in Appendix 7 ).

For avoidance of doubt, the amounts set forth in this clause (ii) are indicative subject to final determination by the Administrative Agent at the time such Subject Fund is included in the Available Borrowing Base;

(iii) [Reserved].

(iv) All PV Systems in any Watched Fund shall have an Advance Rate of 0% for purposes of calculating the Available Borrowing Base. For avoidance of doubt, this shall include any PV Systems in a Watched Fund that were financed in previous tranches and whose Net Cash Flows were incorporated in previous Available Borrowing Base calculations.

(v) To the extent that, despite negotiating in good faith, the Administrative Agent and the Borrower cannot agree on the Advance Rate under clause (ii) of this Appendix 1 , the Advance Rate determined by the Administrative Agent, acting at the direction of the Majority Group Agents, shall prevail.

Exhibit 1

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

EXHIBIT 2

APPENDIX 4

TAX EQUITY STRUCTURES, PARTNERSHIPS, LESSOR PARTNERSHIPS, LESSORS, SUBJECT FUNDS, MANAGING MEMBERS, FUNDED SUBSIDIARIES, LESSEES, CASH SWEEP DESIGNATIONS AND INVESTORS


Tax Equity Structure	Partnership / Lessor Partnership (Subject Fund)	Partnership Managing Member / Lessor Partnership Managing Member	Funded Subsidiaries (Subject Fund and Managing Member, if any)	Lessee	Cash-Sweep Fund or Non-Cash Sweep Fund	Investor(s)
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]	[***]

Exhibit 2

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

EXHIBIT 3

APPENDIX 5

PROJECT DOCUMENTS

[***] Subject Fund

Limited Liability Company Agreement of [***] , dated as of [***] , by and between [***] and [On File with Administrative Agent].

Amendment No. 1 to Limited Liability Company Agreement of [***] , dated as of [***] , by and between [***] and [On File with Administrative Agent].

Amendment No. 2 to Limited Liability Company Agreement of [***] , dated as of [***] , by and between [***] and [On File with Administrative Agent].

Second Amended and Restated Limited Liability Company Agreement of [***] , dated as of [***] , by [***] .

Maintenance Services Agreement, dated as of [***] , by and between SolarCity and [***] .

Master Development, EPC & Purchase Agreement, dated as of [***] , by and between SolarCity and [***] .

Administrative Services Agreement, dated as of [***] , by and between SolarCity and [***] .

Amendment No. 1 to Master Development, EPC & Purchase Agreement, dated as of [***] , by and between [***] .

[***] Subject Fund

Limited Liability Company Agreement of [***] , dated as of [***] , by and between [***] and [***] .

Amendment No. 1 to Limited Liability Company Agreement of [***] , dated as of [***] , by and between [***] and [***] .

Amendment No. 2 to Limited Liability Company Agreement of [***] , dated as of [***] , by and between [***] and [***].

Second Amended and Restated Limited Liability Company Agreement of [***] , dated as of [***] , by [***] .

Maintenance Services Agreement, dated as of [***] , by and between SolarCity and [***] .

Exhibit 3

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

Master Development, EPC & Purchase Agreement, dated as of [***] , by and between SolarCity and [***] .

Amendment No. 1 to Master Development, EPC & Purchase Agreement, dated as of [***] , by and between SolarCity and [***] .

Amendment No. 2 to Master Development, EPC & Purchase Agreement, dated as of [***] , by and between SolarCity and [***] .

Guaranty, dated as of [***] , from SolarCity in favor of [***] and [***] .

Guaranty, dated as of [***] , from [On File with Administrative Agent] in favor of [***] .

Asset Management Agreement, dated as of [***] , by and between SolarCity and [***] .

Affirmation Agreement, dated as of [***] , by [On File with Administrative Agent] to [***] .

[***] Subject Fund

Master Lease, dated as of [***] , by and between [***] and [***] .

Equity Capital Contribution Agreement, dated as of [***] , by and among SolarCity, [***] and [***] .

Amendment to Equity Capital Contribution Agreement, dated as of [***] (to add [***] as a Project State).

Operating Agreement of [***] , dated as of [***] , by and between [***] and [***] .

Operating Agreement of [***] , dated as of [***] , by and among [On File with Administrative Agent], [***] and [***] .

Second Amended and Restated Limited Liability Company Agreement of [***] dated as of [***] , by [***] .

Pass-Through Agreement, dated as of [***] , by and between [***] and [***] .

Guaranty, dated as of [***] , from SolarCity in favor of [On File with Administrative Agent], OPF [***] and [***] .

[***] Subject Fund

Master Lease, dated as of [***] , by and between [***] and [***] .

Exhibit 3

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

Equity Capital Contribution Agreement, dated as of [***] , by and among SolarCity, [***] and [***] .

Amendment to Equity Capital Contribution Agreement, dated as of [***] (to add [***] as a Project State) by and among SolarCity, [***] and [***] .

First Amendment to Equity Capital Contribution Agreement, dated as of [***] , by and among SolarCity, [***] and [***] .

Operating Agreement of [***] , dated as of [***] , by and between [***] and [***] .

Operating Agreement of [***] , dated as of [***] , by and between [On File with Administrative Agent] and [***] .

Second Amended and Restated Limited Liability Company Agreement of [***] dated as of [***] , by [***] .

Pass-Through Agreement, dated as of [***] , by and between [***] and [***] .

Guaranty, dated as of [***] , from SolarCity in favor of [On File with Administrative Agent] and [***] .

[***] Subject Fund

Limited Liability Company Agreement of [***] , dated as of [***] , by and between [***] and [***] .

Second Amended and Restated Limited Liability Company Agreement of [***] , dated as of [***] , by [***] .

Maintenance Services Agreement, dated as of [***] , by and between SolarCity and [***] .

Master Development, EPC & Purchase Agreement, dated as of [***] , by and between SolarCity and [***] .

Administrative Services Agreement, dated as of [***] , by and between SolarCity and [***] .

Guaranty, dated as of [***] , by SolarCity in favor of [***] .

Guaranty, dated as of [***] , by [On File with Administrative Agent], in favor of [***] .

Transition Manager Agreement, dated as of [***] , by and among [***] , SolarCity and [***] .

Exhibit 3

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

Amendment No. 1 to the Transition Management Agreement, dated as of [***] , by and among [***] , SolarCity and [***] .

[***] Subject Fund

Limited Liability Company Agreement of [***] , dated as of [***] , by and among [***] , [On File with Administrative Agent] and [On File with Administrative Agent].

Amended and Restated Limited Liability Company Agreement of [***] , dated as of [***] , by [***] .

Maintenance Services Agreement, dated as of [***] , by and between SolarCity and [***] .

Master Development, EPC & Purchase Agreement, dated as of [***] , by and between SolarCity and [***] .

Administrative Services Agreement, dated as of [***] , by and between SolarCity and [***] .

Guaranty, dated as of [***] , by SolarCity in favor of [On File with Administrative Agent] and [On File with Administrative Agent].

Transition Manager Agreement, dated as of [***] , by and among [***] , SolarCity and [***] .

[***] Subject Fund

Amended and Restated Limited Liability Company Agreement of [***] , dated as of [***] , by [***] .

Contribution Agreement (Systems), dated as of [***] , by and among [***] , [***] , [***] and [***] .

Maintenance Services Agreement, dated as of [***] , by and between SolarCity and [***] .

Administrative Services Agreement, dated as of [***] , by and between SolarCity and [***] .

[***] Subject Fund

Limited Liability Company Agreement of [***] , dated as of [***] , by and between [***] and [On File with Administrative Agent]

Amended and Restated Limited Liability Company Agreement of [***] , dated as of [***] , by [***] .

Exhibit 3

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

Maintenance Services Agreement, dated as of [***] , by and between SolarCity and [***] .

Administrative Services Agreement, dated as of [***] , by and between SolarCity and [***] .

Master Development, EPC & Purchase Agreement, dated as of [***] , by and between SolarCity and [***] .

Guaranty, dated as of [***] , from SolarCity in favor of [On File with Administrative Agent].

Exhibit 3

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

Exhibit 10.19f

CONFIDENTIAL TREATMENT REQUESTED

REQUIRED GROUP AGENT ACTION NO. 7

This REQUIRED GROUP AGENT ACTION NO. 7 (this “ Action ”), dated as of September 30, 2015 (the “ Effective Date ”), is entered into by and among Megalodon Solar, LLC, a Delaware limited liability company (“ Borrower ”), Solar Aquarium Holdings, LLC, a Delaware limited liability company (“ Member ”), Bank of America, N.A., as the Administrative Agent (“ Administrative Agent ”), the Collateral Agent for the Secured Parties (“ Collateral Agent ”) and each of Bank of America, N.A. (“ BA Agent ”), Credit Suisse AG, New York Branch (“ CS Agent ”), Deutsche Bank AG, New York Branch (“ DB Agent ”), ING Capital LLC (“ ING Agent ”) and KeyBank National Association (“ KB Agent ”, and collectively with BA Agent, CS Agent, DB Agent and ING Agent, the “ Group Agents ”), as Group Agents party to the Loan Agreement, dated as of May 4, 2015 (as amended, the “ Loan Agreement ”), by and among the Borrower, Administrative Agent, Collateral Agent, the Group Agents, the Lenders and the other parties from time to time party thereto. As used in this Action, capitalized terms which are not defined herein shall have the meanings ascribed to such terms in the Loan Agreement .

B. The Required Group Agents are willing to provide their consent to the Subject Fund Transactions on the terms and subject to the conditions set forth in this Action;

C. The Borrower, the Required Group Agents, the Administrative Agent and the Collateral Agent desire to amend the Loan Agreement as set forth herein; and

D. The Borrower, Member, the Required Group Agents and the Collateral Agent desire to amend the Pledge and Security Agreement, dated as of May 4, 2015 (as amended, the “ Member Pledge ”), by and among Member, Borrower and the Collateral Agent, as set forth herein.

Section 1. Amendments to the Loan Agreement. Subject to the prior satisfaction of the conditions precedent described in Section 4 hereof, the Loan Agreement will be amended as follows (clauses (a) – (c) below, collectively, the “ Loan Agreement Amendments ”):

(a) Appendix 1 of the Loan Agreement shall be amended and restated as set forth in Exhibit 1 attached hereto;

Required Group Agent Action No. 7

(b) Appendix 4 of the Loan Agreement shall be amended and restated as set forth in Exhibit 2 attached hereto; and

Section 2. Amendment to the Member Pledge . Subject to the prior satisfaction of the conditions precedent described in Section 4 hereof, Section 11(c)(i)(B) of the Member Pledge shall be amended and restated as follows (the “ Member Pledge Amendment ”):

“(B) suffer to exist or consent to any Lien on any of its property, whether now owned or hereafter acquired, except for Permitted Liens and any Lien granted pursuant to that certain Pledge and Security Agreement, dated as of February 4, 2014, by and among Member, Hammerhead Solar, LLC and Bank of America, N.A., in its capacity as collateral agent thereunder, as amended, restated, supplemented, replaced or otherwise modified from time to time, provided that in no event shall any such Lien encumber any of the Collateral, or”.

Section 3. Consents . Subject to the prior satisfaction of the conditions precedent described in Section 4 hereof:

(a) the Required Group Agents consent to the Loan Agreement Amendments and the Member Pledge Amendment, with acknowledgement by each of the Administrative Agent and the Collateral Agent; and

(b) the Administrative Agent and the Required Group Agents consent to the Subject Fund Transactions pursuant to and in accordance with Section 2.10(a) of the Loan Agreement .

Section 4. Conditions Precedent. This Action shall be effective upon the satisfaction of the following conditions precedent:

(a) The Administrative Agent shall have received counterparts of this Action, executed and delivered by each of the other parties hereto.

(c) The Borrower shall have delivered or caused to be delivered to the Administrative Agent a Tax Equity Required Consent from [***] in connection with the Subject Fund Transactions.

(d) Each of the Administrative Agent and each Group Agent shall have received an opinion, dated no earlier than the Effective Date, of Wilson Sonsini Goodrich & Rosati, counsel to the Loan Parties, the Borrower Subsidiary Parties and SolarCity, in form and

2 Required Group Agent Action No. 7

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

substance reasonably acceptable to the Administrative Agent, the Collateral Agent and the Majority Group Agents, with respect to the Subject Fund Transactions.

(e) Each of the Administrative Agent and each Group Agent shall have received opinions, dated no earlier than the Effective Date, of Proskauer Rose LLP, special bankruptcy counsel to the Loan Parties, the Borrower Subsidiary Parties and SolarCity, each in form and substance reasonably acceptable to the Administrative Agent, the Collateral Agent and the Majority Group Agents, with respect to the Subject Fund Transactions.

(i) Each of the other conditions precedent as set forth in Section 3.4 of the Loan Agreement shall have been satisfied with respect to the Subject Fund Transactions.

(j) The Administrative Agent shall have received for its own account all costs and expenses described in Section 7 of this Action, for which invoices have been presented in connection herewith.

Section 5. Reference to and Effect on Financing Documents. Each of the Loan Agreement and the other Financing Documents is and shall remain unchanged and in full force and effect, and, except as expressly set forth herein, nothing contained in this Action shall, by implication or otherwise, limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Administrative Agent or any of the other Secured Parties, or shall alter, modify,

3 Required Group Agent Action No. 7

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in each of the Loan Agreement and any other Financing Document . This Action shall also constitute a “Financing Document” for all purposes of the Loan Agreement and the other Financing Documents.

Section 6. Incorporation by Reference . Sections 10.5 ( Entire Agreement ), 10.6 ( Governing Law ), 10.7 ( Severability ), 10.8 ( Headings ), 10.11 ( Waiver of Jury Trial ), 10.12 ( Consent to Jurisdiction ), 10.14 ( Successors and Assigns ) and 10.16 ( Binding Effect; Counterparts ) of the Loan Agreement are hereby incorporated by reference herein, mutatis mutandis.

Section 7. Expenses. The Borrower agrees to reimburse the Administrative Agent in accordance with Section 10.4(b) of the Loan Agreement for its reasonable and documented out-of-pocket expenses in connection with this Action, including reasonable and documented fees and out-of-pocket expenses of legal counsel.

Section 8. Construction. The rules of interpretation specified in Section 1.2 of the Loan Agreement also apply to this Action, mutatis mutandis.

[ Signature Pages Follow ]

4 Required Group Agent Action No. 7

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

IN WITNESS WHEREOF, the parties hereto have caused this Action to be duly executed by their respective authorized officers as of the day and year first written above.


MEGALODON SOLAR, LLC ,
as Borrower

By:	/s/ Brad W. Buss
Name:	Brad W. Buss
Title:	Treasurer

SOLAR AQUARIUM HOLDINGS, LLC,
as Member

By:	/s/ Brad W. Buss
Name:	Brad W. Buss
Title:	Treasurer

[ Signature Page to Required Group Agent Action No. 7 ]

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.


BANK OF AMERICA, N.A. ,
as a Group Agent

By:	/s/ Sheikh Omer-Farooq
Name:	Sheikh Omer-Farooq
Title:	Director

By:	/s/ Oliver Nisenson
Name:	Oliver Nisenson
Title:	Director

DEUTSCHE BANK AG, NEW YORK BRANCH ,
as a Group Agent

By:	/s/ Vinod Mukani
Name:	Vinod Mukani
Title:	Director

By:	/s/ Vanessa Lamort de Gail
Name:	Vanessa Lamort de Gail
Title:	Director

ING CAPITAL, LLC ,
as a Group Agent

By:	/s/ Erwin Thomet
Name:	Erwin Thomet
Title:	Managing Director

By:	/s/ Tom Cantello
Name:	Tom Cantello
Title:	Director

KEYBANK NATIONAL ASSOCIATION,
as a Group Agent

By:	/s/ Benjamin C. Cooper
Name:	Benjamin C. Cooper
Title:	Vice President, Portfolio Manager

[ Signature Page to Required Group Agent Action No. 7 ]

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.



BANK OF AMERICA, N.A.
as Administrative Agent and Collateral Agent

By:	/s/ Darleen R. DiGrazia
Name:	Darleen R. DiGrazia
Title:	Vice President

[ Signature Page to Required Group Agent Action No. 7 ]

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

EXHIBIT 1

APPENDIX 1

ADVANCE RATE

The “Advance Rate” means

(i) For a Subject Fund the following percentages:


Subject Fund	Advance Rate	Cash Sweep Fund or Non-Cash Sweep Fund
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]


Advance Rate
For each Cash Sweep Fund, Non-Cash Sweep Fund and Other Structure, the Advance Rate will be the percentage determined for each System in such Subject Fund based on the “Type of Fund,” in accordance with the table below.
Type of Fund
Cash Sweep Fund (baseline: CB (see below))	CB
Non Cash Sweep Fund ( [***] % baseline)	[***] %

Exhibit 1

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

Other Non-Financed Structure

( [***] % baseline)

[***] %

Other Financed Structure

[***] %

(iii) [Reserved].

Exhibit 1

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

EXHIBIT 2

APPENDIX 4

TAX EQUITY STRUCTURES, PARTNERSHIPS, LESSOR PARTNERSHIPS, LESSORS, SUBJECT FUNDS, MANAGING MEMBERS, FUNDED SUBSIDIARIES, LESSEES, CASH SWEEP DESIGNATIONS AND INVESTORS


Tax Equity Structure	Partnership / Lessor Partnership (Subject Fund)	Partnership Managing Member / Lessor Partnership Managing Member	Funded Subsidiaries (Subject Fund and Managing Member, if any)	Lessee	Cash-Sweep Fund or Non-Cash Sweep Fund	Investor(s)
[***]	[***]	[***]	· [***]	[***]	[***]	[***]
[***]	[***]	[***]	· [***]	[***]	[***]	[***]
[***]	[***]	[***]	· [***]	[***]	[***]	[***]
[***]	[***]	[***]	· [***]	[***]	[***]	[***]
[***]	[***]	[***]	· [***]	[***]	[***]	[***]
[***]	[***]	[***]	· [***]	[***]	[***]	[***]
[***]	[***]	[***]	· [***]	[***]	[***]	[***]
[***]	[***]	[***]	· [***]	[***]	[***]	[***]
[***]	[***]	[***]	· [***]	[***]	[***]	[***]

Exhibit 2

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

EXHIBIT 3

APPENDIX 5

PROJECT DOCUMENTS

[***] Subject Fund

Limited Liability Company Agreement of [***], dated as of [***], by and between [***] and [On File with Administrative Agent].

Amendment No. 1 to Limited Liability Company Agreement of [***], dated as of [***], by and between [***] and [On File with Administrative Agent].

Amendment No. 2 to Limited Liability Company Agreement of [***], dated as of [***], by and between [***] and [On File with Administrative Agent].

Second Amended and Restated Limited Liability Company Agreement of [***], dated as of [***], by [***].

Maintenance Services Agreement, dated as of [***], by and between SolarCity and [***].

Master Development, EPC & Purchase Agreement, dated as of [***], by and between SolarCity and [***].

Administrative Services Agreement, dated as of [***], by and between SolarCity and [***].

Amendment No. 1 to Master Development, EPC & Purchase Agreement, dated as of [***], by and between SolarCity and [***].

[***] Subject Fund

Limited Liability Company Agreement of [***], dated as of [***], by and between [***] and [***].

Amendment No. 1 to Limited Liability Company Agreement of [***], dated as of [***], by and between [***] and [***].

Amendment No. 2 to Limited Liability Company Agreement of [***], dated as of [***], by and between [***] and [***].

Second Amended and Restated Limited Liability Company Agreement of [***], dated as of [***], by [***].

Maintenance Services Agreement, dated as of [***], by and between SolarCity and [***].

Exhibit 3

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

Master Development, EPC & Purchase Agreement, dated as of [***] , by and between SolarCity and [***] .

Amendment No. 1 to Master Development, EPC & Purchase Agreement, dated as of [***], by and between SolarCity and [***].

Amendment No. 2 to Master Development, EPC & Purchase Agreement, dated as of [***], by and between SolarCity and [***].

Guaranty, dated as of [***], from SolarCity in favor of [***] and [***].

Guaranty, dated as of [***], from [On File with Administrative Agent] in favor of [***].

Asset Management Agreement, dated as of [***], by and between SolarCity and [***].

Affirmation Agreement, dated as of [***], by [On File with Administrative Agent] to [***].

[***] Subject Fund

Master Lease, dated as of [***], by and between [***] and [***].

Equity Capital Contribution Agreement, dated as of [***], by and among SolarCity, [***] and [***].

Amendment to Equity Capital Contribution Agreement, dated as of [***] (to add [***] as a Project State).

Operating Agreement of [***], dated as of [***], by and between [***] and [***].

Operating Agreement of [***], dated as of [***], by and among [On File with Administrative Agent], [***] and [***].

Second Amended and Restated Limited Liability Company Agreement of [***] dated as of [***], by [***].

Pass-Through Agreement, dated as of [***], by and between [***] and [***].

Guaranty, dated as of [***], from SolarCity in favor of [On File with Administrative Agent], [***] and [***].

[***] Subject Fund

Master Lease, dated as of [***], by and between [***] and [***].

Exhibit 3

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

Equity Capital Contribution Agreement, dated as of [***] , by and among SolarCity, [***] and [***] .

Amendment to Equity Capital Contribution Agreement, dated as of [***] (to add [***] as a Project State) by and among SolarCity, [***] and [***].

First Amendment to Equity Capital Contribution Agreement, dated as of [***], by and among SolarCity, [***] and [***].

Operating Agreement of [***], dated as of [***], by and between [***] and [***].

Operating Agreement of [***], dated as of [***], by and between [On File with Administrative Agent] and [***].

Second Amended and Restated Limited Liability Company Agreement of [***] dated as of [***], by [***].

Pass-Through Agreement, dated as of [***], by and between [***] and [***].

Guaranty, dated as of [***], from SolarCity in favor of [On File with Administrative Agent] and [***].

[***] Subject Fund

Limited Liability Company Agreement of [***], dated as of [***], by and between [***] and [***].

Second Amended and Restated Limited Liability Company Agreement of [***], dated as of [***], by [***].

Maintenance Services Agreement, dated as of [***], by and between SolarCity and [***].

Master Development, EPC & Purchase Agreement, dated as of [***], by and between SolarCity and [***].

Administrative Services Agreement, dated as of [***], by and between SolarCity and [***].

Guaranty, dated as of [***], by SolarCity in favor of [***].

Guaranty, dated as of [***], by [On File with Administrative Agent], in favor of [***].

Transition Manager Agreement, dated as of [***], by and among [***], SolarCity and [***].

Exhibit 3

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

Amendment No. 1 to the Transition Management Agreement, dated as of [***] , by and among [***] , SolarCity and [***] .

[***] Subject Fund

Limited Liability Company Agreement of [***] , dated as of [***] , by and among [***] , [On File with Administrative Agent] and [On File with Administrative Agent].

Amended and Restated Limited Liability Company Agreement of [***] , dated as of [***] , by [***].

Maintenance Services Agreement, dated as of [***], by and between SolarCity and [***].

Master Development, EPC & Purchase Agreement, dated as of [***], by and between SolarCity and [***].

Amendment No. 1 to Master Development, EPC & Purchase Agreement, dated as of [***], by and between SolarCity and [***].

Administrative Services Agreement, dated as of [***], by and between SolarCity and [***].

Guaranty, dated as of [***], by SolarCity in favor of [On File with Administrative Agent] and [On File with Administrative Agent].

Transition Manager Agreement, dated as of [***], by and among [***], SolarCity and [***].

[***] Subject Fund

Amended and Restated Limited Liability Company Agreement of [***], dated as of [***], by [***].

Contribution Agreement (Systems), dated as of [***], by and among [***], [***], [***] and [***].

Maintenance Services Agreement, dated as of [***], by and between SolarCity and [***].

Administrative Services Agreement, dated as of [***], by and between SolarCity and [***].

[***] Subject Fund

Limited Liability Company Agreement of [***], dated as of [***], by and between [***] and [On File with Administrative Agent].

Exhibit 3

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

Amendment No. 1 to Limited Liability Company Agreement of [***] , dated as of [***] , by and between [***] and [On File with Administrative Agent].

Amended and Restated Limited Liability Company Agreement of [***], dated as of [***], by [***].

Maintenance Services Agreement, dated as of [***], by and between SolarCity and [***].

Administrative Services Agreement, dated as of [***], by and between SolarCity and [***].

Master Development, EPC & Purchase Agreement, dated as of [***], by and between SolarCity and [***].

Guaranty, dated as of [***], from SolarCity in favor of [On File with Administrative Agent].

[***] Subject Fund

Limited Liability Company Agreement of [***], dated as of [***], by and between [***] and [On File with Administrative Agent].

Amended and Restated Limited Liability Company Agreement of [***], dated as of [***], by [***].

Maintenance Services Agreement, dated as of [***], by and between SolarCity Corporation and [***].

Administrative Services Agreement, dated as of [***], by and between SolarCity Corporation and [***].

Master Development, EPC & Purchase Agreement, dated as of [***], by and between SolarCity Corporation and [***].

Amendment No. 1 to Master Development, EPC & Purchase Agreement, dated as of [***], by and between SolarCity and [***].

Guaranty, dated as of [***], by and between SolarCity Corporation and [On File with Administrative Agent].

Transition Manager Agreement, dated as of [***], by and among [***], SolarCity Corporation and [***].

Exhibit 3

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302(a)
OF THE SARBANES-OXLEY ACT OF 2002

I, Lyndon R. Rive, certify that:

1) I have reviewed this Quarterly Report on Form 10-Q of SolarCity Corporation;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Lyndon R. Rive

Lyndon R. Rive

Chief Executive Officer

(Principal Executive Officer)

Date: October 30, 2015

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302(a)
OF THE SARBANES-OXLEY ACT OF 2002

I, Brad W. Buss, certify that:

1) I have reviewed this Quarterly Report on Form 10-Q of SolarCity Corporation;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Brad W. Buss

Brad W. Buss

Chief Financial Officer

(Principal Financial and Accounting Officer)

Date: October 30, 2015

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Lyndon R. Rive, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of SolarCity Corporation for the quarterly period ended September 30, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of SolarCity Corporation.

Date: October 30, 2015

/s/ Lyndon R. Rive
Lyndon R. Rive
Chief Executive Officer
(Principal Executive Officer)

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Brad W. Buss, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of SolarCity Corporation for the quarterly period ended September 30, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of SolarCity Corporation.

Date: October 30 , 2015

/s/ Brad W. Buss
Brad W. Buss
Chief Financial Officer
(Principal Financial Officer)