3. Related Party Transactions

Real Goods Solar, Inc. (“RGSE”) was a division of our company, until it was spun off in an initial public offering in 2008. On December 31, 2011, we converted our RGSE Class B common shares, which had ten votes per share, to RGSE Class A common shares, which have one vote per share. As a result of this conversion, our voting ownership decreased to approximately 37.5% and, thus, we no longer had financial control of RGSE. Accordingly, we deconsolidated RGSE and reported it as an equity method investment on our consolidated statement of operations for year ended December 31, 2012.

At December 31, 2012, we had two loans receivable from RGSE totaling $2.7 million, bearing interest at an annual rate of 10%. The loans had zero carrying value. On April 23, 2013, we agreed to convert $0.1 of the loan balance into 62,111 shares of RGSE’s Class A common stock. On November 5, 2013, we collected $2.1 million in cash from RGSE and $0.2 million of tenant improvements in settlement of the two outstanding loans made. The $2.3 million gain resulting from the collection of these loans is reported in Interest and other income on our consolidated statement of operations for the year ended December 31, 2013.

During 2013, we also sold the majority of our investment in RGSE for total net proceeds of approximately $25 million. Following the sale of the majority of our position in May 2013, our voting ownership percentage declined to below 20% and our Chairman resigned as Chairman of RGSE’s board of directors and, thus, we no longer had significant influence over RGSE. Therefore, we changed our accounting for our investment in RGSE from the equity method to the cost method. From that time forward, we have not reported any portion of RGSE’s net income or loss in our results.

During 2012 we billed RGSE $0.3 million under our Intercorporate Services Agreement. The agreement was terminated and billing ceased after 2012.

Effective January 1, 2012, we entered into an Industrial Building Lease Agreement with RGSE for office space located in our owned building in Colorado. The five year lease commenced on January 1, 2012 and has a monthly payment of approximately $36,000 plus common area maintenance and tax expenses.

As specified by our Tax Sharing Agreement with RGSE, to the extent RGSE becomes entitled to utilize certain loss carryforwards relating to periods prior to its initial public offering, it will distribute to us the tax effect (estimated to be 34% for federal income tax purposes) of the amount of such tax loss carryforwards so utilized. These net operating loss carryforwards expire beginning in 2018 if not utilized, and are subject to IRS limitations. As of December 31, 2014, $4.4 million of these net operating loss carryforwards remained available for current and future utilization, meaning that RGSE’s potential future payments to us, which would be made over a period of several years, could therefore aggregate to approximately $1.6 million based on current tax rates. These tax assets have a full valuation allowance (See Note 13 Income Taxes) based on RGSE’s current financial performance.