NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 3. ACQUISITION AND DISPOSITION Acquisition of Renewable Energy Developers On October 1, 2013, Capstone acquired 100% of the issued and outstanding shares of ReD in exchange for common shares of Capstone issued  pursuant to a plan of arrangement (the "Arrangement"). At closing, ReD shareholders received 0.26 of a Capstone common share ("Capstone Share")  and $0.001 dollars in cash in exchange for each share of ReD. Capstone issued 19,699 common shares to acquire ReD. In addition, each outstanding option to purchase ReD shares ("ReD Option") was exchanged for an option to acquire Capstone Shares ("Replacement  Option"). Each Replacement Option entitles the holder thereof to purchase 0.26026 of a Capstone Share. The obligations of ReD with respect to its outstanding common share purchase warrants have been assumed by Capstone in accordance with the terms of the warrant indenture whereby each warrant is now exercisable to receive 0.26 of a Capstone Share and $0.001 dollars in cash. Also pursuant to the Arrangement, on October 1, 2013, the 6.75% convertible unsecured subordinated debentures of ReD due December 31, 2017  (the "ReD Debentures") became convertible into Capstone Shares and a nominal amount of cash pursuant to the terms of the debenture indenture,  while remaining outstanding obligations of ReD. The Corporation has agreed to provide credit support for the ReD Debentures (TSX: CPW.DB) and ReD has agreed to provide credit support for the obligations of Capstone under its 6.50% convertible unsecured subordinated debenture (TSX: CSE.DB.A) due December 31, 2016. The acquisition was accounted for using the acquisition method of accounting, which requires that Capstone recognize the identifiable assets  acquired and liabilities assumed at their fair values on the date of acquisition. As at October 1, 2013, the non-controlling interest was calculated on the fair value of the net identifiable assets. Transaction costs on acquisition of $4,278 were expensed in the consolidated statement of income as  part of project development costs and $192 were capitalized to equity as part of the share issuance. The allocation of the purchase price is preliminary and may be revised up to 12 months after the acquisition date. Consideration at October 1, 2013 Cash 76 Share capital (1) 75,645 Warrants and share options 85 Total 75,806 (1) The fair value of theshares is calculated with reference to the quoted price of theshares of Capstone at the date of acquisition, October 1, 2013, which was $3.84 per share.  Recognized amounts of identifiable assets acquired and liabilities assumed at October 1, 2013 Fair value Working capital  (1) 437 Capital and other assets 130,029 Projects under development 12,683 Intangible assets – electricity supply and other contracts 52,041 Equity accounted investments 27,599 Less: net financial liabilities (net of $10,464 and $8,659 for cash and restricted cash acquired, respectively) (115,825) Other liabilities (2,777) Deferred income tax liability (15,548) Total identifiable net assets 88,639 Non-controlling interest (12,833) Total 75,806 Revenue Net Income (loss) Capstone (excluding ReD) 383,788 68,275 ReD 21,813 (21,069) 405,601 47,206 Since acquisition on October 1, 2013, ReD contributed revenue of $5,714 and a net loss of $1,062 to Capstone's financial results. (1) Working capital includes $3,286 of accounts receivable, no allowance for doubtful debts are recorded. IFRS requires disclosure as though the acquisition date for the business combination had been at the beginning of the reporting period, as of January 1, 2013. The pro forma consolidated financial information of Capstone for the year ended December 31, 2013, was as follows: 68 CAPSTONE INFRASTRUCTURE CORPORATION