Note 13.  Investment in Unconsolidated Affiliate

On January 14, 2011,  Tegal, se2quel Partners LLC, a California limited liability company and Sequel Power LLC, a newly formed Delaware limited liability company ("Sequel Power"), entered into a Formation and Contribution Agreement (the "Contribution Agreement").  Sequel Power was focused on the promotion of solar power plant development projects worldwide, the development of self-sustaining businesses from such projects, including but not limited to activities relating to and supporting, developing, building and operating solar photovoltaic fabrication facilities and solar farms, and the consideration of other non-photovoltaic renewable energy projects.  se2quel Partners is owned by Ferdinand Seemann, who previously served as an independent member of the Company's Board of Directors.  Pursuant to the Formation and Contribution Agreement, Tegal contributed $2 million in cash to Sequel Power in exchange for an approximate 25% ownership interest in Sequel Power.  In addition, Tegal issued warrants ("Warrants") to se2quel Partners and se2quel Management GmbH, a German limited liability company, to purchase an aggregate of 185,777 shares of the Company's common stock at an exercise price of $3.15 per share.  The warrants are exercisable for a period of four years.  On March 21, 2012, Sequel Power irrevocably assigned and transferred unto the Company for cancelation a portion of warrants representing the right to purchase 48,310 shares of the Company's common stock.  In exchange, the Company agreed to waive the collection of certain earned fees under its Services Agreement with Sequel Partners.  On March 21, 2013, Sequel Power irrevocably assigned and transferred unto the Company for cancelation the balance of its Warrants representing the right to purchase 44,578 shares of the Company's common stock.  In exchange, the Company agreed to waive receivables related to certain fees earned under its Services Agreement with Sequel Partners and its 25% ownership interest in Sequel Power. In addition, effective March 21, 2013, the Company terminated its management agreement with Sequel Power.

The descriptions of the Formation and Contribution Agreement and the warrants are qualified in their entirety by reference to the full text of such documents, copies of which were filed as exhibits to the Form 8-K report on January 21, 2011.

The Company reviews the investment for impairment whenever events or changes in circumstances indicate that an other than temporary decline in value has occurred.  In the fiscal year ended March 31, 2013, we recorded no impairment to our investment in Sequel Power.  We concluded in fiscal year ended March 2012, that the market value of our investment in Sequel Power was less than our carrying values in the current economic environment.

The value on the balance sheet of Sequel Power at fiscal year end March 31, 2012, prior to the impairment was approximately $1,377 which represented our investment in the value of Sequel Power.  At that time, we concluded the intangible asset had a value of zero.  This valuation was based upon the fact that the business model of Sequel Power was under review by Sequel Power's management.  Sequel Power's management was researching other possibilities for the direction of the company which may or may not used its proprietary solar development model in the future.  Additionally, at that time, there was uncertainty that Sequel Power would be able to continue as a going concern and its survivability was at risk.  The undiscounted expected future cash flows were less than the pre-impairment carrying value of the assets, and an impairment loss was recognized based on the excess of the carrying amount over the fair value of the assets.   Based on these facts, the Company took an impairment charge of its Sequel investment in the amount of $1,377.