ISUN iSun Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2023

 

OR

 

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

 

For the transition period from     to    

 

Commission File No. 001-37707

 

iSUN, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		47-2150172
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification Number)

 

400 Avenue D, Suite 10
Williston, Vermont		05495
(Address of Principal Executive Offices)		(Zip Code)

 

(802) 658-3378

(Registrant’s telephone number)

 

N/A

(Former name or former address, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.0001 par value		ISUN		Nasdaq Capital Market

 

Common Stock, Par Value $0.0001

(Title of class)

 

Securities registered pursuant to Section 12(g) of the Act: NONE

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

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

 

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☒		Smaller reporting company	☒
			Emerging growth company	☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES  ☐ NO ☒

 

The number of shares of the Registrant’s Common Stock outstanding at August 8, 2023 was 30,812,884.

 

 

 

ISUN, INC.

 

Form 10-Q

 

Table of Contents

 

Part I. Financial Information
Item 1. Financial Statements		3
	Condensed Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022	3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023, and 2022 (Unaudited)	4
	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	5
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023, and 2022 (Unaudited)	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
	Forward Looking Statements	22
	Business Introduction / Overview	22
	Critical Accounting Policies and Estimates	24
	Results of Operations	26
	Liquidity and Capital Resources	32
	Off-Balance Sheet Arrangements; Commitments and Contractual Obligations	33
Item 3. Quantitative and Qualitative Disclosures about Market Risk		33
Item 4. Controls and Procedures		33
	Evaluation of Disclosure Controls and Procedures	33
	Changes in Internal Control over Financial Reporting	34
Part II – Other Information		34
Item 1. Legal Proceedings		34
Item 1A. Risk Factors		34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 3. Default Upon Senior Securities		34
Item 4. Mine Safety Disclosures		34
Item 5. Other Information		34
Item 6. Exhibits		35
SIGNATURES		36

 

 

iSun, Inc.

Condensed Consolidated Balance Sheets as of

June 30, 2023 (Unaudited) and December 31, 2022

(In thousands, except number of shares)

 

		June 30, 2023				December 31, 2022
Assets
Current Assets:
Cash		$	6,105			$	5,455
Accounts receivable, net of allowance			11,238				8,783
Contract assets			8,369				7,324
Inventory			2,119				2,536
Other current assets			1,577				1,625
Total current assets			29,408				25,723
Other Assets:
Property and equipment, net of accumulated depreciation			8,108				8,440
Operating lease right-of-use assets, net			6,638				6,960
Captive insurance investment			270				270
Intangible assets, net			13,238				14,038
Investments			12,020				12,020
Other assets			30				30
Total other assets			40,304				41,758
Total assets		$	69,712			$	67,481
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable		$	16,986			$	12,941
Accrued expenses			3,632				5,868
Operating lease liability			601				588
Contract liabilities			8,020				5,419
Current portion of deferred compensation			15				31
Current portion of long-term debt			5,152				5,374
Total current liabilities			34,406				30,221
Long-term liabilities:
Warrant liability			-				10
Operating lease liability, net of current portion			6,405				6,711
Other liabilities			2,832				3,026
Long-term debt, net of current portion			5,508				8,226
Total liabilities			49,151				48,194
Contingencies (Note 1l)			-				-
Stockholders’ equity:
Preferred stock - 0.0001 par value 1,000,000 shares authorized, 0 issued and outstanding as of June 30, 2023 and December 31, 2022			-				-
Common stock – 0.0001 par value 49,000,000 shares authorized, 23,435,489 and 15,083,109 issued and outstanding as of June 30, 2023, and December 31, 2022, respectively			2				2
Additional paid-in capital			80,852				74,070
Accumulated deficit			(60,293	)			(54,785	)
Total Stockholders’ equity			20,561				19,287
Total liabilities and stockholders’ equity		$	69,712			$	67,481

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

iSun, Inc.

Condensed Consolidated Statements of Operations

for the Three and Six Months Ended June 30, 2023, and 2022 (Unaudited)

(In thousands, except number of shares and per share data)

 

		2023				2022				2023				2022
		Three Months ended								Six Months ended
		June 30,								June 30,
		2023				2022				2023				2022
Earned revenue		$	25,006			$	16,476			$	42,365			$	31,563
Cost of earned revenue			19,069				12,723				32,879				24,640
Income before operating expenses			5,937				3,753				9,486				6,923
Warehousing and other operating expenses			220				1,017				451				1,367
General and administrative expenses			6,334				5,982				11,183				11,509
Stock based compensation – general and administrative			373				591				746				1,835
Depreciation and amortization			762				1,778				1,512				3,530
Total operating expenses			7,689				9,368				13,892				18,241
Operating loss			(1,752	)			(5,615	)			(4,406	)			(11,318	)
Other income (expenses):
Gain on forgiveness of PPP Loan			-				-				-				2,592
Change in fair value of the warrant liability			4				28				10				91
Loss on debt conversion			(303	)			-				(303	)
Interest expense, net			(448	)			(87	)			(797	)			(716	)
Other income (expense)			(747	)			(59	)			(1,090	)			(1,967	)
Loss before income taxes			(2,499	)			(5,674	)			(5,496	)			(9,351	)
Tax expense (benefit)			12				7				12				(765	)
Net loss		$	(2,511	)		$	(5,681	)		$	(5,508	)		$	(8,586	)
Net loss per share of Common Stock - Basic and diluted		$	(0.13	)		$	(0.40	)		$	(0.31	)		$	(0.64	)
Net loss per share of Common Stock - Basic		$	(0.13	)		$	(0.40	)		$	(0.31	)		$	(0.64	)
Weighted average shares of Common Stock - Basic and diluted			19,685,045				14,070,117				17,829,459				13,364,352
Weighted average shares of Common Stock - Basic			19,685,045				14,070,117				17,829,459				13,364,352

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

iSun, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity

for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)

(In thousands, except number of shares)

 

		Shares				Amounts				Shares				Amounts				Capital				Deficit)				Total
		Preferred Stock								Common Stock								Additional Paid-In				Retained Earnings/ (Accumulated
		Shares				Amounts				Shares				Amounts				Capital				Deficit)				Total
Balance as of January 1, 2023			-				-				15,083,109			$	2			$	74,070			$	(54,785	)		$	19,287
Issuance under equity incentive plan			-				-				225,169				-				373				-				373
Issuance of shares for acquisition of iSun Energy, LLC			-				-				200,000				-				-				-				-
Issuance of shares of common stock for repayment of debt			-				-				412,218				-				481				-				481
Proceeds from the sales of common stock, net			-				-				893,764				-				1,431				-				1,431
Net Loss			-				-				-				-				-				(2,997	)			(2,997	)
Balance as of March 31, 2023			-			$	-				16,814,260			$	2			$	76,355			$	(57,782	)		$	18,575
Issuance under equity incentive plan			-								-				-				373				-				373
Issuance of shares of common stock for repayment of debt			-								3,524,345								2,466								2,466
Proceeds from the sales of common stock, net			-								3,096,884								1,658								1,658
Net loss			-				-				-				-				-				(2,511	)			(2,511	)
Balance as of June 30, 2023			-								23,435,489				2				80,852			$	(60,293	)		$	20,561

 

 

iSun, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)

For the Three and Six Months Ended June 30, 2022

(In thousands, except number of shares)

 

		Preferred Stock								Common Stock								Additional Paid-In				Retained Earnings/ (Accumulated
		Shares				Amounts				Shares				Amounts				Capital				Deficit)				Total
Balance as of January 1, 2022			-				-				11,825,878			$	1			$	60,863			$	(1,006	)		$	59,858
Issuance under equity incentive plan			-				-				164,067				-				1,244				-				1,244
Sale of common stock pursuant to S-3 registration statement			-				-				1,749,209				-				10,400				-				10,400
Net loss			-				-				-				-				-				(2,905	)			(2,905	)
Balance as of March 31, 2022			-				-				13,739,154			$	1			$	72,507			$	(3,911	)		$	68,597
Balance			-				-				13,739,154			$	1			$	72,507			$	(3,911	)		$	68,597
Issuance under equity incentive plan			-				-				333,888				-				1,476				-				1,476
Proceeds from the sales of common stock, net			-				-				309,038				-				1,239				-				1,239
Net Loss			-				-				-				-				-				(5,681	)			(5,681	)
Balance as of June 30, 2022			-				-				14,382,080				1				75,222				(9,592	)			65,631
Balance			-				-				14,382,080				1				75,222				(9,592	)			65,631

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

iSun, Inc.

Consolidated Statements of Cash Flows

for the Six Months Ended June 30, 2023, and 2022 (Unaudited)

(In thousands)

 

		2023				2022
Cash flows from operating activities
Net loss		$	(5,508	)		$	(8,586	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property plant and equipment			712				1,121
Bad debt expense			34				-
Amortization of intangible assets			800				2,409
Amortization of right-of-use asset			322				-
Gain on forgiveness of PPP loan			-				(2,592	)
Gain on sale of property and equipment			(35	)			-
Change in fair value of warrant liability			(10	)			(91	)
Stock based compensation			746				2,720
Deferred finance charge amortization			333				-
Loss on conversion of debt			303				-
Provision for deferred income taxes			-				(772	)
Changes in operating assets and liabilities:
Accounts receivable			(2,489	)			4,560
Other current assets			48				(241	)
Contract assets			(1,045	)			872
Inventory			417				(2,978	)
Accounts payable			4,045				(3,544	)
Accrued expenses			(2,236	)			(303	)
Contract liabilities			2,601				1,075
Other liabilities			(194	)			(1,102	)
Deferred compensation			(16	)			(14	)
Operating lease liability			(293	)			-
Net cash used in operating activities			(1,465	)			(7,466	)
Cash flows from investing activities:
Purchase of property and equipment			(221	)			(359	)
Proceeds from sale of property and equipment			44				1,247
Dividend receivable			-				200
Net cash (used in) provided by investing activities			(177	)			1,088
Cash flows from financing activities:
Proceeds from line of credit			-				16,227
Payments to line of credit			-				(15,941	)
Proceeds from long term debt			-				230
Repayments of long-term debt			(797	)			(6,723	)
Proceeds from sales of common stock, net			3,089				11,639
Net cash provided by financing activities			2,292				5,432
Net increase (decrease) in cash			650				(946	)
Cash, beginning of period			5,455				2,242
Cash, end of period		$	6,105			$	1,296
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest		$	525			$	716
Income taxes			-				7
Supplemental disclosure of non-cash investing and financing activities
Issuance of shares of Common Stock for repayment of debt			2,947				-
Vehicles and equipment purchased and financed			168				-

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

iSun, Inc

Notes to Consolidated Financial Statements

June 30, 2023 and 2022

(in thousands, except share and per share data)

 

1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

 

a) Organization

 

iSun, Inc. is a leading solar energy and clean mobility infrastructure Company with over 50 years of experience accelerating the adoption of innovative electrification technologies. The Company provides solar products services ranging from project origination, design, development, engineering, procurement, construction, storage, monitoring and maintenance for EV infrastructure, residential, commercial, industrial and utility customers. The Company also provides electrical contracting services and data and communication services. The work is performed under fixed-price and modified fixed-price contracts and time and materials contracts. The Company is incorporated in the State of Delaware and has its corporate headquarters in Williston, Vermont.

 

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or any other period. The accompanying financial statements should be read in conjunction with the Company’s audited financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

 

b) Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of iSun, Inc. and its direct and indirect wholly-owned operating subsidiaries, iSun Residential, Inc., SolarCommunities, Inc., iSun Industrial, LLC, Peck Electric Co., Liberty Electric, Inc., iSun Utility, LLC, iSun Corporate, LLC and iSun Energy, LLC. All material intercompany transactions have been eliminated upon consolidation of these entities.

 

c) Revenue Recognition

 

The majority of the Company’s revenue arrangements generally consist of a single performance obligation to transfer promised goods or services.

 

1) Revenue Recognition Policy

 

Solar Power Systems Sales and Engineering, Procurement, and Construction Services

 

The Company recognizes revenue from the sale of solar power systems, Engineering, Procurement and Construction (“EPC”) services, and other construction-type contracts over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer. Construction contracts, such as the sale of a solar power system combined with EPC services, are generally accounted for as a single unit of account (a single performance obligation) and are not segmented between types of services. Our contracts often require significant services to integrate complex activities and equipment into a single deliverable, and are therefore generally accounted for as a single performance obligation, even when delivering multiple distinct services. For such services, the Company recognizes revenue using the cost to cost method, based primarily on contract cost incurred to date compared to total estimated contract cost. The cost to cost method (an input method) is the most faithful depiction of the Company’s performance because it directly measures the value of the services transferred to the customer. Cost of revenue includes an allocation of indirect costs including depreciation and amortization. Subcontractor materials, labor and equipment, are included in revenue and cost of revenue when management believes that the Company is acting as a principal rather than as an agent (i.e., the Company integrates the materials, labor and equipment into the deliverables promised to the customer). Changes to total estimated contract cost or losses, if any, are recognized in the period in which they are determined as assessed at the contract level. Pre-contract costs are expensed as incurred unless they are expected to be recovered from the customer. As of June 30, 2023 and December 31, 2022 the Company had $0 in pre-contract costs classified as a current asset under contract assets on its Consolidated Balance Sheet. Project mobilization costs are generally charged to project costs as incurred when they are an integrated part of the performance obligation being transferred to the client. Customer payments on construction contracts are typically due within 30 to 45 days of billing, depending on the contract. Sales and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue.

 

For sales of solar power systems in which the Company sells a controlling interest in the project to a customer, revenue is recognized for the consideration received when control of the underlying project is transferred to the customer. Revenue may also be recognized for the sale of a solar power system after it has been completed due to the timing of when a sales contract has been entered into with the customer.

 

Energy Generation

 

Revenue from net metering credits is recorded as electricity is generated from the solar arrays and billed to customers (PPA off-taker) at the price rate stated in the applicable power purchase agreement (PPA).

 

8

 

 

Operation and Maintenance and Other Miscellaneous Services

 

Revenue for time and materials contracts is recognized as the service is provided.

 

2) Disaggregation of Revenue from Contracts with Customers

 

The following table disaggregates the Company’s revenue based on the timing of satisfaction of performance obligations for the three and six months ended June 30, 2023 and June 30, 2022:

 

SCHEDULE OF DISAGGREGATION OF REVENUE

		2023				2022				2023				2022
		Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
Performance obligations satisfied over time
Solar		$	22,879			$	14,867			$	37,322			$	28,475
Electric			1,951				1,249				4,552				2,516
Data and Network			176				360				491				572
Totals		$	25,006			$	16,476			$	42,365			$	31,563

 

The following table disaggregates the Company’s revenue based operational division for the three and six months ended June 30, 2023, and June 30, 2022:

 

SCHEDULE OF REVENUE BASED OPERATIONAL SEGMENT

		2023				2022				2023				2022
		Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
Residential		$	9,324			$	9,949			$	16,174			$	16,346
Commercial and Industrial			15,592				5,992				25,891				13,153
Utility			90				535				300				2,064
Totals		$	25,006			$	16,476			$	42,365			$	31,563

 

3) Variable Consideration

 

The nature of the Company’s contracts gives rise to several types of variable consideration, including claims and unpriced change orders; award and incentive fees; and liquidated damages and penalties. The Company recognizes revenue for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company estimates the amount of revenue to be recognized on variable consideration using the expected value (i.e., the sum of a probability-weighted amount) or the most likely amount method, whichever is expected to better predict the amount. Factors considered in determining whether revenue associated with claims (including change orders in dispute and unapproved change orders in regard to both scope and price) should be recognized include the following: (a) the contract or other evidence provides a legal basis for the claim, (b) additional costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in the Company’s performance, (c) claim-related costs are identifiable and considered reasonable in view of the work performed, and (d) evidence supporting the claim is objective and verifiable. If the requirements for recognizing revenue for claims or unapproved change orders are met, revenue is recorded only when the costs associated with the claims or unapproved change orders have been incurred. Back charges to suppliers or subcontractors are recognized as a reduction of cost when it is determined that recovery of such cost is probable and the amounts can be reliably estimated. Disputed back charges are recognized when the same requirements described above for claims accounting have been satisfied.

 

9

 

 

4) Remaining Performance Obligation

 

Remaining performance obligations, or backlog, represents the aggregate amount of the transaction price allocated to the remaining obligations that the Company has not performed under its customer contracts. The Company has elected to use the optional exemption in ASC 606-10-50-14, which exempts an entity from such disclosures if a performance obligation is part of a contract with an original expected duration of one year or less.

 

5) Warranties

 

The Company generally provides limited workmanship warranties up to five years for work performed under its construction contracts. The warranty periods typically extend for a limited duration following substantial completion of the Company’s work on a project. Historically, warranty claims have not resulted in material costs incurred, and any estimated costs for warranties are included in the individual contract cost estimates for purposes of accounting for long-term contracts.

 

d) Accounts Receivable

 

Accounts receivable are recorded when invoices are issued and presented on the balance sheet net of the allowance for doubtful accounts. The allowance, is estimated based on historical losses, the existing economic condition, and the financial stability of the Company’s customers. Accounts are written off against the reserve when they are determined to be uncollectible.

 

f) Contract Assets and Liabilities

 

The timing of revenue recognition, billings and cash collections results in contracts receivable, retainage receivable, contract assets and contract liabilities on the accompanying consolidated balance sheet. Included in contract assets is revenue in excess of billings and conditional retainage on uncompleted contracts. Included in contract liabilities is billings and conditional retainage in excess of revenue earned on uncompleted contracts. Also included in contract assets and contract liabilities is “conditional retainage” representing work performed by the Company for a customer that is retained pending the completion of the terms within the contract. Upon completion of the contract terms the conditional retainage is billed and collectible based on the passage of time at which time the amount is presented as a retainage receivable. On a contract by contract basis, the conditional retainage is included in the contract asset “revenue in excess of billings and conditional retainage in excess on uncompleted contracts” and contract liability “billings and conditional retainage in excess of revenue earned on uncompleted contracts” to arrive at a net contract asset or liability by contract. The following table provides information about contract assets and liabilities at:

 

SCHEDULE OF CONTRACT ASSET AND LIABILITIES

		June 30, 2023				December 31, 2022
Contract Assets
Revenue in excess of billings on uncompleted contracts		$	7,832			$	6,887
Conditional retainage			537				437
Total Contract Assets			8,369				7,324
Contract Liabilities
Billings in excess of revenue on uncompleted contracts			8,020				5,419
Conditional retainage			-				-
Total Contract Liabilities		$	8,020			$	5,419

 

10

 

 

Project Assets

 

Project assets primarily consist of costs related to solar power projects that are in various stages of development that are capitalized prior to the completion of the sale of the project, and are actively marketed and intended to be sold. In contrast to contract assets, the Company holds a controlling interest in the project itself. These project related costs include costs for land, development, and construction of a PV solar power system. Development costs may include legal, consulting, permitting, transmission upgrade, interconnection, and other similar costs. The Company typically classifies project assets as noncurrent due to the nature of solar power projects (long-lived assets) and the time required to complete all activities to develop, construct, and sell projects, which is typically longer than 12 months. Once the Company enters into a definitive sales agreement, such project assets are classified as current until the sale is completed and the Company has met all of the criteria to recognize the sale as revenue. Any income generated by a project while it remains within project assets is accounted for as a reduction to the basis in the project. If a project is completed and begins commercial operation prior to the closing of a sales arrangement, the completed project will remain in project assets until placed in service. All expenditures related to the development and construction of project assets, whether fully or partially owned, are presented as a component of cash flows from operating activities. Project assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. A project is considered commercially viable or recoverable if it is anticipated to be sold for a profit once it is either fully developed or fully constructed. A partially developed or partially constructed project is considered to be commercially viable or recoverable if the anticipated selling price is higher than the carrying value of the related project assets. The Company examines a number of factors to determine if the project is expected to be recoverable, including whether there are any changes in environmental, permitting, market pricing, regulatory, or other conditions that may impact the project. Such changes could cause the costs of the project to increase or the selling price of the project to decrease. If a project is not considered recoverable, we impair the respective project assets and adjust the carrying value to the estimated fair value, with the resulting impairment recorded within “Selling, general and administrative” expense.

 

Project assets were $0 as of June 30, 2023 and December 31, 2022, respectively.

 

e) Concentration and Credit Risks

 

The Company occasionally has cash balances in a single financial institution during the year in excess of the Federal Deposit Insurance Corporation (FDIC) limits. The differences between book and bank balances are outstanding checks and deposits in transit. At June 30, 2023, the uninsured balances were approximately $4,321.

 

f) Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates include estimates used to review the Company’s impairments and estimations of long-lived assets, impairment on investment, estimates in recording business combinations, goodwill, intangibles, revenue recognition utilizing a cost-to-cost method, allowances for uncollectible accounts, impairment on investments, warrant liability and the valuation allowance on deferred tax assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

g) Recently Issued Accounting Pronouncements

 

The Company is an emerging growth company until at minimum December 31, 2023. The Company will maintain the election available to an emerging growth company to use any extended transition period applicable to non-public companies when complying with a new or revised accounting standard. The Company retains its emerging growth status and therefore elects to adopt new or revised accounting standards on the adoption date required for a private company.

 

In March 2023, the FASB issued ASU No. 2014-01, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects, which amended Subtopic 323-740, Investments—Equity Method and Joint Ventures—Income Taxes, introduced the option to apply the proportional amortization method to account for investments made primarily for the purpose of receiving income tax credits and other income tax benefits when certain requirements are met. This guidance is effective for fiscal years beginning after December 15, 2023 with early adoption permitted. The Company is currently in the process of determining the impact of adoption of the provisions of ASU 2014-01.

 

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h) Fair Value of Financial Instruments

 

The Company’s financial instruments include cash and cash equivalents, accounts receivable, cash collateral deposited with insurance carriers, deferred compensation plan liabilities, accounts payable and other current liabilities, and debt obligations.

 

Fair value is the price that would be received to sell an asset or the amount paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value guidance establishes a valuation hierarchy, which requires maximizing the use of observable inputs when measuring fair value. The three levels of inputs that may be used are: (i) Level 1 - quoted market prices in active markets for identical assets or liabilities; (ii) Level 2 - observable market-based inputs or other observable inputs; and (iii) Level 3 - significant unobservable inputs that cannot be corroborated by observable market data, which are generally determined using valuation models incorporating management estimates of market participant assumptions. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Management’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

 

Fair values of financial instruments are estimated using public market prices, quotes from financial institutions and other available information. Due to their short-term maturity, the carrying amounts of cash, accounts receivable, accounts payable and other current liabilities approximate their fair values. Management believes the carrying values of notes and other receivables, cash collateral deposited with insurance carriers, and outstanding balances on its line of credit and long-term debt approximate their fair values as these amounts are estimated using public market prices, quotes from financial institutions and other available information.

 

i) Debt Extinguishment

 

Under ASC 470, debt should be derecognized when the debt is extinguished, in accordance with the guidance in ASC 405-20, Liabilities: Extinguishments of Liabilities. Under this guidance, debt is extinguished when the debt is paid, or the debtor is legally released from being the primary obligor by the creditor. On January 21, 2022, SunCommon received notification from Citizens Bank N.A. that the Small Business Administration has approved the forgiveness of the PPP loan in its entirety and as such, the full $2,592 has been recognized in the income statement as a gain on the forgiveness of PPP Loan for the six months ended June 30, 2022.

 

j) Inventory

 

Inventory is valued at lower of cost or net realizable value determined by the first-in, first-out method. Inventory primarily consists of solar panels and other materials. The Company reviews the cost of inventories against their estimated net realizable value and records write-downs if any inventories have costs in excess of their net realizable values. Inventory is presented at net realizable value with reserves for obsolete inventory of $0 at June, 2023 and December 31, 2022.

 

k) Segment Information

 

The Company currently operates in four segments based upon our organizational structure and the way in which our operations are managed and evaluated. The first segment is Residential which are projects smaller in size and shorter in duration. The second operating segment is Commercial and Industrial which includes projects that are commonly larger in size and longer in duration serving commercial and industrial customers. The third operating segment is Utility which includes design, development, project origination and other professional services as well as projects that are commonly larger in size and longer in duration serving utility-scale customers. The fourth segment is Corporate, which is responsible for general company oversight and management. Disaggregating the corporate costs from the revenue operations simplifies the performance evaluation of the Residential, Commercial and Industrial, and Utility segments.

 

l) Legal contingencies

 

The Company accounts for liabilities resulting from legal proceedings when it is possible to evaluate the likelihood of an unfavorable outcome in order to provide an estimate for the contingent liability. At June 30, 2023 and 2022, there are no material contingent liabilities arising from pending litigation.

 

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m) Reclassification

 

Certain prior period balances have been reclassified in order to conform to current year presentation. These reclassifications have no effect on previously reported results of operations or loss per share.

 

2. LIQUIDITY AND FINANCIAL CONDITION

 

For the six months ended June 30, 2023, the Company experienced a net loss of approximately $5,500 with cash used in operations of approximately ($1,500). At June 30, 2023, the Company had cash on hand of approximately $6,100 and a working capital deficit of approximately $5,000. To date, the Company has relied predominantly on operating cash flow, borrowings from its credit facilities, and sales of Common Stock. During the six months ended, the Company has reduced its cash used in operations, but is still operating in a net loss situation, although at a reduced level, this raises substantial doubt about the ability for the Company to continue as a going concern for at least one year from the date these financial statements are issued. However, the Company believes the matters outlined below alleviate that substantial doubt.

 

The demand for solar and electric vehicle infrastructure continues to increase across all customer groups. Our residential division has customer orders of approximately $13,100 expected to be completed within three to five months, our commercial and industrial division has a contracted backlog of approximately $140,700 expected to be completed within ten to eighteen months and our utility division has a contracted backlog of approximately $8,000 and 1,600 MW of projects currently under development that will transition to the respective divisions backlog when approaching notice to proceed. The customer demand across our segments will provide short-term operational cash flow. The Company has a diversified revenue stream which mitigates operational exposure impacting specific segments.

 

As of June 30, 2023, the Company has approximately $14,300 in gross proceeds potentially available from sales of Common Stock pursuant to the S-3 Registration Statement which could be utilized to support any short-term deficiencies in operating cash flow.

 

The Company believes its current cash on hand, potential additional sales of Common Stock, the collectability of its accounts receivable and project backlog are sufficient to meet its operating and capital requirements for at least one year from the date these financial statements are issued.

 

3. ACCOUNTS RECEIVABLE

 

 SCHEDULE OF ACCOUNTS RECEIVABLE

		June 30, 2023				December 31, 2022
Accounts receivable - contracts in progress		$	10,880			$	8,502
Accounts receivable - retainage			537				583
Accounts receivable			11,417				9,085
Allowance for doubtful accounts			(179	)			(302	)
Total		$	11,238			$	8,783

 

Bad debt expense was $34 and $0 for the three and six months ended June 30, 2023 and 2022, respectively.

 

Contract assets represent revenue recognized in excess of amounts billed, unbilled receivables, and retainage. Unbilled receivables represent an unconditional right to payment subject only to the passage of time, which are reclassified to accounts receivable when they are billed under the terms of the contract. Contract assets were as follows at June 30, 2023 and 2022:

 

 SCHEDULE OF CONTRACT ASSETS AND LIABILITIES

		June 30, 2023				December 31, 2022
Contract assets		$	7,704			$	6,648
Unbilled receivables, included in costs in excess of billings			128				93
Costs and estimated earnings in excess of billings			7,832				6,741
Retainage			537				583
Total		$	8,369			$	7,324

 

Contract liabilities represent amounts billed to clients in excess of revenue recognized to date, billings in excess of costs, and retainage. The Company anticipates that substantially all incurred cost associated with contract assets as of June 30, 2023 will be billed and collected within one year.

 

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4. CONTRACTS IN PROGRESS

 

 SCHEDULE OF CONTRACTS IN PROGRESS

		June 30, 2023				December 31, 2022
Expenditures to date on uncompleted contracts		$	40,555			$	31,215
Estimated earnings thereon			2,378				2,509
Contract costs			42,933				33,724
Less billings to date			(42,712	)			(31,912	)
Contract costs, net of billings			221				1,812
Plus under billings remaining on contracts 100% complete			128				93
Total		$	349			$	1,905

 

Included in accompany balance sheets under the following captions:

 

		June 30, 2023				December 31, 2022
Contract assets		$	8,369			$	7,324
Contract liabilities			(8,020	)			(5,419	)
Total		$	349			$	1,905

 

5. OPERATING SEGMENTS

 

Beginning in 2023, the Company assessed its operating segment disclosure based on ASC 280, Segment Reporting, guidance. As determined by ASC 280, Segment Reporting, the Company determined that it has more than one reportable segment for which financial information is available and regularly evaluated by the chief operating decision maker, or decision-making group, in deciding the method to allocate resources and assess performance. As a result, the following segments were established: Residential, Commercial and Industrial, Utility and Corporate.

 

Residential

 

Through its SunCommon operating subsidiary, the Company designs, arranges financing, integrates, installs, and manages systems, primarily for residential homeowners. The Company sells residential solar systems through its direct sales and marketing channel strategy. The Company operates in the New York and Vermont residential markets. It has direct sales and/or operations personnel in New York and Vermont.

 

Commercial and Industrial

 

Through our iSun Industrial subsidiary, the Company designs, integrates, installs, and manages systems ranging in size from 50kW (kilowatt) to multi-MW (megawatt) systems primarily for larger commercial and industrial projects. Commercial installations have included installations at office buildings, manufacturing plants, warehouses, service stations, churches, and other consumer facing businesses. Industrial installations have included school districts, local municipalities, federal facilities, higher education institutions as well as green and brown fields. It has operations personnel in New York, New Hampshire, Maine and Vermont.

 

Through its iSun Utility subsidiary, the Company develops, designs, engineers, arranges financing, installs, and manages systems ranging in size from 500 kW (kilowatt) to multi-MW (megawatt) systems primarily for asset owners, business and municipalities. The Utility segment is originating projects in Vermont, North Carolina, South Carolina, Ohio, California, Georgia, Alabama and Colorado. It has operations personnel in Vermont and Pennsylvania.

 

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Segment net revenue, segment operating expenses and segment contribution (loss) information consisted of the following for the three and six months ended June 30, 2023.

 

 SCHEDULE OF SEGMENT NET REVENUE

		Three months ended June 30, 2023
		Residential				Commercial and Industrial				Utility				Corporate				Total
Net revenue		$	9,324			$	15,592			$	90			$	-			$	25,006
Cost of earned revenue			6,323				12,637				109				-				19,069
Income (loss) before operating expenses			3,001				2,955				(19	)			-				5,937
Operating expenses
Warehousing and other operating expenses			-				220				-				-				220
General and administrative expenses			2,978				1,766				361				1,229				6,334
Segment contribution (loss)			23				969				(380	)			(1,229	)			(617	)
Stock based compensation – general and administrative			-				-				-				373				373
Depreciation and amortization			493				269				-								762
Operating (loss) income		$	(470	)		$	700			$	(380	)			(1,602	)		$	(1,752	)

 

		Six months ended June 30, 2023
		Residential				Commercial and Industrial				Utility				Corporate				Total
Net revenue		$	16,174			$	25,891			$	300			$	-			$	42,365
Cost of earned revenue			11,544				20,846				489				-				32,879
Income (loss) before operating expenses			4,630				5,045				(189	)			-				9,486
Operating expenses
Warehousing and other operating expenses			-				451				-				-				451
General and administrative expenses			5,347				3,022				651				2,163				11,183
Segment contribution (loss)			(717	)			1,572				(840	)			(2,163	)			(2,148	)
Stock based compensation – general and administrative			-				-				-				746				746
Depreciation and amortization			985				527				-				-				1,512
Operating (loss) income		$	(1,702	)		$	1,045			$	(840	)			(2,909	)		$	(4,406	)

 

Assets by operating segment are as follows:

 

		June 30, 2023
Residential		$	22,250
Commercial and Industrial			45,647
Utility			919
Corporate			896
Total		$	69,712

 

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6. LEASES

 

The Company has operating leases for offices, warehouse, vehicles, office equipment and land leases for its solar assets. The Company’s leases have remaining lease terms of 1 year to 18 years, some of which include options to extend.

 

In 2020, the Company entered into a ten-year lease agreement for a new headquarters in Williston, Vermont consisting of approximately 6,250 square feet of office space and 6,500 square feet of warehouse. The lease has annual rent of $108 with an annual increase of 2%.

 

The Company leases an office and warehouse facilities in Waterbury, Vermont under agreements expiring in May 2028 and August 2026, respectively. The monthly base rent for the office and warehouse facilities currently approximates $28, subject to annual 3% increases.

 

The Company leases an office and warehouse facility in Rhinebeck, New York from a stockholder. Monthly base rent currently approximates $7 and is on a month-to-month basis.

 

In 2015, the Company entered into two twenty-five-year non-cancelable lease agreements for land on which they constructed solar arrays. One lease has fixed annual rent of $3. The second lease has annual rent of $3 with an annual increase of 2%.

 

In 2017, the Company entered into a twenty-year non-cancelable lease agreement for land on which it constructed solar arrays. The lease has annual rent of $4 with an annual increase of 2%.

 

In 2018, the Company entered into a twenty-year non-cancelable lease agreement for land on which it constructed solar arrays. The lease has annual rent of $26.

 

The Company leases a vehicle under a non-cancelable operating lease. In addition, the Company occasionally pays rent for storage on a month-to-month basis.

 

The Company leases vehicles and office equipment under various agreements expiring through June 2026. As of June 30, 2023, aggregate monthly payments required under these leases approximates $35.

 

The Company’s lease expense for the three and six months ended June 30, 2023 was entirely comprised of operating leases and amounted to $60 and $116, respectively. Operating lease payments, which reduced operating cash flows for the six months ended June 30, 2023 amounted to $408. The difference between the ROU asset amortization of $322and the associated lease expense of $293 consists of interest, new vehicles, new facilities and lease extensions, office and office equipment leases originated during the year ended December 31, 2022.

 

 SCHEDULE OF OPERATING LEASE

		June 30, 2023				December 31, 2022
Operating lease right-of-use assets		$	6,638			$	6,960
Operating lease liabilities—short term			601				588
Operating lease liabilities—long term			6,405				6,711
Total operating lease liabilities		$	7,006			$	7,299

 

As of June 30, 2023, the weighted average remaining lease term for operating leases was 10.53 years and the weighted average discount rate for the Company’s operating leases was 3.33%.

 

 SCHEDULE OF ESTIMATED FUTURE MINIMUM LEASE

Year ending December 31:		Amount
Remaining 2023		$	408
2024			805
2025			798
2026			796
2027			797
2028			804
Thereafter			3,936
Total lease payments			8,344
Less: interest			(1,338	)
Total		$	7,006

 

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7. LONG-TERM DEBT

 

 SUMMARY OF LONG-TERM DEBT

		June 30, 2023				December 31, 2022
NBT Bank, National Association, 4.25% interest rate, secured by all business assets, payable in monthly installments of $5,869 through September 2026, with a balloon payment at maturity.		$	575			$	598
NBT Bank, National Association, 4.15% interest rate, secured by all business assets, payable in monthly installments of $3,677 through April 2026.			118				137
NBT Bank, National Association, 4.20% interest rate, secured by all business assets, payable in monthly installments of $5,598 through October 2026, with a balloon payment at maturity.			298				325
NBT Bank, National Association, repaid in May 2023.			-				14
Various vehicle loans, interest ranging from 0% to 9.25%, total current monthly installments of approximately $40,167 secured by vehicles, with varying terms through 2027.			1,256				1,271
National Bank of Middlebury, repaid in May 2023.			-				21
Senior secured convertible notes payable, 5% interest rate, monthly payments of 1/26th of the original purchase amount plus accrued but unpaid interest beginning March 1, 2023 until maturity date of May 4, 2025.			9,375				12,500
CSA 36: Payable in monthly installments of $2,414, including interest at 5.5%. The interest rate will become variable at the VEDA Prime Rate from June 2025 through maturity in June 2028.			103				115
CSA 36: Payable in monthly interest only installments of $1,104 through June 2020; then payments of $552, representing half of monthly interest only payments, through June 2027 with other half of interest only payments capitalized into principal; then $2,485 monthly payments of principal and interest, with a balloon payment of $20,142 due June 2035; interest at 11.25% throughout the loan term.			118				118
Equipment loans			39				56
Long-term debit			11,882				15,155
Less current portion			(5,152	)			(5,374	)
Long-term debt, including debt issuance costs			6,730				9,781
Less debt issuance costs			(1,222	)			(1,555	)
Long-term debt		$	5,508			$	8,226

 

SCHEDULE OF MATURITIES OF LONG-TERM DEBT

Year ending December 31:		Amount
Remainder of 2023		$	3,179
2024			5,119
2025			2,401
2026			863
2027			147
2028 and thereafter			173
Total		$	11,882

 

Senior Secured Convertible Notes Payable

 

On November 4, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”) with two affiliated investors. At the Closing, the Company issued and sold to each Purchaser a Senior Secured Convertible Note, the aggregate original principal amount of the two Notes was $12,500. The Purchase Agreement provided for a six percent (