UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
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.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction | (I.R.S. Employer | |
| of incorporation or organization) | Identification Number) |
| (Address of Principal Executive Offices) | (Zip Code) |
(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, 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.
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).
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 | ☐ | |
| ☒ | 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 ☐
The number of shares of the Registrant’s Common Stock outstanding at November 10, 2023 was .
ISUN, INC.
Form 10-Q
Table of Contents
| 2 |
iSun, Inc.
Condensed Consolidated Balance Sheets as of
September 30, 2023 (Unaudited) and December 31, 2022
(In thousands, except number of shares)
| September 30, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance | ||||||||
| Contract assets | ||||||||
| Inventory | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Other Assets: | ||||||||
| Property and equipment, net of accumulated depreciation | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Captive insurance investment | ||||||||
| Intangible assets, net | ||||||||
| Investments | ||||||||
| Other assets | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Operating lease liability | ||||||||
| Contract liabilities | ||||||||
| Current portion of deferred compensation | ||||||||
| Current portion of long-term debt | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Warrant liability | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Other liabilities | ||||||||
| Long-term debt, net of current portion | ||||||||
| Total liabilities | ||||||||
| Contingencies (Note 1l) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock - par value shares authorized, issued and outstanding as of September 30, 2023 and December 31, 2022 | ||||||||
| Common stock – par value shares authorized, and issued and outstanding as of September 30, 2023, and December 31, 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 3 |
iSun, Inc.
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)
(In thousands, except number of shares and per share data)
| Three Months ended | Nine Months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Earned revenue | $ | $ | $ | $ | ||||||||||||
| Cost of earned revenue | ||||||||||||||||
| Income before operating expenses | ||||||||||||||||
| Warehousing and other operating expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Stock based compensation – general and administrative | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expense) income: | ||||||||||||||||
| Gain on forgiveness of PPP Loan | ||||||||||||||||
| Change in fair value of the warrant liability | ( | ) | ( | ) | ||||||||||||
| Loss on debt conversion | ( | ) | ||||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expense) income | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Tax expense (benefit) | ( | ) | ||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share of Common Stock - Basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average shares of Common Stock - Basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 4 |
iSun, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity
For the Three and Nine Months Ended September 30, 2023(Unaudited)
(In thousands, except number of shares)
| Preferred Stock | Common Stock | Additional Paid-In | (Accumulated | |||||||||||||||||||||||||
| Shares | Amounts | Shares | Amounts | Capital | Deficit) | Total | ||||||||||||||||||||||
| Balance as of January 1, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Issuance under equity incentive plan | ||||||||||||||||||||||||||||
| Issuance of shares for acquisition of iSun Energy, LLC | - | |||||||||||||||||||||||||||
| Issuance of shares of common stock for repayment of debt | - | |||||||||||||||||||||||||||
| Proceeds from the sales of common stock, net | - | |||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance under equity incentive plan | - | |||||||||||||||||||||||||||
| Issuance of shares of common stock for repayment of debt | - | |||||||||||||||||||||||||||
| Proceeds from the sales of common stock, net | - | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance under equity incentive plan | - | |||||||||||||||||||||||||||
| Issuance of shares of common stock for repayment of debt | - | |||||||||||||||||||||||||||
| Proceeds from the sales of common stock, net | - | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| 5 |
iSun, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)
For the Three and Nine Months Ended September 30, 2022
(In thousands, except number of shares)
| Preferred Stock | Common Stock | Additional Paid-In | (Accumulated | |||||||||||||||||||||||||
| Shares | Amounts | Shares | Amounts | Capital | Deficit) | Total | ||||||||||||||||||||||
| Balance as of January 1, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Issuance under equity incentive plan | ||||||||||||||||||||||||||||
| Sale of common stock pursuant to S-3 registration statement | - | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Issuance under equity incentive plan | - | |||||||||||||||||||||||||||
| Proceeds from the sales of common stock, net | - | |||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Issuance under equity incentive plan | ||||||||||||||||||||||||||||
| Sale of common stock pursuant to S-3 registration statement | - | |||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 6 |
iSun, Inc.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2023, and 2022 (Unaudited)
(In thousands)
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation of property plant and equipment | ||||||||
| Bad debt expense | ||||||||
| Amortization of intangible assets | ||||||||
| Amortization of right-of-use asset | ||||||||
| Gain on forgiveness of PPP loan | ( | ) | ||||||
| Gain on sale of property and equipment | ( | ) | ||||||
| Change in fair value of warrant liability | ( | ) | ||||||
| Stock based compensation | ||||||||
| Deferred finance charge amortization | ||||||||
| Loss on conversion of debt | ||||||||
| Provision for deferred income taxes | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Other current assets | ( | ) | ||||||
| Contract assets | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Contract liabilities | ||||||||
| Other liabilities | ( | ) | ( | ) | ||||
| Deferred compensation | ( | ) | ( | ) | ||||
| Operating lease liability | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from sale of property and equipment | ||||||||
| Captive insurance investment | ( | ) | ||||||
| Dividend receivable | ||||||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from line of credit | ||||||||
| Payments to line of credit | ( | ) | ||||||
| Proceeds from long term debt | ||||||||
| Repayments of long-term debt | ( | ) | ( | ) | ||||
| Proceeds from sales of common stock, net | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | ||||||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| Accrued Employee Incentive Compensation settled in stock | ||||||||
| Issuance of shares of Common Stock for repayment of debt | ||||||||
| Vehicles and equipment purchased and financed | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 7 |
iSun, Inc
Notes to Condensed Consolidated Financial Statements
(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 product 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 consolidated 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 nine months ended September 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 September 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 nine months ended September 30, 2023 and September 30, 2022:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Performance obligations satisfied over time | ||||||||||||||||
| Solar | $ | $ | $ | $ | ||||||||||||
| Electric | ||||||||||||||||
| Data and Network | ||||||||||||||||
| Totals | $ | $ | $ | $ | ||||||||||||
The following table disaggregates the Company’s revenue based operational division for the three and nine months ended September 30, 2023, and September 30, 2022:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Residential | $ | $ | $ | $ | ||||||||||||
| Commercial and Industrial | ||||||||||||||||
| Utility | ||||||||||||||||
| Totals | $ | $ | $ | $ | ||||||||||||
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:
| September 30, 2023 | December 31, 2022 | |||||||
| Contract Assets | ||||||||
| Revenue in excess of billings on uncompleted contracts | $ | $ | ||||||
| Conditional retainage | ||||||||
| Total Contract Assets | ||||||||
| Contract Liabilities | ||||||||
| Billings in excess of revenue on uncompleted contracts | ||||||||
| Conditional retainage | ||||||||
| $ | $ | |||||||
| 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 $
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 September 30, 2023, the uninsured balances were approximately $
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, 2024. 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 evaluating the effect that adopting this new accounting guidance will have on its condensed consolidated financial statements and related disclosures.
| 11 |
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 $
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 $
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 may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements. No reserves were deemed necessary as of September 30, 2023.
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m) Inflation risk
Changes in economic conditions, including inflation, rising interest rates, lower consumer confidence, volatile equity capital markets and ongoing supply chain disruptions may affect our business, revenues and earnings adversely.
n) Reclassification
Certain prior period amounts presented on the Company’s financial statements have been reclassified in order to conform to the current period presentation. These reclassifications have no effect on previously reported results of operations or loss per share.
2. LIQUIDITY AND FINANCIAL CONDITION
For
the nine months ended September 30, 2023, the Company experienced a net loss of approximately $
The demand for solar and electric vehicle infrastructure continues to increase across all customer groups. Our residential division has customer
orders of approximately $
As
of September 30, 2023,
the Company has approximately $
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
| September 30, 2023 | December 31, 2022 | |||||||
| Accounts receivable - contracts in progress | $ | $ | ||||||
| Accounts receivable – retainage | ||||||||
| Allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
Bad
debt expense was $
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 September 30, 2023 and December 31, 2022:
| September 30, 2023 | December 31, 2022 | |||||||
| Contract assets | $ | $ | ||||||
| Unbilled receivables, included in costs in excess of billings | ||||||||
| Retainage | ||||||||
| Total | $ | $ | ||||||
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 September 30, 2023 will be billed and collected within one year.
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4. CONTRACTS IN PROGRESS
| September 30, 2023 | December 31, 2022 | |||||||
| Expenditures to date on uncompleted contracts | $ | $ | ||||||
| Estimated earnings thereon | ||||||||
| Less billings to date | ( | ) | ( | ) | ||||
| Plus under billings remaining on contracts 100% complete | ||||||||
| Total | $ | $ | ||||||
Included in accompany balance sheets under the following captions:
| September 30, 2023 | December 31, 2022 | |||||||
| Contract assets | $ | $ | ||||||
| Contract liabilities | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
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 nine months ended September 30, 2023.
| Three months ended September 30, 2023 | ||||||||||||||||||||
| Residential | Commercial and Industrial | Utility | Corporate | Total | ||||||||||||||||
| Net revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Cost of earned revenue | ||||||||||||||||||||
| Income (loss) before operating expenses | ( | ) | ||||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Warehousing and other operating expenses | ||||||||||||||||||||
| General and administrative expenses | ||||||||||||||||||||
| Segment contribution (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Stock based compensation – general and administrative | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Operating (loss) income | $ | ( | ) | $ | $ | ( | ) | ( | ) | $ | ( | ) | ||||||||
| Nine months ended September 30, 2023 | ||||||||||||||||||||
| Residential | Commercial and Industrial | Utility | Corporate | Total | ||||||||||||||||
| Net revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Cost of earned revenue | ||||||||||||||||||||
| Income (loss) before operating expenses | ( | ) | ||||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Warehousing and other operating expenses | ||||||||||||||||||||
| General and administrative expenses | ||||||||||||||||||||
| Segment contribution (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Stock based compensation – general and administrative | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Operating (loss) income | $ | ( | ) | $ | $ | ( | ) | ( | ) | $ | ( | ) | ||||||||
Assets by operating segment are as follows:
| September 30, 2023 | ||||
| Residential | $ | |||
| Commercial and Industrial | ||||
| Utility | ||||
| Corporate | ||||
| $ | ||||
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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
In
2020, the Company entered into a ten-year lease agreement for a new headquarters in Williston, Vermont consisting of approximately
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 $
The
Company leases an office and warehouse facility in Rhinebeck, New York from a stockholder. Monthly base rent currently approximates $
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 $
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 $
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 $
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 September 30, 2023, aggregate
monthly payments required under these leases approximates $
The
Company’s lease expense for the three and nine months ended September 30, 2023 was entirely comprised of operating leases and amounted
to $
| September 30, 2023 | December 31, 2022 | |||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Operating lease liabilities—short term | ||||||||
| Operating lease liabilities—long term | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
As
of September 30, 2023, the weighted average remaining lease term for operating leases was
| Year ending December 31: | Amount | |||
| Remaining 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: interest | ( | ) | ||
| $ | ||||
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7. LONG-TERM DEBT
| September 30, 2023 | December 31, 2022 | |||||||
| NBT Bank, National Association, | $ | $ | ||||||
| NBT Bank, National Association, | ||||||||
| NBT Bank, National Association, | ||||||||
| NBT Bank, National Association, repaid in May 2023. | ||||||||
| Various vehicle loans, interest ranging from | ||||||||
| National Bank of Middlebury, repaid in May 2023. | ||||||||
| Senior secured convertible notes payable, | ||||||||
| CSA 36: Payable in monthly installments of $ | ||||||||
| CSA 36: Payable in monthly interest only installments of $ | ||||||||
| Equipment loans | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Less debt issuance costs | ( | ) | ( | ) | ||||
| Long-term debt | $ | $ | ||||||
| Year ending December 31: | Amount | |||
| Remainder of 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 and thereafter | ||||
| Total | $ | |||
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 $
On
August 30, 2023, the Company entered into a Letter Agreement with the two affiliated investors regarding a modification of the terms
of the SPA. The Company failed to fulfill the EBITDA covenant for the quarter ended June 30, 2023. Under the Notes, a failure to
fulfill the EBITDA covenant is defined as an Event of Default. Upon the occurrence of an Event of Default, the Purchasers may
accelerate all amounts due under the Notes. The Purchasers have agreed to a waiver of the Event of Default upon the terms set forth
in the letter agreement, including that the Company shall pay the Investors the aggregate amount of $
During
the nine months ended September 30, 2023, the Company issued
common shares having a fair value of $
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8. FAIR VALUE MEASUREMENTS
During
the three and nine months ended September 30, 2023, warrants to acquire shares of Common Stock were granted. The warrants were
issued on August 30, 2023 resulting from a failure to fulfill the EBITDA financial covenant of the Senior Secured Notes. The warrants
were issued to the Investor in order to waive the Event of Default. During the three and nine months ended September 30, 2023, no warrants
to acquire shares of Common Stock were exercised or redeemed. At September 30, 2023,
| Input | Mark-to-Market Measurement at September 30, 2023 | Mark-to-Market Measurement at December 31, 2022 | ||||||
| Risk-free rate | % | % | ||||||
| Remaining term in years | – | |||||||
| Expected volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
| Fair value of common stock | $ | $ | ||||||
| Fair Value Measurement as of September 30, 2023 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Liabilities: | ||||||||||||||||
| Private Warrants | $ | $ | ||||||||||||||
| Fair Value Measurement as of December 31, 2022 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Liabilities: | ||||||||||||||||
| Private Warrants | $ | $ | ||||||||||||||
| September 30, 2023 | December 31, 2022 | |||||||
| Beginning balance | $ | $ | ||||||
| Fair value adjustment – Warrant liability | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
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9. UNION ASSESSMENTS
The Company employs members of the International Brotherhood of Electrical Workers Local 300 (IBEW). The union fee assessments payable are both withholdings from employees and employer assessments. Union fees are for monthly dues, defined contribution pension, health and welfare funds as part of multi-employer plans. All union assessments are based on the number of hours worked or a percentage of gross wages as stipulated in the agreement with the Union.
The Company has an agreement with the IBEW in respect to rates of pay, hours, benefits, and other employment conditions that expires May 31, 2025. During the three and nine months ended September 30, 2023 and 2022, the Company incurred the following union assessments.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Pension fund | $ | $ | $ | $ | ||||||||||||
| Welfare fund | ||||||||||||||||
| National employees benefit fund | ||||||||||||||||
| Joint apprenticeship and training committee | ||||||||||||||||
| 401(k) matching | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
10. DEFERRED COMPENSATION PLAN
In
2018, the Company entered into a deferred compensation agreement with a former minority stockholder. The agreement provides for deferred
income benefits and is payable over the post-retirement period. The Company accrues the present value of the estimated future benefit
payments over the period from the date of the agreement to the retirement date. The minimum commitment for future compensation under
the agreement is $
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Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of Common Stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Option to purchase Common Stock, from Jensyn’s IPO | ||||||||||||||||
| Private warrants to purchase Common Stock, from Jensyn’s IPO | ||||||||||||||||
| Unvested restricted stock awards | ||||||||||||||||
| Options to purchase Common Stock | ||||||||||||||||
| Private warrants to purchase common shares from Anson Note | ||||||||||||||||
| Totals | ||||||||||||||||
Options
As of September 30, 2023, the Company had non-qualified stock options outstanding to purchase shares of Common Stock. The stock options vest at various times and are exercisable for a period of from the date of grant at an average exercise price of $ per share, the fair market value of the Company’s Common Stock on the date of each grant. The Company determined the fair market value of these options to be $ by using the Black Scholes option valuation model. The key assumptions used in the valuation of the options were as follows; a) volatility of %, b) term of years, c) risk free rate of % and d) a dividend yield of %.
Nine Months Ended September 30, 2023 | ||||||||
Number of Options | Weighted average exercise price | |||||||
| Outstanding, beginning January 1, 2023 | $ | |||||||
| Granted | $ | |||||||
| Exercised | $ | |||||||
| Outstanding, ending September 30, 2023 | $ | |||||||
| Exercisable at September 30, 2023 | $ | |||||||
The
above table does not include the
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Aggregate intrinsic value of options outstanding at September 30, 2023 was $. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the fiscal period which was $ as of September 30, 2023 and the exercise price multiplied by the number of options outstanding.
During
the three months ended September 30, 2023 and 2022, the Company charged a total of $
As of September 30, 2023, the Company had $ in unrecognized stock-based compensation related to stock option awards, which is expected to be recognized over a weighted average period of less than . All option units are expected to vest.
Restricted Stock Grant to Executives
With an effective date of January 4, 2021, subject to the iSun, Inc. 2020 Equity Incentive Plan, (the “2020 Plan”), the Company entered into a restricted stock grant agreement with our Chief Executive Officer Jeffrey Peck, Chief Financial Officer John Sullivan, Executive Vice President Fredrick Myrick, and Chief Strategy Officer Michael dAmato in January 2021 (the January 2021 RSGAs). All shares of Common Stock issuable under the January 2021 RSGA are valued as of the grant date at $ per share representing the fair market value. The January 2021 RSGA provides for the issuance of up to shares of the Company’s Common Stock. The restricted shares of Common Stock shall vest as follows: of the restricted shares shall vest immediately, of the restricted shares shall vest on the one (1) year anniversary of the effective date, and the balance, or restricted shares, shall vest on the two (2) year anniversary of the effective date.
With an effective date of January 24, 2022, subject to the iSun, Inc. 2020 Equity Incentive Plan, (the “2020 Plan”), the Company entered into a restricted stock grant agreement with our Chief Executive Officer Jeffrey Peck, Chief Financial Officer John Sullivan, Executive Vice President Fredrick Myrick, and Chief Strategy Officer Michael dAmato in January 2022 (the January 2022 RSGAs). All shares of Common Stock issuable under the January 2022 RSGA are valued as of the grant date at $ per share representing the fair market value. The January 2022 RSGA provides for the issuance of up to shares of the Company’s Common Stock. The restricted shares of Common Stock shall vest as follows: of the restricted shares shall vest immediately, of the restricted shares shall vest on the one (1) year anniversary of the effective date, and the balance, or restricted shares, shall vest on the two (2) year anniversary of the effective date.
With an effective date of January 24, 2023, subject to the iSun, Inc. 2020 Equity Incentive Plan, (the “2020 Plan”), the Company entered into a restricted stock grant agreement with our Chief Executive Officer Jeffrey Peck, Chief Financial Officer John Sullivan, Executive Vice President Fredrick Myrick, and Chief Strategy Officer Michael dAmato in January 2023 (the January 2023 RSGAs). All shares of Common Stock issuable under the January 2023 RSGA are valued as of the grant date at $per share representing the fair market value. The January 2023 RSGA provides for the issuance of up to shares of the Company’s Common Stock. The restricted shares of Common Stock shall vest as follows: of the restricted shares shall vest immediately, of the restricted shares shall vest on the one (1) year anniversary of the effective date, and the balance, or restricted shares, shall vest on the two (2) year anniversary of the effective date.
In
the three months ended September 30, 2023 and 2022, stock-based compensation expense of $
Stock-based compensation, excluding the January 2021, January 2022 and January 2023 RSGA, related to employee and director options totaled $ and $ for the three months ended September 30, 2023 and 2022, respectively. Stock-based compensation, excluding the January 2021, January 2022 and January 2023 RSGA, related to employee and director options totaled $ and $ for the nine months ended September 30, 2023 and 2022, respectively.
13. SUBSEQUENT EVENTS
Sale of Common Stock pursuant to S-3 Registration Statement
Subsequent
to September 30, 2023, shares of Common Stock were sold under the B. Riley Sales Agreement between October 1, 2023 and October
26, 2023, pursuant to a prospectus supplement that was filed with the SEC on February 10, 2021. Total gross proceeds for the shares were
$
Execution of term sheet
On
October 23, 2023, the Company executed a non-binding term sheet with an institutional investor to provide an $
Event of Default
On
November 13, 2023, the Company received notification from the Purchasers of the Senior Secured Convertible Note of an Event of Default
as the Company failed to make the $
Delisting Notice Extension
On November 14, 2023, the Company received notice from the Nasdaq Stock Market that the cure period to regain compliance with the Bid Price Requirement has been extended for an additional 180 days until May 13, 2024.
| 21 |
| Item 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 unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2023 and 2022 and related notes included in Part 1, Item 1 of this Quarterly Report on Form 10-Q. The following discussion and analysis should also be read together with our audited consolidated financial statements and related notes for the year ended December 31, 2022.
Forward-Looking Statements
This discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our actual results could differ materially from the results anticipated by our forward-looking statements. Our future results and financial condition may also differ materially from those that we currently anticipate as a result of the factors described in the sections entitled “Risk Factors” in the filings that we make with the U.S. Securities and Exchange Commission (the “SEC”). Throughout this section, unless otherwise noted, “we,” “us,” “our” and the “Company” refer to iSun, Inc.
Business Introduction / Overview
iSun, Inc., the principal office of which is located in Williston, Vermont, is one of the largest commercial solar engineering, procurement and construction (“EPC”) companies in the country and is expanding across the Northeastern United States (“U.S.”). The Company is a second-generation business founded under the name Peck Electric Co. (“Peck Electric”) in 1972 as a traditional electrical contractor. The Company’s core values are to align people, purpose, and profitability, and since taking leadership in 1994, Jeffrey Peck, the Company’s Chief Executive Officer, has applied such core values to expand into the solar industry. Today, the Company is guided by the mission to facilitate the reduction of carbon emissions through the expansion of clean, renewable energy and we believe that leveraging such core values to deploy resources toward profitable business is the only sustainable strategy to achieve these objectives.
We now conduct all of our business operations exclusively through our direct and indirect wholly-owned subsidiaries, iSun Residential, Inc., SolarCommunities, Inc. iSun Industrial, LLC, Peck Electric Co., Liberty Electric, Inc., iSun Utility, LLC, iSun Energy, LLC and iSun Corporate, LLC.
We are one of the largest solar energy services and infrastructure deployment companies in the country and are expanding across the United States. Our services include solar, storage and electric vehicle infrastructure, development and professional services, engineering, procurement, and installation. We uniquely target all solar markets including residential, commercial, industrial and utility scale customers.
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Prior to becoming a public company, we were a second-generation family business founded under the name Peck Electric Co. in 1972 as a traditional electrical contractor. Our core values were and still are to align people, purpose, and profitability, and since taking leadership in 1994, Jeffrey Peck, our Chief Executive Officer, has applied such core values to expand into the solar industry. Today, we are guided by the mission to facilitate the reduction of carbon emissions through the expansion of clean, renewable energy and we believe that leveraging such core values to deploy resources toward profitable business is the only sustainable strategy to achieve these objectives.
The world recognizes the need to transition to a reliable, renewable energy grid in the next 50 years. States from Vermont to Hawaii are leading the way in the U.S. with renewable energy goals of 75% by 2032 and 100% by 2045, respectively. California committed to 100% carbon-free energy by 2045. The majority of the other states in the U.S. also have renewable energy goals, regardless of current Federal solar policy. We are a member of Renewable Energy Vermont, an organization that advocates for clean, practical and renewable solar energy. The benefits of the newly enacted Inflation Reduction Act of 2022 (“IRA”) provide stability and certainty of incentives for the next 10 years that create value to our shareholders and provides a long-term commitment for the energy transformation. Our triple bottom line, which is geared towards people, environment, and profit, has always been our guide since we began installing renewable energy and we intend that it remain our guide over the next 50 years as we construct our energy future.
The diverse nature of our service offerings allows us to manage our operations based on the maximization of value for our customers in the evolving energy market. Our core revenue stream is generated from our engineering, procurement and installation services and products consisting of solar, electrical and data installations but has expanded to include project origination, design and development services as well. Approximately 85% of our revenue is derived from our solar EPC business, approximately 10% of revenue is derived from our electrical and data business and approximately 5% of revenue is derived from our project origination, development and design services. Recently our growth has been derived by increasing our solar customer base starting in 2013, mergers and acquisitions and expansion into new territories. We currently operate in Vermont, Maine, New Hampshire, New York, Massachusetts, Maryland, Alabama, Georgia and North and South Carolina. Our union crews are expert constructors, and union access to an additional workforce makes us ready for rapid expansion to other states while maintaining control of operating costs. The skillset provided by our workforce is transferrable among our service offerings depending on current demand.
We also make investments in solar development projects and currently own approximately three megawatts of operating solar arrays operating under long-term power purchase agreements. These long-term recurring revenue streams, combined with our in-house development and construction capabilities, make this asset class a strategic long-term investment opportunity for us.
Equity and Ownership Structure
We now conduct all of our business operations exclusively through our direct and indirect wholly-owned subsidiaries, iSun Residential, Inc., SolarCommunities, Inc. iSun Industrial, LLC, Peck Electric Co., Liberty Electric, Inc., iSun Utility, LLC, iSun Energy, LLC and iSun Corporate, LLC.
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Critical Accounting Policies
The following discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.
Use of Estimates
The preparation of financial statements in conformity with 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.
Revenue Recognition
We recognize revenue from contracts with customers under Accounting Standards Codification (“ASC”) Topic 606 (“Topic 606”). Under Topic 606, revenue is recognized when, or as, control of promised goods and services is transferred to customers, and the amount of revenue recognized reflects the consideration to which an entity expects to be entitled in exchange for the goods and services transferred. We primarily recognize revenue over time utilizing the cost-to-cost measure of progress on contracts for specific projects and for certain master service and other service agreements.
| 24 |
Contracts. We derive revenue primarily from construction projects performed under: (i) master and other service agreements, which are typically priced using either a time and materials or a fixed price per unit basis; and (ii) contracts for specific projects requiring the construction and installation of an entire infrastructure system or specified units within an infrastructure system, which are subject to multiple pricing options, including fixed price, unit price, time and materials, or cost plus a markup.
The total contract transaction price and cost estimation processes used for recognizing revenue over time under the cost-to-cost method is based on the professional knowledge and experience of our project managers, engineers and financial professionals. Management reviews estimates of total contract transaction price and total project costs on an ongoing basis. Changes in job performance, job conditions and management’s assessment of expected variable consideration are factors that influence estimates of the total contract transaction price, total costs to complete those contracts and our profit recognition. Changes in these factors could result in revisions to revenue in the period in which the revisions are determined, which could materially affect our consolidated results of operations for that period. Provisions for losses on uncompleted contracts are recorded in the period in which such losses are determined. For the three months and nine months ended September 30, 2023 and 2022, project profit was affected by less than 5% as a result of changes in contract estimates included in projects that were in process as of September 30, 2023 and 2022.
Performance Obligations. A performance obligation is a contractual promise to transfer a distinct good or service to a customer and is the unit of account under Topic 606. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied. 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. Contract amendments and change orders, which are generally not distinct from the existing contract, are typically accounted for as a modification of the existing contract and performance obligation. The vast majority of our performance obligations are completed within one year.
When more than one contract is entered into with a customer on or close to the same date, management evaluates whether those contracts should be combined and accounted for as a single contract as well as whether those contracts should be accounted for as one, or more than one, performance obligation. This evaluation requires significant judgment and is based on the facts and circumstances of the various contracts.
Union Labor
Peck Electric Co uses union labor in order to construct and maintain the solar, electric and data work that comprise the core activities of its business. As such, contributions were made by the Company to the National Joint Apprenticeship and Training Committee, the National Electrical Benefit Funds, Union Pension Plans and a union Health and Welfare Fund. Each employee contributes monthly to the International Brotherhood of Electrical Workers (“IBEW”). Peck Electric Co’s contract with the IBEW expires May 31, 2025.
The Company’s management believes that access to unionized labor provides a unique advantage for growth, because workforce resources can be scaled efficiently utilizing labor unions in other states to meet specific project needs in other states without substantially increasing fixed costs for the Company.
Business Insurance / Captive Insurance Group
In 2018, Peck Electric Co. joined a captive insurance group. The Company’s management believes that belonging to a captive insurance group will stabilize business insurance expenses and will lock in lower rates that are not subject to change from year-to-year and instead are based on the Company’s favorable experience modification rate.
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Warrant Liability
As of September 30, 2023, we have no public warrants outstanding as all public warrants have been exercised or redeemed.
Stock-Based Compensation
We periodically issue stock grants and stock options to employees and directors. We account for stock option grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board (FASB) whereas the value of the award is measured on the date of grant and recognized over the vesting period.
We account for stock grants issued to non-employees in accordance with the authoritative guidance of the FASB whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.
Revenue Drivers
The Company’s business includes the design and construction of solar arrays for its customers. Revenue is recognized for each construction project on a percentage of completion basis. From time to time, the Company constructs solar arrays for its own account or purchases a solar array that must still be constructed. In these instances, no revenue is recognized for the construction of the solar array. In instances where the Company owns the solar array, revenue is recognized for the sale of the electricity generated to third parties. As a result, depending on whether it is building for others or for its own account, the Company’s revenue is subject to significant variation.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2022.
REVENUE AND COST OF EARNED REVENUE
For the three months ended September 30, 2023, our revenue increased 46.6% to $27.9 million compared to $19.0 million for the three months ended September 30, 2022. Revenue for the residential segment decreased 18.6% from $10.2 million to $8.3 million. Revenue for the commercial and industrial segment increased 168.6% from $7.0 million to $18.8 million. Revenue for the utility segment decreased 50.0% from $1.8 million to $0.9 million. Our diversified revenue stream allows for our continued growth despite the slowdown in the residential markets. The main driver in the decline of the residential market demand has been the increase in the interest rate environment. As interest rates stabilize, we anticipate the slowdown to be temporary as we continue to see increases in energy costs in our core markets.
Cost of earned revenue for the three months ended September 30, 2023, was 45.8% higher at $22.5 million compared to $15.4 million for the three months ended September 30, 2022. As revenue increased at approximately the same rate than cost of earned revenue, margins remained relatively flat at 19.5% and 19.0% for the three months ended September 30, 2023 and 2022, respectively.
| 26 |
Income before operating expenses was $5.4 million for the three months ended September 30, 2023. This compares to $3.6 million of income before operating expenses for the three months ended September 30, 2022. The gross margin was 19.5% in the three months ended September 30, 2023 compared to 19.0% in the three months ended September 30, 2022. Our margins remained consistent with the prior year which reflects the efficiencies incorporated throughout the year as our revenue mix changed significantly. For the three months ended September 30, 2023, our revenue mix was 30% residential and 70% commercial, industrial, and utility. For the three months ended September 30, 2022, our revenue mix was 54% residential and 46% commercial, industrial, and utility. As our residential segment contributes the higher margin, the consistency in the blended margin highlights the operational improvements implemented throughout the year. With the consolidation of our small and large commercial installation teams at the beginning of the year, our labor utilization has significantly improved which has mitigated any margin exposure to the fluctuation in our revenue mix.
For the remainder of 2023, we anticipate an increase in revenue over 2022 due to several factors. The demand for solar and electric vehicle infrastructure continues to increase across all customer groups. Our residential division has customer orders of approximately $15.0 million expected to be completed within three to five months, our commercial and industrial division has a contracted backlog of approximately $140.3 million expected to be completed within ten to eighteen months and our utility division has a contracted backlog of approximately $6.5 million and 1.6 GW 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.
In addition, the Inflation Reduction Act of 2022 (“IRA”) legislation will invest nearly $370 billion in energy security and climate change programs over the next decade. The IRA renews the full 30% credit rate for Investment Tax Credit (“ITC”) eligible facilities that meet the prevailing wage and apprenticeship requirements. The IRA provides a direct pay provision for tax exempt entities including local government, tribal nations, nonprofits, cooperative and municipal utilities while also allowing for the transferability of those tax credits. The IRA allows for additional bonus credits for qualifications related to domestic content, energy communities and low- and moderate-income communities. The ITC will step down to 26% in 2033 and 22% in 2034.
In addition, we are engaging existing customers and new partners outside of Vermont as we align our growth plans for continued expansion across the Northeast and additional strategic geographical areas. Our current project backlog includes projects in Vermont, Maine, New Hampshire and Maryland while our pipeline includes projects across the United States.
GENERAL AND ADMINISTRATIVE EXPENSES
Total G&A expenses were $5.7 million for the three months ended September 30, 2023, compared to $6.0 million for the three months ended September 30, 2022. As a percentage of revenue, G&A expenses decreased to 20.6% in the three months ended September 30, 2023 compared to 31.3% in the three months ended September 30, 2022. In total dollars, G&A decreased from the prior year as the current overhead structure can support the anticipated revenue growth projection over the next 12 months. As we continue to implement a shared services model, we would anticipate additional reductions to overall expenses without impacting revenue growth.
DEPRECIATION AND AMORTIZATION
For the three months ended September 30, 2023 and 2022, the non-cash expenses related to depreciation and amortization totaled $0.8 million and $1.8 million, respectively.
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WAREHOUSE AND OTHER OPERATING EXPENSES
Warehousing and other operating expenses were $0.2 million for the three months ended September 30, 2023 compared to $0.2 million for the three months ended September 30, 2022.
STOCK-BASED COMPENSATION EXPENSES
During the three months ended September 30, 2023, we incurred $0.5 million in total non-cash stock-based compensation expense compared to $0.6 million for the same period in the prior year related to the issuance of new restricted stock awards and stock options as well as the continued amortization of restricted stock awards and stock options issued in prior years.
OTHER INCOME (EXPENSES)
Interest expense for the three months ended September 30, 2023, was $0.3 million compared to $0.1 million for the same period of the prior year. The change in the fair value of the warrant liability was a loss of $0.2 million and $0 for the three months ended September 30, 2023 and 2022, respectively.
INCOME (BENEFIT) TAX EXPENSE
The US GAAP effective tax rate for the three months ended September 30, 2023, was 0.0% and September 30, 2022 was 0.0%. The proforma effective tax rate for the three months September 30, 2023 was 21.0% and September 30, 2022 was 21.0%.
NET LOSS
The net loss for the three months ended September 30, 2023 was $2.2 million compared to a net loss of $4.9 million for the three months September 30, 2022.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2022.
REVENUE AND COST OF EARNED REVENUE
For the nine months ended September 30, 2023, our revenue increased 38.9% to $70.3 million compared to $50.6 million for the nine months ended September 30, 2022. Revenue for the residential segment remained flat at $24.4 million compared to $24.3 million. Revenue for the commercial and industrial segment increased 98.2% from $22.5 million to $44.6 million. Revenue for the utility segment decreased 68.4% from $3.8 million to $1.2 million. Our diversified revenue stream allows for our continued growth despite the slowdown in the residential markets. The main driver in the decline of the residential market demand has been the increase in the interest rate environment. As interest rates stabilize, we anticipate the slowdown to be temporary as we continue to see increases in energy costs in our core markets.
Cost of earned revenue for the nine months ended September 30, 2023, was 38.2% higher at $55.4 million compared to $40.1 million for the nine months ended September 30, 2022. As revenue increased at approximately the same rate than cost of earned revenue, margins remained relatively flat at 21.2% and 20.8% for the nine months ended September 30, 2023 and 2022, respectively.
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Income before operating expenses was $14.9 million for the nine months ended September 30, 2023. This compares to $10.5 million of income before operating expenses for the nine months ended September 30, 2022. The gross margin was 21.2% in the nine months ended September 30, 2023 compared to 20.8% in the nine months ended September 30, 2022. Our margins remained consistent with the prior year which reflects the efficiencies incorporated throughout the year as our revenue mix changed significantly. For the nine months ended September 30, 2023, our revenue mix was 35% residential and 65% commercial, industrial, and utility. For the nine months ended September 30, 2022, our revenue mix was 48% residential and 52% commercial, industrial, and utility. As our residential segment contributes the higher margin, the consistency in the blended margin highlights the operational improvements implemented throughout the year.
For the remainder of 2023, we anticipate an increase in revenue over 2022 due to several factors. The demand for solar and electric vehicle infrastructure continues to increase across all customer groups. Our residential division has customer orders of approximately $15.0 million expected to be completed within three to five months, our commercial and industrial division has a contracted backlog of approximately $140.3 million expected to be completed within ten to eighteen months and our utility division has a contracted backlog of approximately $6.5 million and 1.6 GW 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. With the consolidation of our small and large commercial installation teams at the beginning of the year, our labor utilization has significantly improved which has mitigated any margin exposure to the fluctuation in our revenue mix.
In addition, the Inflation Reduction Act of 2022 (“IRA”) legislation will invest nearly $370 billion in energy security and climate change programs over the next decade. The IRA renews the full 30% credit rate for Investment Tax Credit (“ITC”) eligible facilities that meet the prevailing wage and apprenticeship requirements. The IRA provides a direct pay provision for tax exempt entities including local government, tribal nations, nonprofits, cooperative and municipal utilities while also allowing for the transferability of those tax credits. The IRA allows for additional bonus credits for qualifications related to domestic content, energy communities and low- and moderate-income communities. The ITC will step down to 26% in 2033 and 22% in 2034.
In addition, we are engaging existing customers and new partners outside of Vermont as we align our growth plans for continued expansion across the Northeast and additional strategic geographical areas. Our current project backlog includes projects in Vermont, Maine, New Hampshire, and Maryland while our pipeline includes projects across the United States.
GENERAL AND ADMINISTRATIVE EXPENSES
Total G&A expenses were $16.9 million for the nine months ended September 30, 2023, compared to $17.5 million for the nine months ended September 30, 2022. As a percentage of revenue, G&A expenses decreased to 24.1% in the nine months ended September 30, 2023 compared to 3465% in the nine months ended September 30, 2022. In total dollars, G&A decreased as we take advantage of the synergies provided by our acquisitions. As we continue to implement a shared services model, we would anticipate additional reductions to overall expenses without impacting revenue growth.
DEPRECIATION AND AMORTIZATION
For the nine months ended September 30, 2023 and 2022, the non-cash expenses related to depreciation and amortization totaled $2.3 million and $5.3 million, respectively.
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WAREHOUSE AND OTHER OPERATING EXPENSES
Warehousing and other operating expenses were $0.6 million for the nine months ended September 30, 2023 compared to $1.5 million for the nine months ended September 30, 2022. The decrease is related to the reduction of our warehousing expenses as we continue to drive synergies between operating segments.
STOCK-BASED COMPENSATION EXPENSES
During the nine months ended September 30, 2023, we incurred $1.2 million in total non-cash stock-based compensation expense compared to $2.4 million for the same period in the prior year related to the issuance of new restricted stock awards and stock options as well as the continued amortization of restricted stock awards and stock options issued in prior years.
OTHER INCOME (EXPENSES)
Interest expense for the nine months ended September 30, 2023, was $1.1 million compared to $0.8 million for the same period of the prior year. Loss on conversion for the nine months ended September 30, 2023, was $0.3 million compared to $0.0 million for the same period of the prior year. We had a PPP forgiveness of $2.6 million in the prior year. The change in the fair value of the warrant liability was a loss of $0.2 million for the nine months ended September 30, 2023 compared to a gain of $0.1 for the nine months ended September 30, 2022.
INCOME (BENEFIT) TAX EXPENSE
The US GAAP effective tax rate for the nine months ended September 30, 2023, was 0.0% and September 30, 2022 was 0.0%. The proforma effective tax rate for the nine months September 30, 2023 was 21.0% and September 30, 2022 was 21.0%.
NET LOSS
The net loss for the nine months ended September 30, 2023 was $7.8 million compared to a net loss of $13.5 million for the nine months September 30, 2022.
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Certain Non-GAAP Measures
We periodically review the following key non-GAAP measures to evaluate our business and trends, measure our performance, prepare financial projections and make strategic decisions.
EBITDA and Adjusted EBITDA
Included in this presentation are discussions and reconciliations of earnings before interest, income tax and depreciation and amortization (“EBITDA”) and EBITDA adjusted for certain non-cash, non-recurring or non-core expenses (“Adjusted EBITDA”) to net loss in accordance with GAAP. Adjusted EBITDA excludes certain non-cash and other expenses, certain legal services costs, professional and consulting fees and expenses, and one-time Reverse Merger and Recapitalization expenses and certain adjustments. We believe that these non-GAAP measures illustrate the underlying financial and business trends relating to our results of operations and comparability between current and prior periods. We also use these non-GAAP measures to establish and monitor operational goals.
These non-GAAP measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute or superior to, the other measures of financial performance prepared in accordance with GAAP. Using only the non-GAAP financial measures, particularly Adjusted EBITDA, to analyze our performance would have material limitations because such calculations are based on a subjective determination regarding the nature and classification of events and circumstances that investors may find significant. We compensate for these limitations by presenting both the GAAP and non-GAAP measures of our operating results. Although other companies may report measures entitled “Adjusted EBITDA” or similar in nature, numerous methods may exist for calculating a company’s Adjusted EBITDA or similar measures. As a result, the methods that we use to calculate Adjusted EBITDA may differ from the methods used by other companies to calculate their non-GAAP measures.
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The reconciliations of EBITDA and Adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, are shown in the table below:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net income (loss) | $ | (2,248 | ) | $ | (4,934 | ) | $ | (7,756 | ) | $ | (13,520 | ) | ||||
| Depreciation and amortization | 782 | 1,770 | 2,294 | 5,300 | ||||||||||||
| Interest expense | 292 | 84 | 1,089 | 800 | ||||||||||||
| Stock based compensation | 494 | 567 | 1,240 | 2,402 | ||||||||||||
| Loss on conversion of debt - - 303 - | ||||||||||||||||
| Change in fair value of warrant liability | 178 | (7 | ) | 168 | (98 | ) | ||||||||||
| Income tax (benefit) | - | - | 12 | (765 | ) | |||||||||||
| EBITDA | (495 | ) | (2,520 | ) | (2,650 | ) | (5,881 | ) | ||||||||
| Other costs(1) | - | 10 | 350 | 10 | ||||||||||||
| Adjusted EBITDA | $ | (495 | ) | $ | (2,510 | ) | $ | (2,300 | ) | $ | (5,871 | ) | ||||
| Weighted Average shares outstanding | 30,898,334 | 13,546,624 | 22,222,377 | 13,769,564 | ||||||||||||
| Adjusted EBITDA per share | (0.02 | ) | (0.18 | ) | (0.10 | ) | (0.43 | ) | ||||||||
| (1) | Other costs consist of one-time legal expenses related to the settlement of a lawsuit. |
LIQUIDITY AND CAPITAL RESOURCES
We had $5.5 million in unrestricted cash at September 30, 2023, as compared to $5.5 million at December 31, 2022.
As of September 30, 2023, our working capital deficit was $7.6 million compared to a working capital deficit of $5.0 million at December 31, 2022. To date, the Company has relied predominantly on cash flow from financing activities to fund its operations, borrowings from its credit facilities, and sales of Common Stock. The availability of financing and the cash flow from operations alleviates the potential for substantial doubt. On October 23, 2023, the Company executed a term sheet to refinance the existing convertible note. The terms of the new debt agreement are an $8 million long-term note that amortizes over 48 months. The amortization schedule reduces the monthly payment from $0.48 million under the existing note to $0.17 million under the new facility which will improve our working capital by $5.6 million at closing. The new facility does not have a conversion feature which will alleviate any potential downward pressure on our valuation from the previous convertible note provisions.
As of September 30, 2023, the Company has approximately $10.9 million 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.
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We believe that the aggregate of our existing cash and cash equivalents and sales of Common Stock pursuant to our shelf registration, will be sufficient to meet our operating cash requirements for at least one year from the date these financial statements are issued. The demand for solar and electric vehicle infrastructure continues to increase across all customer groups. Our residential division has customer orders of approximately $15.0 million expected to be completed within three to five months, our commercial and industrial division has a contracted backlog of approximately $140.3 million expected to be completed within ten to eighteen months and our utility division has a contracted backlog of approximately $6.5 million and 1.6 GW 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.
Cash flow used in operating activities was $3.8 million for the nine months ended September 30, 2023, compared to $7.6 million of cash used in operating activities in the nine months ended September 30, 2022. The decrease in cash used in operating activities was primarily the result of the increase in accounts payable of $7.8 million and the increase in accounts receivable of $4.4 million and $4.2 million in contract assets.
Net cash used in investing activities was $0.9 million for the nine months ended September 30, 2023, compared to $0.9 million of cash provided by investing activities in the nine months ended September 30, 2022. The change for the nine months ended September 30, 2023 was attributable to the purchase of equipment for approximately $0.6 million, and the change for the nine months ended September 30, 2022 was attributable to the sale of solar assets for approximately $1.2 million.
Net cash provided by financing activities was $4.9 million for the nine months ended September 30, 2023 compared to $8.2 million of cash provided by financing activities for the nine months ended September, 2022. The cash flow provided by financing activities consisted of $6.4 million from the sale of Common Stock and $1.5 million in repayment of long term debt.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on its financial condition, revenues, results of operations, liquidity, or capital expenditures.
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
As a smaller reporting company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are not required to provide the information required by this Item.
| Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Management has determined there is a lack of supervisory review of the financial statement closing process due to limited resources and formal documentation of procedures and controls. This control deficiency constitutes a material weakness in internal control over financial reporting. As a result, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective. We plan to take steps to remedy this material weakness in with the implementation of an “Internal Control-Integrated Framework” As of September 30, 2023, we continued to build out and document the control environment. The Enterprise Resource Planning (“ERP”) system implemented in the prior year allows for a more robust environment that mitigates the potential for misstatements in our financial reporting.
| 33 |
Disclosure controls and procedures are designed to ensure that the information that is required to be disclosed by us in our Exchange Act report is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the three months ended September 30, 2023, we continued to build out our control environment and explored various field project management tools that would integrate to our existing ERP system. This will enhance our internal controls and include the development of an authorization matrix across the operating segments. The control environment is focused on establishing the appropriate controls and approval process around financial reporting to mitigate the risk of potential misstatements in our financial statements which was previously identified as a material weakness. We began implementing stronger processes and controls related to estimating, procurement and project management.
PART II – Other Information
| Item 1. | Legal Proceedings |
None.
| Item 1A. | Risk Factors |
As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
| Item 3. | Defaults Upon Senior Securities |
None.
| Item 4. | Mine Safety Disclosures |
None.
| Item 5. | Other Information |
None.
| 34 |
| Item 6. | Exhibits |
Exhibits Index
| 35 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 10th day of August 2023.
| iSUN, INC. | ||
| By: | /s/ Jeffrey Peck | |
| Jeffrey Peck | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ John Sullivan | |
| John Sullivan | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
| Dated: November 14, 2023 | ||
| 36 |
Exhibit 31.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Jeffrey Peck, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of iSun, Inc.; |
| 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. |
| Date: November 14, 2023 | By: | /s/ Jeffrey Peck |
| Jeffrey Peck | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 31.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, John Sullivan, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of iSun, Inc.; |
| 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. |
| Date: November 14, 2023 | By: | /s/ John Sullivan |
| John Sullivan | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
Exhibit 32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of iSun, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey Peck, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 14, 2023 | By: | /s/ Jeffrey Peck |
| Jeffrey Peck | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 32.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of iSun, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Sullivan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 14, 2023 | By: | /s/ John Sullivan |
| John Sullivan | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, par value | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 49,000,000 | 49,000,000 |
| Common stock, shares issued | 34,940,885 | 15,083,109 |
| Common stock, shares outstanding | 34,940,885 | 15,083,109 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
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| Income Statement [Abstract] | ||||
| Earned revenue | $ 27,909 | $ 19,034 | $ 70,274 | $ 50,597 |
| Cost of earned revenue | 22,481 | 15,417 | 55,360 | 40,057 |
| Income before operating expenses | 5,428 | 3,617 | 14,914 | 10,540 |
| Warehousing and other operating expenses | 183 | 172 | 634 | 1,539 |
| General and administrative expenses | 5,747 | 5,965 | 16,930 | 17,474 |
| Stock based compensation – general and administrative | 494 | 567 | 1,240 | 2,402 |
| Depreciation and amortization | 782 | 1,770 | 2,294 | 5,300 |
| Total operating expenses | 7,206 | 8,474 | 21,098 | 26,715 |
| Operating loss | (1,778) | (4,857) | (6,184) | (16,175) |
| Other (expense) income: | ||||
| Gain on forgiveness of PPP Loan | 2,592 | |||
| Change in fair value of the warrant liability | (178) | 7 | (168) | 98 |
| Loss on debt conversion | (303) | |||
| Interest expense, net | (292) | (84) | (1,089) | (800) |
| Other (expense) income | (470) | (77) | (1,560) | 1,890 |
| Loss before income taxes | (2,248) | (4,934) | (7,744) | (14,285) |
| Tax expense (benefit) | 12 | (765) | ||
| Net loss | $ (2,248) | $ (4,934) | $ (7,756) | $ (13,520) |
| Net loss per share of Common Stock - Basic | $ (0.07) | $ (0.36) | $ (0.35) | $ (0.98) |
| Net loss per share of Common Stock - Diluted | $ (0.07) | $ (0.36) | $ (0.35) | $ (0.98) |
| Weighted average shares of Common Stock - Basic | 30,898,334 | 13,546,624 | 22,222,377 | 13,769,564 |
| Weighted average shares of Common Stock - Diluted | 30,898,334 | 13,546,624 | 22,222,377 | 13,769,564 |
SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES | 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 product 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 consolidated 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 nine months ended September 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 September 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).
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 nine months ended September 30, 2023 and September 30, 2022:
The following table disaggregates the Company’s revenue based operational division for the three and nine months ended September 30, 2023, and September 30, 2022:
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.
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:
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 September 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 September 30, 2023, the uninsured balances were approximately $3,554.
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, 2024. 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 evaluating the effect that adopting this new accounting guidance will have on its condensed consolidated financial statements and related disclosures.
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 on the statement of operations as a gain on forgiveness of PPP Loan for the nine months ended September 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 September, 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 may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements. No reserves were deemed necessary as of September 30, 2023.
m) Inflation risk
Changes in economic conditions, including inflation, rising interest rates, lower consumer confidence, volatile equity capital markets and ongoing supply chain disruptions may affect our business, revenues and earnings adversely.
n) Reclassification
Certain prior period amounts presented on the Company’s financial statements have been reclassified in order to conform to the current period presentation. These reclassifications have no effect on previously reported results of operations or loss per share.
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LIQUIDITY AND FINANCIAL CONDITION |
9 Months Ended |
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Sep. 30, 2023 | |
| Liquidity And Financial Condition | |
| LIQUIDITY AND FINANCIAL CONDITION | 2. LIQUIDITY AND FINANCIAL CONDITION
For the nine months ended September 30, 2023, the Company experienced a net loss of approximately $7,800 with cash used in operations of approximately $3,800. At September 30, 2023, the Company had cash on hand of approximately $5,600 and a working capital deficit of approximately $7,600. To date, the Company has relied predominantly on operating cash flow, borrowings from its credit facilities, and sales of Common Stock. During the nine months ended September 30, 2023, 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 $15,000 expected to be completed within to five months, our commercial and industrial division has a contracted backlog of approximately $140,300 expected to be completed within ten to eighteen months and our utility division has a contracted backlog of approximately $6,500 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 September 30, 2023, the Company has approximately $10,900 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.
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ACCOUNTS RECEIVABLE |
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| ACCOUNTS RECEIVABLE | 3. ACCOUNTS RECEIVABLE
Bad debt expense was $50 and $145 at September 30, 2023 and December 31, 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 September 30, 2023 and December 31, 2022:
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 September 30, 2023 will be billed and collected within one year.
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| CONTRACTS IN PROGRESS | 4. CONTRACTS IN PROGRESS
Included in accompany balance sheets under the following captions:
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OPERATING SEGMENTS |
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| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPERATING SEGMENTS | 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.
Segment net revenue, segment operating expenses and segment contribution (loss) information consisted of the following for the three and nine months ended September 30, 2023.
Assets by operating segment are as follows:
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LEASES |
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| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASES | 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 September 30, 2023, aggregate monthly payments required under these leases approximates $35.
The Company’s lease expense for the three and nine months ended September 30, 2023 was entirely comprised of operating leases and amounted to $58 and $184, respectively. Operating lease payments, which reduced operating cash flows for the nine months ended September 30, 2023 amounted to $612. The difference between the ROU asset amortization of $481 and the associated lease expense of $440 consists of interest, new vehicles, new facilities and lease extensions, office and office equipment leases originated during the year ended December 31, 2022.
As of September 30, 2023, the weighted average remaining lease term for operating leases was 10.33 years and the weighted average discount rate for the Company’s operating leases was 3.33%.
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LONG-TERM DEBT |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LONG-TERM DEBT | 7. LONG-TERM DEBT
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 (6%) original interest discount resulting in gross proceeds to the Company of $11,750. Upon (i) the effectiveness of a Registration Statement covering the Registrable Securities (as defined in the SPA), (ii) the Stockholder Approval (as defined in the SPA), (iii) the Company’s achievement of certain revenue and EBITDA targets, (iv) the Company having sufficient authorized shares of Common Stock (v) the Company’s maintenance of certain balance sheet requirements and (vi) certain other conditions, the Company and the Purchasers will consummate a second closing in which the Company will issue and sell to each Purchaser a second Note, the two notes being in the aggregate principal amount of $12,500 having identical terms and conditions as the original Note, including a six percent (6%) original interest discount, for an aggregate principal amount of $25,000 in Notes that may be issued and sold pursuant to the Purchase Agreement. The Conversion Price of $ is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for, Common Stock at a price below the then-applicable Conversion Price (subject to certain exceptions). Beginning on March 1, 2023 and on the first day of each month thereafter, the Company will be required to redeem 1/26th of the original principal amount of each Note, plus accrued but unpaid interest, until the maturity date of May 4, 2025.
On August 30, 2023, the Company entered into a Letter Agreement with the two affiliated investors regarding a modification of the terms of the SPA. The Company failed to fulfill the EBITDA covenant for the quarter ended June 30, 2023. Under the Notes, a failure to fulfill the EBITDA covenant is defined as an Event of Default. Upon the occurrence of an Event of Default, the Purchasers may accelerate all amounts due under the Notes. The Purchasers have agreed to a waiver of the Event of Default upon the terms set forth in the letter agreement, including that the Company shall pay the Investors the aggregate amount of $1,442 of the principal amount of the Notes by wire transfer, that the Fixed Conversion Price of the Notes shall be adjusted to $1.00, and that the Company shall issue warrants to acquire an aggregate of 1,000,000 shares of Common Stock with an exercise price of $1.00 per share and a term of 5 years. For updated information with respect to the SPA and letter agreement, see Note 13 Subsequent Events below.
During the nine months ended September 30, 2023, the Company issued common shares having a fair value of $3,825 for the repayment of principal related to the Senior Secured Convertible Notes and recognized a loss of approximately $303 for the excess fair value of such shares.
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FAIR VALUE MEASUREMENTS |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FAIR VALUE MEASUREMENTS | 8. FAIR VALUE MEASUREMENTS
During the three and nine months ended September 30, 2023, warrants to acquire shares of Common Stock were granted. The warrants were issued on August 30, 2023 resulting from a failure to fulfill the EBITDA financial covenant of the Senior Secured Notes. The warrants were issued to the Investor in order to waive the Event of Default. During the three and nine months ended September 30, 2023, no warrants to acquire shares of Common Stock were exercised or redeemed. At September 30, 2023, 1,069,144 private warrants to acquire shares of Common Stock that were outstanding at the time of the Company became a public company remain outstanding.
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UNION ASSESSMENTS |
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| UNION ASSESSMENTS | 9. UNION ASSESSMENTS
The Company employs members of the International Brotherhood of Electrical Workers Local 300 (IBEW). The union fee assessments payable are both withholdings from employees and employer assessments. Union fees are for monthly dues, defined contribution pension, health and welfare funds as part of multi-employer plans. All union assessments are based on the number of hours worked or a percentage of gross wages as stipulated in the agreement with the Union.
The Company has an agreement with the IBEW in respect to rates of pay, hours, benefits, and other employment conditions that expires May 31, 2025. During the three and nine months ended September 30, 2023 and 2022, the Company incurred the following union assessments.
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DEFERRED COMPENSATION PLAN |
9 Months Ended |
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Sep. 30, 2023 | |
| Compensation Related Costs [Abstract] | |
| DEFERRED COMPENSATION PLAN | 10. DEFERRED COMPENSATION PLAN
In 2018, the Company entered into a deferred compensation agreement with a former minority stockholder. The agreement provides for deferred income benefits and is payable over the post-retirement period. The Company accrues the present value of the estimated future benefit payments over the period from the date of the agreement to the retirement date. The minimum commitment for future compensation under the agreement is $15, the net present value of which is $15. The Company will also pay the former stockholder a solar management fee of 24.5% of the available cash flow from the solar arrays put into service on or before December 31, 2017 over the life of the arrays. The amount is de minimis and therefore not recorded on the balance sheet as of September 30, 2023 and December 31, 2022 and recorded in the statement of operations when incurred.
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EARNINGS (LOSS) PER SHARE |
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| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EARNINGS (LOSS) PER SHARE |
Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of Common Stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock.
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RESTRICTED STOCK AND STOCK OPTIONS |
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| Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RESTRICTED STOCK AND STOCK OPTIONS |
Options
As of September 30, 2023, the Company had non-qualified stock options outstanding to purchase shares of Common Stock. The stock options vest at various times and are exercisable for a period of from the date of grant at an average exercise price of $ per share, the fair market value of the Company’s Common Stock on the date of each grant. The Company determined the fair market value of these options to be $ by using the Black Scholes option valuation model. The key assumptions used in the valuation of the options were as follows; a) volatility of %, b) term of years, c) risk free rate of % and d) a dividend yield of %.
The above table does not include the 429,000 options issued as part of the Jensyn IPO.
Aggregate intrinsic value of options outstanding at September 30, 2023 was $. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the fiscal period which was $ as of September 30, 2023 and the exercise price multiplied by the number of options outstanding.
During the three months ended September 30, 2023 and 2022, the Company charged a total of $100 and $300, respectively to operations to recognize stock-based compensation expense related to stock option awards. During the nine months ended September 30, 2023 and 2022, the Company charged a total of $400 and $1,100, respectively to operations to recognize stock-based compensation expense related to stock option awards.
As of September 30, 2023, the Company had $ in unrecognized stock-based compensation related to stock option awards, which is expected to be recognized over a weighted average period of less than . All option units are expected to vest.
Restricted Stock Grant to Executives
With an effective date of January 4, 2021, subject to the iSun, Inc. 2020 Equity Incentive Plan, (the “2020 Plan”), the Company entered into a restricted stock grant agreement with our Chief Executive Officer Jeffrey Peck, Chief Financial Officer John Sullivan, Executive Vice President Fredrick Myrick, and Chief Strategy Officer Michael dAmato in January 2021 (the January 2021 RSGAs). All shares of Common Stock issuable under the January 2021 RSGA are valued as of the grant date at $ per share representing the fair market value. The January 2021 RSGA provides for the issuance of up to shares of the Company’s Common Stock. The restricted shares of Common Stock shall vest as follows: of the restricted shares shall vest immediately, of the restricted shares shall vest on the one (1) year anniversary of the effective date, and the balance, or restricted shares, shall vest on the two (2) year anniversary of the effective date.
With an effective date of January 24, 2022, subject to the iSun, Inc. 2020 Equity Incentive Plan, (the “2020 Plan”), the Company entered into a restricted stock grant agreement with our Chief Executive Officer Jeffrey Peck, Chief Financial Officer John Sullivan, Executive Vice President Fredrick Myrick, and Chief Strategy Officer Michael dAmato in January 2022 (the January 2022 RSGAs). All shares of Common Stock issuable under the January 2022 RSGA are valued as of the grant date at $ per share representing the fair market value. The January 2022 RSGA provides for the issuance of up to shares of the Company’s Common Stock. The restricted shares of Common Stock shall vest as follows: of the restricted shares shall vest immediately, of the restricted shares shall vest on the one (1) year anniversary of the effective date, and the balance, or restricted shares, shall vest on the two (2) year anniversary of the effective date.
With an effective date of January 24, 2023, subject to the iSun, Inc. 2020 Equity Incentive Plan, (the “2020 Plan”), the Company entered into a restricted stock grant agreement with our Chief Executive Officer Jeffrey Peck, Chief Financial Officer John Sullivan, Executive Vice President Fredrick Myrick, and Chief Strategy Officer Michael dAmato in January 2023 (the January 2023 RSGAs). All shares of Common Stock issuable under the January 2023 RSGA are valued as of the grant date at $per share representing the fair market value. The January 2023 RSGA provides for the issuance of up to shares of the Company’s Common Stock. The restricted shares of Common Stock shall vest as follows: of the restricted shares shall vest immediately, of the restricted shares shall vest on the one (1) year anniversary of the effective date, and the balance, or restricted shares, shall vest on the two (2) year anniversary of the effective date.
In the three months ended September 30, 2023 and 2022, stock-based compensation expense of $200 and $300, respectively was recognized for the January 2021, January 2022 and January 2023 RSGA. In the nine months ended September 30, 2023 and 2022, stock-based compensation expense of $700 and $1,200, respectively was recognized for the January 2021, January 2022 and January 2023 RSGA.
Stock-based compensation, excluding the January 2021, January 2022 and January 2023 RSGA, related to employee and director options totaled $ and $ for the three months ended September 30, 2023 and 2022, respectively. Stock-based compensation, excluding the January 2021, January 2022 and January 2023 RSGA, related to employee and director options totaled $ and $ for the nine months ended September 30, 2023 and 2022, respectively.
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SUBSEQUENT EVENTS |
9 Months Ended |
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Sep. 30, 2023 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | 13. SUBSEQUENT EVENTS
Sale of Common Stock pursuant to S-3 Registration Statement
Subsequent to September 30, 2023, shares of Common Stock were sold under the B. Riley Sales Agreement between October 1, 2023 and October 26, 2023, pursuant to a prospectus supplement that was filed with the SEC on February 10, 2021. Total gross proceeds for the shares were $260 or $ per share. Net proceeds after issuance costs were $250 or $ per share.
Execution of term sheet
On October 23, 2023, the Company executed a non-binding term sheet with an institutional investor to provide an $8 million term loan with a 48-month amortization period. The primary use of proceeds will be repayment of the existing Senior Secured Convertible Notes in full. The new loan facility will be secured by all assets of the Company and will not have any conversion provisions eliminating the potential for future dilution. The closing date is scheduled for December 5, 2023.
Event of Default
On November 13, 2023, the Company received notification from the Purchasers of the Senior Secured Convertible Note of an Event of Default as the Company failed to make the $1,442 accelerated principal payment under the terms of the Letter Agreement dated August 30, 2023. Given the Event of Default, the Purchasers are demanding immediate repayment of the Notes in cash at the Mandatory Default Amount as defined in the Notes. The Company intends to satisfy the demand payment through the closing of the term loan pending completion of the due diligence process.
Delisting Notice Extension
On November 14, 2023, the Company received notice from the Nasdaq Stock Market that the cure period to regain compliance with the Bid Price Requirement has been extended for an additional 180 days until May 13, 2024. |
SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization | 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 product 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 consolidated 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 nine months ended September 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.
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| Principles of Consolidation | 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.
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| Revenue Recognition | 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 September 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).
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 nine months ended September 30, 2023 and September 30, 2022:
The following table disaggregates the Company’s revenue based operational division for the three and nine months ended September 30, 2023, and September 30, 2022:
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.
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.
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| Accounts Receivable | 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.
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| Contract Assets and Liabilities | 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:
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 September 30, 2023 and December 31, 2022, respectively.
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| Concentration and Credit Risks | 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 September 30, 2023, the uninsured balances were approximately $3,554.
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| Use of Estimates | 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.
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| Recently Issued Accounting Pronouncements | g) Recently Issued Accounting Pronouncements
The Company is an emerging growth company until at minimum December 31, 2024. 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 evaluating the effect that adopting this new accounting guidance will have on its condensed consolidated financial statements and related disclosures.
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| Fair Value of Financial Instruments | 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.
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| Debt Extinguishment | 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 on the statement of operations as a gain on forgiveness of PPP Loan for the nine months ended September 30, 2022.
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| Inventory | 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 September, 2023 and December 31, 2022.
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| Segment Information | 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.
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| Legal contingencies | l) Legal contingencies
The Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements. No reserves were deemed necessary as of September 30, 2023.
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| Inflation risk | m) Inflation risk
Changes in economic conditions, including inflation, rising interest rates, lower consumer confidence, volatile equity capital markets and ongoing supply chain disruptions may affect our business, revenues and earnings adversely.
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| Reclassification | n) Reclassification
Certain prior period amounts presented on the Company’s financial statements have been reclassified in order to conform to the current period presentation. These reclassifications have no effect on previously reported results of operations or loss per share. |
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SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF DISAGGREGATION OF REVENUE | The following table disaggregates the Company’s revenue based on the timing of satisfaction of performance obligations for the three and nine months ended September 30, 2023 and September 30, 2022:
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| SCHEDULE OF REVENUE BASED OPERATIONAL SEGMENT | The following table disaggregates the Company’s revenue based operational division for the three and nine months ended September 30, 2023, and September 30, 2022:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF CONTRACT ASSET AND LIABILITIES |
|
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ACCOUNTS RECEIVABLE (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF ACCOUNTS RECEIVABLE |
|
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| SCHEDULE OF CONTRACT ASSETS AND LIABILITIES | 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 September 30, 2023 and December 31, 2022:
|
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CONTRACTS IN PROGRESS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contracts In Progress | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF CONTRACTS IN PROGRESS |
Included in accompany balance sheets under the following captions:
|
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OPERATING SEGMENTS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF SEGMENT NET REVENUE | Segment net revenue, segment operating expenses and segment contribution (loss) information consisted of the following for the three and nine months ended September 30, 2023.
Assets by operating segment are as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF OPERATING LEASE |
|
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| SCHEDULE OF ESTIMATED FUTURE MINIMUM LEASE | As of September 30, 2023, the weighted average remaining lease term for operating leases was 10.33 years and the weighted average discount rate for the Company’s operating leases was 3.33%.
|
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LONG-TERM DEBT (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF LONG-TERM DEBT |
|
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| SCHEDULE OF MATURITIES OF LONG-TERM DEBT |
|
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FAIR VALUE MEASUREMENTS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF FAIR VALUE MEASUREMENT INPUTS |
|
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| SCHEDULE OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS |
|
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| SCHEDULE OF ROLL FORWARD OF LEVEL 3 INSTRUMENTS |
|
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UNION ASSESSMENTS (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Union Assessments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF UNION ASSESSMENTS | The Company has an agreement with the IBEW in respect to rates of pay, hours, benefits, and other employment conditions that expires May 31, 2025. During the three and nine months ended September 30, 2023 and 2022, the Company incurred the following union assessments.
|
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EARNINGS (LOSS) PER SHARE (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF POTENTIAL SHARE ISSUANCES EXCLUDED FROM COMPUTATION OF EARNINGS (LOSS) PER SHARE |
|
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RESTRICTED STOCK AND STOCK OPTIONS (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF SHARE BASED PAYMENT ARRANGEMENT, OPTION, ACTIVITY |
|
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SCHEDULE OF DISAGGREGATION OF REVENUE (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Revenue | $ 27,909 | $ 19,034 | $ 70,274 | $ 50,597 |
| Solar Operations [Member] | ||||
| Revenue | 23,549 | 16,836 | 60,401 | 45,311 |
| Electric Operations [Member] | ||||
| Revenue | 3,773 | 1,994 | 9,081 | 4,510 |
| Data and Network Operations [Member] | ||||
| Revenue | $ 587 | $ 204 | $ 792 | $ 776 |
SCHEDULE OF REVENUE BASED OPERATIONAL SEGMENT (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Revenue | $ 27,909 | $ 19,034 | $ 70,274 | $ 50,597 |
| Residential [Member] | ||||
| Revenue | 8,280 | 11,338 | 24,418 | 27,684 |
| Commercial and Industrial [Member] | ||||
| Revenue | 18,836 | 5,933 | 43,471 | 19,085 |
| Utility [Member] | ||||
| Revenue | $ 793 | $ 1,763 | $ 2,385 | $ 3,828 |
SCHEDULE OF CONTRACT ASSET AND LIABILITIES (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Revenue in excess of billings on uncompleted contracts | $ 10,934 | $ 6,887 |
| Conditional retainage | 551 | 437 |
| Total Contract Assets | 11,485 | 7,324 |
| Billings in excess of revenue on uncompleted contracts | 6,439 | 5,419 |
| Conditional retainage | ||
| Total Contract Liabilities | $ 6,439 | $ 5,419 |
SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Property, Plant and Equipment [Line Items] | |||||
| Uninsured cash balances | $ 3,554 | $ 3,554 | |||
| Gain on forgiveness of PPP loan | $ 2,592 | ||||
| Inventory allowance | $ 0 | 0 | $ 0 | ||
| PPP [Member] | |||||
| Property, Plant and Equipment [Line Items] | |||||
| Gain on forgiveness of PPP loan | $ 2,592 | ||||
| Solar Power Projects [Member] | |||||
| Property, Plant and Equipment [Line Items] | |||||
| Project assets | $ 0 | $ 0 | |||
LIQUIDITY AND FINANCIAL CONDITION (Details Narrative) $ in Thousands |
9 Months Ended | ||
|---|---|---|---|
|
Sep. 30, 2023
USD ($)
MW
|
Sep. 30, 2022
USD ($)
|
Dec. 31, 2022
USD ($)
|
|
| Operating loss | $ 7,800 | ||
| Cash in operations | 3,800 | ||
| Cash | 5,600 | $ 5,455 | |
| Working capital | 7,600 | ||
| Proceeds from issuance or sale of equity | 6,358 | $ 13,937 | |
| Common Stock [Member] | |||
| Proceeds from issuance or sale of equity | 10,900 | ||
| Residential [Member] | |||
| Customer orders | $ 15,000 | ||
| Residential [Member] | Minimum [Member] | |||
| Completion period | 3 months | ||
| Residential [Member] | Maximum [Member] | |||
| Completion period | 5 months | ||
| Commercial [Member] | |||
| Contracted backlog | $ 140,300 | ||
| Industrial [Member] | |||
| Contracted backlog | $ 6,500 | ||
| Utility [Member] | |||
| Projects under development | MW | 1,600 | ||
SCHEDULE OF ACCOUNTS RECEIVABLE (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
| Accounts receivable | $ 13,303 | $ 9,085 |
| Allowance for doubtful accounts | (176) | (302) |
| Total | 13,127 | 8,783 |
| Contracts in Progress [Member] | ||
| Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
| Accounts receivable | 12,752 | 8,502 |
| Retainage [Member] | ||
| Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
| Accounts receivable | $ 551 | $ 583 |
SCHEDULE OF CONTRACT ASSETS AND LIABILITIES (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Receivables [Abstract] | ||
| Contract assets | $ 10,843 | $ 6,648 |
| Unbilled receivables, included in costs in excess of billings | 91 | 93 |
| Costs and estimated earnings in excess of billings | 10,934 | 6,741 |
| Retainage | 551 | 583 |
| Total | $ 11,485 | $ 7,324 |
ACCOUNTS RECEIVABLE (Details Narrative) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended | |
|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Receivables [Abstract] | |||
| Bad debt expense | $ 50 | $ 87 | $ 145 |
SCHEDULE OF CONTRACTS IN PROGRESS (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Capitalized Contract Cost [Line Items] | ||
| Contract costs | $ 58,100 | $ 33,724 |
| Less billings to date | (53,145) | (31,912) |
| Contract costs, net of billings | 4,955 | 1,812 |
| Plus under billings remaining on contracts 100% complete | 91 | 93 |
| Total | 5,046 | 1,905 |
| Contract assets | 11,485 | 7,324 |
| Contract liabilities | (6,439) | (5,419) |
| Expenditures on Uncompleted Contracts [Member] | ||
| Capitalized Contract Cost [Line Items] | ||
| Contract costs | 54,092 | 31,215 |
| Estimated Earnings Thereon [Member] | ||
| Capitalized Contract Cost [Line Items] | ||
| Contract costs | $ 4,008 | $ 2,509 |
SCHEDULE OF OPERATING LEASE (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Leases [Abstract] | ||
| Operating lease right-of-use assets | $ 6,479 | $ 6,960 |
| Operating lease liabilities—short term | 598 | 588 |
| Operating lease liabilities—long term | 6,261 | 6,711 |
| Total operating lease liabilities | $ 6,859 | $ 7,299 |
SCHEDULE OF ESTIMATED FUTURE MINIMUM LEASE (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Leases [Abstract] | ||
| Remaining 2023 | $ 204 | |
| 2024 | 805 | |
| 2025 | 798 | |
| 2026 | 796 | |
| 2027 | 797 | |
| 2028 | 804 | |
| Thereafter | 3,937 | |
| Total lease payments | 8,141 | |
| Less: interest | (1,282) | |
| Total operating leases liability | $ 6,859 | $ 7,299 |
SCHEDULE OF MATURITIES OF LONG-TERM DEBT (Details) $ in Thousands |
Sep. 30, 2023
USD ($)
|
|---|---|
| Debt Disclosure [Abstract] | |
| Remainder of 2023 | $ 8,088 |
| 2024 | 590 |
| 2025 | 511 |
| 2026 | 901 |
| 2027 | 187 |
| 2028 and thereafter | 206 |
| Total | $ 10,483 |
LONG-TERM DEBT (Details Narrative) - USD ($) |
9 Months Ended | ||
|---|---|---|---|
Nov. 04, 2022 |
Sep. 30, 2023 |
Aug. 30, 2023 |
|
| Debt Instrument [Line Items] | |||
| Share Price | $ 2.66 | ||
| Repayments of convertible notes | $ 3,825,000 | ||
| Common Stock [Member] | |||
| Debt Instrument [Line Items] | |||
| Shares issued | 6,340,411 | ||
| Warrant [Member] | |||
| Debt Instrument [Line Items] | |||
| Warrants to acquire an common stock | 1,000,000 | ||
| Exercise price of warrants | $ 1.00 | ||
| Warrants and rights outstanding, term | 5 years | ||
| Investor [Member] | |||
| Debt Instrument [Line Items] | |||
| Debt instrument face amount | $ 1,442 | ||
| Exercise price of warrants | $ 1.00 | ||
| Senior Secured Convertible First Note [Member] | |||
| Debt Instrument [Line Items] | |||
| Debt instrument face amount | $ 12,500,000 | ||
| Discount percentage | 6.00% | ||
| Gross proceeds from debt | $ 11,750,000 | ||
| Senior Secured Convertible Second Note [Member] | |||
| Debt Instrument [Line Items] | |||
| Debt instrument face amount | $ 12,500,000 | ||
| Discount percentage | 6.00% | ||
| Senior Secured Convertible Note [Member] | |||
| Debt Instrument [Line Items] | |||
| Debt instrument face amount | $ 25,000,000 |
SCHEDULE OF FAIR VALUE MEASUREMENT INPUTS (Details) - $ / shares |
9 Months Ended | 12 Months Ended | |
|---|---|---|---|
Sep. 30, 2023 |
Dec. 31, 2022 |
Nov. 04, 2022 |
|
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
| Fair value of common stock | $ 2.66 | ||
| Private Warrants [Member] | |||
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
| Risk-free rate | 4.81% | 3.88% | |
| Remaining term in years | 1 year 5 months 19 days | ||
| Expected volatility | 140.91% | 147.02% | |
| Exercise price | $ 11.50 | $ 11.50 | |
| Fair value of common stock | $ 0.22 | $ 1.30 | |
| Private Warrants [Member] | Minimum [Member] | |||
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
| Remaining term in years | 8 months 19 days | ||
| Private Warrants [Member] | Maximum [Member] | |||
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
| Remaining term in years | 4 years 10 months 28 days |
SCHEDULE OF ROLL FORWARD OF LEVEL 3 INSTRUMENTS (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Fair Value Disclosures [Abstract] | |||||
| Beginning balance | $ 10 | $ 148 | $ 148 | ||
| Fair value adjustment – Warrant liability | $ 178 | $ (7) | 168 | $ (98) | (138) |
| Ending balance | $ 178 | $ 178 | $ 10 | ||
FAIR VALUE MEASUREMENTS (Details Narrative) - Warrant [Member] |
3 Months Ended | 9 Months Ended |
|---|---|---|
|
Sep. 30, 2023
shares
|
Sep. 30, 2023
shares
|
|
| Number of new shares issued | 1,000,000 | 1,000,000 |
| Private warrants to acquire shares of common stock | 1,069,144 | 1,069,144 |
SCHEDULE OF UNION ASSESSMENTS (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Defined Benefit Plan Disclosure [Line Items] | ||||
| Union assessments | $ 684 | $ 300 | $ 1,766 | $ 1,369 |
| Pension Plan [Member] | ||||
| Defined Benefit Plan Disclosure [Line Items] | ||||
| Union assessments | 198 | 82 | 472 | 326 |
| Welfare Fund [Member] | ||||
| Defined Benefit Plan Disclosure [Line Items] | ||||
| Union assessments | 360 | 160 | 954 | 814 |
| National Employees Benefit Fund [Member] | ||||
| Defined Benefit Plan Disclosure [Line Items] | ||||
| Union assessments | 47 | 21 | 103 | 74 |
| Joint Apprenticeship and Training Committee [Member] | ||||
| Defined Benefit Plan Disclosure [Line Items] | ||||
| Union assessments | 37 | 6 | 75 | 32 |
| 401 (K) Matching Plan [Member] | ||||
| Defined Benefit Plan Disclosure [Line Items] | ||||
| Union assessments | $ 42 | $ 31 | $ 162 | $ 123 |
DEFERRED COMPENSATION PLAN (Details Narrative) - Investor [Member] $ in Thousands |
12 Months Ended |
|---|---|
|
Dec. 31, 2018
USD ($)
| |
| Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items] | |
| Minimum commitment for future compensation | $ 15 |
| Net present value of future compensation | $ 15 |
| Solar management fee | 24.50% |
SCHEDULE OF SHARE BASED PAYMENT ARRANGEMENT, OPTION, ACTIVITY (Details) - Share-Based Payment Arrangement, Option [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
$ / shares
shares
| |
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
| Number of Options, Outstanding Balance | shares | 576,333 |
| Weighted average exercise price, Outstanding | $ / shares | $ 3.80 |
| Number of Options, Granted | shares | 590,000 |
| Weighted average exercise price, Granted | $ / shares | $ 1.03 |
| Number of Options, Exercised | shares | |
| Weighted average exercise price, Exercised | $ / shares | |
| Number of Options, Outstanding Balance | shares | 1,166,333 |
| Weighted average exercise price, Outstanding | $ / shares | $ 2.40 |
| Number of Options, Exercisable | shares | 451,333 |
| Weighted average exercise price, Exercisable | $ / shares | $ 3.46 |
SUBSEQUENT EVENTS (Details Narrative) - USD ($) |
1 Months Ended | |||
|---|---|---|---|---|
Oct. 23, 2023 |
Oct. 26, 2023 |
Nov. 13, 2023 |
Nov. 04, 2022 |
|
| Subsequent Event [Line Items] | ||||
| Share price | $ 2.66 | |||
| Subsequent Event [Member] | ||||
| Subsequent Event [Line Items] | ||||
| Loan processing fee | $ 8,000,000 | |||
| B Riley Sales Agreement [Member] | Subsequent Event [Member] | ||||
| Subsequent Event [Line Items] | ||||
| Number of shares issued in transaction | 1,381,844 | |||
| Proceeds from issuance of common stock | $ 260,000 | |||
| Shares issued price per shares | $ 0.19 | |||
| Net proceeds from issuance of common stock | $ 250,000 | |||
| Share price | $ 0.18 | |||
| Letter Agreement [Member] | Subsequent Event [Member] | ||||
| Subsequent Event [Line Items] | ||||
| Debt instrument face amount | $ 1,442 |