☒ QUARTERLY REPORT UNDER SECTION 13 OR ~~15(D)~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT UNDER SECTION 13 OR ~~15(D)~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Former name, former address and former fiscal year, if changed since last report)

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 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, a 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.

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).

The number of shares of registrant’s common stock outstanding as of ~~November 8, 2022~~August 11, 2023 was ~~35,187,898~~44,288,422.

This Quarterly Report on Form 10-Q (this ~~“Quarterly Report”)~~Quarterly Report) contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and we intend that such forward-looking statements be subject to the safe harbors created thereby. For this purpose, any statements contained in this Quarterly Report except for statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, trends in our businesses, or other characterizations of future events or circumstances are forward-looking statements.

The forward-looking statements included herein are based on current expectations of our management based on available information and involve a number of risks and uncertainties, all of which are difficult or impossible to predict accurately and many of which are beyond our control. As such, our actual results may differ significantly from those expressed in any forward-looking statements. Factors that might cause these differences in actual results include the ~~risks~~impacts on us, our operations, or our future financial and ~~uncertainties~~operational results; discussed in Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022, as amended by our Form 10-K/A filed on May 1, 2023 (our “Annual Report”), and the additional risks described in other documents we file from time to time with the Securities and Exchange Commission ~~(SEC)~~(the “SEC”). In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking information. Except as may be required by law, we disclaim any intent to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

	September 30, 2022			December 31, 2021			June 30, 2023			December 31, 2022
		(Unaudited)					(Unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	14,273		$	19,719		$	4,631		$	7,807
Restricted cash		248			323			249			248
Accounts receivable, net		7,633			4,568			14,712			13,873
Inventory		26,927			10,219			18,937			26,401
Contract assets		24,722			14,498			16,201			20,699
Other current assets		3,278			4,154			3,279			5,824
Total Current Assets		77,081			53,481			58,009			74,852
Property and equipment, net		2,494			3,195			1,488			2,154
Finance lease right-of-use assets, net		1,888			1,407			4,300			2,487
Operating lease right-of-use assets		1,937			2,502
Operating lease right-of-use assets, net								2,374			2,779
Deposits		162			132			199			192
Intangible assets, net		5,620			7,910			4,630			5,290
Goodwill		32,186			32,186			32,186			32,186
Total Assets	$	121,368		$	100,813		$	103,186		$	119,940

Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable and accrued liabilities	$	19,160		$	11,127		$	22,209		$	24,567
Contract liabilities		26,695			12,201			21,231			24,960
Finance lease liability, current portion		491			424
Operating lease liability, current portion		905			993
Finance lease liabilities, current portion								1,047			631
Operating lease liabilities, current portion								1,008			1,098
Total Current Liabilities		47,251			24,745			45,495			51,256

Long-Term Liabilities:
Finance lease liability, net of current portion		997			542
Operating lease liability, net of current portion		1,032			1,509
Finance lease liabilities, net of current portion								2,911			1,470
Operating lease liabilities, net of current portion								1,366			1,681
Warranty liability		1,431			1,251			1,716			1,596
Total Long-Term Liabilities		3,460			3,302			5,993			4,747
Total Liabilities		50,711			28,047			51,488			56,003

Commitments and contingencies		-			-			-			-

Shareholders’ Equity:
Preferred stock, $0.001 par value, 5,000,000 authorized shares; no shares issued and outstanding
Common stock, $0.001 par value; 50,000,000 authorized shares; 35,161,648 and 29,193,772 shares issued and outstanding, at September 30, 2022 and December 31, 2021, respectively		35			29
Preferred stock Series B, $0.001 par value, 5,000,000 authorized shares; no shares issued and outstanding								-			-
Common stock, $0.001 par value; 50,000,000 authorized shares; 40,980,882 and 35,374,978 shares issued and outstanding, at June 30, 2023 and December 31, 2022, respectively								41			35
Additional paid-in capital		207,067			187,997			214,194			207,373
Accumulated deficit		(136,445	)		(115,260	)		(162,537	)		(143,471	)
Total Shareholders’ Equity		70,657			72,766			51,698			63,937

Total Liabilities and Shareholders’ Equity	$	121,368		$	100,813		$	103,186		$	119,940

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

FOR THE ~~THREE AND NINE MONTHS ENDED SEPTEMBER~~Three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022

	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021			June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021			June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022

Revenue, net	$	40,713		$	31,220		$	108,306		$	69,480		$	34,638		$	36,397		$	72,537		$	67,593

Cost of Goods Sold		21,204			18,150			59,030			42,348			23,196			19,803			49,173			37,827

Gross Profit		19,509			13,070			49,276			27,132			11,442			16,594			23,364			29,766

Operating Expenses:
Selling and marketing		14,773			10,072			41,320			21,468			11,967			14,318			24,046			26,548
General and administrative		8,718			7,185			24,025			17,081			9,773			8,495			18,616			15,305
Stock-based compensation		364			1,206			2,019			2,470			436			371			880			1,655
Depreciation and amortization		1,056			1,062			3,177			2,160			623			1,071			1,245			2,121

Total Operating Expenses		24,911			19,525			70,541			43,179			22,799			24,255			44,787			45,629

Operating Loss		(5,402	)		(6,455	)		(21,265	)		(16,047	)		(11,357	)		(7,661	)		(21,423	)		(15,863	)

Other Income (Expense)
Other income (expense), net		(6	)		5			46			2,896			(1,016	)		51			4,049			53
Interest expense		(50	)		(10	)		(115	)		(40	)		(173	)		(59	)		(242	)		(66	)
Gain on disposal of property and equipment		65			-			243			51
Gain (Loss) on disposal of property and equipment														(18	)		178			(1,338	)		178

Total Other Income (Expense), net		9			(5	)		174			2,907			(1,207	)		170			2,469			165

Loss before Income Taxes		(5,393	)		(6,460	)		(21,091	)		(13,140	)		(12,564	)		(7,491	)		(18,954	)		(15,698	)

Income Tax Expense		-			-			94			-			112			94			112			94

Net Loss	$	(5,393	)	$	(6,460	)	$	(21,185	)	$	(13,140	)	$	(12,676	)	$	(7,585	)	$	(19,066	)	$	(15,792	)

LOSS PER SHARE:
Basic	$	(0.16	)	$	(0.24	)	$	(0.66	)	$	(0.50	)	$	(0.34	)	$	(0.23	)	$	(0.52	)	$	(0.51	)
Diluted	$	(0.16	)	$	(0.24	)	$	(0.66	)	$	(0.50	)	$	(0.34	)	$	(0.23	)	$	(0.52	)	$	(0.51	)

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
Basic		33,626,405			27,047,960			32,027,304			26,449,743			37,524,312			32,907,289			36,477,806			31,262,031
Diluted		33,626,405			27,047,960			32,027,304			26,449,743			37,524,312			32,907,289			36,477,806			31,262,031

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

FOR THE ~~THREE~~ ~~AND Nine~~Three and six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

						Additional														Additional
	Common Stock					Paid-in			Accumulated						Common Stock					Paid-in			Accumulated
	Shares			Amount		Capital			Deficit			Total			Shares			Amount		Capital			Deficit			Total
Balance at December 31, 2021		29,193,772		$	29	$	187,997		$	(115,260	)	$	72,766
Stock-based compensation		-			-		1,284			-			1,284
Issuance of common stock under terms of restricted stock grants		121,666			-		-			-			-
Sales of common stock pursuant to S-3 registration statement, net		2,757,830			3		7,811			-			7,814
Net loss for the three months ended March 31, 2022		-			-		-			(8,207	)		(8,207	)
Balance at March 31, 2022		32,073,268			32		197,092			(123,467	)		73,657
Balance at December 31, 2022																35,374,978		$	35	$	207,373		$	(143,471	)	$	63,937
Stock-based compensation		-			-		371			-			371			-			-		444			-			444
Issuance of common stock under terms of restricted stock grants		95,000			-		-			-			-			104,267			-		-			-			-
Tax withholdings related to net share settlements of equity awards		(16,703	)		-		(34	)		-			(34	)		(13,271	)		-		(39	)		-			(39	)
Sales of common stock pursuant to S-3 registration statement, net		783,257			1		2,004			-			2,005			100,000			1		141			-			142
Net loss for the three months ended June 30. 2022		-			-		-			(7,585	)		(7,585	)
Balance at June 30, 2022		32,934,822			33		199,433			(131,052	)		68,414
Net loss for the three months ended March 31, 2023																-			-		-			(6,390	)		(6,390	)
Balance at March 31, 2023																35,565,974			36		207,919			(149,861	)		58,094
Stock-based compensation		-			-		364			-			364			-			-		436			-			436
Issuance of common stock under terms of restricted stock grants		17,500			-		-			-			-			73,763			-		-			-			-
Tax withholdings related to net share settlements of equity awards		(3,748	)		-		(13	)		-			(13	)		(3,598	)		-		(4	)		-			(4	)
Registered direct sale of common stock pursuant to S-3 registration statement, net																4,050,000			4		4,286			-			4,290
Sales of common stock pursuant to S-3 registration statement, net		2,213,074			2		7,283			-			7,285			1,294,743			1		1,557			-			1,558
Net loss for the three months ended September 30, 2022		-			-		-			(5,393	)		(5,393	)
Balance at September 30, 2022		35,161,648		$	35	$	207,067		$	(136,445	)	$	70,657
Net loss for the three months ended June 30, 2023																-			-		-			(12,676	)		(12,676	)
Balance at June 30, 2023																40,980,882		$	41	$	214,194		$	(162,537	)	$	51,698

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

FOR THE SIX MONTHS ~~Nine months ended September~~ENDED June 30, ~~2022~~2023 and ~~2021~~2022

	September 30, 2022			September 30, 2021			June 30, 2023			June 30, 2022
	Nine Months Ended						Six Months Ended
	September 30, 2022			September 30, 2021			June 30, 2023			June 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(21,185	)	$	(13,140	)	$	(19,066	)	$	(15,792	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		3,827			3,900			1,967			2,595
Amortization of right-of-use assets		811			762			674			536
Gain on sale of equipment		(243	)		(51	)
Paycheck Protection Program loan forgiveness		-			(2,881	)
Loss (Gain) on sale of inventory and equipment								1,338			(178	)
Stock-based compensation		2,019			2,470			880			1,655
Bad debt expense		378			255			394			225
Changes in Operating Assets and Liabilities, net of acquisition
Changes in Operating Assets and Liabilities:
Accounts receivable		(3,443	)		(1,197	)		(1,233	)		(3,669	)
Inventory		(16,784	)		(5,700	)		3,494			(8,603	)
Deposits and other current assets		846			(2,073	)		2,538			(601	)
Contract assets		(10,224	)		(2,685	)		4,498			(5,139	)
Accounts payable and accrued liabilities		8,033			(4,669	)		(2,358	)		5,196
Contract liabilities		14,494			350			(3,729	)		7,216
Warranty liability		180			90			120			120
Operating lease liability		(811	)		(762	)
Operating lease liabilities								(674	)		(536	)
NET CASH USED IN OPERATING ACTIVITIES		(22,102	)		(25,331	)		(11,157	)		(16,975	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Solcius LLC, net of cash acquired		-			(50,619	)
Purchase of property and equipment		(432	)		(535	)		(150	)		(439	)
Proceeds from sale of equipment		311			61
NET CASH USED IN INVESTING ACTIVITIES		(121	)		(51,093	)
Proceeds from sale of inventory and equipment								2,631			197
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES								2,481			(242	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on finance lease liabilities		(355	)		(206	)		(446	)		(220	)
Proceeds from sale of common stock, net		17,104			48,858			5,990			9,819
Payments for taxes related to net share settlement of equity awards		(47	)		-			(43	)		(34	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		16,702			48,652			5,501			9,565

NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		(5,521	)		(27,772	)		(3,175	)		(7,652	)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF PERIOD		20,042			39,339
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR								8,055			20,042
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$	14,521		$	11,567		$	4,880		$	12,390

Cash and cash equivalents	$	14,273		$	11,219		$	4,631		$	12,067
Restricted cash		248			348			249			323
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$	14,521		$	11,567		$	4,880		$	12,390

CASH PAID FOR:
Interest	$	51		$	40		$	125		$	18
Franchise and corporate excise taxes	$	42		$	-		$	174		$	42

SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS
Increase in operating right-of-use assets and liabilities due to lease modification	$	-		$	132
Right-of-use assets obtained in exchange for new finance lease liability	$	903		$	252
Right-of-use assets obtained in exchange for new operating lease liability	$	247		$	697
Decrease in operating right-of-use assets as a result of lease modification							$	44		$	-
Right-of-use assets obtained in exchange for new operating lease liabilities							$	314		$	247
Right-of-use assets obtained in exchange for new finance liabilities							$	2,310		$	338

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

References herein to “we,” “us,” “Sunworks,” and “the Company” are to Sunworks, Inc. and its wholly owned subsidiaries, Sunworks United Inc. (“Sunworks United”), Commercial Solar Energy, Inc. (“CSE”), and Solcius ~~LLC~~LLC. (“Solcius”).

We provide photovoltaic (“PV”) and battery-based power and storage systems for the residential and commercial markets. Commercial projects include commercial, agricultural, industrial and public works projects. We operate in several residential and commercial markets including California, Utah, Nevada, Arizona, New Mexico, Texas, Colorado, Minnesota, Wisconsin, Massachusetts, Rhode Island, New York, Pennsylvania, New Jersey and South Carolina. Through our operating subsidiaries, we design, arrange financing, integrate, install, and manage systems ranging in size from 2kW (kilowatt) for residential projects to multi-MW (megawatt) systems for larger commercial and public works projects. Commercial installations have included installations at office buildings, manufacturing plants, warehouses, service stations, churches, and agricultural facilities such as farms, wineries, and dairies. Public works installations have included school districts, local municipalities, federal facilities and higher education institutions.

On April 8, 2021, Sunworks, Inc., through its operating subsidiary Sunworks United (the “Buyer”), acquired all of the issued and outstanding membership interests (the “Solcius Acquisition”) of Solcius, from Solcius Holdings, LLC (“Seller”). Located in Provo, Utah, Solcius is a full-service, residential solar systems provider. The Company believes the Solcius Acquisition enhances economies of scale, leading to better access to suppliers, vendors and financial partners, as well as marketing and customer acquisition opportunities.

The Solcius Acquisition was consummated on April 8, 2021, pursuant to a Membership Interest Purchase Agreement, dated as of April 8, 2021 (the “Purchase Agreement”), by and between Buyer and Seller. The purchase price for Solcius consisted of $~~51,750~~ in cash, subject to post-closing adjustments related to working capital, cash, indebtedness and transaction expenses. The acquired assets and operating results of Solcius are included in these condensed consolidated financial statements and footnotes since the date of acquisition through September 30, 2022 (see Note 3).

The accompanying unaudited condensed consolidated financial statements (“financial statements”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022.~~2023. The financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022, as amended by our Form 10-K/A filed on May 1, 2023.

The financial statements have been prepared assuming that the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. These accounting policies conform to GAAP and have been consistently applied in the preparation of the condensed consolidated financial statements.

There have been no significant changes in the Company’s accounting policies from those disclosed in its Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

The accompanying condensed consolidated financial statements include the accounts of Sunworks, Inc., and its wholly owned operating ~~subsidiaries:~~subsidiaries, Sunworks United Inc., Commercial Solar Energy, Inc. and Solcius LLC. All material intercompany transactions have been eliminated upon consolidation of these entities.

The Company has historically incurred significant operating losses. At June 30, 2023, the Company had an accumulated deficit of approximately $162,537. The Company’s net losses were $12,676 and $19,066 for the three and six months ended June 30, 2023, respectively.

We partner with various financing providers that offer our customers financial products that allow them to monetize the benefit of solar power generation. At the time of sale of a solar installation, we have historically received advanced funding from lenders to support our working capital needs. Credit market tightening related to recent bank sector volatility and general economic uncertainty have begun to materially change how lenders manage their risk profiles. In view of changing market dynamics, some of our lenders are either reducing or eliminating advance funding, which delays the timing of payment to us and negatively affects our available liquidity. Additionally, lenders are modifying their payment milestones and timelines, which may further reduce our available liquidity.

Management assesses whether the Company has sufficient liquidity to fund its costs for the next twelve months from each financial statement issuance date to determine if there is a substantial doubt about the Company’s ability to continue as a going concern. In the preparation of this liquidity assessment, management applied judgment to estimate the projected cash flows of the Company, including the following: (i) projected cash outflows, (ii) projected cash inflows, (iii) categorization of expenditures as discretionary versus non-discretionary, (iv) the ability to expedite collection of receivables under the Company’s factoring agreement with Produce Pay, Inc. and (vi) the ability to raise capital through the sale of equity in at-the-market offerings (see Note 8) or otherwise. The cash flow projections are based on known or planned cash requirements for operating costs and expected customer revenues from customers.

The Company’s continued existence is dependent upon management’s ability to increase liquidity, raise capital and develop profitable operations. Management is devoting significant efforts to increasing liquidity, raising capital and developing its business. The Company may meet its working capital requirements through a variety of means, including debt financings, equity financings, the sale or other disposition of assets, and/or reductions in operating costs. The Company anticipates that it will need to sell additional shares of stock, in at-the-market offerings or otherwise, in order to satisfy its liquidity needs for the next twelve months. Our ability to raise additional capital by issuing additional shares will require an increase in our authorized shares that requires shareholder approval. If the Company cannot raise needed funds, it raises substantial doubt about the Company’s ability to satisfy its liabilities and commitments in the normal course of business over the next year.

Effective May 4, 2023, Commercial Solar Energy, Inc. and Sunworks United, Inc., wholly-owned subsidiaries of Sunworks, Inc. (collectively, the “Company”) entered into a Factoring Agreement (the “Factoring Agreement”) with Produce Pay Inc. (the “Buyer”). Patrick McCullough, a director of the Company, is the Chief Executive Officer of the Buyer. Under the terms of the Factoring Agreement, the Company may use the Buyer’s on-line software platform to offer for sale, and the Buyer may purchase at 80% of face value, certain accounts receivable of the Company. The Company will receive a rebate back to the Company in a maximum amount of 18.4% of the verified receivable amount if the receivable is collected within 30 days and a lesser rebate amount based on the receivable collection period. The Factoring Agreement provides for a minimum volume commitment of $10,000 accounts receivable during the first year of the agreement. As of June 30, 2023, $2,405 of accounts receivable had been factored cumulatively pursuant to the Factoring Agreement.

On May 22, 2023, the Company entered into trade purchase agreement with respect to its Employee Retention Tax Credit (ERTC) receivable with 1861 Acquisition LLC. Under the terms of the agreement, the Company received $5,723 of proceeds under the trade purchase agreement. The sale of the ERTC receivable resulted in a loss of $1,028 in the second quarter of 2023.

On January 27, 2021, the Company filed a Registration Statement on Form S-3 (File No. 333-252475) (the “2021 Registration Statement”), with the SEC. The 2021 Registration Statement allows the Company to offer and sell, from time to time in one or more offerings, any combination of common stock, preferred stock, warrants, or units having an aggregate initial offering price not to exceed $100,000. The 2021 Registration Statement was declared effective by the SEC on February 3, 2021. From January 1, 2023 through the date of this filing we sold 1,394,743 shares with gross proceeds of approximately $1,751 under the 2021 Registration Statement. Approximately $17,600 of the $100,000 total is available for future offerings pursuant to the 2021 Registration Statement.

On June 1, 2022, the Company filed a Registration Statement on Form S-3 (File No. 333-265336) (the “2022 Registration Statement”), with the SEC. The 2022 Registration Statement allows the Company to offer and sell, from time to time in one or more offerings, any combination of common stock, preferred stock, warrants, or units having an aggregate initial offering price not to exceed $75,000. The 2022 Registration Statement was declared effective by the SEC on August 5, 2022. On June 12, 2023, pursuant to a securities purchase agreement, the Company sold and issued 4,050,000 shares of common stock at a purchase price of $1.14 per share for total gross proceeds of $4,617. On August 11, 2023, pursuant to a securities purchase agreement, the Company sold and issued 3,300,000 shares of common stock at a purchase price of $1.00 per share for total gross proceeds of $3,300. Approximately $67,100 of the $75,000 total is available for future offerings pursuant to the 2022 Registration Statement.

Certain prior period amounts have been reclassified to conform to the current presentation. The reclassifications impact historical cost of goods sold, depreciation, amortization and general and administrative expenses. During the ~~quarter~~three months ended ~~September~~June 30, ~~2021,~~2022, $~~201~~241 of ~~depreciation and $667~~ ~~of backlog amortization previously reported in~~ depreciation and amortization expense and $~~478~~30 of costs previously reported in general and administrative expense are now reclassified to cost of goods sold. During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, $~~407~~474 of ~~depreciation and $1,333~~ ~~of backlog amortization previously reported in~~ depreciation and amortization expense and $~~771~~656 of costs previously reported in general and administrative expense are now reclassified to cost of goods sold. Additionally, other reclassifications impact historical segment reporting disclosures as historical corporate payroll costs were moved from the commercial operations segment to the corporate segment for enhanced reporting disclosures.

In July 2022, we completed an assessment of the contract fulfillment costs that give rise to an asset for residential contracts. We determined that additional specifically identifiable costs related directly to residential contracts can be capitalized, in accordance with Accounting Standards Codification (“ASC”) Section 340-40. The additional capitalized costs of approximately $~~2,794~~ as of September 30, 2022, include the allocation of costs that relate directly to the residential contracts. For the three and nine months ended September 30, 2021, the related capitalizable contract fulfillment costs were not material.

We currently operate in three segments based upon our organizational structure and the way in which our operations are managed and evaluated. Our largest segment is Residential Solar which are projects smaller in size and shorter in duration. Our second operating segment is Commercial Solar Energy which includes projects that are commonly larger in size and longer in duration serving commercial, industrial, agricultural and public works customers. Our third segment is ~~the~~ Corporate, which is responsible for general company oversight and management. Disaggregating the corporate costs from the residential and commercial operations simplifies the performance evaluation of the Residential Solar and Commercial Solar Energy segments.

The preparation of ~~condensed~~ consolidated 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 ~~condensed~~ consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates used to review the Company’s goodwill and intangibles, for possible impairments and estimations of long-lived assets, revenue recognition on construction contracts recognized over time, ~~fair value of assets acquired and liabilities assumed in a business combination,~~ allowances for uncollectible accounts, finance lease right-of-use assets and liabilities, operating lease right-of-use assets and liabilities, warranty reserves, inventory valuation, valuations of non-cash capital stock issuances 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 and related costs on construction contracts are recognized as the performance obligations for work are satisfied over time in accordance with ~~ASC~~Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Under ASC 606, revenue and associated profit, engineering, procurement and construction (“EPC”) projects for residential and smaller commercial systems that require us to deliver functioning solar power systems are generally completed within two to twelve months from commencement of construction. Construction on larger commercial projects may be completed within eighteen to thirty-six months, depending on the size and location. We recognize revenue from commercial EPC services over time as our performance creates or enhances an energy generation asset controlled by the customer.

For residential contracts, the Company recognizes revenue upon completion of the job as determined by final inspection. We recognize revenue for systems operations and maintenance over the term of the service period.

For commercial projects, we commence recognizing performance revenue when work starts on the job and continue recognizing revenue over time as work is performed based on the ratio of costs incurred, excluding modules and components, compared to the total estimated non-materials costs at completion of the performance obligations.

Judgment is required to evaluate assumptions including the amount of net contract revenue and the total estimated costs to determine the Company’s progress towards contract completion and to calculate the corresponding amount of revenue to recognize. If the estimated total costs on any contract are greater than the net contract revenue, the Company recognizes the entire estimated loss in the period the loss becomes known.

Changes in estimates for commercial projects occur for a variety of reasons, including, but not limited to (i) construction plan accelerations or delays, (ii) product cost forecast changes, (iii) change orders, or (iv) changes in other information used to estimate costs. Changes in estimates may have a material effect in the Company’s condensed consolidated statements of operations. The table below outlines the impact on revenue of net changes in estimated transaction prices and input costs for systems related sales contracts (both increases and decreases) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 as well as the number of projects that comprise such changes. For purposes of the following table, only projects with changes in estimates that have an impact on revenue ~~and/~~and or cost of at least ~~$100,~~$100, calculated on a quarterly basis during the periods, are presented. Also included in the table is the net change in estimate as a percentage of the aggregate revenue for such projects.


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(In thousands, except number of projects)	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021			June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Increase in revenue from net changes in transaction prices	$	-		$	-		$	484		$	190		$	223		$	-		$	163		$	475
Increase (decrease) in revenue from net changes in input cost estimates		-			1,307			(500	)		985			386			-			571			(487	)
Net increase (decrease) in revenue from net changes in estimates	$	-		$	1,307		$	(16	)	$	1,175		$	609		$	-		$	734		$	(12	)

Number of projects		-			4			3			6			5			-			7			3

Net change in estimate as a percentage of aggregate revenue for associated projects		0.0	%		17.3	%		(0.2	)%		11.3	%		8.2	%		0.0	%		7.5	%		(0.2	)%

Contract assets consist of (i) the earned, but unbilled, portion of a project for which payment is deferred by the customer until certain contractual milestones are met; (ii) direct costs, including ~~all installation materials,~~ commissions, installation labor ~~benefit~~ related costs and permitting fees paid prior to recording revenue, and (iii) unbilled receivables which represent revenue that has been recognized in advance of billing the customer, which is common for larger construction contracts. Contract liabilities consist of deferred revenue, customer deposits and customer advances, which represent consideration received from a customer prior to transferring control of goods or services to the customer under the terms of a contract. Total contract assets and contract liabilities balances as of the respective dates are as follows:


(In thousands)					June 30, 2023		December 31, 2022
	As of				As of
(In thousands)	September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Contract Assets	$	24,722	$	14,498	$	16,201	$	20,699
Contract Liabilities	$	26,695	$	12,201		21,231		24,960

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company recognized revenue of $~~486~~4,187 and $~~8,295~~17,308, respectively, that was included in contract liabilities as of December 31, ~~2021. Prior to the Solcius Acquisition, the Commercial Solar Energy segment for~~2022. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022, the Company recognized revenue of $~~1,942~~4,187 and $~~4,376~~6,863, respectively, that was included in contract liabilities as of December 31, ~~2020, respectively.~~2021.

The following table represents the average percentage of completion as of ~~September~~June 30, ~~2022~~2023 for EPC projects that the Company is constructing. The Company expects to recognize $~~39,695~~36,161 of revenue upon transfer of control of the projects.

(Loss) per Share dictates the calculation of basic earnings (loss) per share and diluted earnings per share. Basic earnings (loss) per share are computed by dividing income (loss) available to ~~holders of~~ common ~~stock~~shareholders by the weighted-average number of common shares ~~of common stock outstanding.~~available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional ~~shares of~~ common ~~stock~~shares that would have been outstanding if the potential ~~shares of~~ common ~~stock~~shares had been issued and if the additional ~~shares of~~ common ~~stock~~shares were dilutive. The shares for employee options, unvested restricted stock ~~warrants~~units (“RSUs”) and ~~convertible notes~~unvested performance-based restricted stock units (“PSUs”) were not used in the calculation of the net loss per share.

A net loss causes all outstanding common stock options, unvested RSUs and unvested ~~restricted stock units (“RSUs”)~~PSUs to be anti-dilutive. As a result, the basic and diluted losses per common share are the same for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

As of ~~September~~June 30, 2023, the potentially dilutive securities that have been excluded from the computations of weighted average shares outstanding include 162,436 stock options, 746,829 unvested RSUs and 1,634,546 unvested PSUs.

As of June 30, 2022, the potentially dilutive securities that have been excluded from the computations of weighted average shares outstanding include ~~236,720~~276,720 stock options, ~~and~~ ~~1,080,914~~666,692 unvested ~~RSUs.~~

~~As of September 30, 2021, the potentially dilutive securities that have been excluded from the computations of weighted average shares outstanding include~~ ~~307,698~~ ~~stock options and~~ ~~317,500~~442,889 unvested ~~RSUs.~~PSUs.

Dilutive per share amounts are computed using the weighted-average number of shares of common stock outstanding and potentially dilutive securities, using the treasury stock method, if their effect would be dilutive.

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Measurement of Credit Losses on Financial Instruments.” This ASU replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information for credit loss estimates on certain types of financial instruments, including trade receivables. In addition, new disclosures are required. The ASU, as subsequently amended, is effective for the Company for fiscal years beginning after December 15, 2022, as the Company was a smaller reporting company as of November 15, 2019, the determination date. We adopted ASU 2016-13 on January 1, 2023. Based on the composition of the Company’s accounts receivable, and other financial assets, including current market conditions and historical credit loss activity, the adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures. Specifically, the Company’s estimate of expected credit losses as of June 30, 2023, using its expected credit loss evaluation process described above, resulted in no adjustments to the provision for credit losses and no cumulative-effect adjustment to accumulated deficit on the adoption date of the standard.

Management reviewed currently issued pronouncements during the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, and believes that any recently issued, but not yet effective, accounting standards, if currently adopted, would not have a material effect on the accompanying condensed consolidated financial statements.

On April 8, 2021, pursuant to the Purchase Agreement, the Company, through its operating subsidiary Sunworks United, acquired all of the issued and outstanding membership interests of Solcius from the Seller. Located in Provo, Utah, Solcius is a full-service residential solar systems provider.

~~The purchase price for Solcius consisted of $51,750~~ in cash subject to post-closing adjustments related to working capital, cash, indebtedness and transaction expenses. The Solcius Acquisition was accounted for under ASC 805 and the financial results of Solcius have been included in the Company’s condensed consolidated financial statements since the date of the Solcius Acquisition.

~~Under the purchase method of accounting, the transaction was valued for accounting purposes at $52,111~~ which was the fair value of Solcius at the time of acquisition. The assets and liabilities of Solcius were recorded at their respective fair values as of the date of acquisition. The Company utilized the services of a valuation specialist to assist in identifying $~~15,600~~ of separately identifiable intangible assets. Any difference between the cost of Solcius and the fair value of the assets acquired and liabilities assumed is recorded as goodwill. The acquisition date estimated fair value of the consideration transferred consisted of the following:

~~During the three and nine months ended September 30, 2022, we recorded~~ no ~~transaction costs related to the Solcius Acquisition. During the three and nine months ended September 30, 2021, we recorded transaction costs of $~~25 ~~and $774~~ related to the Solcius Acquisition, respectively. These expenses were accounted for separately from the net assets acquired and were included in general and administrative expense for the three months and nine months ended September 30, 2021.

We conducted an assessment of the net assets acquired and recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values and concluded that no additional adjustment to the purchase price allocation or accounting was required from the original purchase accounting.

The results of operations for the Solcius Acquisition since the April 8, 2021 closing date have been included in our consolidated financial statements. The following unaudited pro forma financial information represents a summary of the condensed consolidated results of operations for three and nine months ended September 30, 2022 and 2021, assuming the Solcius Acquisition had been completed as of January 1, 2020. The pro forma financial information includes certain non-recurring pro forma adjustments that were directly attributable to the business combination. The pro forma adjustments include the elimination of Solcius Acquisition transaction expenses totaling $~~774~~ incurred in the nine months ended September 30, 2021, and adjustments to recognize amortization of intangible assets, retention stock-based compensation programs and retention bonus accruals in the 2022 and 2021 periods. The retention bonus expense is recognized over the first year following the Solcius Acquisition. The pro forma financial information is not necessarily indicative of the results of operations that would have been achieved if the Solcius Acquisition had been effective as of these dates, or of future results.

The following table represents a disaggregation of revenue by customer type from contracts with customers for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:

	2022		2021		2022		2021		2023		2022		2023		2022
	Three months ended September 30,				Nine months ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2022		2021		2022		2021
Residential	$	37,253	$	24,584	$	97,416	$	51,044
									2023		2022		2023		2022
Commercial		3,049		4,795		8,593		14,011	$	4,218	$	2,756	$	6,950	$	5,545
Public Works		411		1,841		2,297		4,425		3,133		478		8,227		1,886
Residential										27,287		33,163		57,360		60,162
Total	$	40,713	$	31,220	$	108,306	$	69,480	$	34,638	$	36,397	$	72,537	$	67,593
Revenues									$	34,638	$	36,397	$	72,537	$	67,593

~~Beginning in 2022, the~~The Company assessed its operating segment disclosure based on ASC 280, Segment Reporting, guidance. As a result, the following segments were established: Residential Solar, Commercial Solar Energy, and Corporate.

Through our Solcius operating subsidiary, we design, arrange financing, integrate, install, and manage systems, primarily for residential homeowners. We sell residential solar systems through multiple channels, through our network of sales channel partners, as well as, a growing direct sales channel strategy. We operate in several residential markets including California, Utah, Nevada, Arizona, New Mexico, Texas, Colorado, Minnesota, Wisconsin, and South Carolina. ~~We have direct sales and/or operations personnel in California, Nevada, Utah, Arizona, New Mexico, Texas, Colorado, South Carolina, Wisconsin and Minnesota.~~

Through our ~~CSE~~Commercial Solar Energy subsidiary, we design, arrange financing, integrate, install, and manage systems ranging in size from 50kW (kilowatt) to multi-MW (megawatt) systems primarily for larger commercial and public works projects. Commercial installations have included installations at office buildings, manufacturing plants, warehouses, service stations, churches, and agricultural facilities such as farms, wineries, and dairies. Public works installations have included school districts, local municipalities, federal facilities and higher education institutions. Historically, the ~~CSE~~Commercial Solar Energy subsidiary participated in the California ~~Residential~~residential solar market. Following the acquisition of Solcius, ~~Acquisition,~~ all new residential sales are managed under the Solcius brand. Due to materiality, the Company will continue to report the remaining backlog of residential projects ~~from CSE~~ in the Commercial Solar Energy segment, which is expected to be fulfilled within the next year. ~~CSE~~Commercial Solar Energy primarily operates in California.

Segment net revenue, segment operating expenses and segment contribution (loss) information consisted of the following for the three ~~months~~ and ~~nine~~six months ended ~~September~~June 30, 2023 and 2022. Certain prior period amounts have been reclassified to conform to the current period presentation.

													Residential Solar			Commercial Solar			Corporate			Total
	Three months ended September 30, 2022												Three Months Ended June 30, 2023
	Residential Solar			Commercial Solar			Corporate			Total			Residential Solar			Commercial Solar			Corporate			Total
Net revenue	$	36,659		$	4,054		$	-		$	40,713		$	27,200		$	7,438		$	-		$	34,638
Cost of goods sold		17,132			4,050			22			21,204			17,729			5,467			-			23,196
Gross profit (loss)		19,527			4			(22	)		19,509
Gross profit														9,471			1,971						11,442

Operating expenses
Selling and marketing		13,711			809			253			14,773			11,272			584			111			11,967
General and administrative		5,069			1,797			1,852			8,718			5,687			1,852			2,234			9,773
Segment contribution (loss)		747			(2,602	)		(2,127	)		(3,982	)
Segment loss														(7,488	)		(465	)		(2,345	)		(10,298	)

Stock-based compensation		19			31			314			364			15			33			388			436
Depreciation and amortization		1,056			-			-			1,056			623			-			-			623
Operating loss	$	(328	)	$	(2,633	)	$	(2,441	)	$	(5,402	)	$	(8,126	)	$	(498	)	$	(2,733	)	$	(11,357	)

The Company has right-of-use (“ROU”) operating leases for offices, warehouses, vehicles, and office equipment. The Company’s leases have remaining lease terms of 1 year to 54 years, some of which include options to extend.

The Company’s operating lease expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 amounted to $~~373~~444 and $~~1,184~~1,041, respectively. The Company’s operating lease expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 amounted to $~~394~~384 and $~~1,086~~811, respectively. Operating lease payments, which reduced operating cash flows for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 amounted to $~~373~~444 and $~~1,184~~1,041, respectively. The difference between the year to date ROU asset amortization of $~~811~~674 and the associated lease expense of $~~1,184~~1,041 consists of short-term leases excluded from the ROU asset calculation, basic operating lease expenses included in the lease expense for property and sales taxes, triple net and common area charges for facilities and other equipment and vehicle lease related charges.

	September 30, 2022		June 30, 2023
		(in thousands)	(in thousands)
Operating lease right-of-use assets	$	1,937	$	2,374

Operating lease liabilities—short term		905
Operating lease liabilities—long term		1,032
Operating lease liabilities, current portion				1,008
Operating lease liabilities, net of current portion				1,366
Total operating lease liabilities	$	1,937	$	2,374

As of ~~September~~June 30, ~~2022,~~2023, the weighted average remaining lease term was ~~3.0~~3.2 years and the weighted average discount rate for the Company’s leases was ~~3.0~~4.4%%.

	Operating Leases		Operating Leases
		(in thousands)	(in thousands)
Remainder of 2022	$	264
2023		806
Remainder of 2023			$	633
2024		353		784
2025		297		596
2026		278		527
Thereafter		-
2027				43
Total lease payments	$	1,998	$	2,583
Less: imputed interest		61		209
Total	$	1,937	$	2,374

The Company has finance leases for vehicles. The Company’s finance leases have remaining lease terms of 1 year to 4 years.

	September 30, 2022			June 30, 2023
		(in thousands)		(in thousands)
Finance lease right-of-use asset cost	$	2,761		$	5,871
Finance lease right-of-use accumulated amortization		(873	)		(1,571	)
Finance lease right of use asset, net	$	1,888		$	4,300

Finance lease obligation—short term	$	491
Finance lease obligation—long term		997
Finance lease obligation, current portion				$	1,047
Finance lease obligation, net of current portion					2,911
Total finance lease obligation	$	1,488		$	3,958

As of ~~September~~June 30, ~~2022,~~2023, the weighted average remaining lease term was ~~3.2~~2.8 years and the weighted average discount rate for the Company’s leases was ~~5.2~~8.4%%.

	September 30, 2022		June 30, 2023
		(in thousands)	(in thousands)
Remainder of 2022	$	159
2023		517
Remainder of 2023			$	691
2024		385		1,283
2025		355		1,250
2026		197		1,044
Thereafter		-
2027				313
Total lease payments	$	1,613	$	4,581
Less: imputed interest		125		623
Total	$	1,488	$	3,958

The Company’s intangible assets at ~~September~~June 30, ~~2022~~2023 consist of the following:

	Amortization periods	Cost		Accumulated amortization			Net carrying value		Amortization periods	Cost		Accumulated amortization			Net carrying value
Trademarks	10 Years	$	5,200	$	(780	)	$	4,420	10 Years	$	5,200	$	(1,170	)	$	4,030
Backlog of projects	9 Months		2,000		(2,000	)		-	9 Months		2,000		(2,000	)		-
Covenant not-to-compete	3 Years		2,400		(1,200	)		1,200	3 Years		2,400		(1,800	)		600
Software (included in property and equipment)	3 Years		3,400		(1,700	)		1,700	3 Years		3,400		(2,550	)		850
Dealer relationships	18 Months		2,600		(2,600	)		-	18 Months		2,600		(2,600	)		-
		$	15,600	$	(8,280	)	$	7,320		$	15,600	$	(10,120	)	$	5,480

Intangible assets are stated at their original estimated value at the date of acquisition. The amortization of intangible assets commences upon acquisition. The intangible assets are being amortized using the straight-line method over the intangible asset’s estimated useful life:

Amortization ~~expense~~expenses for intangible assets for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was as follows:

	For the		For the		For the		For the
	Three Months Ended		Nine Months ended		Three Months Ended		Six Months ended
	September 30, 2022		September 30, 2022		June 30, 2023		June 30, 2023
Trademarks	$	130	$	390	$	130	$	260
Covenant not-to-compete		200		600		200		400
Software		283		850		283		567
Dealer relationships		434		1,300
Amortization expenses for intangible assets	$	1,047	$	3,140	$	613	$	1,227

Estimated future amortization expense for the Company’s intangible assets as of ~~September~~June 30, ~~2022~~2023 is as follows:

Years ending December 31,
Remainder of 2022	$	613
2023	$	2,453
Remainder of 2023			$	1,227
2024	$	1,004	$	1,003
2025	$	520	$	520
2026	$	520	$	520
2027			$	520
Thereafter	$	2,210	$	1,690

Depreciation and amortization expense on property and equipment and intangible assets for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was $~~1,232~~1,016 and $~~3,827~~1,967, respectively. Depreciation and amortization expense on property and equipment and intangible assets for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was $~~1,930~~1,312 and $~~3,900~~2,595, respectively.

~~On April 28, 2020, the Company’s operating subsidiary, Sunworks United received a loan of $2,847~~ under the Paycheck Protection Program (“PPP”), which was established by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). As modified by the subsequent PPP Flexibility Act of 2020, proceeds from the loan were used to cover documented expenses related to payroll, rent and utilities, during the 24-week period after the cash was received by the Company. The 24-week period ended on October 12, 2020. The loan was accounted for as a financial liability in accordance with FASB ASC 470 until June 29, 2021, when the $~~2,847~~ ~~loan was fully forgiven, together with $~~34 of accrued interest. As a result, the Company recorded a gain on extinguishment of the debt which is included in other income on the condensed consolidated statements of operations for the nine months ended September 30, 2021.

On June 8, 2022, the Company entered into a Sales Agreement (the “Roth/Northland Sales Agreement”) with Roth Capital Partners, LLC and Northland Securities, Inc. (each an “Agent” and collectively, the “Agents”), pursuant to which the Company may offer and sell from time to time up to an aggregate of $~~26,800~~ of shares of the Company’s common stock (the “June 2022 Placement Shares”), through the Agents. On June 8, 2022, the Company filed a prospectus supplement with the Securities and Exchange Commission (“SEC”) that covers the sale of June 2022 Placement Shares to be sold under the Sales Agreement (the “2022 Prospectus Supplement”).

The June 2022 Placement Shares have been registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Registration Statement on Form S-3 (File No. 333-252475) (the “2021 Registration Statement”), which was originally filed with the SEC on January 27, 2021 and declared effective by the SEC on February 3, 2021, the base prospectus contained within the 2021 Registration Statement, and the 2022 Prospectus Supplement. The June 2022 Placement Shares may be sold by the Company in “at the market offerings,” as defined in Rule 415 promulgated under the Securities Act, through the Agents.

~~During the third quarter of 2022,~~ ~~2,213,074~~ ~~of the June 2022 Placement Shares were sold under the Roth/Northland Sales Agreement. Total gross proceeds for the sales were $7,467~~ ~~and such shares were sold at an average sale price of $3.37~~ ~~per share. Net proceeds from such sales, after brokerage costs, professional, registration and other fees were $7,285~~ ~~or $3.29~~ ~~per share.~~

On February 10, 2021, the Company entered into a Sales Agreement (the “Roth Sales Agreement”) with Roth Capital Partners, LLC (the “Agent RCP”), pursuant to which the Company could offer and sell from time to time, through the Agent RCP, shares of the Company’s common stock, ~~(“the 2021~~(the “2021 Placement Shares”), registered under the Securities Act of 1933 (the “Securities Act”), pursuant to the 2021 Registration Statement.

On October 21, 2021, the Company filed a prospectus supplement with the SEC, (the “2021 Prospectus Supplement”) pursuant to which the Company could offer and sell from time to time, through the Agent RCP, up to $25,000 of the 2021 Placement Shares pursuant to the 2021 Registration Statement in ~~“at the market~~“at-the-market” offerings,” as defined in Rule 415 promulgated under the Securities Act.

~~During~~On June 8, 2022, the ~~first quarter~~Company entered into a Sales Agreement (the “Roth/Northland Sales Agreement”) with Roth Capital Partners, LLC and Northland Securities, Inc. (each an “Agent” and collectively, the “Agents”), pursuant to which the Company may offer and sell from time to time up to an aggregate of ~~2022,~~ $~~2,757,830~~26,800 of shares of the Company’s common stock (the “June 2022 Placement Shares” and together with the 2021 Placement Shares, ~~were~~the “Placement Shares”), through the Agents. On June 8, 2022, the Company filed a prospectus supplement with the SEC that covers the sale of June 2022 Placement Shares to be sold under the ~~Roth~~Roth/Northland Sales ~~Agreement. Total gross proceeds from the sales were $7,974~~ ~~at an average sale price of $2.89~~ ~~per share. Net proceeds after brokerage costs, professional, registration and other fees were $7,814~~ ~~or $2.83~~ ~~per share.~~Agreement (the “2022 Prospectus Supplement”).

The June 2022 Placement Shares are registered under the Securities Act, pursuant to the 2021 Registration Statement. The June 2022 Placement Shares may be sold by the Company in at-the-market offerings, as defined in Rule 415 promulgated under the Securities Act, through the Agents.

During the ~~second quarter~~first six months of 2022, ~~783,257~~3,541,087 ~~shares~~ of ~~common stock~~the Placement Shares were sold under the Roth Sales Agreement. Total gross proceeds for the sales were $~~2,080~~10,054 and such shares were sold at an average sale price of $~~2.66~~2.84 per share. Net proceeds from such sales, after brokerage costs, professional, registration and other fees were $~~2,005~~9,819 or $~~2.56~~2.77 per share.

~~In connection with the filing of the 2022 Prospectus Supplement for June 2022 Placement Shares, the Roth Sales Agreement and the 2021 Prospectus Supplement were terminated.~~2023 At-The-Market Offerings

During the first six months of 2023, 1,394,743 of the Placement Shares were sold under the Roth/Northland Sales Agreement. Total gross proceeds for the sales were $1,751 and such shares were sold at an average sale price of $1.26 per share. Net proceeds from such sales, after brokerage costs, professional, registration and other fees were $1.22 per share.

On June ~~1, 2022,~~8, 2023, pursuant to a securities purchase agreement, the Company ~~filed a Registration Statement on Form S-3 (File No. 333-265336) (the “2022 Registration Statement”) with the SEC. The 2022 Registration Statement allows the Company to offer~~sold and ~~sell, from time to time in one or more offerings, any combination~~issued 4,050,000 shares of common stock ~~preferred stock, warrants,~~at a purchase price of $1.14 per share for total gross proceeds of $4,617. After deducting placement agent commissions and other offering expenses, the net proceeds were $4,290 or ~~units having an aggregate initial offering price not to exceed~~ $~~75,000~~1.06~~. The 2022 Registration Statement was declared effective by the SEC on August 5, 2022.~~ per share.

As of ~~September~~June 30, ~~2022,~~2023, the Company has incentive stock options and non-qualified stock options outstanding to purchase ~~236,720~~162,436 shares of common stock, per the terms set forth in the option agreements. The stock options vest at various times and are exercisable for a period of five years from the date of grant at exercise prices ranging from $2.52 to $12.15 per share, ~~based on~~ the market value of the Company’s common stock on the date of each grant. The Company determined the fair market value of these options by using the Black Scholes option valuation model. Option forfeitures are accounted for as they occur.

A summary of the Company’s stock option activity and related information ~~for the nine months ended September 30, 2022, is as~~ follows:

				Weighted		June 30, 2023
	Number			Average					Weighted
	of			Exercise		Number			Average
	Options			Price		of			Exercise
Outstanding, at December 31, 2021		290,684		$	11.65
						Options			Price
Outstanding, at December 31, 2022							211,720		$	11.66
Granted		-			-		-			-
Exercised		-			-		-			-
Forfeited		(48,251	)		11.50		(40,000	)		12.15
Expired		(5,713	)		10.50		(9,284	)		8.44
Outstanding and expected to vest as of September 30, 2022		236,720		$	11.71
Exercisable at September 30, 2022		236,720		$	11.71
Outstanding and expected to vest as of June 30, 2023							162,436		$	11.72
Exercisable at June 30, 2023							162,436		$	11.72
Weighted average fair value of options granted during period				$	-		-		$	-

The following summarizes the options to purchase shares of the Company’s common stock which were outstanding at ~~September~~June 30, ~~2022:~~2023:

						Weighted							Weighted
						Average							Average
						Remaining							Remaining
Exercise		Stock Options		Stock Options		Contractual
Exercisable								Exercisable	Stock Options		Stock Options		Contractual
Prices	Prices	Outstanding		Exercisable		Life (years)		Prices	Outstanding		Exercisable		Life (years)
$	8.68		7,142		7,142		0.62	3.07		3,071		3,071		1.13
$	7.63		2,142		2,142		0.66	2.52		4,365		4,365		1.26
$	3.07		3,071		3,071		1.88	12.15		155,000		155,000		2.79
$	2.52		4,365		4,365		2.01
$	12.15		220,000		220,000		3.53
			236,720		236,720					162,436		162,436

Aggregate intrinsic value of options outstanding and exercisable at ~~September~~June 30, ~~2022,~~2023, and December 31, ~~2021~~2022 was $10 and $20, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the fiscal period, which was $~~2.79~~1.13 and $~~3.07~~1.58 as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, and the exercise price multiplied by the number of options outstanding.

The Company recorded stock-based compensation expense for stock options of $10 and $~~674~~0 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively. The Company recorded stock-based compensation expense for stock options of $~~605~~2 and $~~1,355~~673 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively.

The following table summarizes the Company’s restricted stock unit activity during the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:

				Weighted Average		June 30, 2023
	Number Of Shares			Grant Date Value per Share					Weighted Average
Unvested, beginning December 31, 2021		1,185,889		$	5.11
						Number Of Shares			Grant Date Value per Share
Unvested, beginning December 31, 2022							561,136		$	3.80
Granted		167,208		$	2.44		403,536		$	2.37
Vested		(224,166	)	$	9.55		(178,029	)	$	3.84
Forfeited		(48,017	)	$	3.35		(39,814	)	$	2.82
Unvested at September 30, 2022		1,080,914		$	3.85
Unvested at the end of June 30, 2023							746,829		$	3.07

The Company recorded RSU compensation expense for RSUs of $~~363~~436 and $~~1,345~~880 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively. The Company recorded RSU compensation expense for RSUs of $~~601~~369 and $~~1,115~~982 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively.

Separate from the RSUs above are Performance Based Restricted Stock Units that vest on achieving certain revenue, cash flow and profitability goals measured annually, or in some cases, for the year ending December 31, 2024. The maximum number of shares issuable upon achieving all goals is 1,634,546 shares.

From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. There are no pending significant legal proceedings to which the Company is a party for which management believes the ultimate outcome would have a negative impact on the Company’s financial position.

Subsequent events have been evaluated from the condensed consolidated balance sheet date of September 30, 2022 through the date of this Quarterly Report. Based on management’s evaluation, there are no events that required recognition or disclosure in the Company’s accompanying condensed consolidated financial statements or the related notes thereto.

On August 11, 2023, pursuant to a securities purchase agreement, the Company sold and issued 3,300,000 shares of common stock at a purchase price of $1.00 per share for total gross proceeds of $3,300. After deducting placement agent commissions and other offering expenses, the net proceeds were $3,002 or $0.91 per share.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this “Quarterly Report”) and the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022, as amended by our Form 10-K/A filed on May 1, 2023 (our “Annual Report”). This section contains forward-looking statements that are based on our current expectations and reflect our plans, estimates, and anticipated future financial performance. These statements involve numerous risks and uncertainties. Our actual results may differ materially from those expressed or implied by these forward-looking statements as a result of many factors, including those set forth in the sections entitled “Risk Factors” in ~~Item 1A of our Annual Report and~~ Part II, Item 1A, ~~of our Quarterly Report for the quarter ended March 31, 2022,~~ and “Cautionary Note Regarding Forward-Looking Statements” included in this Quarterly Report.

Unless otherwise noted, (1) “Sunworks” refers to Sunworks, Inc., (2) “Company,” “we,” “us,” and “our,” refer to the ongoing business operations of Sunworks, Inc., and its ~~wholly owned~~wholly-owned operating subsidiaries, Sunworks United Inc., ~~(“Sunworks United”),~~ Commercial Solar Energy, Inc. ~~(“CSE”),~~ and Solcius ~~LLC (“Solcius”).~~LLC. All material intercompany transactions have been eliminated upon consolidation of these entities.

All amounts presented in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, unless otherwise noted, are expressed in thousands of U.S. dollars, except share and per share amounts and unless otherwise noted.

The financial and operating results for the three and nine months ended September 30, 2022, include the operating results of Solcius acquired on April 8, 2021, with only a partial contribution for the three and nine months ended September 30, 2021.

On April 8, 2021, Sunworks, through its operating subsidiary Sunworks United, acquired all of the issued and outstanding membership interests (the “Solcius Acquisition”) of Solcius, from Solcius Holdings, LLC (“Seller”). Located in Provo, Utah, Solcius is a full-service, residential solar systems provider. The transaction creates a national solar power provider with a presence now in 15 states, including California, Utah, Nevada, Arizona, New Mexico, Texas, Colorado, Minnesota, Wisconsin, Massachusetts, Rhode Island, New York, Pennsylvania, New Jersey and South Carolina. The Company believes the transaction enhances economies of scale, leading to better access to suppliers, vendors and financial partners, as well as marketing and customer acquisition opportunities.

Through our Residential Solar operating subsidiary, Solcius, LLC, we design, arrange financing, integrate, install, and manage systems, primarily for residential homeowners. We sell residential solar systems through multiple channels, including our network of sales channel partners, and our growing direct sales channel strategy. We operate in several residential and commercial markets including California, Utah, Nevada, Arizona, New Mexico, Texas, Colorado, Minnesota, Wisconsin and South Carolina. ~~We have direct sales or operations personnel in California, Nevada, Utah, Arizona, New Mexico, Texas, Colorado, South Carolina, Wisconsin and Minnesota.~~

Through our ~~CSE~~Commercial Solar Energy operating ~~subsidiary,~~subsidiaries, we design, arrange financing, integrate, install, and manage systems ranging in size from 2kW (kilowatt) for residential projects to multi-MW (megawatt) systems for larger commercial and public works projects. Commercial installations have included installations at office buildings, manufacturing plants, warehouses, service stations, churches, and agricultural facilities such as farms, wineries, and dairies. Public works installations have included school districts, local municipalities, federal facilities and higher education institutions. Historically, our CSE subsidiary participated in the California residential solar market. Following the Solcius Acquisition, all new residential sales are managed under the Solcius brand. Due to materiality, the Company will continue to report the remaining backlog of residential projects in the Commercial Solar Energy ~~segment, which is expected to be fulfilled within the next year. CSE~~ primarily operates primarily in California.

For the third quarter of 2022, approximately 92% of our revenue was from installations for the residential market and approximately 8% of our revenue was from installations for the commercial and public works markets.

For both the ~~third quarter of 2021~~three and six months ended June 30, 2023, approximately 79% of our revenue was from installations for the residential market, and approximately 21% of our revenue was from installations for the commercial and public works markets. ~~Solcius revenue was only included since its acquisition date of April 8, 2021.~~

~~Increase the velocity of installation.~~ We believe a reduction in the time required to install a residential solar installation improves both pricing power with third-party channel relationships and customer retention. During the second and third quarters of 2022, we decentralized all design, permitting and scheduling activities to local and regional Company hubs, while continuing to leverage the benefits of scale across shared services. We will continue to utilize lean principles and practices to optimize workflow and improve installation timelines.

~~Expand cost-efficient direct sales channel.~~ We have embarked on a multi-year initiative to develop a robust, direct sales team designed to complement our third-party channel partners. This direct sales team is incentivized to develop business across the residential markets where we operate, with an emphasis on rooftop solar installations. During the third quarter of 2022, the direct sales team was responsible 24% of total installation revenue, versus approximately 4% in the prior-year period.

~~Drive efficient sourcing and procurement.~~ We intend to shift an increased proportion of our sourcing away from foreign, third-party distribution channels toward U.S. based original equipment manufacturers, an approach that will allow for improved surety of supply. By year-end 2024, we intend to source a significant share of our panel and component inventory from U.S. based producers, whereas no materials are currently sourced domestically. During the third quarter of 2022, we grew total inventory by $8,100 on a sequential quarter basis to $26,900, thereby ensuring product availability during a period of elevated customer demand.

~~Drive sustained margin expansion.~~ We believe key drivers of margin expansion include programmatic price increases; market share gains in both our core California commercial market and new geographic regions; reductions in lead times; optimization of our sales channel partner network; an increased mix of revenue derived from our direct sales force; increased productivity resulting from recent headcount investments; and the adoption of lean principles to reduce cost and drive continuous improvement. We expect to achieve improved margin realization in the fourth quarter 2022, when compared to the first nine months of 2022, as recent performance improvement initiatives are further implemented.

For the ~~quarter~~three months and six months ended ~~September~~June 30, 2022, approximately 91% and 89% of our ~~combined backlog~~revenue, respectively, was ~~$110,000, representing an increase of 116% compared to the third quarter of 2021.~~

Residential Solar segment originations increased 48% in the three months ended September 30, 2022, compared to the prior year period, driven by growth in both dealer and direct channels. Within this segment, originations generated from the direct sales channel were approximately 24%, in the three months ended September 30, 2022, compared to approximately 3% in the prior period, due to execution against our stated goal to diversify our sources of originations. As a result of these improvements, the Residential Solar backlog increased to $70,000, during the third quarter of 2022 which is double the prior year quarter and up approximately 18% on a sequential quarter basis. We expect to execute against our Residential Solar segment backlog over the next 1-5 months, as project complexity, jurisdictional requirements, materials and labor availability each influence timelines for completion.

Commercial Solar segment orders were approximately $8,000 during the three months ended September 30, 2022, compared to approximately $6,000 during the comparable period in 2021. The Commercial Solar segment backlog increased to approximately $40,000, during the third quarter of 2022, which represents an increase of over double the prior year period. We expect to execute against this backlog over the next 3-18 months, subject to receiving timely authorizations to proceed with construction from the various stakeholders.

The continued global novel coronavirus and its variants (COVID-19) pandemic, has resulted in significant governmental measures being implemented to control the spread of the virus, including quarantines, travel restrictions and business shutdowns. The uncertain macroeconomic environment created by the COVID-19 pandemic has had and may continue to have a significant, adverse impact on our business. To assist readers in reviewing management’s discussion and analysis of financial condition and results of operations, we provide the following discussion regarding the effects COVID-19 has had on the Company, what management expects the future impact to be, how we are responding to evolving circumstances and how we are planning for further COVID-19 uncertainties.

State and local directives, guidelines, and other restrictions, as well as consumer behavior, continue to impact our operations in the regions in which we operate, particularly California. During 2022 and 2021 we continued to serve customers. COVID-19 and the governmental directives materially disrupted the operations of the local and state governments by closing or restricting operations at city, county and state offices for design reviews, permitting projects, and inspections of projects. Utility companies have been unable to provide timely shutdowns, inspections and interconnection approvals. This disruption negatively impacts our ability to complete projects, generate revenue on projects in backlog and causes many customers to delay decisions on new projects.

~~Our revenue and gross profit~~installations for the ~~first nine months~~residential market and approximately 9% and 11% of ~~2022 were negatively impacted by governmental responses to~~our revenue, respectively was from installations for the ~~COVID-19 pandemic, which delayed pre-construction approvals~~commercial and ~~installation activity for our larger~~ public works agriculture and commercial projects by delaying approvals. Earlier governmental orders and social distancing guidelines slowed our sales process, as our customers avoided interacting with our sales and installation personnel and delayed buying decisions.

We received a loan under the Paycheck Protection Program of $2,847 which was used to pay for payroll costs, interest on debt, rent, utilities, and group health care benefits, allowing the Company to focus on revenue generating activities in an effort to mitigate some of the impact COVID-19 has on our business. The entire principal of the loan and all accrued interest was forgiven in June of 2021.

Although there is uncertainty around the continued impact and severity the COVID-19 pandemic has had, and will continue to have, on our operations, these developments and measures have negatively affected our business, including a negative impact on the supply chain upon which we rely on to operate. We will continue to attempt to mitigate the impact through appropriate operational measures.

As the COVID-19 pandemic and its effects evolve, we are monitoring our business to ensure that our expenses are in line with expected cash generation. The extent to which our results are affected by the COVID-19 pandemic will largely depend on future developments which cannot be accurately predicted and are uncertain, but the COVID-19 pandemic has had and will continue to have an adverse effect on our business, operations, financial condition, results of operations, and cash flows.markets.

We prepare our unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which requires management to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses recorded in our financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carry values of assets and liabilities that are not readily apparent from other sources.

These estimates may change as new events occur and additional information is obtained. Actual results may differ from these estimates under different assumptions and conditions.

There were no significant changes in our critical accounting estimates during the ~~third quarter. In July 2022, we completed an assessment of the contract fulfillment costs that give rise~~six months ended June 30, 2023 compared to an asset for residential contracts. We determined that additional specifically identifiable costs related directly to residential contracts can be capitalized, in accordance with Accounting Standards Codification (“ASC”) Section 340-40. The additional capitalized costs of approximately $2,794 as of September 30, 2022, include the allocation of costs that relate directly to the residential contracts. This change in estimate is an update of the estimatesthose previously disclosed in “Critical Accounting Policies” and “Use of Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report. ~~For the three and nine months ended September 30, 2021, these related amounts were immaterial.~~

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2022~~2023 COMPARED TO THE THREE MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2021~~2022

For the three months ended ~~September~~June 30, ~~2022,~~2023, revenue ~~increased~~declined to ~~$40,713~~$34,638, compared to ~~$31,220~~$36,397 for the same quarter in the prior year. Approximately ~~92%~~78.5% of revenue was from residential segment installations, ~~for the residential markets,~~ or ~~$37,253,~~$27,200, compared to ~~79%~~89.3% of revenue, or ~~$24,854,~~$32,516, for the same quarter in the prior year. ~~The increase in residential~~Residential segment revenue isdeclined as a result of organic growth and the inclusion of the Residential Solar segment (Solcius) revenue. Within the Residential Solar segment, revenue from the direct salesforce accounted for approximately 24% of revenue for the three months ended September 30, 2022,fewer projects reaching final inspection compared to ~~approximately 4%~~the same quarter in the prior ~~year.~~year, partially offset by higher average selling prices. Commercial and public works revenue was approximately 8%21.5% of ~~total~~ revenue, or ~~$3,460,~~$7,438, for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~21%~~10.7%, or ~~$6,636~~$3,881, of revenue in the same period in the prior year. The ~~reduction~~increase in commercial revenue is ~~primarily driven by lower new orders in~~a result of an increased backlog and executing on our strategy to grow the ~~preceding quarters.~~commercial segment.

Cost of goods sold for the three months ended ~~September~~June 30, ~~2022,~~2023, was ~~$21,204,~~$23,196, compared to ~~$18,150~~$19,803 reported for the three months ended ~~September~~June 30, ~~2021.~~2022. The increase in cost of goods sold is primarily the result of ~~increase in revenue compared to the prior year period and~~ inflationary pressures on ~~material~~labor, materials and ~~labor costs.~~

construction supplies, as well as, under absorption of direct and overhead costs due to extended California interconnection approval timelines and lower volume in several markets.

Gross profit was ~~$19,509~~$11,442 for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$13,070~~$16,594 for the prior year period. The gross margin ~~increased~~declined to ~~47.9%~~33.0% in the ~~third~~second quarter of ~~2022,~~2023, compared to ~~41.9%~~45.6% in the ~~third~~second quarter ~~of 2021.~~2022. The reduction in margin ~~percentage increase~~ is the result of ainstallation delays due to delayed regulatory approvals and higher mix of Residential Solar projects as well as inflationary pressures on materials and labor. The change in estimate for the capitalization of additional specifically identifiable costs related directly to in-process residential installation contracts increased gross profit by approximately $2,794 during the third quarter of 2022.

For the three months ended ~~September~~June 30, ~~2022, our~~2023, the Company’s selling and marketing expenses were ~~$14,773,~~$11,967 compared to ~~$10,072~~$14,318 for the same three months in ~~2021.~~2022. As a percentage of revenue, selling and marketing expenses were ~~36.3%~~34.5% of revenue in the ~~third~~second quarter of ~~2022,~~2023 compared to ~~32.3%~~39.3% of revenue in the same period in ~~2021.~~2022. The ~~increased~~decreased expenses ~~in the current year period~~ were largely related to ~~additional~~the benefit of our sales and marketing effort over the past year to expand our lead generation efforts and improve brand awareness. Additionally, these investments are targeted at positively impacting our ability to grow our in-house sales capability for residential markets. In the prior year period, we incurred a higher marketing spend for dealer commissions, advertising and ~~investment in the~~branding. The residential ~~direct salesforce.~~sales and marketing model had previously focused on lead generation and effective interaction with a network of authorized dealers and third-party sales organizations.

Total ~~G&A~~general and administrative expenses ~~of $8,718~~increased to $9,773 for the three months ended ~~September~~June 30, ~~2022 increased~~2023, compared to ~~$7,185~~$8,495 for the same period in the prior year. The ~~G&A~~general and administrative expenses increased infrom the ~~current~~prior year period ~~due to investments~~as a result of increases in salaries and benefits, insurance, professional services, software and equipment related ~~benefits~~expenses, partially offset by savings attributable to ~~support the revenue growth~~a reduction of ~~the business.~~

During the three months ended ~~September~~June 30, ~~2022,~~2023, we incurred ~~$364~~$436 in total non-cash stock-based compensation expense, compared to ~~$1,206~~$371 for the prior year period. The ~~year over year decrease~~period-over-period increase in stock-based compensation is the result of ~~the vesting of the Solcius Acquisition related RSUs and stock options in April 2022. Partially offsetting the reduction in stock-based compensation expense is the non-cash expenses for~~ expanding RSU grants as part of utilizing the non-cash compensation structure ~~to a broader population of~~for incentivizing employees.

Depreciation and amortization expense for the three months ended ~~September~~June 30, ~~2022~~2023 was $1,232, including $176 recorded within cost of goods sold, compared to $1,930, including $868 recorded within cost of goods sold for the prior year period. Depreciation and amortization expenses decreased as a result of the identified intangible asset for the acquired order backlog related to the Solcius Acquisition having been fully amortized within the first nine months of the transaction. The intangible assets are being amortized over the estimated useful lives of the specific assets,$1,016, which ~~have original useful lives ranging from nine months to ten years.~~

Other income was $9 for the three months ended September 30, 2022, compared to an expense of $(5) for the same three month period in 2021. A gain of $65 was recognized on the sale of surplus equipment during 2022. Interest expense for the third quarter of 2022 was $50 compared to $10 for the same quarter in 2021. The 2022 interest expense is primarily related to the ROU finance leased assets.

~~The net loss for the three months ended September 30, 2022 was $5,393, compared to a net loss of $6,460 for the three months ended September 30, 2021.~~

~~RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2021~~

For the nine months ended September 30, 2022, revenue was $108,306 compared to $69,480 for the nine months ended September 30, 2021. Approximately 90% of revenue in the first nine months of 2022 was from installations for the residential markets at $97,416, compared to 73% of revenue or $51,044 for the same period in the prior year. Residential Solar segment revenue increased as a result of the full period inclusion of the Solcius Acquisition, which was completed in April 2021 and the expansion of our direct sales force and growth across the traditional dealer channel. Commercial Solar Energy segment revenue was 10% of total revenue, or $10,890, for the first nine months of 2022, compared to 27%, or $18,436, of revenue in the same period of the prior year. The reduction was primarily driven by lower new orders in the preceding quarters.

~~Cost of goods sold for the nine months ended September 30, 2022 was $59,030, or 54.5% of revenue, compared to $42,348, or 60.9% of revenue, reported for the nine months ended September 30, 2021.~~

Gross profit was $49,276 for the nine months ended September 30, 2022. This compares to $27,132 of gross profit for the same period of the prior year. Gross margin improved to 45.5% in the first nine months of 2022 compared to 39.1% in the same nine-month period of 2021. The gross margin improvement in the current year period is predominantly driven by a mix of higher margin residential revenue, partially offset by inflationary pressures on materials and labor. The change in estimate for the capitalization of an additional specifically identifiable costs related directly to in-process residential installation contracts increased gross profit by approximately $2,794 for the nine months ended September 30, 2022.

Revenue and gross profit in the nine months ended September 30, 2022 were positively impacted by the Solcius Acquisition. In contrast, the prior year Solcius results were only included from the April 8, 2021 acquisition date through the end of the third quarter of 2021.

For the nine months ended September 30, 2022, our selling and marketing expenses were $41,320, compared to $21,468 for the nine months ended September 30, 2021. As a percentage of revenue, selling and marketing expenses were 38.2% of the first nine months revenue in 2022, compared to 30.9% of revenue in the same period of 2021. Selling and marketing expenses increased in the current year period as a result of higher residential revenue, as the residential business model focuses on lead generation and effective interaction with third-party sales organizations.

Total G&A expenses for the nine months ended September 30, 2022 was $24,025, compared to $17,081 for the nine months ended September 30, 2021. The G&A expenses increased from the prior year period as a result of the Solcius Acquisition, which was completed in April 2021, and increases in salaries and benefits in support of the revenue growth.

During the nine months ended September 30, 2022, we incurred $2,019 in total non-cash stock-based compensation expense, compared to $2,470 for the same period in the prior year. The year over year decrease in stock-based compensation is the result of the vesting of the Solcius Acquisition related RSUs and stock options granted in April 2022. Partially offsetting the reduction in stock-based compensation expense is the non-cash expense for expanding RSU grants as part of the compensation structure to a broader population of employees.

~~Depreciation and amortization expense for the nine months ended September 30, 2022 was $3,827, including $650~~includes $393 recorded in cost of goods sold compared to ~~$3,900, including $1,740~~$1,312, which includes $241 recorded in cost of goods sold ~~for the same period~~ in the prior ~~year.~~year period. Depreciation and amortization expenses decreased in the current year period as a result of a portion of the $15,600 of identified intangible assets of Solcius being fully amortized within ~~the first nine months since~~2022 following the closing of the Solcius ~~Acquisition~~acquisition in April 2021. The ~~total $15,600 balance of intangible assets is being amortized over the~~ estimated useful lives range from nine months to ten years. Offsetting the reduction in amortization of intangibles was an increase in depreciation expense for additional installation service vehicles added during the first half of 2023. The amortization expense from the Solcius acquisition for the second quarter of 2023 was $613, compared to $1,047 for the same period in 2022.

Other expenses were $(1,207) for the three months ended June 30, 2023, compared to other income of $170 for the same period in the prior year. Other expense is primarily the result of the ~~specific assets.~~$1,028 loss resulting from the sale our net $5,055 Employee Retention Tax Credit during the quarter. The interest expense of $173 is primarily related to the finance lease assets, credit card finance charges, sales tax liability and the financing of business insurance premiums.

Income tax expense is a provision for Texas Margin Tax for our Texas based operations.

The net loss for the three months ended June 30, 2023, was $12,676, compared to a net loss of $7,585 for the three months ended June 30, 2022.

For the quarter ended June 30, 2023, our combined backlog of residential and commercial projects was $84,000, approximately a 2.7% decrease compared to the prior year end. Residential Solar segment originations decreased by approximately 50% in the current quarter, compared to the prior year quarter, primarily driven by higher interest rates and following a surge in California originations in the first quarter of 2023 as customers secured more favorable economics in advance of the NEM 3.0 deadline. Within this segment, originations generated from the direct sales channel were approximately 45%, compared to approximately 23% in the prior period, due to execution against our stated goal to diversify our sources of originations. As a result, the Residential Solar backlog declined to $48,000, or 19%, on a year-over-year basis. We expect to execute against our Residential Solar segment backlog over the next 1-5 months, as project complexity, jurisdictional requirements, materials and labor availability each influence timelines for completion.

Commercial Solar segment orders were approximately $8,094 for the quarter ending June 30, 2023, compared to approximately $23,743 during the same period in the prior year, which was primarily driven by the timing of several large orders. The Commercial Solar segment backlog is $36,200, which represents a 0.2% increase on a year-over-year basis. We expect to execute against this backlog over the next 3 to18 months, subject to receiving timely authorizations to proceed with construction from the various stakeholders.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2023 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2022

For the six months ended June 30, 2023, revenue increased to $72,537 compared to $67,593 for the six months ended June 30, 2022. Residential segment revenue was approximately 78.9% of revenue in the first six months of 2023 or $57,207. Residential segment revenue was approximately 87.2% of revenue or $58,911, for the same period in the prior year. Residential segment revenue decreased as a result of the reduction in third-party sales organization sourced revenue and extended inspection times. As a percentage of total revenue, residential segment revenue decreased as commercial revenue increased in both dollars and percentage of total revenue. Commercial segment revenue was 21.1% of total revenue, or $15,330, for the first six months of 2023, compared to 12.8%, or $8,682 of revenue in the same period of the prior year. Commercial revenue benefits from greater order volume in prior periods.

Cost of goods sold for the six months ended June 30, 2023, was $49,173, or 67.8% of revenue, compared to $37,827, or 56.0% of revenue, reported for the six months ended June 30, 2022. The increase in cost of goods sold is primarily the result of higher revenue combined with inflationary pressures on materials and construction labor, as well as labor inefficiencies associated with weather and regulatory approval delays in the current year. Included within cost of goods sold is a $979 inventory write-down for solar module inventory to lower of cost or market, as a result of excess inventory in our Commercial Solar Energy segment.

Gross profit was $23,364 for the six months ended June 30, 2023. This compares to $29,766 of gross profit for the same period of the prior year. Gross margin declined to 32.2% in the first six months of 2023 compared to 44.0% in the same six-month period of 2022. The reduction in margin is the result of installation delays due to regulatory approvals and weather delays, as well as, higher construction costs.

For the six months ended June 30, 2023, our selling and marketing expenses were $24,046, compared to $26,548 for the six months ended June 30, 2022. As a percentage of revenue, selling and marketing expenses were 33.1% for the six months ended June 30, 2023, compared to 39.3% of revenue in the same period of 2022. Selling and marketing expenses decreased as a result of lower residential revenue, as the residential business model focuses more on direct lead generation.

Total general and administrative expenses of $18,616 for the six months ended June 30, 2023, increased, compared to $15,305 for the six months ended June 30, 2022. The general and administrative expenses increased from the prior year six-month period as a result of increases in corporate overhead expenses including legal, accounting and consulting fees.

During the six months ended June 30, 2023, we incurred $880 in total non-cash stock-based compensation expense, compared to $1,655 for the same period in the prior year. The period-over-period decrease in stock-based compensation is the result of the vesting of the Solcius acquisition related RSUs and stock options granted in April 2021. Partially offsetting the reduction in stock-based compensation expense is the non-cash expense for expanding RSU grants during 2022 as part of the compensation structure to a broader population of employees.

Depreciation and amortization expense for the six months ended June 30, 2023 was $1,967, which includes $722 recorded in cost of goods sold compared to $2,595, which includes $474 recorded in cost of goods sold in the prior year period. Depreciation and amortization expenses decreased in the current year period as a result of a portion of the $15,600 of identified intangible assets of Solcius being fully amortized within 2022 following the closing of the Solcius acquisition in April 2021. The estimated useful lives range from nine months to ten years.

Other income was ~~$174~~$2,469 for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$2,907~~$165 for the same period in ~~2021.~~ the prior year. Other income is primarily related to the $5,055 employee retention tax credit receivable, net of consultants’ fees. During the second quarter the employee retention tax credit was sold at a discount of $1,028 which appears as other expense. Interest expense of $242 is primarily related to the finance lease assets, sales tax liability, credit card finance charges and the financing of business insurance premiums. Included in loss on sale of assets is the sale of $3,969 of solar module inventory for $2,596, recognizing a loss on the sale of assets of $1,373.

Other income in ~~the~~ 2022 ~~period~~ was the result of the gain on equipment sales of $178 most of which ~~were~~was fully depreciated. ~~Other income in the prior year period was primarily the result~~Interest expense of ~~the June 2021 forgiveness of the PPP loan of $2,847 and $34 of accrued loan interest. Interest expense~~$66 is primarily for interest on finance ~~leases. Interest expense for the nine months ended September 30, 2022, was $115, compared to $40 during the nine months ended September 30, 2021.~~

Income tax expense ~~was $94~~is a provision for ~~the nine months ended September 30, 2022, compared to no income tax expense in the prior year period. The income tax expense in the current period is attributable to the~~ Texas ~~margin tax related to~~Margin Tax on our Texas based ~~operations, which we acquired as a result of the Solcius Acquisition in April 2021.~~operations.

The net loss for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$21,185.~~$19,066. The net loss for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$13,140.~~$15,792.

We had ~~$14,273~~$4,631 in unrestricted cash at ~~September~~June 30, ~~2022,~~2023, as compared to ~~$19,719~~$7,807 at December 31, ~~2021.~~2022. We believe that our existing cash and cash equivalents is not sufficient to meet our operating cash requirements and strategic objectives for growth for at least the next year. To satisfy our capital requirements, including acquisitions and ongoing operations, for 12 months and longer into the future, we ~~will likely seek~~expect to raise additional ~~financing~~capital through debt and equity ~~financings.~~financings or the sale or other disposition of assets.

On January 27, 2021, ~~the Company~~we filed a Registration Statement on Form S-3 (File No. 333-252475) (the “2021 Registration Statement”), with the SEC. The 2021 Registration Statement allows the Company to offer and sell, from time to time in one or more offerings, any combination of common stock, preferred stock, warrants, or units having an aggregate initial offering price not to exceed $100,000. The 2021 Registration Statement was declared effective by the SEC on February 3, 2021. From January 1, ~~2022~~2023 through the date of this filing we sold ~~5,754,161~~1,394,743 shares with gross proceeds of approximately ~~$17,500~~$1,751 under the 2021 Registration Statement. Approximately ~~$19,400~~$17,600 of the $100,000 total is available for future offerings pursuant to the 2021 Registration Statement.

On June 12, 2023, pursuant to a securities purchase agreement, the Company sold and issued 4,050,000 shares ~~have been~~of common stock registered under the 2022 Registration Statement. The registered direct offering was at a purchase price of $1.14 per share for total gross proceeds of $4,617. After deducting placement agent commissions and other offering expenses, the net proceeds were $4,290, or $1.06 per share.

On August 11, 2023, pursuant to a securities purchase agreement, the Company sold and issued 3,300,000 shares of common stock registered under the 2022 Registration Statement. The registered direct offering was at a purchase price of $1.00 per share for total gross proceeds of $3,300. After deducting placement agent commissions and other offering expenses, the net proceeds were $3,002, or $0.91 per share. Approximately $67,100 of the $75,000 total is available for future offerings pursuant to the 2022 Registration Statement.

In addition, effective May 4, 2023, we entered into a Factoring Agreement (the “Factoring Agreement”) with Produce Pay Inc. (the “Buyer”) pursuant to which we may offer for sale, and the Buyer may purchase at 80% of face value, certain accounts receivable of the Company. Through June 30, 2023, $2,405 of receivables have been factored. Proceeds received total $1,924 through June 30, 2023 and $54 of interest expense recognized.

On May 22, 2023, the Company entered into a trade purchase agreement with respect to its Employee Retention Tax Credit receivable (ERC) with 1861 Acquisition LLC. Under the terms of the agreement, on May 23, 2023, the Company received $5,723 of proceeds under the trade purchase agreement.

As of ~~September~~June 30, ~~2022,~~2023, our working capital surplus was ~~$29,830,~~$12,514 compared to a working capital surplus of ~~$28,736~~$23,596 at December 31, ~~2021.~~2022.

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we used ~~$22,102~~$11,157 of cash in operating activities compared to ~~$25,331~~$16,975 used in operating activities for the ~~nine months ended September 30, 2021.~~prior year period. The cash used in operating activities ~~during the current year period~~ was primarily the result of ~~the current~~a higher operating loss during year ~~net loss combined with investments in working capital to secure solar panel~~partially offset by a reduction of inventory, which is primarily driven by sales of excess inventory and ~~inverter inventory to support growth~~improved module lead times and ~~minimize the impacts of supply chain disruption.~~availability.

Net cash ~~used in~~provided by investing activities totaled ~~$121~~$2,481 for the ~~nine~~six months ended ~~September~~June 30, ~~2022 and was~~2023, primarily ~~used for~~from the sale of inventory partially offset by the acquisition of vehicles and equipment. The cash used in investing activities for the same period in ~~2021~~2022 totaled ~~$51,093 as a result of the purchase of Solcius, which required net cash of $50,619, and the purchase of vehicles, property and equipment.~~

Net cash provided by financing activities during the nine months ended September 30, 2022, was $16,702 primarily due to net proceeds from sales of our common stock during the first nine months of the current year.$242 for routine equipment purchases.

Net cash provided by financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2023 was ~~$48,652. Net cash was provided~~$5,501 primarily ~~by financing activities includes the~~due to net proceeds from the at-the-market offerings under our 2021 Registration Statement and our registered direct offering under our 2022 Registration Statement. Principal payments for finance lease liabilities totaled $446 together with $43 in tax payments related to net share settlement of ~~$48,858 from sales of our common stock.~~equity awards.

Net cash provided by financing activities during the first six months of 2022 was $9,565 primarily due to net proceeds from the at-the-market offerings under our 2021 Registration Statement.

We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity, or capital expenditures.

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the required time periods specified in the SEC rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls and procedures or our internal controls will prevent all errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. In addition, the design of any system of controls is based on assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies and procedures may deteriorate. Control systems can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the ~~third~~fiscal second quarter ~~of 2022,~~ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The disclosure below supplements our risk factors from those disclosed in Part I, Item 1A in our Annual Report and Part II, Item 1A of our Quarterly Report for the quarter ended March 31, 2023. These risks and uncertainties, along with those previously disclosed, could materially adversely affect our business or financial results.

~~Interest Rate Volatility~~Our ability to raise capital through the sale of our common stock in amounts sufficient to fund operations requires shareholder approval of an amendment to our certificate of incorporation to increase our authorized shares of common stock.

~~Volatility~~To satisfy our capital requirements, we expect to raise additional capital through equity financings. Our certificate of incorporation currently authorizes the issuance of 50,000,000 shares of common stock. As of August 11, 2023, there were 44,280,882 shares of common stock issued and ~~increases in interest rates could adversely impact~~outstanding. Our ability to raise additional capital sufficient to fund operations by issuing shares of common stock will require us to increase the number of our ~~business. While interest rates have been at long-term historic lows in recent years, they have recently increased, and may continue increasing in~~authorized shares of common stock above 50,000,000. To increase the ~~near future. While~~number of our authorized shares of common stock, we ~~do not provide company branded financing solutions~~will need to ask our shareholders to approve an amendment to our ~~customers,~~certificate of incorporation, which requires an affirmative vote of a majority of the shares of our common stock attending our annual shareholders meeting and voting on the proposal to amend our certificate of incorporation. There is no assurance that we ~~partner with~~will be able to obtain the requisite shareholder approval to increase the number of our authorized shares of common stock. Failure to increase the number of our authorized shares of common stock would have a ~~diverse group~~material adverse impact on our ability to raise capital sufficient to fund operations.

If we are unable to obtain funding on a timely basis, or if revenues from collaboration arrangements or financing sources are less than we have projected, we may be required to further revise our business plan and strategy, which may result in us significantly curtailing, delaying or discontinuing portions or all of ~~funding partners. Rising interest rates increases the cost of capital for~~ our ~~funding partners, which are typically passed onto~~operations, or may result in our ~~customers.~~being unable to expand our operations or otherwise capitalize on our business opportunities. As a result, our business, financial condition and results of ~~the increase in the cost of our products and services, there might~~operations could be ~~less adoption of solar systems and our cash flow might be negatively impacted.~~materially affected.

~~None.~~The meeting date for the 2023 annual meeting of stockholders (the “2023 Annual Meeting”) has been advanced more than 30 days from the anniversary of the Company’s 2022 annual meeting of stockholders. The 2023 Annual Meeting is tentatively scheduled for September 22, 2023. The time and meeting website information will be set forth in the Company’s proxy statement for the 2023 Annual Meeting, which will be filed with the SEC in advance of the meeting. Pursuant to Rule 14a-8, in order for a stockholder proposal or the nomination of a candidate for director to be included in the Company’s definitive proxy statement for the 2023 Annual Meeting, it must be submitted to our Corporate Secretary at 1555 Freedom Boulevard, 200 W, Provo, UT 84604 no later than August 18, 2023, which the Company believes is a reasonable time before it begins to print and send its proxy materials. The proposals and nominations must comply with all of the applicable requirements set forth in the rules and regulations of the SEC, under the Exchange Act, and the Company’s Bylaws.

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Provo, State of Utah, on ~~November 8, 2022.~~August 14, 2023.

Title of each class		~~Ticker~~Trading symbol(s)		Name of each exchange on which registered
Common stock, par value $0.001 per share		SUNW		~~The~~ Nasdaq Capital Market

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

	Page

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS	4

Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2022~~2023 (Unaudited) and December 31, ~~2021~~2022	4

Unaudited Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	5

Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	6

Unaudited Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	7

Notes to the Unaudited Condensed Consolidated Financial Statements	8

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	25

ITEM 4. CONTROLS AND PROCEDURES	25

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	26

ITEM ~~4. CONTROLS~~1A. RISK FACTORS	26

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND ~~PROCEDURES~~USE OF PROCEEDS	27

~~PART II - OTHER INFORMATION~~

ITEM ~~1. LEGAL PROCEEDINGS~~3. DEFAULTS UPON SENIOR SECURITIES	27

ITEM ~~1A. RISK FACTORS~~4. MINE SAFETY DISCLOSURES	27

ITEM ~~2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~5. OTHER INFORMATION	27

ITEM ~~3. DEFAULTS UPON SENIOR SECURITIES~~6. EXHIBITS	27

~~ITEM 4. MINE SAFETY DISCLOSURES~~SIGNATURES	27

~~ITEM 5. OTHER INFORMATION~~	27

~~ITEM 6. EXHIBITS~~	28

~~SIGNATURES~~	29

					Additional
	Common Stock				Paid-in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance at December 31, 2020		23,835,258	$	24	$	122,668	$	(88,635	)	$	34,057
Stock-based compensation for options		-		-		151		-			151
Sales of common stock pursuant to S-3 registration statement		3,212,486		3		48,855		-			48,858
Net loss for the three months ended March 31, 2021		-		-		-		(4,813	)		(4,813	)
Balance at March 31, 2021		27,047,744		27		171,674		(93,448	)		78,253
Stock-based compensation for options		-		-		1,113		-			1,113
Net loss for the three months ended June 30, 2021		-		-		-		(1,867	)		(1,867	)
Balance at June 30, 2021		27,047,744		27		172,787		(95,315	)		77,499
Stock-based compensation for options		-		-		1,206		-			1,206
Issuance of common stock for cashless exercise of options		1,530		-		-		-			-
Net loss for the three months ended September 30, 2021		-		-		-		(6,460	)		(6,460	)
Balance at September 30, 2021		27,049,274	$	27	$	173,993	$	(101,775	)	$	72,245

	(in thousands)
Base purchase price	$	51,750
Working capital shortfall		(1,131	)
Cash surplus		1,492
Total purchase price paid	$	52,111

Cash	$	1,492
Accounts receivable		1,729
Inventory		3,833
Contract assets		7,336
Prepaids and other current assets		1,603
Property and equipment		143
Deposits		91
Operating lease right-of-use asset		1,885
Finance lease right-of-use assets		1,200
Other intangible assets		15,600
Identifiable assets acquired		34,912
Accounts payable and accrued liabilities		(6,957	)
Contract liabilities		(5,273	)
Operating and finance lease liabilities		(2,757	)
Liabilities assumed		(14,987	)
Net identifiable assets acquired		19,925
Goodwill		32,186
Net assets acquired	$	52,111


	Nine months ended September 30, 2022
	Residential Solar			Commercial Solar			Corporate			Total
Net revenue	$	95,569		$	12,737		$	-		$	108,306
Cost of goods sold		47,646			11,354			30			59,030
Gross profit		47,923			1,383			(30	)		49,276

Operating expenses
Selling and marketing		38,068			2,530			722			41,320
General and administrative		13,810			4,941			5,274			24,025
Segment loss		(3,955	)		(6,088	)		(6,026	)		(16,069	)
Segment contribution (loss)		(3,955	)		(6,088	)		(6,026	)		(16,069	)

Stock-based compensation		740			101			1,178			2,019
Depreciation and amortization		3,177			-			-			3,177
Operating loss	$	(7,872	)	$	(6,189	)	$	(7,204	)	$	(21,265	)

	September 30, 2022
	(in thousands)
Operating Segment:
Residential Solar	$	93,956
Commercial Solar		15,818
Corporate		11,594
Total Consolidated Assets	$	121,368

	Three Months Ended
	September 30,
	2022			2021
Net Total Originations (Watts in thousands)		15,249			11,101
Installation (Watts in thousands)		8,703			5,805
Average Project Size Installed (Watts)		6,689			6,072
Revenue	$	36,659		$	23,379
Gross Margin		53.2	%		52.9	%
Operating (Loss)	$	(328	)	$	(3,259	)
Operating (Loss) %		(0.9	)%		(13.9	)%

	Three Months Ended
	June 30,
	2023			2022
Net Total Originations (Watts in thousands)		8,064			16,292
Installation (Watts in thousands)		6,309			7,920
Average Project Size Installed (Watts)		6,782			6,268
Revenue	$	27,200		$	32,516
Gross Margin		34.8	%		49.3	%
Operating (Loss)	$	(8,126	)	$	(3,269	)
Operating (Loss) %		(29.9	)%		(10.1	)%

Exhibit No.		Description
3.1		Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the annual report on Form 10-K filed with the Securities and Exchange Commission on March 26, 2021).
3.2		Bylaws of Sunworks, Inc. (as updated through June 2, 2021) (incorporated by reference to Exhibit 3.2 to the annual report on Form 10-K filed with the Securities and Exchange Commission on March 11, 2022).
10.1		Factoring Agreement, dated May 4, 2023, by and among Commercial Solar Energy, Inc. Sunworks United, Inc. and Produce Pay Inc. (incorporated by reference to Exhibit 10.1 to the quarterly report on Form 10-Q filed with the Securities and Exchange Commission on May 22, 2023).
31.1*		Certification of Principal Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
31.2*		Certification of Principal Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
32.1**		Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**		Inline XBRL Instance Document.
101.SCH**		Inline XBRL Taxonomy Extension Schema Document.
101.CAL**		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

*	Filed herewith.

**	Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

	Sunworks, Inc.

Date: ~~November 8, 2022~~August 14, 2023	By:	/s/ Gaylon Morris
		Gaylon Morris, Chief Executive Officer
		(Principal Executive Officer)

Date: ~~November 8, 2022~~August 14, 2023	By:	/s/ Jason Bonfigt
		Jason Bonfigt, Chief Financial Officer
		(Principal Financial and Accounting Officer)