UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31,September 30, 2023

OR

For the transition period from     to    

Commission File No. 001-37707

iSUN, INC.

(Exact name of registrant as specified in its charter)

(802) 658-3378

(Registrant’s telephone number)

N/A

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

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

Common Stock, Par Value $0.0001

(Title of class)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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

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

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

The number of shares of the Registrant’s Common Stock outstanding at May 8,November 10, 2023 was 18,858,92337,544,216.

ISUN, INC.

Form 10-Q

Table of Contents

iSun, Inc.

Condensed Consolidated Balance Sheets as of

March 31,September 30, 2023 (Unaudited) and December 31, 2022

(In thousands, except number of shares)

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

iSun, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

For the Three and Nine Months Ended March 31,September 30, 2023 and 2022 (Unaudited)

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

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

iSun, Inc.

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

For the Three and Nine Months Ended March 31, 2023September 30, 2023(Unaudited)

(In thousands, except number of shares)

iSun, Inc.

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

For the Three and Nine Months Ended March 31,September 30, 2022

(In thousands, except number of shares)

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

iSun, Inc.

Consolidated Statements of Cash Flows (Unaudited)

For the ThreeNine Months ended March 31,Ended September 30, 2023, and 2022 (Unaudited)

(In thousands, except number of shares)thousands)

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

iSun, Inc

Notes to Condensed Consolidated Financial Statements

March 31, 2023 and 2022

(in thousands, except share and per share data)

1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

a) Organization

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

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

b) Principles of Consolidation

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

c) Revenue Recognition

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

1) Revenue Recognition Policy

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

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

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

Energy Generation

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

Operation and Maintenance and Other Miscellaneous Services

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

2) Disaggregation of Revenue from Contracts with Customers

The following table disaggregates the Company’s revenue based on the timing of satisfaction of performance obligations for the three month periodand nine months ended March 31,September 30, 2023 and September 30, 2022:

SCHEDULE OF DISAGGREGATION OF REVENUE

The following table disaggregates the Company’s revenue based operational division for the three month periodand nine months ended March 31,September 30, 2023, and September 30, 2022:

SCHEDULE OF REVENUE BASED OPERATIONAL SEGMENT

3) Variable Consideration

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

4) Remaining Performance Obligation

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

5) Warranties

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

d) Accounts Receivable

Accounts receivable are recorded when invoices are issued and presented on the balance sheet net of the allowance for doubtful accounts. The allowance, which was $226 at March 31, 2023 and $302 at December 31, 2022, is estimated based on historical losses, the existing economic condition, and the financial stability of the Company’s customers. Accounts are written off against the reserve when they are determined to be uncollectible.

f) e) Contract Assets and Liabilities

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

SCHEDULE OF CONTRACT ASSET AND LIABILITIES

Project Assets

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

Project Assetassets were $0 for the years ended March 31,as of September 30, 2023 and December 31, 2022, respectively.

f)e) Concentration and Credit Risks

The Company occasionally has cash balances in a single financial institution during the year in excess of the Federal Deposit Insurance Corporation (FDIC) limits. The differences between book and bank balances are outstanding checks and deposits in transit. At March 31,September 30, 2023, the uninsured balances were approximately $5,4643,554.

g)f) Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principlesU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates theirSignificant estimates including those related to inputsinclude estimates used to recognize revenue over time,review the Company’s impairments and estimations of long-lived assets, impairment on investment, estimates in recording the business combinations, goodwill, intangibles, investments,revenue recognition utilizing a cost-to-cost method, allowances for uncollectible accounts, impairment on investments, warrant liability and the valuation ofallowance 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 couldmay differ from those estimates.these estimates under different assumptions or conditions.

h)g) Recently Issued Accounting Pronouncements

The Company is an emerging growth company until at minimum December 31, 2023.2024. The Company will maintain the election available to an emerging growth company to use any extended transition period applicable to non-public companies when complying with a new or revised accounting standard. The Company retains its emerging growth status and therefore elects to adopt new or revised accounting standards on the adoption date required for a private company.

In March 2023, the FASB issued ASU No. 2014-01, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects, which amended Subtopic 323-740, Investments—Equity Method and Joint Ventures—Income Taxes, introduced the option to apply the proportional amortization method to account for investments made primarily for the purpose of receiving income tax credits and other income tax benefits when certain requirements are met. This guidance is effective for fiscal years beginning after December 15, 2023 with early adoption permitted. The adoption ofCompany is currently evaluating the effect that adopting this standard does notnew accounting guidance will have a material impact on the Company’sits condensed consolidated financial statements and related disclosures.

i)h) Fair Value of Financial Instruments

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

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

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

j)i) Debt Extinguishment

Under ASC 470, debt should be derecognized when the debt is extinguished, in accordance with the guidance in ASC 405-20, Liabilities: Extinguishments of Liabilities. Under this guidance, debt is extinguished when the debt is paid, or the debtor is legally released from being the primary obligor by the creditor. On January 21, 2022, SunCommon received notification from Citizens Bank N.A. that the Small Business Administration has approved the forgiveness of the PPP loan in its entirety and as such, the full $2,592 has been recognized inon the income statement of operations as a gain upon debt extinguishmenton forgiveness of PPP Loan for the threenine months ended March 31,September 30, 2022.

k)j) Inventory

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

l)k) Segment Information

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

m)l) Legal contingencies

The Company accounts for liabilities resulting frommay be involved in legal proceedings, when it is possible to evaluateclaims and assessments arising in the likelihoodordinary course of an unfavorable outcomebusiness. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements. No reserves were deemed necessary as of September 30, 2023.

m) Inflation risk

Changes in order to provide an estimate for the contingent liability. At March 31, 2023economic conditions, including inflation, rising interest rates, lower consumer confidence, volatile equity capital markets and 2022, there are no material contingent liabilities arising from pending litigation.ongoing supply chain disruptions may affect our business, revenues and earnings adversely.

n) Reclassification

Certain reclassificationsprior period amounts presented on the Company’s financial statements have been made to prior year’s financial statementreclassified in order to conform to classifications used in the current year.period presentation. These reclassifications have no effect on previously reported results of operations or loss per share.

2. LIQUIDITY AND FINANCIAL CONDITION

For the threenine months ended March 31,September 30, 2023, the Company experienced a net operating loss of approximately $2,7007,800 with positive cash flow fromused in operations of approximately $5003,800. At March 31,September 30, 2023, the Company had cash on hand of approximately $7,2005,600 and a working capital deficit of approximately $6,0007,600. To date, the Company has relied predominantly on operating cash flow, borrowings from its credit facilities, and sales of Common Stock. The working capital deficit increased due toDuring the nine months ended September 30, 2023, the Company has reduced its cash used in operations, but is still operating in a net operating loss driven by the seasonal weather impact to installations in the Northeast whichsituation, although at a reduced level, this raises substantial doubt about the ability for the Company to continue as a going concern.concern for at least one year from the date these financial statements are issued. However, the Company believes the matters outlined below alleviate that substantial doubt.