| Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies
(a) Basis of Presentation The unaudited condensed consolidated
financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”)
and, therefore, certain information and disclosures normally included in annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted. In the opinion of management, the information
reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All
such adjustments are of a normal recurring nature. Quarterly results are not necessarily indicative of results for the full year. The
condensed consolidated balance sheet as of December 31, 2022 has been derived from the audited consolidated financial statements at that
date but does not include all information and footnotes required by U.S. GAAP for complete financial statements. These unaudited condensed
consolidated financial statements should be read in conjunction with the audited financial statements included in the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
(b) Use of Estimates The preparation of the unaudited condensed
consolidated financial statements in conformity with U.S. GAAP requires the Group to make estimates and assumptions that affect reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated
financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. Significant accounting estimates reflected in the Group’s unaudited condensed consolidated financial statements
include the allowance for doubtful accounts receivable and other receivable, the impairment of goodwill and long-lived assets, fair value
of derivative liability and share based compensation. Changes in facts and circumstances may result in revised estimates. The current
economic environment has increased the degree of uncertainty inherent in those estimates and assumptions.
(c) Revenue Recognition The Group’s accounting practices
under Accounting Standards Codification (“ASC”) No. 606 are as followings: The Group generates revenue from sales
of PV components, sales of self-assembled solar modules, roofing and solar energy systems installation, electricity revenue with Power
Purchase Agreements (“PPAs”), sales of PV project assets, and others for the nine months ended September 30, 2023 and 2022. Sale of PV components Revenue on sale of PV components includes
one performance obligation of delivering the products and the revenue is recognized at a point in time following the transfer of control
of such products to the customer, which typically occurs upon shipment or acceptance of the customer depending on the terms of the underlying
contracts. Sales of self-assembled solar modules Revenue on sale of self-assembled solar
modules includes one performance obligation of delivering the products and the revenue is recognized at a point in time following the
transfer of control of such products to the customer, which typically occurs upon the delivery to the customer. Revenue from roofing and solar energy systems installation
Revenue from roofing and solar energy
system installation is recognized over time. For revenue from solar energy system
installation, the Group’s only performance obligation is to design and install a customized solar energy system, sometimes, reinstall
the customer’s existing solar energy system. For revenue from roofing the Group’s only performance obligation is to design
and build roof system per customer specifications. The Group’s roofing projects
involve the construction of a specific roof systems in accordance with each customer’s selection; the Group’s solar energy
system installations involve solar modules being retrofitted to existing consumer roofs using rails, then connected to the utility using
an inverter system. For both solar energy system installation and roofing, typically jobs are completed within three months, the specific
timing depends on the size of the job and the complexity of the job site, and the contract price includes all material and labor needed,
and payments are collected based on specific milestones. The Group provides solar energy systems
and roofing installation for various customers, such as homeowners and real estate developers, but the design and installation for each
customer differs substantially on the basis of each customer’s needs and the type of shingle or roof that is placed with the solar
energy system. The asset consequently has no alternative use to the Group because the customer specific design limits the Group’s
practical ability to readily direct the solar energy system to another customer. As such the Group’s performance does not create
an asset with an alternative use to the Group. Pursuant to the contract, the customers agree to pay for any costs, expenses and losses
incurred by the Group upon termination, and therefore, revenue is recognized over time according to ASC 606-10-25-27(c). For both solar energy system installation
and roofing, all costs to obtain and fulfill contracts associated with system sales and other product sales are expensed to cost of revenue
when the corresponding revenue is recognized. The Group recognizes revenue using
a cost-based input method that recognizes revenue and gross profit as work is performed based on the relationship between actual costs
incurred compared to the total estimated cost of the contract, to determine the Group’s progress towards contract completion and
to calculate the corresponding amount of revenue and gross profit to recognize. The total estimated cost of the contract constitutes of
material cost and labor cost and are developed based on the size and specific situation of different jobs. Changes in estimates are mainly
due to: (i) unforeseen field conditions that impacts the estimated workload, and (ii) change of the unit price of material or labor cost. If the estimated total costs on any
contract are greater than the net contract revenues, the Group recognizes the entire estimated loss in the period the loss becomes known. Electricity revenue with PPAs The Group sells energy generated by
PV solar power systems under PPAs. For energy sold under PPAs, the Group recognizes revenue each period based on the volume of energy
delivered to the customer (i.e., the PPAs off-taker) and the price stated in the PPAs. The Group has determined that none of the PPAs
contains a lease since (i) the purchaser does not have the rights to operate the PV solar power systems, (ii) the purchaser does not have
the rights to control physical access to the PV solar power systems, and (iii) the price that the purchaser pays is at a fixed price per
unit of output. Sale of PV project asset The Group’s sales arrangements
for PV projects do not contain any forms of continuing involvement that may affect the revenue or profit recognition of the transactions,
nor any variable considerations for energy performance guarantees, minimum electricity end subscription commitments. The Group therefore
determined its single performance obligation to the customer is the sale of a completed solar project. The Group recognizes revenue for
sales of solar projects at a point in time after the solar project has been grid connected and the customer obtains control of the solar
project. Other revenue Other revenue mainly consists of sales
of self-assembled solar modules, sales of component and charging stations, sales of forklifts, engineering and maintenance service, shipping
and delivery service, sales of pre-development solar projects and others. Other revenues are recognized at a point in time following the
transfer of control of such service or products to the customer, which typically occurs upon shipment of product or acceptance of the
customer depending on the terms of the underlying contracts. Disaggregation
of revenues from continuing operations The following table illustrates the
disaggregation of revenue by revenue stream and by geographical location for the three and nine months ended September 30, 2023 and 2022:
Schedule of disaggregation of revenues
By revenue stream For the nine months ended September 30, 2023 (Unaudited)
Sales of PV components Sales of self-assembled solar modules Revenue from roofing and solar systems installation Electricity revenue with PPAs Sales of pre-development solar projects Others Total
Australia $ 119,062 $ – $ – $ – $ – $ 870 $ 119,932
United States – 26,810 2,256 216 6,743 – 36,025
Japan – – – – – 67 67
Italy – – – 499 – – 499
United Kingdom – – – 1,260 – – 1,260
Greece – – – 1,979 – – 1,979
Total $ 119,062 $ 26,810 $ 2,256 $ 3,954 $ 6,743 $ 937 $ 159,762
By revenue stream For the three months ended September 30, 2023 (Unaudited)
Sales of PV components Sales of self-assembled solar modules Revenue from roofing and solar systems installation Electricity revenue with PPAs Sales of pre-development solar projects Others Total
Australia $ 45,035 $ – $ – $ – $ – $ 260 $ 45,295
United States – 8,071 831 69 – – 8,971
Japan – – – – – 25 25
Italy – – – 192 – – 192
United Kingdom – – – 616 – – 616
Greece – – – 829 – – 829
Total $ 45,035 $ 8,071 $ 831 $ 1,706 $ – $ 285 $ 55,928
By revenue stream For the nine months ended September 30, 2022 (Unaudited)
Sales of PV components Revenue from roofing and solar systems installation Electricity revenue with PPAs Sales of self-assembled solar modules Sales of pre-development solar projects Others Total
Australia $ 94,953 $ – $ – $ – $ – $ 660 $ 95,613
Italy – – 776 – – – 776
United States 1,608 23,735 – 1,382 637 304 27,666
United Kingdom – – 1,561 – – – 1,561
Greece – – 2,136 – – – 2,136
Total $ 96,561 $ 23,735 $ 4,473 $ 1,382 $ 637 $ 964 $ 127,752
By revenue stream For the three months ended September 30, 2022 (Unaudited)
Sales of PV components Revenue from roofing and solar systems installation Electricity revenue with PPAs Sales of self-assembled solar modules Sales of pre-development solar projects Others Total
Australia $ 35,399 $ – $ – $ – $ – $ 218 $ 35,617
Italy – – 308 – – – 308
United States 305 3,582 – 1,318 – 259 5,464
United Kingdom – – 629 – – – 629
Greece – – 785 – – – 785
Total $ 35,704 $ 3,582 $ 1,722 $ 1,318 $ – $ 477 $ 42,803
Schedule of revenue by timing
By timing of revenue recognition For the nine months ended September 30, 2023 (Unaudited)
Sales of PV components Sales of self-assembled solar modules Revenue from roofing and solar systems installation Electricity revenue with PPAs Others Total
Goods transferred at a point in time $ 119,062 $ 26,810 $ – $ 3,954 $ 7,680 $ 157,506
Service transferred over time – – 2,256 – – 2,256
Total $ 119,062 $ 26,810 $ 2,256 $ 3,954 $ 7,680 $ 159,762
By timing of revenue recognition For the three months ended September 30, 2023
(Unaudited)
Sales of PV components Sales of self-assembled solar modules Revenue from roofing and solar systems installation Electricity revenue with PPAs Others Total
Goods transferred at a point in time $ 45,035 $ 8,071 $ – $ 1,706 $ 285 $ 55,097
Service transferred over time – – 831 – – 831
Total $ 45,035 $ 8,071 $ 831 $ 1,706 $ 285 $ 55,928
By timing of revenue recognition For the nine months ended September 30, 2022 (Unaudited)
Sales of PV components Revenue from roofing and solar systems installation Electricity revenue with PPAs Sales of self-assembled solar modules Others Total
Goods transferred at a point in time $ 96,561 $ – $ 4,473 $ 1,382 $ 1,601 $ 104,017
Service transferred over time – 23,735 – – – 23,735
Total $ 96,561 $ 23,735 $ 4,473 $ 1,382 $ 1,601 $ 127,752
By timing of revenue recognition For the three months ended September 30, 2022 (Unaudited)
Sales of PV components Revenue from roofing and solar systems installation Electricity revenue with PPAs Sales of self-assembled solar modules Others Total
Goods transferred at a point in time $ 35,704 $ – $ 1,722 $ 1,318 $ 477 $ 39,221
Service transferred over time – 3,582 – – – 3,582
Total $ 35,704 $ 3,582 $ 1,722 $ 1,318 $ 477 $ 42,803 Contract balance The following table provides information
about accounts receivable, contract assets and contract liabilities from contracts with customers:
September 30, 2023 (Unaudited) December 31, 2022
Accounts Receivable $ 24,194 $ 21,181
Contract assets 358 1,403
Advance from customers 5,635 7,404 The contract assets primarily relate
to the Group’s rights to consideration for work completed but not billed at the reporting date, primarily for the revenue from roofing
and solar energy systems installation in the United States. The contract assets are transferred to receivables when the rights become
unconditional after billing is issued. Advance from customers, which represent
a contract liability, represent mostly unrecognized amount received for customers. Advance from customers is recognized as (or when)
the Group performs under the contract. During the nine months ended September 30, 2023 and 2022, the Group recognized $ 7,404 4,924
(d) Discontinued operations A disposal of a component of an entity
or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift
that has (or will have) a major effect on an entity's operations and financial results when any of the following occurs:
(1) the component of an entity or group of components of an entity meets the criteria to be classified as
held for sale;
(2) the component of an entity or group of components of an entity is disposed of by sale;
(3) the components of an entity or group of components of an entity is disposed of other than by sale (for
example, by abandonment or in a distribution to owners in a spinoff). For any component classified as held
for sale or disposed of by sale or other than by sale that qualify for presentation as a discontinued operation in the period, the Group
has reported the assets and labilities of the discontinued operations as current and non-current assets of discontinued operations, and
current and non-current liabilities of discontinued operations in the consolidated balance sheets as of December 31, 2022. The results
of operations of discontinued operation for the nine and three months ended September 30, 2023 and 2022 have been reflected separately
in the consolidated statements of operations as a single line item for all periods presented in accordance with U.S.GAAP. Cash flows from
discontinued operations of the three categories for the nine months ended September 30, 2023 and 2022 were separately presented in the
consolidated statements of cash flows for all periods presented in accordance with U.S. GAAP. For the disposal under common control,
the Group records the impacts on deconsolidation in additional paid in capital based on the difference on the deconsolidation date between
(i) the aggregate of (a) the consideration received, (b) the carrying amount of non-controlling interest in the deconsolidated subsidiaries,
and (c) the carrying amount of the remaining interests in the deconsolidated subsidiaries less (ii) the carrying amount of the deconsolidated
subsidiaries’ assets and liabilities.
(e) Recent Accounting Pronouncements Recently adopted accounting pronouncements In October 2021, the FASB issued ASU
2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU
2021-08”), which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination
in accordance with Topic 606, Revenue from Contracts with Customers (“ASC 606”). The update will generally result in an entity
recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the
acquisition date rather than at fair value. ASU 2021-08 is effective on a prospective basis for fiscal years beginning after December
15, 2022, with early adoption permitted. The Group adopted ASU 2021-08 effective January 1, 2023 and apply the guidance to subsequent
acquisitions. The adoption of ASU 2021-08 will only impact the accounting for the Group’s future acquisitions. Accounting Pronouncements Issued
But Not Yet Adopted In March 2020, the FASB issued ASU
2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”),
which provides elective amendments for entities that have contracts, hedging relationships and other transactions that reference LIBOR
or another reference rate expected to be discontinued because of reference rate reform. These amendments were effective immediately and
may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December
31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), to expand and clarify the scope of Topic 848
to include derivative instruments on discounting transactions. The amendments in this ASU are effective in the same timeframe as ASU 2020-04.
In December 2022, the FASB issued ASU 2022-06, Reference Rate reform (Topic 848): Deferral of the Sunset Date of Topic 848, which deferred
the sunset date of Topic 848, Reference Rate Reform to December 31, 2024. The Group is currently evaluating the impact this guidance will
have on its consolidated financial statements. The Group does not believe other recently
issued but not yet effective accounting standards, if currently adopted, would have a material effect on the unaudited condensed consolidated
balance sheets, statements of operations and cash flows. |
