| SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES | iSUN, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES a) Organization iSun, Inc.(formerly known as The Peck Company Holdings, Inc.) is a solar engineering, construction and procurement contractor for commercial and
industrial customers across the Northeastern United States. 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. Effective January 19, the Company changed its corporate name from The Peck Company Holdings, Inc. to iSun, Inc. (the “Name Change”). The Name Change was
effected through a parent/subsidiary short-form merger of iSun, Inc., our wholly-owned Delaware subsidiary formed solely for the purpose of the name change, with and into us. We were the surviving entity. To effectuate the short-form merger, we
filed a Certificate of Merger with the Secretary of State of the State of Delaware on January The merger became
effective on January with the State of Delaware and, for purposes of the quotation of our Common Stock on the Nasdaq
Capital Market (“Nasdaq”), effective at the open of the market on January The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the
instructions to Form 10 -Q and Article 8 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three
and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year
ending December 31, 2021 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/A for the year ended December 31, 2020. b) Principles of Consolidation The accompanying consolidated financial statements include the accounts of iSun, Inc. and its wholly-owned operating subsidiaries, Peck Electric
Co and iSun Energy LLC. All material intercompany transactions have been eliminated upon consolidation of these entities. c) Revenue Recognition The majority of the Company’s revenue arrangements generally consist of a single performance obligation to transfer promised goods or services. 1) Revenue Recognition Policy Solar Power Systems Sales and Engineering, Procurement, and Construction Services The Company recognizes revenue from the sale of solar power systems,
Engineering, Procurement and Construction (“EPC”) services, and other construction type contracts over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer. Construction contracts, such as the
sale of a solar power system combined with EPC services, are generally accounted for as a single unit of account (a single performance obligation) and are not segmented between types of services. Our contracts often require significant services
to integrate complex activities and equipment into a single deliverable, and are therefore generally accounted for as a single performance obligation, even when delivering multiple distinct services. For such services, the Company recognizes
revenue using the cost to cost method, based primarily on contract cost incurred to date compared to total estimated contract cost. The cost to cost method (an input method) is the most faithful depiction of the Company’s performance because it
directly measures the value of the services transferred to the customer. Cost of revenue includes an allocation of indirect costs including depreciation and amortization. Subcontractor materials, labor and equipment, are included in revenue and
cost of revenue when management believes that the Company is acting as a principal rather than as an agent (i.e., the Company integrates the materials, labor and equipment into the deliverables promised to the customer). Changes to total
estimated contract cost or losses, if any, are recognized in the period in which they are determined as assessed at the contract level. Pre-contract costs are expensed as incurred unless they are expected to be recovered from the customer. As of
June 30, and December the Company had 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 to days of billing,
depending on the contract. Sales and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. For sales of solar power systems in which the Company sells a controlling interest in the project to a customer, revenue is recognized for the
consideration received when control of the underlying project is transferred to the customer. Revenue may also be recognized for the sale of a solar power system after it has been completed due to the timing of when a sales contract has been
entered into with the customer. Energy Generation Revenue from net metering credits is recorded as electricity is generated from the solar arrays and billed to customers (PPA off-taker) at the
price rate stated in the applicable power purchase agreement (PPA). Operation and Maintenance and Other Miscellaneous Services Revenue for time and materials contracts is recognized as the service is provided. 2) Disaggregation of Revenue from Contracts with Customers The following table disaggregates the Company’s revenue based on the
timing of satisfaction of performance obligations for the three and months
ended June :
Three Months Ended June
Six Months Ended June
2021
2020
2021
2020
Performance obligations satisfied over time
Solar
$
3,516,055
$
2,092,228
$
9,608,729
$
5,322,072
Electric
605,245
482,566
1,494,356
974,206
Data and Network
232,005
195,432
510,877
458,628
Totals
$
4,353,305
$
2,770,226
$
11,613,962
$
6,754,906 For the three and months ended June and the Company did not perform any service
which the performance obligation was satisfied at a point in time. 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 - - - which exempts an entity from such disclosures if a performance obligation is part of a contract with an original expected duration of 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) 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) limit of up to $250,000 per financial institution.
The differences between book and bank balances are outstanding checks and deposits in transit. At June the
uninsured balances were approximately . e) Income Taxes Through June 20, (the date of the completion of the Reverse Merger and Recapitalization between Peck Electric Co. and Jensyn Acquisition Corp, (the
Company’s predecessor)) the former Peck Electric Co. had elected to be taxed as an S-Corporation under the Internal Revenue Code and similar codes in states in which the Company was subject to taxation. While this election was in effect, the
income (whether distributed or not) was taxed for federal income tax purposes to former Peck Electric stockholders. Accordingly, no provision for federal income tax was required. However, the Company did calculate a proforma provision. The
provision for income taxes for former Peck Electric Co. was primarily for Vermont minimum taxes. As of the date of the completion of the Reverse Merger and Recapitalization, the Company effectively became a C-Corporation, which changed the
level of taxation from the stockholders to the Company. The deferred tax assets and liabilities that arise out of the change of tax status have been recorded to account for the temporary differences that existed on the date of the change
resulting in a deferred tax liability of At June and December the deferred tax liability was and respectively. The Company accounts for income taxes under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred
tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The financial statements of the Company account for deferred tax assets and
liabilities in accordance with Accounting Standards Codification (“ASC”) 740, Income taxes. The Company also uses a more-likely-than-not measurement for all tax
positions taken or expected to be taken on a tax return in order for those tax positions to be recognized in the financial statements. If the Company were to incur interest and penalties related to income taxes, these would be included in the
provision for income taxes. Generally, the three tax years previously filed remain subject to examination by federal and state tax
authorities. f) Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 revenues and expenses during the reporting period. On an
ongoing basis, the Company evaluates their estimates, including those related to inputs used to recognize revenue over time, goodwill, intangibles, investments, impairment on investments, warranty liability and valuation of deferred tax assets.
Actual results could differ from those estimates. g) Deferred Finance Costs Deferred financing costs relate to the Company’s debt and equity
instruments. Deferred financing costs relating to debt instruments are amortized over the terms of the related instrument using the effective interest method. Amortization expense associated
with deferred financing costs, which is included in interest expense, totaled $770 for the three months ended June 30, 2021 and $1,535 for the three months ended June 30, 2020. Amortization expense associated with deferred
financing costs, which is included in interest expense, totaled
and for the months ended June and June respectively. 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 - quoted market prices in active markets for identical assets or liabilities; (ii) Level -
observable market-based inputs or other observable inputs; and (iii) Level - 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. The contingent provisions of the Assignment Agreement entered into with
Oakwood Construction Services and Adani Solar USA, Inc. are considered Level 3 measurements. Given that the probability of such provisions
being achieved is highly unlikely, no value was assigned to the contingent provision. i) Segment Information Operating segments are defined as components of an enterprise for which
separate financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment with different
product offerings for financial reporting purposes, which represents the Company’s core business. j) Recently Issued Accounting Pronouncements On May 03, the FASB issued Accounting Standards Update (ASU) - Earnings Per Share (Topic 260) , Debt— Modifications and Extinguishments (Subtopic 470 - 50) , Compensation—Stock Compensation (Topic 718) , and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815 - 40) : Issuer’s Accounting for Certain
Modifications or Exchanges of Freestanding Equity-Classified Written Call Options . The FASB issued ASU - to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified
after modification or exchange. The ASU is effective years beginning after December including interim periods
within those years and the Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures. k) 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 net of an allowance of $0 at June 30, 2021 and December 31, 2020. l) Reclassification Certain reclassifications have been made to prior year’s financial statement to conform to classifications used in the current year. |
