United States securities and exchange commission logo
September 15, 2022
Gaylon Morris
Chief Executive Officer
Sunworks, Inc.
1555 Freedom Boulevard
Provo, UT 84604
Re: Sunworks, Inc.
Form 10-K for the
Fiscal Year ended December 31, 2021
Filed March 11,
2022
File No. 001-36868
Dear Mr. Morris:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for the Fiscal Year ended December 31, 2021
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations for the Years Ended December 31, 2021 and 2020,
page 34
1. We understand from your
disclosures on page 7 that you differentiate between residential
and commercial
installations in reporting your operations, and between small and large
commercial and public
works projects based on a 100kW threshold, as well as cycle times
in describing the scope
or duration of your solar installation projects.
We note there was a
substantial shift in the relative significance of your residential and
commercial
installations as a result of the April 8, 2021 acquisition of Solcius LLC, also
that you appear to be
tracking the total number of installations and total solar capacity on
your website, and that
you reference the metrics of residential solar segment originations,
commercial solar energy
segment orders, and backlog in your earnings releases.
Gaylon Morris
FirstName
Sunworks, LastNameGaylon Morris
Inc.
Comapany 15,
September NameSunworks,
2022 Inc.
September
Page 2 15, 2022 Page 2
FirstName LastName
We also note that your website presentation for the second quarter of
2022 includes a
strategic update, including the time required to install residential
solar systems, a shift
towards direct sales channels, a shift in sourcing from third party
distribution channels to
manage supply chain constraints, price increases to offset
inflationary pressures, and
efforts to "execute against" multi-year high backlog in both segments.
Please expand the disclosures in your annual report and subsequent
interim reports as
necessary to address any material financial effects associated with
the efforts, concerns,
and objectives identified in your strategic update, including the
associated trends and
uncertainties involving reasonably possible effects of the initiatives
that you mention, and
to clarify how these matters have evolved over the periods covered by
each report.
Please include meaningful measures of installation volumes for your
residential and
commercial installations for each period, such as the number of
installations within a
range or size class, or kilowatts or megawatts associated with
completed installations,
and address the relationship between costs and revenues associated
with these categories
of installations, including any reasonably possible changes that would
have material
effects, to comply with Item 303(b) and (b)(2) of Regulation S-K.
Please discuss the composition of the backlog measures for each
segment, in terms of the
nature and duration of the underlying projects, reasons for
installation delays, and the
amount of time that you envision will be necessary to realize these
amounts.
Financial Statements
Consolidated Statements of Operations, page F-2
2. We note that your cost of goods sold and gross profit measures do not
appear to reflect
depreciation and amortization expense, although details in Notes 6 and
9 on pages F-15,
F-16 and F-17 seem to identify one or more components that would be
attributable to cost
of goods sold under generally accepted accounting principles (GAAP).
SAB Topic 11:B provides an accommodation for presenting cost of goods
sold apart from
allocable depreciation and amortization expense, which generally
requires a parenthetical
notation of the excluded amounts, although it does not extend to
measures of gross profit,
which should reflect all costs of goods sold in accordance with GAAP.
Tell us how you have evaluated the nature and use of your property and
equipment, and
the intangible assets, in determining whether the associated
depreciation and amortization
would be attributable to cost of goods sold. Also clarify how you are
reporting the lease
expenses and ROU amortization discussed in Notes 7 and 8 on pages F-15
and F-16,
pertaining to your offices, warehouses, vehicles, and office
equipment.
Please submit any revisions to the presentation or incremental
disclosures that you believe
would adequately address or alleviate the concerns outlined above.
Gaylon Morris
Sunworks, Inc.
September 15, 2022
Page 3
Note 2 - Summary of Significant Accounting Policies
Revenue Recognition, page F-7
3. We understand from your disclosures on page 4, that in addition to
sales and installations
of power and storage systems, you also provide services in managing
systems for your
residential and commercial customers; and we see that on page F-7, you
refer to revenues
from commercial EPC services and for systems operations and
maintenance.
However, in Note 4 on page F-14 you limit your disaggregation of
revenue to the
categories of Residential, Commercial and Public Works. Tell us the
reasons you have not
differentiated between revenues from the sales of products, and
revenues from the
provision of services, either in the Statements of Operations, or in
the disaggregation of
revenues that is required by FASB ASC 606-10-50-5.
Please explain how you considered such revenues, as well as the short
term and long term
projects within the commercial segment, in determining that the three
categories that you
have identified adequately depict how the nature, amount, timing, and
uncertainty of
revenue and cash flows are affected by economic factors, if this is
your view.
4. We note that you report activity as "Cost of Goods Sold" on page F-3,
although use the
term "Cost of sales" when reporting the corresponding activity for the
operating segments
on page F-14. Please modify these captions as necessary to be
consistent and
representationally faithful of the underlying activity. If the
measures reflect both costs of
goods sold, and costs of services, this should be evident from the
caption.
Note 5 - Operating Segments, page F-14
5. We note that you report depreciation and amortization for each
reportable operating
segment. Please expand your disclosures to include a measure of total
assets for each
segment, a reconciliation of segment assets to total consolidated
assets, and if necessary,
an explanation of the nature of any differences between the segment
assets and
consolidated assets, to comply with FASB ASC 280-10-50-22, 27, 29(c),
and 30(c).
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff. You may contact Mark Wojciechowski, Staff Accountant, at
(202) 551-3759
or Karl Hiller, Branch Chief, at (202) 551-3686 if you have any questions.
FirstName LastNameGaylon Morris Sincerely,
Comapany NameSunworks, Inc.
Division of
Corporation Finance
September 15, 2022 Page 3 Office of
Energy & Transportation
FirstName LastName