The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements as of and for the three ended
Forward-Looking Statements
This discussion and analysis contains forward-looking statements about our plans
and expectations of what may happen in the future. Forward-looking statements
are based on a number of assumptions and estimates that are inherently subject
to significant risks and uncertainties, and our actual results could differ
materially from the results anticipated by our forward-looking statements. Our
future results and financial condition may also differ materially from those
that we currently anticipate as a result of the factors described in the
sections entitled "Risk Factors" in the filings that we make with the
Business Introduction / Overview
The
The world recognizes the need to transition to a reliable, renewable energy grid
in the next 50 years.
After installing more than 125 megawatts of solar energy, we believe that we are
well-positioned for what we believe to be the coming transformation to an all
renewable energy economy. As a result of the completion of our business
combination transaction with
We have a three-pronged growth strategy that includes (1) organic expansion
across the
Equity and Ownership Structure
On
21 Critical Accounting Policies
The following discussion and analysis of the Company's financial condition and
results of operations are based upon the Company's financial statements, which
have been prepared in accordance with accounting principles generally accepted
in
Use of Estimates
The preparation of 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 financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates include estimates used to review the Company's, impairments and estimations of long-lived assets, revenue recognition utilizing a cost to cost method, allowances for uncollectible accounts, 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 Recognition
We recognize revenue from contracts with customers under Accounting Standards Codification ("ASC") Topic 606 ("Topic 606"). Under Topic 606, revenue is recognized when, or as, control of promised goods and services is transferred to customers, and the amount of revenue recognized reflects the consideration to which an entity expects to be entitled in exchange for the goods and services transferred. We primarily recognize revenue over time utilizing the cost-to-cost measure of progress on contracts for specific projects and for certain master service and other service agreements.
Contracts. We derive revenue primarily from construction projects performed under: (i) master and other service agreements, which are typically priced using either a time and materials or a fixed price per unit basis; and (ii) contracts for specific projects requiring the construction and installation of an entire infrastructure system or specified units within an infrastructure system, which are subject to multiple pricing options, including fixed price, unit price, time and materials, or cost plus a markup.
The total contract transaction price and cost estimation processes used for recognizing revenue over time under the cost-to-cost method is based on the professional knowledge and experience of our project managers, engineers and financial professionals. Management reviews estimates of total contract transaction price and total project costs on an ongoing basis. Changes in job performance, job conditions and management's assessment of expected variable consideration are factors that influence estimates of the total contract transaction price, total costs to complete those contracts and our profit recognition. Changes in these factors could result in revisions to revenue in the period in which the revisions are determined, which could materially affect our consolidated results of operations for that period. Provisions for losses on uncompleted contracts are recorded in the period in which such losses are determined.
Performance Obligations. A performance obligation is a contractual promise to transfer a distinct good or service to a customer and is the unit of account under Topic 606. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied. 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. Contract amendments and change orders, which are generally not distinct from the existing contract, are typically accounted for as a modification of the existing contract and performance obligation. The vast majority of our performance obligations are completed within one year.
When more than one contract is entered into with a customer on or close to the same date, management evaluates whether those contracts should be combined and accounted for as a single contract as well as whether those contracts should be accounted for as one, or more than one, performance obligation. This evaluation requires significant judgment and is based on the facts and circumstances of the various contracts.
22 Union Labor
The Company uses union labor in order to construct and maintain the solar,
electric and data work that comprise the core activities of its business. As
such, contributions were made by the Company to the
The Company's management believes that access to unionized labor provides a unique advantage for growth, because workforce resources can be scaled efficiently utilizing labor unions in other states to meet specific project needs in other states without substantially increasing fixed costs for the Company.
In 2018,
Revenue Drivers
The Company's business includes the design and construction of solar arrays for its customers. Revenue is recognized for each construction project on a percentage of completion basis. From time to time, the Company constructs solar arrays for its own account or purchases a solar array that must still be constructed. In these instances, no revenue is recognized for the construction of the solar array. In instances where the Company owns the solar array, revenue is recognized for the sale of the electricity generated to third parties. As a result, depending on whether it is building for others or for its own account, the Company's revenue is subject to significant variation.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
REVENUE AND COST OF GOODS SOLD
Consolidated revenue for the three months ended
Gross profit decreased 66.1% to
Total operating expenses for the three months ended
23
Income tax benefit for the three months ended
Backlog for the three months ended
SELLING AND MARKETING EXPENSES
We rely on referrals from customers and on its industry reputation, and therefore has not historically incurred significant selling and marketing expenses.
GENERAL AND ADMINISTRATIVE EXPENSES
Total general and administrative ("G&A") expenses were
DEPRECIATION AND AMORTIZATION
Depreciation expenses for the three months ended
OTHER EXPENSES
Warehousing and other operating expenses were
NET INCOME
The net loss for the three months ended
Certain Non-GAAP Measures
We periodically review the following key non-GAAP measures to evaluate our business and trends, measure our performance, prepare financial projections and make strategic decisions.
EBITD and, Adjusted EBITDA
Included in this presentation are discussions and reconciliations of earnings before interest, income tax and depreciation and amortization ("EBITDA") and EBITDA adjusted for certain non-cash, non-recurring or non-core expenses ("Adjusted EBITDA") to net income in accordance with GAAP. Adjusted EBITDA excludes certain non-cash and other expenses, certain legal services costs, professional and consulting fees and expenses, and one-time Merger expenses and certain adjustments. We believe that these non-GAAP measures illustrate the underlying financial and business trends relating to our results of operations and comparability between current and prior periods. We also use these non-GAAP measures to establish and monitor operational goals.
24
These non-GAAP measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute or superior to, the other measures of financial performance prepared in accordance with GAAP. Using only the non-GAAP financial measures, particularly Adjusted EBITDA, to analyze our performance would have material limitations because such calculations are based on a subjective determination regarding the nature and classification of events and circumstances that investors may find significant. We compensate for these limitations by presenting both the GAAP and non-GAAP measures of our operating results. Although other companies may report measures entitled "Adjusted EBITDA" or similar in nature, numerous methods may exist for calculating a company's Adjusted EBITDA or similar measures. As a result, the methods that we use to calculate Adjusted EBITDA may differ from the methods used by other companies to calculate their non-GAAP measures.
The reconciliations of EBITDA to net (loss) income, the most directly comparable financial measure calculated and presented in accordance with GAAP, are shown in the table below: Three months ended March 31, 2020 2019 Net (loss) income$ (432,632 ) $ 376,652 Depreciation and amortization 155,012 150,483 Other (income) expense, net 80,766 44,659 Income tax (benefit) provision (142,311 ) 500 EBITDA (339,165 ) 572,294
Weighted Average shares outstanding 5,298,159 3,234,501
Adjusted EPS $ (0.06 )$ 0.18 25
LIQUIDITY AND CAPITAL RESOURCES
The Company had
As of
Due to the impact of the COVID-19 pandemic, the Company had several current
projects paused and future projects delayed at
During 2019, the Company entered into an equity line of credit facility with
potential to sell at-the-market shares. The Company would receive the cash
proceeds of this sale which would help support any cash flow deficiencies that
may arise. Under this agreement,
Certain of the Company's loan agreements contain a clause requiring lender approval for changes to the guarantor under such agreements. If this clause is implicated, such lenders may require outstanding indebtedness to become immediately due.
Cash flow used in operating activities was
Net cash used in investing activities was
Net cash provided by financing activities was
26
The Company believes its current cash on hand including the proceeds received under the PPP loan, the availability under the equity line of credits, the collectability of its accounts receivable and project backlog are sufficient to meet its operating and capital requirements for at least the next twelve months from the date these financial statements are issued.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on its financial condition, revenues, results of operations, liquidity, or capital expenditures.
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