UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022.

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File Number 001-36868

SUNWORKS, INC.

(Name of registrant in its charter)

Delaware

01-0592299

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

1555 Freedom Boulevard

Provo, UT 84604

(Address of principal executive offices) (Zip Code)

(385) 497-6955

(Registrant’s telephone Number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class		Ticker symbol(s)		Name of each exchange on which registered
Common stock, par value $0.001 per share		SUNW		The Nasdaq Capital Market

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 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, a 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.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

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 registrant’s common stock outstanding as of November 8, 2022 was 35,187,898.

TABLE OF CONTENTS

	Page

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS	4

Condensed Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021	4

Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021	5

Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2022 and 2021	6

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	7

Notes to the Unaudited Condensed Consolidated Financial Statements	8

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	26

ITEM 4. CONTROLS AND PROCEDURES	27

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	27

ITEM 1A. RISK FACTORS	27

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	27

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	27

ITEM 4. MINE SAFETY DISCLOSURES	27

ITEM 5. OTHER INFORMATION	27

ITEM 6. EXHIBITS	28

SIGNATURES	29

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and we intend that such forward-looking statements be subject to the safe harbors created thereby. For this purpose, any statements contained in this Quarterly Report except for statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, trends in our businesses, or other characterizations of future events or circumstances are forward-looking statements.

The forward-looking statements included herein are based on current expectations of our management based on available information and involve a number of risks and uncertainties, all of which are difficult or impossible to predict accurately and many of which are beyond our control. As such, our actual results may differ significantly from those expressed in any forward-looking statements. Factors that might cause these differences in actual results include the risks and uncertainties discussed in Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 (our “Annual Report”), and the additional risks described in other documents we file from time to time with the Securities and Exchange Commission (SEC). In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking information. Except as may be required by law, we disclaim any intent to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

SUNWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021

(in thousands, except share data)

	September 30, 2022			December 31, 2021
		(Unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	14,273		$	19,719
Restricted cash		248			323
Accounts receivable, net		7,633			4,568
Inventory		26,927			10,219
Contract assets		24,722			14,498
Other current assets		3,278			4,154
Total Current Assets		77,081			53,481
Property and equipment, net		2,494			3,195
Finance lease right-of-use assets, net		1,888			1,407
Operating lease right-of-use assets		1,937			2,502
Deposits		162			132
Intangible assets, net		5,620			7,910
Goodwill		32,186			32,186
Total Assets	$	121,368		$	100,813

Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable and accrued liabilities	$	19,160		$	11,127
Contract liabilities		26,695			12,201
Finance lease liability, current portion		491			424
Operating lease liability, current portion		905			993
Total Current Liabilities		47,251			24,745

Long-Term Liabilities:
Finance lease liability, net of current portion		997			542
Operating lease liability, net of current portion		1,032			1,509
Warranty liability		1,431			1,251
Total Long-Term Liabilities		3,460			3,302
Total Liabilities		50,711			28,047

Commitments and contingencies		-			-

Shareholders’ Equity:
Preferred stock, $0.001 par value, 5,000,000 authorized shares; no shares issued and outstanding
Common stock, $0.001 par value; 50,000,000 authorized shares; 35,161,648 and 29,193,772 shares issued and outstanding, at September 30, 2022 and December 31, 2021, respectively		35			29
Additional paid-in capital		207,067			187,997
Accumulated deficit		(136,445	)		(115,260	)
Total Shareholders’ Equity		70,657			72,766

Total Liabilities and Shareholders’ Equity	$	121,368		$	100,813

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

SUNWORKS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 and 2021

(in thousands, except share and per share data)

	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021

Revenue, net	$	40,713	$	31,220	$	108,306	$	69,480

Cost of Goods Sold		21,204		18,150		59,030		42,348

Gross Profit		19,509		13,070		49,276		27,132

Operating Expenses:
Selling and marketing		14,773		10,072		41,320		21,468
General and administrative		8,718		7,185		24,025		17,081
Stock-based compensation		364		1,206		2,019		2,470
Depreciation and amortization		1,056		1,062		3,177		2,160

Total Operating Expenses		24,911		19,525		70,541		43,179

SEC Form 10-Q filed by Sunworks Inc.