Notes
to Condensed Consolidated Financial Statements
Note
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
a)
Organization
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 South Burlington, Vermont.
On
February 26, 2019, Peck Electric Co., a privately held company, entered into a Share Exchange Agreement (the “Exchange Agreement”)
with Jensyn Acquisition Corp. (“Jensyn”), a publicly held company whose primary business objective was to acquire,
through a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business
combination (the “Reverse Merger and Recapitalization”), with one or more target businesses (a special purpose acquisition
company or “SPAC”). On June 20, 2019, with the approval of the stockholders of each of Peck Electric Co. and Jensyn,
the Reverse Merger and Recapitalization was completed. In connection with the Reverse Merger and Recapitalization, Jensyn issued
3,234,501 shares of Jensyn’s Common Stock, par value $0.0001 per share (the “Common Stock”), to the stockholders
of the Peck Electric Co. in exchange for all of the equity securities of Peck Electric Co., and Peck Electric Co. became a wholly-owned
subsidiary of Jensyn. While Jensyn was the surviving legal entity, Peck Company Holdings, Inc. was deemed the acquiring entity
for accounting purposes. Concurrent with the completion of the Reverse Merger and Recapitalization, Jensyn changed its name from
“Jensyn Acquisition Corp.” to “The Peck Company Holdings, Inc.” and the symbol for its Common Stock
traded on Nasdaq became “PECK”. Unless the context otherwise requires, “we,” “us,” “our,”
“Peck Company” and the “Company” refer to the combined company.
b)
Basis of Presentation
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 months ended March 31, 2020 are
not necessarily indicative of the results that may be expected for the year ending December 31, 2020 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 for the year ended December 31, 2019.
As
a result of the Reverse Merger and Recapitalization, the Company implemented changes to the following accounting policies, adoption
of an accounting policy for income taxes in the second quarter of 2019, updated accounting policy for earnings per share, deferred
finance costs, fair value of financial instruments and the adoption of a new revenue recognition policy.
c)
Revenue Recognition
1) Revenue Recognition Standard
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU and all subsequently issued clarifying ASUs replaced most
existing revenue recognition guidance in U.S. GAAP. The ASU also required expanded disclosures relating to the nature, amount,
timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the new standard
in the fourth quarter 2019, effective January 1, 2019, the first day of the Company’s fiscal year, using the modified retrospective
method.
As
part of the adoption of the ASU, the Company elected to use the following transition practical expedients: (i) completed contracts
that begin and end in the same annual reporting period have not been restated; (ii) the Company used the known transaction price
for completed contracts; (iii) to exclude disclosures of transaction prices allocated to remaining performance obligations when
the Company expects to recognize such revenue for all periods prior to the date of initial application of the ASU; and (iv) the
Company has reflected the aggregate of all contract modifications that occurred prior to the date of initial application when
identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction
price.
The majority of the Company’s
revenue is recognized over time based on the percentage of completion method with cost inputs. Revenue recognized over time primarily
consists of performance obligations that are satisfied within one year or less. The majority of the Company’s revenue
arrangements generally consist of a single performance obligation to transfer promised goods or services
2)
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 March 31, 2020, the Company had
$0 in pre-contract costs classified as a current asset under contract assets on the 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 30 to 45 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.
3)
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 months ended March 31:
|
|
March 31, 2020
|
|
|
March 31, 2019
|
|
Performance obligations satisfied over time
|
|
|
|
|
|
|
|
|
Solar
|
|
$
|
3,229,844
|
|
|
$
|
2,451,716
|
|
Electrical
|
|
|
491,640
|
|
|
|
1,133,106
|
|
Data and Network
|
|
|
263,196
|
|
|
|
265,655
|
|
Total
|
|
$
|
3,984,680
|
|
|
$
|
3,850,477
|
|
During
the periods ended March 31, 2020 and 2019, there was no revenue recognized based on the satisfaction of performance obligation
at a point in time.
4)
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.
5)
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
606-10-50-14, which exempts an entity from such disclosures if a performance obligation is part of a contract with an original
expected duration of one year or less.
6)
Warranties
The
Company generally provides limited warranties 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.
e)
Accounts Receivable
Accounts
receivable are recorded when invoices are issued and presented on the condensed balance sheet net of the allowance for doubtful
accounts. The allowance, which was $84,000 at March 31, 2020 and December 31, 2019, is estimated based on historical losses, the
existing economic condition, and the financial stability of the Company’s customers. Accounts are written off against the
reserve when they are determined to be uncollectible.
f)
Project Assets
Project
assets primarily consist of costs related to solar power projects that are in various stages of development that are capitalized
prior to the completion of the sale of the project, and are actively marketed and intended to be sold. In contrast to contract
assets, the Company holds a controlling interest in the project itself. These project related costs include costs for land, development,
and construction of a PV solar power system. Development costs may include legal, consulting, permitting, transmission upgrade,
interconnection, and other similar costs. The Company typically classifies project assets as noncurrent due to the nature of solar
power projects (long-lived assets) and the time required to complete all activities to develop, construct, and sell projects,
which is typically longer than 12 months. Once the Company enters into a definitive sales agreement, such project assets are classified
as current until the sale is completed and the Company has met all of the criteria to recognize the sale as revenue. Any income
generated by a project while it remains within project assets is accounted for as a reduction to the basis in the project. If
a project is completed and begins commercial operation prior to the closing of a sales arrangement, the completed project will
remain in project assets until placed in service. All expenditures related to the development and construction of project assets,
whether fully or partially owned, are presented as a component of cash flows from operating activities. Project assets are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. A project
is considered commercially viable or recoverable if it is anticipated to be sold for a profit once it is either fully developed
or fully constructed. A partially developed or partially constructed project is considered to be commercially viable or recoverable
if the anticipated selling price is higher than the carrying value of the related project assets. The Company examines a number
of factors to determine if the project is expected to be recoverable, including whether there are any changes in environmental,
permitting, market pricing, regulatory, or other conditions that may impact the project. Such changes could cause the costs of
the project to increase or the selling price of the project to decrease. If a project is not considered recoverable, we impair
the respective project assets and adjust the carrying value to the estimated fair value, with the resulting impairment recorded
within “Selling, general and administrative” expense.
Project
Asset were $0 for the three months ended March 31, 2020 and 2019, respectively.
g)
Property and Equipment
Property
and equipment greater than $1,000 are recorded at cost, less accumulated depreciation. Cost includes the price paid to acquire
or construct the assets, required installation costs, and any expenditures that substantially add to the value or substantially
extend the useful life of the assets.
The
solar arrays represent project assets that the Company may temporarily own and operate after being placed into service. The Company
reports solar arrays at cost, less accumulated depreciation. The Company begins depreciation on the solar arrays when they are
placed in service.
Depreciation
is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:
Buildings
and improvements
|
39
years
|
Vehicles
|
3-5
years
|
Tools
and equipment
|
3-7
years
|
Solar
arrays
|
20
years
|
Total
depreciation expense for the three months ended March 31, 2020 and March 31, 2019 was $155,012 and $150,483, respectively.
The
cost of assets sold, retired, or otherwise disposed of, and the related allowance for depreciation are eliminated from the accounts
and any resulting gain or loss is included in operations. The cost of maintenance and repairs are charged to expense as incurred,
while significant renewals or betterments are capitalized.
h)
Long-Lived Assets
The
Company assesses long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances
arise, including consideration of technological obsolescence, that may indicate that the carrying amount of such assets may not
be recoverable. These events and changes in circumstances may include a significant decrease in the market price of a long-lived
asset; a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition;
a significant adverse change in the business climate that could affect the value of a long-lived asset; an accumulation of costs
significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset; a current
period operating or cash flow loss combined with a history of such losses or a projection of future losses associated with the
use of a long-lived asset; or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed
of significantly before the end of its previously estimated useful life. For purposes of recognition and measurement of an impairment
loss, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are
largely independent of the cash flows of other assets and liabilities.
When
impairment indicators are present, the Company compares undiscounted future cash flows, including the eventual disposition of
the asset group at market value, to the asset group’s carrying value to determine if the asset group is recoverable. If
the carrying value of the asset group exceeds the undiscounted future cash flows, the Company measures any impairment by comparing
the fair value of the asset group to its carrying value. Fair value is generally determined by considering (i) internally developed
discounted cash flows for the asset group, (ii) third-party valuations, and/or (iii) information available regarding the current
market value for such assets.
If
the fair value of an asset group is determined to be less than its carrying value, an impairment in the amount of the difference
is recorded in the period that the impairment indicator occurs. Estimating future cash flows requires significant judgment, and
such projections may vary from the cash flows eventually realized.
The
Company considers a long-lived asset to be abandoned after the Company has ceased use of such asset and they have no intent to
use or repurpose the asset in the future. Abandoned long-lived assets are recorded at their salvage value, if any.
i)
Asset Retirement Obligations
The
Company develops, constructs, and operates certain solar arrays with land lease agreements that include a requirement for the
removal of the assets at the end of the term of the agreement. The Company recognizes such asset retirement obligations (“ARO”)
in the period in which they are incurred based on the present value of estimated third-party recommissioning costs, and they capitalize
the associated asset retirement costs as part of the carrying amount of the related assets. Once an asset is placed into service,
the asset retirement cost is subsequently depreciated on a straight-line basis over the estimated useful life of the asset. Changes
in AROs resulting from the passage of time are recognized as an increase in the carrying amount of the liability and as accretion
expense. The AROs were not deemed significant to the financial statements and were therefore not recorded as a liability at March
31, 2020 and December 31, 2019.
j)
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 limit of up to $250,000 per financial institution. The differences between book and bank balances are outstanding
checks and deposits in transit. At March 31, 2020, the uninsured balances were immaterial.
k)
Income Taxes
Through
June 20, 2019 (the date of the closing of the Exchange Agreement) the former Peck Electric 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 was primarily for Vermont minimum taxes. As of the date of the completion of the Exchange
Agreement, 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 $1,506,362.
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.
l)
Sales Tax
The
Company’s accounting policy is to exclude state sales tax collected and remitted from revenues and costs of sales, respectively.
m)
Use of Estimates
The
preparation of financial statements in conformity with U.S. GAAP 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, specifically percentage-of-completion. Actual results could
differ from those estimates.
n)
Recently Issued Accounting Pronouncements
Prior
to June 20, 2019, the Company was defined as a non-public entity for purposes of applying transition guidance related to new or
revised accounting standards under GAAP, and was required to adopt new or revised accounting standards after the required adoption
dates that applied to public companies. Subsequent to June 20, 2019, the Company maintains its emerging growth company status
until no later than December 31, 2021. The Company will maintain the election available to an emerging growth company to use any
extended transition period applicable to non-public companies when complying with a new or revised accounting standard. The Company
retains its emerging growth status and therefore elects to adopt new or revised accounting standards on the adoption date required
for a private company.
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations
by recognizing a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.
Leases will be classified as either operating or financing, with such classifications affecting the pattern of expense recognition
in the income statement. ASU 2016-02 is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted.
This standard was recently delayed for emerging growth companies that elected to adopt new accounting standards on the adoption
date required for private companies and will be effective for the Company’s annual reporting period in 2022 and interim
periods beginning first quarter of 2023. The Company is evaluating the impact ASU 2016-02 will have on its financial statements
and associated disclosures.
In
June 2016 the FASB issued ASU No. 2016-13, Financial Instruments-Credit losses (Topic 326). This new guidance will change
how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other
instruments. The update will replace the current incurred loss model with an expected loss model. Under the incurred loss model,
a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to
believe that a loss is probable (that is has been “incurred”). Under the expected loss model, a loss (or allowance)
is recognized upon initial recognitions of the asset that reflects all future events that leads to a loss being realized, regardless
of whether it is probable that the future event will occur. The incurred loss model considers past events and conditions, while
the expected loss model includes expectations for the future which have yet to occur. ASU 2018-19 was issued in November 2018
and excludes operating leases from the new guidance. The standard will require entities to record a cumulative-effect adjustment
to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. As an Emerging Growth
Company, the standard is effective for the Company’s 2022 annual reporting period and interim periods beginning first quarter
of 2023. The Company is evaluating the impact of ASU 2016-13 will have on its financial statements and associated disclosures.
In
December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740). This ASU reduces the complexity over accounting
for income taxes by removing certain exceptions and amending guidance to improve consistent application of accounting over income
taxes. We are currently assessing the provision of this guidance to determine whether or not its adoption will have an impact
on our consolidated financial statements and related disclosures. The guidance is effective January 1, 2021 with early adoption
permitted.
o)
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. The Company incurred $21,547 of deferred financing costs
for the year ended December 31, 2019 in connection with a refinance of its revolving line of credit. Amortization expense associated
with deferred financing costs, which is included in interest expense, totaled $1,535 for the three months ended March 31, 2020
and $0 for the three months ended March 31, 2019. Debt financing costs relating to the equity credit line
were offset against additional paid in capital as the shares issued were fully earned on the execution of the agreement. The Company
incurred $413,032 of deferred financing costs that was recorded to additional paid in capital for the year ended December 31,
2019.
p)
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 1 - quoted market prices in active markets for identical
assets or liabilities; (ii) Level 2 - observable market-based inputs or other observable inputs; and (iii) Level 3 - 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 and cash equivalents, 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 credit facilities approximate
their fair values.
The
earnout provision of the Share Exchange is considered a Level 3 measurement. Given that the probability of such provisions being
achieved is highly unlikely, no value was assigned to the earnout provision.
q)
Subsequent Events
The
Company has evaluated subsequent events through the date of this filing and based on its evaluation there are no events that are
required to be disclosed herein.
r)
Cash and cash equivalents
The
Company considers all highly liquid instruments with an original maturity of three months or less as cash equivalents.
Note
2. EXCHANGE AGREEMENT/REVERSE MERGER AND RECAPITALIZATION
As
discussed in Note 1, on June 20, 2019, the Company consummated the Reverse Merger and Recapitalization pursuant to the Exchange
Agreement between Jensyn and Peck Electric Co. The materials actions arising from the agreement are outlined below:
a)
Exchange of Shares
Upon
the closing of the Exchange Agreement, the stockholders of Peck Electric Co. exchanged their shares of capital stock in Peck Electric
Co. for 3,234,501 shares of the Jensyn’s Common Stock (the “Share Exchange”), representing approximately 59%
of Jensyn’s outstanding shares after giving effect to the Reverse Merger and Recapitalization. As a result of the Share
Exchange, Peck Electric became a wholly owned subsidiary of the Company.
Upon
the closing of the Reverse Merger and Recapitalization and after giving effect to the issuances of Common Stock and the conversion
of 4,194,500 rights to purchase Common Stock into 419,450 shares of Common Stock. In addition, 1,819,482 shares of the Company’s
Common Stock were issued to Jensyn shareholders upon the closing of the Reverse Merger and Recapitalization. The Company also
redeemed a total of 492,037 shares of its Common Stock pursuant to the terms of the Company’s Second Amended and Restated
Certificate of Incorporation resulting in a total payment to redeeming stockholders of $5,510,814.
i.
warrants exercisable for 2,097,250 shares of Common Stock, consisting of 3,900,000 warrants originally sold as part of units in
Jensyn’s initial public offering (the “IPO”) and 294,500 warrants sold as part of the units issued in a private
placement simultaneously with the consummation of the Jensyn IPO. Each warrant entitles its holder to purchase one-half of one
share of Common Stock at an exercise price of $5.75 per half share ($11.50 per whole share)
ii.
warrants exercisable for 195,000 shares of Common Stock, consisting of 390,000 private warrants originally sold as part of Firm
Units in the IPO. Each warrant entitled its holder to purchase one-half of one share of Common Stock at an exercise price of $5.75
per half share ($11.50 per whole share).
iii.
Purchase option for 390,000 Units was originally sold as part of the IPO. Each Unit has an exercise price of $12.00 per Unit and
consists of the following:
|
o
|
One
share of Common Stock
|
|
o
|
One
right to receive one-tenth (1/10) of a share of Common Stock issued upon exercise of the Unit
|
One
warrant entitling its holder to purchase one-half of one share of Common Stock at an exercise price of $5.75 per half share ($11.50
per whole share).
b)
Earnout
In
the event that the earnout provisions of Exchange Agreement are deemed to have been met by June 30, 2020, the end of the Earnout
Period, then the Company shall issue 898,473 shares of Common Stock to the original Peck Electric Co. stockholders, issue 11,231
shares of Common Stock to Exit Strategy Partners, LLC, and issue shares of Common Stock to certain of the initial stockholders
of the Company a number of shares of the Company’s Common Stock equal to the number of shares of the Company’s Common
Stock forfeited and canceled by such stockholders to the extent that such shares are used to satisfy Company obligations or to
induce investors to make an equity investment in the Company at or prior to the Closing as described below under “Issuance
of Additional Shares and Forfeiture of Sponsor Shares.” Earnout provision will be met in the event that (a) the Company’s
Adjusted EBITDA for the twelve (12) month period commencing on the first full month that is after the Closing Date (the “Earnout
Period”) is $5,000,000 or more (the “Adjusted EBITDA Target) or (b) the closing Stock Price is $12.00 or more after
the Closing Date (the “Stock Price Target”) and prior to the end of the Earnout Period.
c)
Issuance of Additional Shares and Forfeiture of Sponsor Shares
In
connection with the Reverse Merger and Recapitalization arising out of the Exchange Agreement, the Company issued 493,299 shares
of Common Stock in exchange for the cancellation of approximately $5,618,675 of obligations and, as contemplated by the Exchange
Agreement, certain insiders and their transferees have agreed to forfeit and cancel 281,758 shares of Common Stock. As of December
31, 2019, 257,799 shares of Common Stock were forfeited and new shares will be issued if the earnout provisions of Exchange Agreement
are deemed to have been met by June 30, 2020, the end of the Earnout Period. The remaining 23,959 shares of Common Stock are pending
forfeiture and cancellation as of March 31, 2020.
Note
3. LIQUIDITY AND FINANCIAL CONDITION
For
the three months ended March 31, 2020, the Company experienced a net operating loss and negative cash flow from operations. At
March 31, 2020, the Company had balances of cash of $56,548, working capital deficit of $206,449 and total stockholders’
equity of $3,441,809. To date, the Company has relied predominantly on operating cash flow and borrowings from its credit facilities
to fund its operations.
On
April 24, 2020, the Company received a loan under the CARES Act Payroll Protection Program (“PPP”) of $1,487,624.
Proceeds from the loan used to cover documented expenses related to payroll, rent and utilities, during the 8-week period, subsequent
to the cash being received by the Company, are eligible to be forgiven. The forgiveness amount allows for not more than 25% of
the forgiveness to be for non-payroll items and is subject to reduction if employees are terminated or wages are reduced. The
remaining unforgiven amount of the loan bears interest at 1% per annum and matures on April 24, 2022. Initial principal payments
are deferred for the first six months; however, interest still accrues during this time. There are no collateral requirements
or prepayment penalties associated with the loan.
Due
to the impact of the COVID-19 pandemic, the Company had several current projects paused and the commencement of future projects
delayed at March 31. 2020. All projects are anticipated to begin promptly once the Stay at Home orders of the State of Vermont
expire or are relaxed. The current Stay at Home order is expected to end on May 15, 2020. However, as the Company does support
and maintain critical infrastructure, several projects were deemed essential and allowed to continue.
Under
the terms of the Company’s equity line of credit, Lincoln Park Capital is required to purchase shares up to a total value
of $15,000,000 pursuant to certain terms and conditions. The Company can require the purchase of 50,000 shares of Common Stock
under a regular purchase. On the next day following a regular purchase, the Company can require the purchase of an accelerated
purchase equal to 200% of the shares sold in the regular purchase as well as an additional accelerated purchase equal to 300%
of the shares sold in the regular purchase. The total number of shares authorized under the Purchase Agreement total 3,024,194
which would allow the Company to maximize the equity line of credit within 10 business days.
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.
Note
4. ACCOUNTS RECEIVABLE
Accounts
receivable consist of:
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Accounts receivable - contracts in progress
|
|
$
|
7,044,538
|
|
|
$
|
7,190,412
|
|
Accounts receivable - retainage
|
|
|
167,142
|
|
|
|
188,193
|
|
|
|
|
7,211,680
|
|
|
|
7,378,605
|
|
Allowance for doubtful accounts
|
|
|
(84,000
|
)
|
|
|
(84,000
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,127,680
|
|
|
$
|
7,294,605
|
|
Bad
debt expense was $0 for March 31, 2020 and 2019, respectively.
Contract
assets represent revenue recognized in excess of amounts billed, unbilled receivables, and retainage. Unbilled receivables represent
an unconditional right to payment subject only to the passage of time, which are reclassified to accounts receivable when they
are billed under the terms of the contract. Contract assets were as follows at March 31, 2020 and December 31, 2019:
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Costs in excess of billings
|
|
$
|
1,470,076
|
|
|
$
|
1,272,372
|
|
Unbilled receivables
|
|
|
-
|
|
|
|
206,213
|
|
Retainage
|
|
|
167,142
|
|
|
|
188,193
|
|
|
|
$
|
1,637,218
|
|
|
$
|
1,666,778
|
|
Contract
liabilities represent amounts billed to clients in excess of revenue recognized to date, billings in excess of costs, and retainage.
The Company anticipates that substantially all incurred cost associated with contract assets as of March 31, 2020 will be billed
and collected within one year. Contract liabilities were as follows at March 31, 2020 and December 31, 2019:
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Billings in excess of costs
|
|
$
|
287,451
|
|
|
$
|
126,026
|
|
Note
5. CONTRACTS IN PROGRESS
Information
with respect to contracts in progress is as follows:
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Expenditures to date on uncompleted contracts
|
|
$
|
9,879,528
|
|
|
$
|
4,699,855
|
|
Estimated earnings thereon
|
|
|
2,005,741
|
|
|
|
1,409,060
|
|
|
|
|
11,885,269
|
|
|
|
6,108,915
|
|
Less billings to date
|
|
|
(10,702,644
|
)
|
|
|
(5,168,782
|
)
|
|
|
|
1,182,625
|
|
|
|
940,133
|
|
Plus under billings remaining on contracts 100% complete
|
|
|
-
|
|
|
|
206,213
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,182,625
|
|
|
$
|
1,146,346
|
|
Included
in accompanying balance sheets under the following captions:
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Cost and estimated earnings in excess of billings
|
|
$
|
1,470,076
|
|
|
$
|
1,272,372
|
|
Billings in excess of costs and estimated earnings on uncompleted contracts
|
|
|
(287,451
|
)
|
|
|
(126,026
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,182,625
|
|
|
$
|
1,146,346
|
|
Note
6. LONG-TERM DEBT
A
summary of long-term debt is as follows:
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
NBT Bank, National Association, 4.25% interest rate, secured by all business assets, payable in monthly installments of $5,869 through September 2026, with a balloon payment at maturity.
|
|
$
|
708,258
|
|
|
$
|
723,230
|
|
|
|
|
|
|
|
|
|
|
NBT Bank, National Association, 4.00% interest rate, secured by all business assets, payable in monthly installments of $12,070 through January 2021.
|
|
|
117,577
|
|
|
|
153,258
|
|
|
|
|
|
|
|
|
|
|
NBT Bank, National Association, 4.20% interest rate, secured by building, payable in monthly installments of $3,293 through September 2026, with a balloon payment at maturity.
|
|
|
265,591
|
|
|
|
274,476
|
|
|
|
|
|
|
|
|
|
|
NBT Bank, National Association, 4.15% interest rate, secured by all business assets, payable in monthly installments of $3,677 through April 2026.
|
|
|
234,755
|
|
|
|
244,920
|
|
|
|
|
|
|
|
|
|
|
NBT Bank, National Association, 4.20% interest rate, secured by all business assets, payable in monthly installments of $5,598 through October 2026, with a balloon payment at maturity.
|
|
|
459,373
|
|
|
|
474,464
|
|
|
|
|
|
|
|
|
|
|
NBT Bank, National Association, 4.85% interest rate, secured by a piece of equipment, payable in monthly installments of $2,932 including interest, through May 2023.
|
|
|
93,277
|
|
|
|
110,413
|
|
|
|
|
|
|
|
|
|
|
Various vehicle loans, interest ranging from 0% to 6.99%, total current monthly installments of approximately $8,150, secured by vehicles, with varying terms through September 2025.
|
|
|
307,105
|
|
|
|
333,510
|
|
|
|
|
|
|
|
|
|
|
National Bank of Middlebury, 3.95% interest rate for the initial 5 years, after which the loan rate will adjust equal to the Federal Home Loan Bank of Boston 5/20 – year Advance Rate plus 2.75%, loan is subject to a floor rate of 3.95%, secured by solar panels and related equipment, payable in monthly installments of $2,388 including interest, through December 2024.
|
|
|
91,269
|
|
|
|
98,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,277,205
|
|
|
|
2,412,304
|
|
Less current portion
|
|
|
(376,814
|
)
|
|
|
(426,254
|
)
|
|
|
|
1,900,391
|
|
|
|
1,986,050
|
|
Less debt issuance costs
|
|
|
(18,468
|
)
|
|
|
(20,003
|
)
|
|
|
$
|
1,881,923
|
|
|
$
|
1,966,047
|
|
Maturities
of long-term debt are as follows:
Year ending March 31:
|
|
|
Amount
|
|
|
|
|
|
|
Remainder of 2020
|
|
|
$
|
291,155
|
|
2021
|
|
|
|
306,504
|
|
2022
|
|
|
|
304,574
|
|
2023
|
|
|
|
262,008
|
|
2024
|
|
|
|
213,524
|
|
2025 and
thereafter
|
|
|
|
899,440
|
|
|
|
|
|
|
|
|
|
|
$
|
2,277,205
|
|
Note
7. LINE OF CREDIT
The
Company has a working capital line of credit with NBT Bank with a limit of $6,000,000 and a variable interest rate based on the
Wall Street Journal Prime rate, currently 3.25%. The line of credit is payable upon demand with a maturity date of September 2020.
The balance outstanding was $5,622,691 and $2,663,124 at March 31, 2020 and December 31, 2019, respectively Borrowing is based
on 80% of eligible accounts receivable. The line is secured by all business assets and it and is subject to certain financial
covenants. These financial covenants consist of a minimum debt service coverage ratio of 1.20 to 1.00 measured on a quarterly
basis and are in effect beginning September 2020.
The
Company has a line of credit with NBT Bank with a limit of $2,000,000 to fund the development of certain solar arrays. The line
has a variable interest rate based on the Wall Street Journal Prime rate, currently 4.75%. The maturity date is September 2020.There
were no borrowings at March 31, 2020 and the balance was $510,100 at December 31, 2019. The line is secured by all business assets
and is subject to certain financial covenants. These financial covenants consist of a minimum debt service coverage ratio of 1.20
to 1.00 measured on a quarterly basis and are in effect beginning September 2020.
Note
8. COMMITTMENTS AND CONTINGENCIES
In
2015, the Company entered into two twenty-five-year non-cancelable lease agreements for land on which they constructed solar arrays.
One lease has fixed annual rent of $2,500. The second lease has annual rent of $2,500 with an annual increase of 2%.
In
2017, the Company entered into a twenty-year non-cancelable lease agreement for land on which it constructed solar arrays. The
lease has annual rent of $3,500 with an annual increase of 2%.
In
2018, the Company entered into a twenty-year non-cancelable lease agreement for land on which it constructed solar arrays. The
lease has annual rent of $26,000.
In
2019, the Company entered into a two-year non-cancelable lease agreement for equipment used in solar installations. The leases
have a combined annual rent of $45,832.
The
Company leases a vehicle under a non-cancelable operating lease. In addition, the Company occasionally pays rent for storage on
a month-to-month basis.
Total
rent expense for all of the non-cancelable leases above were $12,030 and $26,000 for the quarters ended March 31, 2020 and 2019,
respectively.
The
Company also rents equipment to be used on jobs under varying terms not exceeding one year. Total rent expense under short term
rental agreements was $87,626 and $44.123 for the quarters ended March 31, 2020 and 2019, respectively.
Future
minimum lease payments required under all of the non-cancelable operating leases are as follows:
Year ending December 31:
|
|
|
Amount
|
|
|
|
|
|
|
Remainder of 2020
|
|
|
$
|
68,776
|
|
2021
|
|
|
|
54,201
|
|
2022
|
|
|
|
35,236
|
|
2023
|
|
|
|
35,371
|
|
2024
|
|
|
|
35,508
|
|
2025
|
|
|
|
35,231
|
|
Thereafter
|
|
|
|
448,546
|
|
|
|
|
|
|
|
|
|
|
$
|
712,869
|
|
Note
9. UNION ASSESSMENTS
The
Company employs members of the International Brotherhood of Electrical Workers Local 300 (IBEW). The union fee assessments payable
are both withholdings from employees and employer assessments. Union fees are for monthly dues, defined contribution pension,
health and welfare funds as part of multi-employer plans. All union assessments are based on the number of hours worked or a percentage
of gross wages as stipulated in the agreement with the Union.
The
Company has an agreement with the IBEW in respect to rates of pay, hours, benefits, and other employment conditions. During the
years ended March 31, 2020 and 2019, the Company incurred the following union assessments.
|
|
March 31, 2020
|
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
Pension fund
|
|
$
|
73,170
|
|
|
$
|
81,441
|
|
Welfare fund
|
|
|
214,028
|
|
|
|
255,314
|
|
National employees benefit fund
|
|
|
20,519
|
|
|
|
25,614
|
|
Joint apprenticeship and training committee
|
|
|
2,841
|
|
|
|
3,688
|
|
401(k) matching
|
|
|
-
|
|
|
|
8,735
|
|
Total
|
|
$
|
310,558
|
|
|
$
|
374,792
|
|
Note
10. PROVISION FOR INCOME TAXES
In connection with the closing
of the Reverse Merger and Recapitalization, the Company’s tax status changed from an S-corporation to a C-corporation. As
a result, the Company is responsible for federal and state income taxes and must record deferred tax assets and liabilities for
the tax effects of any temporary differences that exist on the date of the change. When push down accounting does not apply as
part of a business combination, U.S. GAAP requires the effect of the change in tax status to be recognized in the financial statements
and the effect is included in income (loss) from continuing operations. The Company recorded deferred income tax expense
and a corresponding deferred tax liability of $1,098,481 as of and for the year ended December 31, 2019, of which
$1,506,362 was recorded at the time of conversion to a C Corporation (see note 1 (k) income taxes).
The Company’s unaudited statements
of operations also present pro-forma income tax expense for the period ended March 31, 2019 at the statutory rate.
The
provision for income taxes at March 31, 2020 and 2019 consists of the following:
|
|
March 31, 2020
|
|
|
March 31, 2019
|
|
Current
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
State
|
|
|
750
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
750
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(108,437
|
)
|
|
|
-
|
|
State
|
|
|
(34,624
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liability
|
|
$
|
(143,061
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
(Benefit) provision for Income Taxes
|
|
$
|
(142,311
|
)
|
|
$
|
500
|
|
The
Company’s total deferred tax assets and liabilities at March 31, 2020 and December 31, 2019 are as follows:
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
Deferred tax assets (liabilities)
|
|
|
|
|
|
|
|
|
Accruals and reserves
|
|
$
|
23,280
|
|
|
$
|
4,157
|
|
Net operating loss
|
|
|
521,315
|
|
|
|
421,940
|
|
Total deferred tax assets
|
|
|
544,595
|
|
|
|
426,097
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
(1,500,015
|
)
|
|
|
(1,524,578
|
)
|
Total deferred tax liabilities
|
|
|
(1,500,015
|
)
|
|
|
(1,524,578
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset (liabilities)
|
|
$
|
(955,420
|
)
|
|
$
|
(1,098,481
|
)
|
Reconciliation
between the effective tax on income from operations and the statutory tax rate is as follows:
|
|
March 31, 2020
|
|
|
March 31, 2019
|
|
Income tax (benefit) expense at federal statutory rate
|
|
$
|
(120,738
|
)
|
|
$
|
104,547
|
|
Federal taxes on period Company was a flow through entity
|
|
|
-
|
|
|
|
(104,547
|
)
|
Permanent differences
|
|
|
13,238
|
|
|
|
-
|
|
State and local taxes net of federal benefit
|
|
|
(33,901
|
)
|
|
|
500
|
|
Income tax (benefit) expense
|
|
$
|
(142,311
|
)
|
|
$
|
500
|
|
Note
11. CAPTIVE INSURANCE
The
Company and other companies are members of an offshore heterogeneous group captive insurance holding company entitled Navigator
Casualty, LTD. (NCL). NCL is located in the Cayman Islands and insures claims relating to workers’ compensation, general
liability, and auto liability coverage.
Premiums
are developed through the use of an actuarially determined loss forecast. Premiums paid totaled $174,891 and $117,528 for the
years ended December 31, 2019 and 2018, respectively. The loss funding, derived from the actuarial forecast, is broken-out into
two categories by the actuary known as the “A & B” Funds. The “A” Fund pays for the first $100,000
of any loss and the “B” Fund contributes to the remainder of the loss layer up to $300,000 total per occurrence.
Each
shareholder has equal ownership and invests a one-time cash capitalization of $36,000. This is broken out into two categories,
$35,900 of redeemable preference shares and $100 for a single common share. Each shareholder represents a single and equal vote
on NCL’s Board of Directors.
Summary
financial information on NCL as of September 30, 2019 is:
Total assets
|
|
$
|
68,741,297
|
|
Total liabilities
|
|
$
|
34,086,013
|
|
Comprehensive income
|
|
$
|
5,762,011
|
|
NCL’s
fiscal year end is September 30, 2019.
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
Investment in NCL
|
|
|
|
|
|
|
|
|
Capital
|
|
$
|
36,000
|
|
|
$
|
36,000
|
|
Cash security
|
|
|
158,785
|
|
|
|
101,555
|
|
Investment income in excess of losses (incurred and reserves)
|
|
|
3,320
|
|
|
|
3,320
|
|
Total investment
|
|
$
|
198,105
|
|
|
$
|
140,875
|
|
Note
12. RELATED PARTY TRANSACTIONS
In
2014, the minority stockholders of Peck Electric Co., who sold the building that the Company occupies, lent the proceeds to the
majority stockholders of Peck Electric Co. who contributed $400,000 of the net proceeds as paid in capital. At March 31, 2020,
the amount owed of $100,000 is included in the “due to stockholders” as there is a right to offset.
In
May 2018, stockholders of the Company bought out a minority stockholder of Peck Electric Co. The Company advanced $250,000 for
the stock purchase which is included in the “due from stockholders”. At March 31, 2020 and December 31, 2019, the
amounts of $602,463 and $337,000, respectively, are included in the “due to stockholders” as there is a right
to offset.
In
2019, the Company’s majority stockholder loaned $286,964 to the Company to help with cash flow needs and the amount is included
in the “due to stockholders” at March 31, 2020.
The
Company was an S-corporation through June 20, 2019 and as a result, the taxable income of the Company is reported on the owner’s
tax returns and they are taxed individually. As a result, the Company has accrued a distribution for taxes of $266,814 at March
31, 2020 and December 31, 2019, respectively, to the owners of Peck Electric Co. for the period during which the Company was an
S-corporation, which is included in the “due to stockholders” value below.
The
amounts below include amounts due to/from stockholders as of March 31, 2020 and December 31, 2019:
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
Due to stockholders consists of unsecured notes to stockholders with interest at the mid-term AFR rate (2.08% at March 31, 2020).
|
|
$
|
51,315
|
|
|
$
|
342,718
|
|
Note
13. DEFERRED COMPENSATION PLAN
In
2018, the Company entered into a deferred compensation agreement with a former minority stockholder. The agreement provides for
deferred income benefits and is payable over the post-retirement period. The Company accrues the present value of the estimated
future benefit payments over the period from the date of the agreement to the retirement date. The minimum commitment for future
compensation under the agreement is $155,000, the net present value of which is $109,013. The Company will also pay the former
stockholder a solar management fee of 24.5% of the available cash flow from the solar arrays put into service on or before December
31, 2017 over the life of the arrays. The amount is de minimis and therefore not recorded on the balance sheet as of March 31,
2020 and December 31, 2019 and recorded in the statement of operations when incurred.
Note
14. EARNINGS (LOSS) PER SHARE
Basic
earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the
weighted average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive
securities. Diluted EPS gives effect to the potential dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock.
As
a result of the Reverse Merger and Recapitalization, the Company has retrospectively adjusted the weighted average of shares of
common stock outstanding prior to June 20, 2019 by multiplying them by the exchange ratio used to determine the number of shares
of common stock into which they converted.
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(432,632
|
)
|
|
$
|
376,652
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
5,298,159
|
|
|
|
3,234,501
|
|
Diluted
|
|
|
5,298,159
|
|
|
|
3,234,501
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share
|
|
|
(0.08
|
)
|
|
|
0.12
|
|
Diluted income (loss) per share
|
|
|
(0.08
|
)
|
|
|
0.12
|
|
|
|
|
|
|
|
|
|
|
Pro forma C-corporation Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
|
|
|
$
|
272,605
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
3,234,501
|
|
Diluted
|
|
|
|
|
|
|
3,234,501
|
|
|
|
|
|
|
|
|
|
|
Basic income per share
|
|
|
|
|
|
$
|
0.08
|
|
Diluted income per share
|
|
|
|
|
|
$
|
0.08
|
|
The
Company has contingent share arrangements and warrants arising from the Reverse Merger and Recapitalization and Jensyn’s
IPO as discussed in Note 2. The potential issuance of additional shares of Common Stock from these arrangements were excluded
from the diluted EPS calculation because the prevailing market and operating conditions at the present time do not indicate that
any additional shares of Common Stock will be issued. These instruments could result in dilution in future periods. Below is a
schedule of the potential share issuances arising from these contingencies that were excluded from the calculations above:
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Earnout provision, includes new shares of Common Stock that may be issued to former Peck Electric Co. shareholders
|
|
|
898,473
|
|
|
|
-
|
|
Earnout provision, includes new shares of Common Stock that may be issued to Exit Strategy
|
|
|
11,231
|
|
|
|
-
|
|
Earnout provision, including new shares of Common Stock that may be issued to holders of forfeited and canceled shares
|
|
|
257,799
|
|
|
|
-
|
|
Option to purchase Common Stock, from Jensyn’s IPO
|
|
|
429,000
|
|
|
|
-
|
|
Warrants to purchase Common Stock, from Jensyn’s IPO
|
|
|
2,292,250
|
|
|
|
-
|
|
Note
15. SUBSEQUENT EVENTS
Peck
Electric Co., a Vermont corporation and a wholly-owned subsidiary of the Company (the “Borrower”), applied for and
received a loan (the “PPP Loan”) from NBT Bank, N.A. (the “Lender”) in the principal amount of $1,487,624
pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act
(the “CARES Act”), which was enacted March 27, 2020.
The Loan is evidenced by a promissory note (the “PPP Note”),
dated April 24, 2020, issued by the Borrower to the Lender. The PPP Note matures on April 24, 2022 and bears interest at a rate
of 1.00% per annum, payable monthly commencing on November 24, 2020, following an initial deferral period as specified under the
PPP. The PPP Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Proceeds from the
PPP Loan will be available to the Borrower to fund designated expenses, including certain payroll costs, group health care benefits
and other permitted expenses, in accordance with the PPP. Under the terms of the PPP, up to the entire amount of principal and
accrued interest may be forgiven to the extent PPP Loan proceeds are used for qualifying expenses as described in the CARES Act
and applicable implementing guidance issued by the U.S. Small Business Administration under the PPP. The Company intends that the
Borrower will use the entire PPP Loan amount for designated qualifying expenses and to apply for forgiveness of the PPP Loan in
accordance with the terms of the PPP.
With
respect to any portion of the PPP Loan that is not forgiven, the PPP Loan will be subject to customary provisions for a loan of
this type, including customary events of default relating to, among other things, payment defaults, breaches of the provisions
of the PPP Note and cross-defaults on any other loan with the Lender or other creditors.
The
Company entered into an Exchange and Subscription Agreement (the “Exchange Agreement”) dated April 22, 2020 with GreenSeed
Investors, LLC, a Delaware limited liability company (“GSI”), and Solar Project Partners, LLC, a Delaware limited
liability company (“SPP”).
Pursuant
to the Exchange Agreement, the Company subscribed for 500,000 Units of Class B Preferred Membership units of GSI in exchange for
200,000 shares of the Company’s Series A Preferred Stock (the “Preferred Shares”). In addition, the Company
subscribed for and purchased 100,000 Units of SPP in exchange for the issuance by the Company of a Warrant to acquire 275,000
shares of the Company’s Common Stock at an exercise price of $15.00 per share.
The
Exchange Agreement provides that as long as the dividend payment on the Preferred Shares in each calendar quarter is equal to
the aggregate distribution with respect to the GSI Units, such payments and distributions shall be offset and neither GSI nor
the Company need to make any cash payments to the other.
The
Company granted to GSI the right to repurchase up to 400,000 (in tranches of 50,000) of the Units at a valuation of $4,000,000.
The
Company granted to GSI registration rights with respect to the Preferred Shares, the Warrant, and the Common Stock underlying
the Warrant.