UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
 
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

OR
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from     to    

Commission File No. 001-37707

iSUN, INC.
(Exact name of registrant as specified in its charter)

Delaware
​
47-2150172
(State or other jurisdiction of incorporation or organization)
​
(I.R.S. Employer Identification Number)

400 Avenue D, Suite 10
Williston, Vermont
​
05495
(Address of Principal Executive Offices)
​
(Zip Code)

(802) 658-3378
(Registrant’s telephone number)


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

Title of each class
  
Trading Symbol(s)
  
Name of each exchange on which registered
Common Stock, $0.0001 par value
  
ISUN
  
Nasdaq Capital Market

Common Stock, Par Value $0.0001
(Title of class)
Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ☐ No ☒

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, if any, 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). Yes ☒ No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein and, will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 has filed a report on and attestation to its management’s assessment of the effectiveness of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262 (b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES  ☐ NO ☒

The aggregate market value of the Common Stock held by non-affiliates as of June 30, 2021 was $66.4 million.

The number of shares of the Registrant’s Common Stock outstanding as April 13, 2022 was 13,951,640.
 
TABLE OF CONTENTS

 
PART I
  
Item 1.
3
Item 1A.
 12
Item 1B.
29
Item 2.
 29
Item 3.
 29
Item 4.
 29
     
 
PART II
  
Item 5.
 30
Item 6.
 30
Item 7.
 31
Item 7A.
 37
Item 8.
37
Item 9.
 71
Item 9A.
 71
Item 9B.
 71
     
 
PART III
  
Item 10.
 72
Item 11.
 72
Item 12.
 72
Item 13.
72
Item 14.
72
     
 
PART IV
  
Item 15.
 73
Item 16.
 80

1
SUMMARY RISK FACTORS

Investing in our shares of Common Stock involves numerous risks, including the risks described in “Part I—Item 1A. Risk Factors” of this Annual Report on Form 10-K. Below are some of our principal risks, any one of which could materially adversely affect our business, financial condition, results of operations, and prospects:

 
•
If there is a subsequent wave of the coronavirus pandemic (COVID-19) it will likely impact general market and economic conditionsand is likely to have a material adverse effect on our business and results of operations.

 
•
We operated at a loss in 2021 and 2020, and cannot predict when we will achieve profitability.

 
•
Our management discovered a material weakness in our disclosure controls and procedures and internal control over financial reporting as required to be implemented by Section 404 of the Sarbanes-Oxley Act of 2002.

 
•
We may require substantial additional funding which may not be available to us on acceptable terms, or at all. If we fail to raise the necessary additional capital, we may be unable to achieve growth of our operations.

 
•
A material reduction in the retail price of traditional utility generated electricity or electricity from other sources could harm our business, financial condition, results of operations and prospects.

 
•
Existing electric utility industry regulations, and changes to regulations, may present technical, regulatory and economic barriers to the purchase and use of solar energy systems that may significantly reduce demand for our solar energy systems.

 
•
Our growth strategy depends on the widespread adoption of solar power technology.

 
•
Our business currently depends on the availability of rebates, tax credits and other financial incentives. The expiration, elimination or reduction of these rebates, credits and incentives would adversely impact our business.

 
•
Our business depends in part on the regulatory treatment of third-party owned solar energy systems.

 
•
Our ability to provide solar energy systems to customers on an economically viable basis depends on our ability to help customers arrange financing for such systems.

 
•
We may not realize the anticipated benefits of future acquisitions, and integration of these acquisitions may disrupt our business and management.

 
•
We may require additional financing to sustain our operations, without which we may not be able to continue operations, and the terms of subsequent financings may adversely impact our stockholders.

 
•
The share price of our Common Stock is subject to fluctuation, has been and may continue to be volatile and may decline regardless of our operating performance, resulting in substantial losses for investors who have purchased shares of our Common Stock.


2
PART I
 
Item 1.
Business.

Forward-looking Statements

Statements in this Annual Report on Form 10-K that are not historical facts constitute forward-looking statements. Examples of forward-looking statements include statements relating to industry prospects, our future economic performance including anticipated revenues and expenditures, results of operations or financial position, and other financial items, our business plans and objectives, and may include certain assumptions that underlie forward-looking statements. Risks and uncertainties that may affect our future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements include, among other things, those listed under “Risk Factors” and elsewhere in this Annual Report.

These risks and uncertainties include but are not limited to:

 
•
the potential impact of a subsequent wave of the COVID-19 pandemic on our business;

 
•
our limited operating history;

 
•
our ability to raise additional capital to meet our objectives;

 
•
our ability to compete in the solar power industry;

 
•
our ability to sell solar power systems;

 
•
our ability to arrange financing for our customers;

 
•
government incentive programs related to solar energy;

 
•
our ability to increase the size of our company and manage growth;

 
•
our ability to acquire and integrate other businesses;

 
•
disruptions to our supply chain from protective tariffs on imported components, supply shortages and/or fluctuations in pricing;

 
•
our ability or inability to attract and/or retain competent employees;

 
•
relationships with employees, consultants, customers, and suppliers; and

 
•
the concentration of our business in one industry in limited geographic areas;

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology.

These statements are subject to business and economic risk and reflect management’s current expectations and involve subjects that are inherently uncertain and difficult to predict. Actual events or results may differ materially. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of these statements. We are under no duty to update any of the forward-looking statements after the date of this Annual Report to conform these statements to actual results.

Business Introduction/Summary

We were originally formed on October 8, 2014 as a blank check company under the name Jensyn Acquisition Corp. for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, with one or more businesses or entities. On June 20, 2019, we completed a business combination (the “Reverse Merger and Recapitalization”) pursuant to which we acquired Peck Electric Co. (“Peck Electric”). The Business Combination was a reverse merger treated as a recapitalization and that Peck Electric was deemed the accounting acquirer and takes over the historical information for the Company. Following the Reverse Merger and Recapitalization, we became known as The Peck Company Holdings, Inc. We conducted all of our business operations exclusively through our wholly owned subsidiary, Peck Electric, until January 19, 2021.

3
On January 19, 2021, we completed a business combination (the “Merger Agreement”) pursuant to which we acquired iSun Energy LLC (“iSun Energy”). The Business Combination was an acquisition treated as a merger and reorganization and iSun Energy became a wholly owned subsidiary of The Peck Company Holdings, Inc. Following the business combination, we changed our name to iSun, Inc. (the “Company”).

On April 6, 2021, iSun Utility, LLC (“iSun Utility”), a Delaware limited liability company and wholly-owned subsidiary of the Company, Adani Solar USA, Inc., a Delaware corporation (Adani”), and Oakwood Construction Services, Inc., a Delaware corporation (“Oakwood”) entered into an Assignment Agreement (the “Assignment”), pursuant to which iSun Utility acquired all rights to the intellectual property of Oakwood and its affiliates (the “Project IP”). Oakwood is a utility-scale solar EPC company and a wholly-owned subsidiary of Adani. The Project IP includes all of the intellectual property, project references, templates, client lists, agreements, forms and processes of Adani’s U.S. solar business.

On September 8, 2021, iSun, Inc. entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, iSun Residential Merger Sub, Inc., a Vermont corporation (the “Merger Sub”) and wholly-owned subsidiary of iSun Residential, Inc., a Delaware corporation (“iSun Residential”) and wholly-owned subsidiary of the Company, SolarCommunities, Inc., d/b/a SunCommon, a Vermont benefit corporation (“SunCommon”), and Jeffrey Irish, James Moore, and Duane Peterson as a “Shareholder Representative Group” of the holders of SunCommon’s capital stock (the “SunCommon Shareholders”), pursuant to which the Merger Sub  merged with and into SunCommon (the “Merger”) with SunCommon as the surviving company in the Merger and SunCommon became  a wholly-owned subsidiary of iSun Residential. The Merger was effective on October 1, 2021.

We now conduct all of our business operations exclusively through our direct and indirect wholly-owned subsidiaries, iSun Residential, Inc., SolarCommunities, Inc. iSun Industrial, LLC, Peck Electric Co., Liberty Electric, Inc., iSun Utility, LLC, iSun Energy, LLC and iSun Corporate, LLC.

We are one of the largest solar energy services and infrastructure deployment companies in the country and are expanding across the United States. Our services include solar, storage and electric vehicle infrastructure, development and professional services, engineering, procurement, and installation. We uniquely target all solar markets including residential, commercial, industrial and utility scale customers.

Prior to becoming a public company, we were a second-generation family business founded under the name Peck Electric Co. in 1972 as a traditional electrical contractor. Our core values were and still are to align people, purpose, and profitability, and since taking leadership in 1994, Jeffrey Peck, our Chief Executive Officer, has applied such core values to expand into the solar industry. Today, we are guided by the mission to facilitate the reduction of carbon emissions through the expansion of clean, renewable energy and we believe that leveraging such core values to deploy resources toward profitable business is the only sustainable strategy to achieve these objectives.

The world recognizes the need to transition to a reliable, renewable energy grid in the next 50 years. States from Vermont to Hawaii are leading the way in the U.S. with renewable energy goals of 75% by 2032 and 100% by 2045, respectively. California committed to 100% carbon-free energy by 2045. The majority of the other states in the U.S. also have renewable energy goals, regardless of current Federal solar policy. We are a member of Renewable Energy Vermont, an organization that advocates for clean, practical and renewable solar energy. We intend to use near-term incentives to take advantage of long-term, sustainable energy transformation with a commitment to the environment and to our shareholders. Our triple bottom line, which is geared towards people, environment, and profit, has always been our guide since we began installing renewable energy and we intend that it remain our guide over the next 50 years as we construct our energy future.

We primarily provide services to solar energy customers for projects ranging in size from several kilowatts for residential loads to multi-megawatt systems for commercial, industrial and utility projects. To date, we have installed over 400 megawatts of solar systems since inception and are focused on profitable growth opportunities. 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 the Reverse Merger and Recapitalization, we have now opened our family company to the public market as part of our strategic growth plan. We are expanding across the United States to serve the fast-growing demand for clean renewable energy. We are open to partnering with others to accelerate our growth process, and we are expanding our portfolio of company-owned solar arrays to establish recurring revenue streams for many years to come. We have established a leading presence in the market after five decades of successfully serving our customers, and we are now ready for new opportunities and the next five decades of success.

We manage our business through our construction operations and offer our EPC services and products consisting of solar, electrical and data installations. Approximately 88% of our revenue is derived from our solar EPC business, approximately 11% of revenue is derived from our electrical and data business and approximately 1% of revenue is currently derived from recurring revenue of Company-owned solar arrays. Recently our growth has been derived by increasing our solar customer base starting in 2013 and by continuing to serve the needs of existing electrical and data customers. We have installed some of the largest commercial and utility-scale solar arrays in the State of Vermont. Our union crews are expert constructors, and union access to an additional workforce makes us ready for rapid expansion to other states while maintaining control of operating costs. The skillset provided by our workforce is transferrable among our service offerings depending on current demand.
 
We also make investments in solar development projects and currently own approximately three megawatts of operating solar arrays operating under long-term power purchase agreements. These long-term recurring revenue streams, combined with our in-house development and construction capabilities, make this asset class a strategic long-term investment opportunity for us.

We have a three-pronged growth strategy that includes (1) organic expansion across the Northeastern United States, (2) conducting accretive merger and acquisition transactions to expand geographically, and (3) investing into Company-owned solar assets.

4
Consummation of the Business Combinations

On January 19, 2021, we completed a business combination (the “iSun Merger Agreement”) pursuant to which we acquired iSun Energy LLC (“iSun Energy”). The Business Combination was an acquisition treated as a merger and reorganization and that iSun Energy, LLC became a wholly owned subsidiary of The Peck Company Holdings, Inc. Immediately prior to the iSun Merger Agreement, we changed our name to iSun, Inc.

On April 6, 2021, iSun Utility, LLC (“iSun Utility”), a Delaware limited liability company and wholly-owned subsidiary of the Company, Adani Solar USA, Inc., a Delaware corporation (Adani”), and Oakwood Construction Services, Inc., a Delaware corporation (“Oakwood”) entered into an Assignment Agreement (the “Assignment”), pursuant to which iSun Utility acquired all rights to the intellectual property of Oakwood and its affiliates (the “Project IP”). Oakwood is a utility-scale solar EPC company was a wholly-owned subsidiary of Adani. The Project IP includes all of the intellectual property, project references, templates, client lists, agreements, forms and processes of Adani’s U.S. solar business.

On September 8, 2021, we entered into an Agreement and Plan of Merger (the “SunCommon Merger Agreement”) by and among the Company, iSun Residential Merger Sub, Inc., a Vermont corporation (the “Merger Sub”) and wholly-owned subsidiary of iSun Residential, Inc., a Delaware corporation (“iSun Residential”) and wholly-owned subsidiary of the Company, SolarCommunities, Inc., d/b/a SunCommon, a Vermont benefit corporation (“SunCommon”), and Jeffrey Irish, James Moore, and Duane Peterson as a “Shareholder Representative Group” of the holders of SunCommon’s capital stock (the “SunCommon Shareholders”), pursuant to which the Merger Sub merged with and into SunCommon (the “SunCommon Merger”) with SunCommon as the surviving company in the Merger and SunCommon became  a wholly-owned subsidiary of iSun Residential. The SunCommon Merger was effective on October 1, 2021.

We now conduct all of our business operations exclusively through our wholly owned subsidiaries, iSun Residential, Inc., SolarCommunities, Inc. iSun Industrial, LLC, Peck Electric Co., Liberty Electric, Inc., iSun Utility, LLC, iSun Energy, LLC and iSun Corporate, LLC.

5
Market Overview

We believe that domestic solar capacity and production will experience explosive growth over the short (through 2035) and long (2050) terms. Both short-term and long-term solar production estimates by research groups vary, however even the most conservative estimates project significant growth in domestic solar deployment through 2035 and again through 2050. Current domestic production is estimated at 100GW, and services only 3% of the rapidly growing US electricity demand. According to an October 2021 US DOE Solar Futures Studyi, absent any concerted policy efforts towards decarbonization, domestic solar capacity is projected to increase by 700% by 2050. Modest decarbonization efforts such as those incorporated in the current administration’s ‘Build Back Better’ plan would require cumulative solar deployment to increase much more significantly from current levels - 100 GW serving ~3% of US electricity demand in 2021  to 760-1000 GW serving 37-42% by 2035, an increase of 1150%, according to Solar Power World. The International Energy Agency (IEA) projects 270 GW of domestic solar capacity by 2026 – nearly 3x the current domestic production levels. As incentives increase and technology costs fall, the EIA also predicts renewables could account for nearly 60 percent of capacity additions through 2050. S&P Global Market Intelligence’s projections are significantly more aggressive, projecting that domestic production will achieve 87% of the IEA’s 2050 projection within the next 5 yearsii.

We agree with the conclusions of the aforementioned reports suggesting that broader decarbonization initiatives involving the decarbonization of the broader U.S. energy system through large-scale electrification of buildings, transportation, and industry will have an impact on both supply (solar deployment) and demand (electricity consumed). The EIA forecasts electricity demand growth owing to electrification of fuel-based building demands (e.g., heating), vehicles, and industrial processes of 30% from 2020 to 2035, and an additional 34% increase in energy demand from 2035 to 2050.

While these efforts will further accelerate growth, iSun also concurs with the conclusions of these reports that domestic solar capacity and production will grow regardless of legislative efforts supporting the aforementioned decarbonization efforts. Each report concludes that decarbonization efforts occurring within specific geographic markets and select industries are already underway and are driving demand for additional domestic solar capacity accordingly:

Targeted High-Value Geographic Markets: These markets offer:

  1.)
A higher internal rate of return (“IRR”) on solar investments,

2.)
statewide legislation promoting decarbonization efforts that will in-turn increase electricity demand,

3.)
high concentrations of consumers who are proactively taking steps towards decarbonization by electrifying their homes, appliances, small businesses, and automobiles,

4.)
utilities with a favorable composition of interconnection requests and transmission and distribution capacity.
 
Targeted Rapidly Growing Industry Sectors: The anticipated widespread adoption of electric vehicles such as the United States  will dramatically change the landscape for domestic energy consumption and production. Mercedes, Ford, and General Motors have all committed to moving to electric or EV hybrid platforms within the decade, ensuring that by 2035, it will be difficult – if not impossible – for consumers to purchase a new car with an internal combustion engine. The average electric vehicle requires 30 kilowatt-hours to travel 100 miles - essentially the same amount of electricity an average American home uses each day. This will have a profound impact on electricity demand across each segment of the marketplace. Overnight, household electricity demand could double for the average American 2-car family. As widespread EV adoption begins to accelerate, consumers will begin looking for ways to reduce their electric bills, increasing demand for household solar solutions. Although consumer behaviors may change with EV adoption…expectations will not. Consumers will still expect that they will be able to recharge their cars quickly and easily at the places they most often frequent. This will in turn prompt commercial enterprises small and large to also look for ways to manage such expectations at reasonable costs. Expectations will be even greater at destination locations such as hotels, municipal facilities, or even remote trailheads or parks, prompting asset owners and municipalities to explore scalable solutions that may not be able to be addressed on-site. And of course, all this activity will in turn be met with an increase in electricity demand, prompting utilities to begin exploring ways of rapidly increasing their capacity.

Strategy

iSun is uniquely positioned in the marketplace to address the generational opportunity presented by automotive electrification and decarbonization. iSun’s Solar Platform serves the evolving energy needs and increased energy demands presented by automotive electrification and decarbonization within of each segment of the solar marketplace. Our:


 1.
Residential solar brand, SunCommon: Supports EV purchases with at-home charging, promotes residential solar + storage installation, and provides other smart home energy upgrades.

2.
Commercial Division: Supports EV fleet and workplace charging adoption, promotes solar projects at the workplace to help employers and businesses provide for their customers and employees, and future-proof their energy costs.

3.
Industrial & Municipal Solar Division: Enables municipalities, destination locations, and communities and/or dwellings where on-site or roof-top installation may not be a viable option to adopt EV charging and solar solutions via resilient microgrid and community solar projects.

4.
Utility Solar Division: Helps utilities meet increased demand and upgrade their infrastructure to with utility-scale solar projects and resources.
 
i US Residential PV Customer Acquisition Costs and Trends, Woods Mackenzie Power & Renewables, October 2021 (Connelly, White). Page 5
ii Solar Power World Reference.
6
Some of the customer needs that will result from automotive electrification and decarbonization are agnostic to scale and will be universal across all segments. A customer-centric organization, iSun has created cross-division service teams to proactively address these needs. iSun’s:


 1.
EV Charging Services provides proprietary, solar-powered charging hardware and software solutions that enable grid-tied or off-grid EV charging.

2.
Development and Professional Services provide solar developers with an a la carte menu of services they can use to help accelerate the development process, and more quickly bring their projects on-line, all without having to scale their operation.

3.
Solar Installation, Operations and Management Services incorporates iSun’s expertise as one of the largest solar contractors into a comprehensive suite of services solar asset owners can use to keep their arrays operating at peak performance levels.

Because we provide services to each segment of the marketplace, our Solar Platform enables us to adapt to the evolving range of customer demand and energy innovations resulting from decarbonization and vehicle electrification.

Customer Acquisition: iSun’s growth and new customer acquisition strategies are unique to each division.

Residential: SunCommon values high-touch customer service capabilities that foster long-term customer relationships. Our focus ideally suits the contemporary market environment, where recent technologies like EV charging, energy storage and grid management are arriving early and often. The rapid pace of these deployments mean consumers will be looking to enhance their systems more regularly, increasing long-term customer value. We can cultivate and maintain these relationships at an exceptionally low cost. SunCommon reported new customer acquisition costs of $0.36/w for the 12 months ending December 31, 2021.

Commercial: With the addition of an external sales and marketing efforts through the SunCommon acquisition, we are able to leverage this function and support the expansion of our commercial operations. We have historically worked with existing customers and used those long-standing relationships to attract new and repeat customers. As we grow into new geographic areas, we can continue to add commercial projects to our pipeline through a concentrated sales and marketing effort.

Industrial: We continue to experience organic growth from our established relationships with national developers requesting development and EPC services. Additionally, we have made strategic investments in entities capable of providing a robust pipeline of industrial-scale EPC projects. On November 24, 2021, iSun entered into a Membership Unit Purchase agreement (the “MUPA”) with Encore Redevelopment LLC (“Encore”) in exchange for a fully diluted 9.1% ownership interest in Encore. The investment provides for collaboration opportunities across Encore’s robust project pipeline, which is expected to double over the course of the next 12 months with the capital infusion. Additionally, the transaction provides insights into new prospective geographic markets, which can be used to inform iSun’s geographic growth strategy for its Residential and Commercial divisions.

Utility: With the acquisition of Oakwood Construction Services intellectual property, we were able to expand our utility-scale capabilities to include EPC as well as our development and professional services. Unlike EPC services, development and professional services occur prior to the commencement of construction and are not contingent upon a project proceeding to construction status. Development and professional services not only enhance cash-flows and margins on a month-to-month basis, but also afford us the rights to construction services for each project that proceeds to construction, effectively transforming the lead generation funnel for iSun’s Utility Division into a revenue generator instead of an expense. Immediate success of this strategy is demonstrated by contracts for  development and professional services work on 566MW of solar projects across 4 project sites across the US.

Ancillary Markets

Our capabilities allow for expansion into high-growth adjacent markets. We began operations as a traditional electric contractor and hold a wide range of capabilities to install electric equipment for a variety of end uses. Today, these core capabilities have developed our business in solar array installation, traditional electric, and data services. We can deploy these capabilities to other large, rapidly growing clean/renewable end market within each segment; namely electric vehicle (“EV”) charging stations, data centers, energy storage and other markets. The rapid proliferation of EV charging stations has followed the shift in auto sales to electronic vehicles, and the EV charging market is expected to expand to over $30 billion by 2024 with a CAGR of 40% over the 5-year period. Energy storage measured by megawatts expanded by 44% year-over-year in 2018 and is projected to grow into a $4.7 billion market by 2024. Both markets represent adjacent, high growth expansion opportunities for us, and both require minimal investment of resources, infrastructure or capital spend given its complementary nature to our existing capabilities.

7
Employees

As of March 31, 2022, we employed approximately 325 full-time employees. We may also utilize outside subcontractors to assist with installing solar systems for our commercial and residential customers. Our direct installation labor is a combination of employees and contract labor.

We have direct access to unionized labor, which provides a unique advantage for growth, because workforce resources can be scaled efficiently utilizing local labor unions in other states to meet specific project needs in other states without increasing fixed labor costs for us.

Financing

To promote sales, we assist customers in obtaining financing options. Our objective is to arrange the most flexible terms that meet the needs and wants of the customer. Although we do not yet directly provide financing, we have relationships to arrange financing with numerous private and public sources, including SunLight, the Vermont State Employees Credit Union, which offers VGreen financing to maximize solar investment savings.

We believe it is best for customers to own their own systems, but some customers prefer not to own their systems. We also have the ability to arrange financing with third parties through power purchase agreements and leases for our customers.

Suppliers

We purchase solar panels, inverters and materials directly from multiple manufacturers and through distributors. We intend to further coordinate purchases across all business segments and to optimize supply relationships to realize the advantages of greater scale.

If one or more of our suppliers fail to meet our supply needs, ceases or reduces production due to its financial condition, acquisition by a competitor or otherwise, it may be difficult to quickly identify alternate suppliers or to qualify alternative products on commercially reasonable terms, and our ability to satisfy this demand may be adversely affected. We do not, however, rely on any single supplier and our management believes that we can obtain needed solar panels and materials from a number of different suppliers. Accordingly, we believe that the loss of any single supplier would not materially affect our business.

We also utilize strategic companies with subcontractors for electrical installations, for racking and solar panel installations, as well as numerous subcontractors for grading, landscaping, and construction for our commercial, and industrial customers.

Installation

We are a licensed contractor in the markets that we serve, and we are responsible for every customer installation. We manage the entire process from permitting through inspection to interconnection to the power grid, thereby making the system installation process simple and seamless for its customers. Controlling every aspect of the installation process allows us to minimize costs, ensure quality and deliver high levels of customer satisfaction.

8
Even with controlling every aspect of the installation process, the ability to perform on a contract is subject to limitations. There remain jurisdictional approval processes outside our immediate control including, but not limited to, approvals of city, county, state or Federal government bodies or one of their respective agencies. Other aspects outside of our direct control include approvals from various utility companies and weather conditions.

After-Sales Support

It is our intent to provide continuing operation and maintenance services for our installed residential and commercial solar systems. We provide extended factory equipment technical support and act as a service liaison using our proprietary knowledge, technology, and solar electric energy engineering staff. We do this through a 5-year limited workmanship warranty and operations and maintenance program, which among other things, provides a service and technical support line to our customers. We generally respond to our job site related issues within 24 hours and offer assistance as long as required to maintain customer satisfaction. Our price to customers includes this warranty, and also includes the pass through of various manufacturers’ warranties that are typically up to 25 years.

Customers

Historically, the majority of our revenue came from commercial and industrial solar installations ranging in size from 100 kilowatts to 10 megawatts. In 2021, we expanded our capabilities to serve customers across the residential, commercial, industrial and utility markets. We expanded our services based on customer demand to include development and professional services, engineering, procurement, installation, storage, monitoring and electric vehicle infrastructure support.

In 2021, approximately 61% of our revenue were in commercial and industrial solar projects, approximately 28% of revenues were generated by residential installations and, 11% of our revenue were from our electrical and data contracts. Approximately 83% of our revenue in 2020 were generated by commercial and small utility solar projects. Approximately 0.5% of revenues were generated by residential installations in 2020. We expect that these percentages will vary from year to year.

We believe that we have an advantage in the commercial solar market in Vermont given our extensive contact list, resulting from our experience in the commercial and industrial construction market, which also provides access to customers that trust us. Through our network of vendors, participation in variety of industry trade associations and independent sales consultants, we now have a growing list of repeat clients, as well as an active and loyal referral network.

Competitors

In the solar installation market, we compete with companies that offer products similar to our products. Some of these companies have greater financial resources, operational experience, and technical capabilities than we do. When bidding for solar installation projects, however, our current experience suggests that we are the dominant or preferred competitor in the markets in which we compete. We do not believe that any competitor has more than 10% of the market across all the areas in which we currently operate. We compete with other solar installers on our expertise and proven track record of performance. Also, pricing, service and the ability to arrange financing may be important for a project award.

Seasonality

We often find that some customers tend to book projects by the end of a calendar year to realize the benefits of available subsidy programs prior to year-end. This results in third and fourth quarter sales being more robust usually at the expense of the first quarter. In the future, this seasonality may cause fluctuations in financial results. In addition, other seasonality trends may develop and the existing seasonality that we experience may change. Weather can also be an important factor affecting project timelines.

Technology and Intellectual Property

Generally, the solar EPC business is not dependent on intellectual property. We did acquire the intellectual property of Oakwood Construction Services, LLC which provides proprietary capabilities for development and execution of large utility scale solar projects at a significant value to our customers.

Government Regulation and Incentives

Government Regulation

We are not regulated as a public utility in the United States under applicable national, state or other local regulatory regimes where we conducts business.

9
To operate our systems, we obtain interconnection permission from the applicable local primary electric utility. Depending on the size of the solar energy system and local law requirements, interconnection permission is provided by the local utility and we and/or our customer. In almost all cases, interconnection permissions are issued on the basis of a standard process that has been pre-approved by the local public utility commission or other regulatory body with jurisdiction over net metering procedures. As such, no additional regulatory approvals are required once interconnection permission is given.

Our operations are subject to stringent and complex federal, state and local laws, including regulations governing the occupational health and safety of our employees and wage regulations. For example, we are subject to the requirements of OSHA, the DOT and comparable state laws that protect and regulate employee health and safety.

Government Incentives

Federal, state and local government bodies provide incentives to owners, end users, distributors, system integrators and manufacturers of solar energy systems to promote solar energy in the form of rebates, tax credits and other financial incentives such as system performance payments, payments for renewable energy credits associated with renewable energy generation and exclusion of solar energy systems from property tax assessments. These incentives enable iSun to lower the price it charges customers to own or lease, our solar energy systems, helping to catalyze customer acceptance of solar energy as an alternative to utility-provided power.

The federal government currently offers a 26% investment tax credit (“ITC”) under Section 48(a) of the Internal Revenue Code for the installation of certain solar power facilities until December 31, 2022, after which it will fall to 22% in 2023 and 10% in 2024.

The economics of purchasing a solar energy system are also improved by eligibility for accelerated depreciation, also known as the modified accelerated cost recovery system, or MACRS, depreciation, which allows for the depreciation of equipment according to an accelerated schedule set forth by the Internal Revenue Service. The acceleration of depreciation creates a valuable tax benefit that reduces the overall cost of the solar energy system and increases the return on investment.

Approximately 50% of states in the U.S. offer a personal and/or corporate investment or production tax credit for solar energy that is additive to the ITC. Further, these states, and many local jurisdictions, have established property tax incentives for renewable energy systems that include exemptions, exclusions, abatements, and credits. Many state governments, traditional utilities, municipal utilities and co-operative utilities offer a rebate or other cash incentive for the installation and operation of a solar energy system or energy efficiency measures. Capital costs or “up-front” rebates provide funds to solar customers based on the cost, size or expected production of a customer’s solar energy system. Performance-based incentives provide cash payments to a solar energy system owner based on the energy generated by their solar energy system during a pre-determined period, and they are paid over that time period. Depending on the cost of the system and other site-specific variables, tax incentives can typically cover 30-40% of the cost of a commercial or residential solar system.

Many states also have adopted procurement requirements for renewable energy production that requires regulated utilities to procure a specified percentage of total electricity delivered to customers in the State from eligible renewable energy sources, such as solar energy systems, by a specified date.

Environmental, Social and Corporate Governance

Governance and Strategic Overview

In 2022, iSun is building upon its historic foundation of environmentally and socially responsible business by formalizing an enterprise-level ESG strategy.  This strategy will be overseen by an ESG Executive Committee and guided by the Corporate Governance Committee on the Board of Directors.  Our governance efforts have included developing and publishing a core set of policies that speak to our position on and approach to a range of environmental, social, and governance issues.  Through a stakeholder engagement process and iSun employee interviews, we have identified a set of material issues that are critical to both our business and to our key stakeholders. As such, we have developed policies and are implementing initiatives related to climate change and environmental stewardship, diversity, equity and inclusion (DEI), labor management and human rights, and stakeholder engagement. We are also formalizing and implementing a Business Code of Conduct as well as a Supplier Code of Conduct.

Our strategic plan is designed to mitigate the risks and capitalize on the opportunities associated with these issues, with an explicit focus on aligning our commercial goals and impact aspirations to drive both shareholder and broader stakeholder value.  This strategy will be guided by cross-functional working groups comprised of leaders from across the company and will have explicit goals, key performance indicators (KPIs), and timelines for implementing the initiatives that address each issue.

iSun will be focused on integrating, aligning, and scaling the impact programs developed over the years by SunCommon, our recently purchased subsidiary, which is a certified Public Benefit Corporation and recognized leader in the B-Corp world of socially responsible business.

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iSun is currently in compliance with all ESG-related requirements of the SEC and of Nasdaq including the Board Diversity Disclosure Matrix provided below.

iSun, Inc. Board Diversity Matrix
                        
                         
Total Number of Directors : 5
                        
   
Female
    
Male
    
Non-Binary
    
Did Not
Disclose
Gender
  
Part 1: Gender Identity
                        
Directors
    
1
      
4
      
0
      
0
  
                                 
Part 2: Demographic Background
                                
African American or Black
    
0
      
0
      
0
      
0
  
Alaskan Native or Native American
    
0
      
0
      
0
      
0
  
Asian
    
0
      
0
      
0
      
0
  
Hispanic or Latin
    
0
      
0
      
0
      
0
  
Native Hawaiian or Pacific Islander
    
0
      
0
      
0
      
0
  
White
    
1
      
4
      
0
      
0
  
Two or more Races/Ethnicities
    
0
      
0
      
0
      
0
  
LGBTQ+
    
0
      
0
      
0
      
0
  
Did Not Disclose Demographic Background
    
0
      
0
      
0
      
0
  

Risks and Opportunities

Climate change, and its associated issues like emissions, energy management, waste, and water management – have been identified as critical to our social mission and the concerns of our commercial customers, employees, and investors.  Our mission to accelerate the world’s transition from dirty to clean energy can only be achieved if we are also decarbonizing our own operations and supply chains.  We will be setting long-term goals on climate change and these associated environmental issues after we conduct our first enterprise Greenhouse Gas (GHG) accounting exercise to determine our scopes 1, 2, and 3 emissions.

Human capital, and diversity, equity, and inclusion (DEI), have been identified as critical to our long-term success and social impact aspirations.  Human capital has become an increasingly important topic for investors and society at large. It is also integral to the long-term success of our business as we rely heavily on our installation teams and the union members we employ. In turn, we will be ramping up our focus on workforce development and upward mobility opportunities for our employees, advancing work opportunities for diverse and at-risk populations, as well as supporting economic inclusion within our supply chains through a minority-owned business procurement program.

Governance and corporate transparency, both internally and externally, is another core risk and opportunity to address.  Our revamped ESG governance structure and utilization of the ESG project management platform, ESGProgram.io, will ensure alignment and integration of these efforts across the iSun enterprise.  An internal and external ESG communications plan will also ensure our intentions, efforts, and outcomes are well understood by our external stakeholders and greater operational alignment with our internal teams.  Lastly, we will be providing ESG education to our executive leaders and Board to ensure they can actively contribute to the success of our ESG strategy.

Climate Change and Human Capital Management

Climate change and human capital management are two leading ESG issues across industries.  From investor expectations to SEC disclosure regulations, climate risk management and human capital management have emerged as the two most critical issues from a stakeholder and general public perspective.

Our objectives for climate change include measuring and reducing our emissions, waste, and water, enhancing our operational climate risk resilience, and developing service offerings that support the climate risk resilience of our customers.  We will be setting long-term climate change goals, KPI’s, and timelines for achievement, as well as reporting our progress in a 2022 Task Force for Climate-Related Financial Disclosures (TCFD) report.

Our objectives for human capital management include increasing the diversity of our workforce and procurement partners, creating upward mobility opportunities for diverse employees and field staff, as well as increasing the visibility and importance of the Trades in the communities we live and work.  We will be setting long-term human capital goals, KPI’s, and timelines for achievement, as well as reporting our progress in 2022 with the relevant metrics from the Sustainable Accounting Standards Boards (SASB).

Commitments

We will be implementing our enterprise ESG strategic plan across our operations.  As our cross-functional working groups get up and running, we will begin our enterprise GHG emissions assessment and develop the internal infrastructure for consistent ESG data collection.  All material issues will be overseen by their relevant functional leaders and will have explicit and quantified goals, KPI’s, and timelines for achievement.  We will be reporting on our progress throughout the year, culminating in a ESG report and complete with a Sustainable Accounting Standards Boards (SASB) and Task Force for Climate-related Financial Disclosures (TCFD) reports.  Our progress will be actively communicated externally on our website and in governance documents to ensure full visibility into our ESG intentions, efforts, and results.
 
Corporate Information

Our address is 400 Avenue D, Suite 10, Williston, VT 05495 and our telephone number is (802) 658-3378. Our corporate website is: www.isunenergy.com. The content of our website shall not be deemed incorporated by reference in this Annual Report.

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Item 1A.
Risk Factors.

An investment in our Common Stock involves significant risks. You should carefully consider the risk factors contained in this Annual Report and in our filings with the SEC before you decide to invest in our Common Stock. Our business, prospects, financial condition and results of operations may be materially and adversely affected as a result of any of such risks. The value of our Common Stock could decline as a result of any of these risks. You could lose all or part of your investment in our Common Stock. Some of our statements in sections entitled “Risk Factors” are forward-looking statements. The risks and uncertainties we have described are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business, prospects, financial condition and results of operations.

The impact of a subsequent wave of the coronavirus pandemic (COVID-19) on general market and economic conditions has yet to be determined and if it occurs it is likely to have a material adverse effect on our business and results of operations.

As of the date of this Annual Report on Form 10-K, the coronavirus pandemic (COVID-19) has resulted in widespread disruption to capital markets and general economic and business climate. For the year ending December 31, 2021, we experienced significant disruption to our supply chain, instability in material pricing and labor shortages due to the long-term impact of COVID-19. On March 16, 2020, in response to intensifying efforts to contain the spread of COVID-19, we temporarily limited access to headquarters and began implementing remote work environments for our employees. On March 25, 2020, we closed our headquarters and advised all employees to work remotely until more guidance is provided. On August 1, 2020, we reopened our headquarters on a limited basis with the proper workplace safety protocols in place while allowing all employees to continue remote work at their discretion. We continue to monitor the outbreak of COVID-19 to help ensure the health and safety of our associates and our customers. We are also continuing to communicate with our suppliers regarding the flow of product and potential temporary effects on our supply chain. On June 14, 2021, Vermont Governor Phil Scott removed all COVID-19 restrictions and Vermont’s State of Emergency expired on June 15, 2021. Given the dynamic nature of these circumstances, the duration of business disruption and the related financial affect cannot be reasonably estimated at this time. The extent to which COVID-19 affects our results, or those of our suppliers, will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions and related costs to contain or treat it, among others.

Risks Related to Our Financial Position and Capital Requirements

We operated at a loss in 2021 and 2020 and cannot predict when we will achieve profitability.

Our management believes that achieving profitability will depend in large part on our ability to increase market share in our existing market segments and expand our geographic foot print  and to consummate synergistic acquisitions. No assurance can be given that we will achieve profitably or that we will have adequate working capital to meet our obligations as they become due.

Our management discovered a material weakness in our disclosure controls and procedures and internal control over financial reporting as required to be implemented by Section 404 of the Sarbanes-Oxley Act of 2002.

We are currently subject to Section 404 of the Sarbanes-Oxley Act of 2002 and are required to provide management’s attestation on internal controls. Our management has identified control deficiencies and the need for a stronger internal controls environment relating to the financial statement close process. The ineffectiveness of the design, implementation and operation of the controls surrounding these matters creates a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis. Accordingly, our management concluded that this deficiency represents a material weakness in our internal control over financial reporting as of December 31, 2021. Although our management has taken significant steps to remediate this weakness, our management can give no assurance yet that all the measures it has taken will on a permanent and sustainable basis remediate the material weaknesses in our disclosure controls and procedures and internal control over financial reporting or that any other material weaknesses or restatements of financial results will not arise in the future. We plan to take additional steps to remedy this material weakness. If we are not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in the future, we will not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our Common Stock.

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We may require substantial additional funding which may not be available to it on acceptable terms, or at all. If we fail to raise the necessary additional capital, we may be unable to achieve growth of our operations.

The Company was not profitable in 2021 and 2020. In order to grow our operations, we may increase our spending for our operating expenses, capital expenditures and acquisitions.

We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue our organic growth or corporate acquisitions. Any of these events could significantly harm our business, financial condition, and strategy.

In order to carry out our business plan and implement our strategy, we anticipate that we will need to obtain additional financing from time to time, and we may choose to raise additional funds through strategic collaborations, public or private equity or debt financing, bank lines of credit, asset sales, government grants, or other arrangements. Our management cannot be sure that any additional funding, if needed, will be available on favorable terms or at all. Furthermore, any additional equity or equity-related financing obtained may be dilutive to our stockholders, and debt or equity financing, if available, may subject us to restrictive covenants and significant interest costs.

An inability to raise capital when needed could harm our business, financial condition and results of operations, and could cause our stock price to decline or require that it cease operations.

Risks Related to Our Business and Industry

A material reduction in the retail price of traditional utility generated electricity or electricity from other sources could harm our business, financial condition, results of operations and prospects.

Our management believes that a significant number of our customers decide to buy solar energy because they want to pay less for electricity than what is offered by the traditional utilities.

The customer’s decision to choose solar energy may also be affected by the cost of other renewable energy sources. Decreases in the retail prices of electricity from the traditional utilities or from other renewable energy sources would harm our ability to offer competitive pricing and could harm our business. The price of electricity from traditional utilities could decrease as a result of:

 
•
construction of a significant number of new power generation plants, including plants utilizing natural gas, nuclear, coal, renewable energy or other generation technologies;

 
•
relief of transmission constraints that enable local centers to generate energy less expensively;

 
•
reductions in the price of natural gas;

 
•
utility rate adjustment and customer class cost reallocation;

 
•
energy conservation technologies and public initiatives to reduce electricity consumption;

 
•
development of new or lower-cost energy storage technologies that have the ability to reduce a customer’s average cost of electricity by shifting load to off-peak times; or

 
•
development of new energy generation technologies that provide less expensive energy.

A reduction in utility electricity prices would make the purchase or the lease of our solar energy systems less economically attractive. If the retail price of energy available from traditional utilities were to decrease due to any of these reasons, or other reasons, we would be at a competitive disadvantage, may be unable to attract new customers and our growth would be limited.

Existing electric utility industry regulations, and changes to regulations, may present technical, regulatory and economic barriers to the purchase and use of solar energy systems that may significantly reduce demand for our solar energy systems.

Federal, state and local government regulations and policies concerning the electric utility industry, and internal policies and regulations promulgated by electric utilities, heavily influence the market for electricity generation products and services. These regulations and policies often relate to electricity pricing and the interconnection of customer-owned electricity generation. In the United States, governments and utilities continuously modify these regulations and policies. These regulations and policies could deter customers from purchasing renewable energy, including solar energy systems. This could result in a significant reduction in the potential demand for our solar energy systems. For example, utilities commonly charge fees to larger, industrial customers for disconnecting from the electric grid or for having the capacity to use power from the electric grid for back-up purposes. These fees could increase our customers’ cost to use our systems and make them less desirable, thereby harming our business, prospects, financial condition and results of operations. In addition, depending on the region, electricity generated by solar energy systems competes most effectively with expensive peak-hour electricity from the electric grid, rather than the less expensive average price of electricity. Modifications to the utilities’ peak hour pricing policies or rate design, such as to a flat rate, would require us to lower the price of our solar energy systems to compete with the price of electricity from the electric grid.

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In addition, any changes to government or internal utility regulations and policies that favor electric utilities could reduce our competitiveness and cause a significant reduction in demand for our products and services. For example, certain jurisdictions have proposed assessing fees on customers purchasing energy from solar energy systems or imposing a new charge that would disproportionately impact solar energy system customers who utilize net metering, either of which would increase the cost of energy to those customers and could reduce demand for our solar energy systems. It is possible charges could be imposed on not just future customers but our existing customers, causing a potentially significant consumer relations problem and harming our reputation and business. Due to the current concentration of our business in Vermont, any such changes in these markets would be particularly harmful to our business, results of operations, and future growth.

Our growth strategy depends on the widespread adoption of solar power technology.

The market for solar power products is emerging and rapidly evolving, and our future success is uncertain. If solar power technology proves unsuitable for widespread commercial deployment or if demand for solar power products fails to develop sufficiently, we would be unable to generate enough revenues to achieve and sustain profitability and positive cash flow. The factors influencing the widespread adoption of solar power technology include but are not limited to:

 
•
cost-effectiveness of solar power technologies as compared with conventional and non-solar alternative energy technologies;

 
•
performance and reliability of solar power products as compared with conventional and non-solar alternative energy products;

 
•
fluctuations in economic and market conditions which impact the viability of conventional and non-solar alternative energy sources, such as increases or decreases in the prices of oil and other fossil fuels;

 
•
continued deregulation of the electric power industry and broader energy industry; and

 
•
availability of governmental subsidies and incentives.

Our business currently depends on the availability of rebates, tax credits and other financial incentives. The expiration, elimination or reduction of these rebates, credits and incentives would adversely impact our business.

U.S. federal, state and local government bodies provide incentives to end users, distributors, system integrators and manufacturers of solar energy systems to promote solar electricity in the form of rebates, tax credits and other financial incentives such as system performance payments and payments for renewable energy credits associated with renewable energy generation. These governmental rebates, tax credits and other financial incentives enhance the return on investment for our customers and incent them to purchase solar systems. These incentives enables us to lower the price that we charge customers for energy and for solar energy systems. However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or be reduced or terminated as solar energy adoption rates increase. These reductions or terminations often occur without warning.

Reductions in, or eliminations or expirations of, governmental incentives could adversely impact our results of operations and our ability to compete in our industry, causing us to increase the prices of our solar energy systems, and reducing the size of our addressable market. In addition, this would adversely impact our ability to attract investment partners and to form new financing funds and our ability to offer attractive financing to prospective customers.

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Our business depends in part on the regulatory treatment of third-party owned solar energy systems.

Our leases and any power purchase agreements are third-party ownership arrangements. Sales of electricity by third parties face regulatory challenges in some states and jurisdictions. Other challenges pertain to whether third-party owned systems qualify for the same levels of rebates or other non-tax incentives available for customer-owned solar energy systems, whether third-party owned systems are eligible at all for these incentives, and whether third-party owned systems are eligible for net metering and the associated significant cost savings. Reductions in, or eliminations of, this treatment of these third-party arrangements could reduce demand for our systems, adversely impact our access to capital and could cause us to increase the price that we charge our customers for energy.

Our ability to provide solar energy systems to customers on an economically viable basis depends on our ability to help customers arrange financing for such systems.

Our solar energy systems have been eligible for federal investment tax credits or U.S. Treasury grants, as well as depreciation benefits. We have relied on, and will continue to rely on, financing structures that monetize a substantial portion of those benefits and provide financing for our solar energy systems. With the lapse of the U.S. Treasury grant program, we anticipate that our customers’ reliance on these tax-advantaged financing structures will increase substantially. If, for any reason, our customers were unable to continue to monetize those benefits through these arrangements, we may be unable to provide and maintain solar energy systems for new customers on an economically viable basis.

The availability of this tax-advantaged financing depends upon many factors, including, but not limited to:

 
•
the state of financial and credit markets;

 
•
changes in the legal or tax risks associated with these financings; and

 
•
non-renewal of these incentives or decreases in the associated benefits.

U.S. Treasury grants are no longer available for new solar energy systems. Changes in existing law and interpretations by the Internal Revenue Service and the courts could reduce the willingness of funding sources to provide funds to customers of these solar energy systems. We cannot assure you that this type of financing will be available to our customers. If, for any reason, we are unable to find financing for solar energy systems, we may no longer be able to provide solar energy systems to new customers on an economically viable basis. This would have a material adverse effect on our business, financial condition, and results of operations.

Rising interest rates could adversely impact our business.

Increases in interest rates could have an adverse impact on our business by increasing our cost of capital, which would increase our interest expense and make acquisitions more expensive to undertake.

Further, rising interest rates may negatively impact our ability to arrange financing for our customers on favorable terms to facilitate our customers’ purchases of our solar energy systems. The majority of our cash flows to date have been from the sales of solar energy systems. Rising interest rates may have the effect of depressing the sales of solar energy systems because many consumers finance their purchases.

As a result, an increase in interest rates may negatively affect our costs and reduce our revenues, which would have an adverse effect on our business, financial condition, and results of operations.

If we cannot compete successfully against other solar and energy companies, we may not be successful in developing our operations and our business may suffer.

The solar and energy industries are characterized by intense competition and rapid technological advances, both in the United States and internationally. We compete with solar companies with business models that are similar to ours. In addition, we compete with solar companies in the downstream value chain of solar energy. For example, we face competition from purely finance driven organizations that acquire customers and then subcontract out the installation of solar energy systems, from installation businesses that seek financing from external parties, from large construction companies and utilities, and increasingly from sophisticated electrical and roofing companies. Some of these competitors specialize in the residential solar energy market, and some may provide energy at lower costs than we do. Further, some competitors are integrating vertically in order to ensure supply and to control costs. Many of our competitors also have significant brand name recognition and have extensive knowledge of our target markets.

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If we are unable to compete in the market, we will have an adverse effect on our business, financial condition, and results of operations.

Adverse economic conditions may have material adverse consequences on our business, results of operations and financial condition.

Unpredictable and unstable changes in economic conditions, including recession, inflation, increased government intervention, or other changes, may adversely affect our general business strategy. We rely upon our ability to generate additional sources of liquidity and we may need to raise additional funds through public or private debt or equity financings in order to fund existing operations or to take advantage of opportunities, including acquisitions of complementary businesses or technologies. Any adverse event would have a material adverse impact on our business, results of operations and financial condition.

Our business is concentrated in certain markets, putting it at risk of region-specific disruptions.

As of December 31, 2021, a vast majority of our total solar installations were in the Northeast. Our management expects our near-term future growth to occur throughout the Eastern United States, and to further expand our customer base and operational infrastructure. Accordingly, our business and results of operations are particularly susceptible to adverse economic, regulatory, political, weather and other conditions in such markets and in other markets that may become similarly concentrated.

If we are unable to retain and recruit qualified technicians and advisors, or if our key executives, key employees or consultants discontinue their employment or consulting relationship with us, we may delay our development efforts or otherwise harm our business.

We may not be able to attract or retain qualified management or technical personnel in the future due to the intense competition for qualified personnel among solar, energy, and other businesses. Our industry has experienced a high rate of turnover of management personnel in recent years. If we are not able to attract, retain, and motivate necessary personnel to accomplish our business objectives, we may experience constraints that will significantly impede the successful development of any product candidates, our ability to raise additional capital, and our ability to implement our overall business strategy.

We are highly dependent on members of our management and technical staff. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level, and senior managers as well as junior, mid-level, and senior technical personnel. The loss of any of our executive officers, key employees, or consultants and our inability to find suitable replacements could potentially harm our business, financial condition, and prospects. We may be unable to attract and retain personnel on acceptable terms given the competition among solar and energy companies. Certain of our current officers, directors, and/or consultants hereafter appointed may from time to time serve as officers, directors, scientific advisors, and/or consultants of other solar and energy companies. We do not maintain “key man” insurance policies on any of our officers or employees. Other than certain members of our senior management team, all of our employees are employed “at will” and, therefore, each employee may leave our employment and join a competitor at any time.

We plan to grant stock options, restricted stock grants, or other forms of equity awards in the future as a method of attracting and retaining employees, motivating performance, and aligning the interests of employees with those of our stockholders. If we are unable to implement and maintain equity compensation arrangements that provide sufficient incentives, we may be unable to retain our existing employees and attract additional qualified candidates. If we are unable to retain our existing employees and attract additional qualified candidates, our business and results of operations could be adversely affected.

The execution of our business plan and development strategy may be seriously harmed if integration of our senior management team is not successful.

As our business continues to grow and in the event that we acquire new businesses, we may experience significant changes in our senior management team. Failure to integrate our Board of Directors and senior management teams may negatively affect the operations of our business.

We may not successfully implement our business model.

Our business model is predicated on our ability to build and sell solar systems at a profit, and through organic growth, geographic expansion and strategic acquisitions. Our management intends to continue to operate our business as it has previously, with sourcing and marketing methods that we have used successfully in the past. However, our management cannot assure you that our methods will continue to attract new customers nor that we can maintain profitability in the very competitive solar systems marketplace.

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We may not be able to effectively manage our growth.

Our future growth, if any, may cause a significant strain on our management and our operational, financial, and other resources. Our ability to manage our growth effectively will require us to implement and improve our operational, financial, and management systems and to expand, train, manage, and motivate our employees. These demands may require the hiring of additional management personnel and the development of additional expertise by our management. Any increase in resources used without a corresponding increase in our operational, financial, and management systems could have a material adverse effect on our business, financial condition, and results of operations.

We may not realize the anticipated benefits of completed and future acquisitions, and integration of these acquisitions may disrupt our business and management.

We have acquired and, in the future, we may acquire companies, project pipelines, products or technologies or enter into joint ventures or other strategic initiatives. We may not realize the anticipated benefits of these acquisition  and any acquisition has numerous risks. These risks include the following:

 
•
difficulty in assimilating the operations and personnel of the acquired company;

 
•
difficulty in effectively integrating the acquired technologies or products with our current technologies;

 
•
difficulty in maintaining controls, procedures and policies during the transition and integration;

 
•
disruption of our ongoing business and distraction of management and employees from other opportunities and challenges due to integration issues;

 
•
difficulty integrating the acquired company’s accounting, management information, and other administrative systems;

 
•
inability to retain key technical and managerial personnel of the acquired business;

 
•
inability to retain key customers, vendors, and other business partners of the acquired business;

 
•
inability to achieve the financial and strategic goals for the acquired and combined businesses;

 
•
incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact operating results;

 
•
potential failure of the due diligence processes to identify significant issues with product quality, legal and financial liabilities, among other things;

 
•
potential inability to assert that internal controls over financial reporting are effective; and

 
•
potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which could delay or prevent such acquisitions.

Mergers and acquisitions of companies are inherently risky and, if we do not complete the integration of acquired businesses successfully and in a timely manner, we may not realize the anticipated benefits of the acquisitions to the extent anticipated, which could adversely affect our business, financial condition, or results of operations.

With respect to providing electricity on a price-competitive basis, solar systems face competition from traditional regulated electric utilities, from less-regulated third party energy service providers and from new renewable energy companies.

The solar energy and renewable energy industries are both highly competitive and continually evolving as participants strive to distinguish themselves within their markets and compete with large traditional utilities. We believe that our primary competitors are the traditional utilities that supply electricity to our potential customers. Traditional utilities generally have substantially greater financial, technical, operational and other resources than we do. As a result, these competitors may be able to devote more resources to the research, development, promotion, and sale of their products or respond more quickly to evolving industry standards and changes in market conditions than we can. Traditional utilities could also offer other value-added products or services that could help them to compete with us even if the cost of electricity they offer is higher than that of ours. In addition, a majority of utilities’ sources of electricity is non-solar, which may allow utilities to sell electricity more cheaply than electricity generated by our solar energy systems.

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We also compete with companies that are not regulated like traditional utilities, but that have access to the traditional utility electricity transmission and distribution infrastructure pursuant to state and local pro-competitive and consumer choice policies. These energy service companies are able to offer customers electricity supply-only solutions that are competitive with our solar energy system options on both price and usage of renewable energy technology while avoiding the long-term agreements and physical installations that our current fund-financed business model requires. This may limit our ability to attract new customers; particularly those who wish to avoid long-term contracts or have an aesthetic or other objection to putting solar panels on their roofs.

As the solar industry grows and evolves, we will also face new competitors who are not currently in the market. Low technological barriers to entry characterize our industry and well-capitalized companies could choose to enter the market and compete with it. Our failure to adapt to changing market conditions and to compete successfully with existing or new competitors will limit our growth and will have a material adverse effect on our business and prospects.

Developments in alternative technologies or improvements in distributed solar energy generation may materially adversely affect demand for our offerings.

Significant developments in alternative technologies, such as advances in other forms of distributed solar power generation, storage solutions such as batteries, the widespread use or adoption of fuel cells for residential or commercial properties or improvements in other forms of centralized power production may materially and adversely affect our business and prospects in ways management does not currently anticipate. Any failure by us to adopt new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay deployment of our solar energy systems, which could result in product obsolescence, the loss of competitiveness of our systems, decreased revenue and a loss of market share to competitors.

Due to the limited number of suppliers in our industry, the acquisition of any of these suppliers by a competitor or any shortage, delay, price change, imposition of tariffs or duties or other limitation in our ability to obtain components or technologies that we use could result in sales and installation delays, cancellations, and loss of market share.

While we purchase our products from several different suppliers, if one or more of the suppliers on which we rely to meet anticipated demand ceases or reduces production due to its financial condition, is acquired by a competitor or otherwise is unable to increase production as industry demand increases, or is otherwise unable to allocate sufficient production to us, it may be difficult for us to quickly identify alternate suppliers or to qualify alternative products on commercially reasonable terms, and our ability to satisfy this demand may be adversely affected. There are a limited number of suppliers of solar energy system components and technologies. While we believe there are other sources of supply for these products available, transitioning to a new supplier may result in additional costs and delays in acquiring our solar products and deploying our systems. These issues could harm our business or financial performance.

In addition, the acquisition of a component supplier or technology provider by one of our competitors could limit our access to such components or technologies and require significant redesigns of our solar energy systems or installation procedures and have a material adverse effect on our business.

There have also been periods of industry-wide shortages of key components, including solar panels, in times of industry disruption. The manufacturing infrastructure for some of these components has a long lead-time, requires significant capital investment and relies on the continued availability of key commodity materials, potentially resulting in an inability to meet demand for these components. The solar industry is frequently experiencing significant disruption and, as a result, shortages of key components, including solar panels, may be more likely to occur, which in turn may result in price increases for such components. Even if industry-wide shortages do not occur, suppliers may decide to allocate key components with high demand or insufficient production capacity to more profitable customers, customers with long-term supply agreements or customers other than us and our supply of such components may be reduced as a result.

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Typically, we purchase the components for our solar energy systems on an as-needed basis and do not operate under long-term supply agreements. The vast majority of our purchases are denominated in U.S. dollars. Since our revenue is also generated in U.S. dollars, we are mostly insulated from currency fluctuations. However, since our suppliers often incur a significant amount of their costs by purchasing raw materials and generating operating expenses in foreign currencies, if the value of the U.S. dollar depreciates significantly or for a prolonged period of time against these other currencies, this may cause our suppliers to raise the prices they charge us, which could harm our financial results. Any supply shortages, delays, price changes or other limitation in our ability to obtain components or technologies that we use could limit our growth, cause cancellations or adversely affect our profitability, and result in loss of market share and damage to our brand.

We act as the licensed general contractor for our customers and are subject to risks associated with construction, cost overruns, delays, regulatory compliance and other contingencies, any of which could have a material adverse effect on our business and results of operations.

We are a licensed contractor and we are normally the general contractor, electrician, construction manager, and installer for our solar energy systems. We may be liable to customers for any damage that we cause to the home, belongings or property of our customers during the installation of our systems. For example, we penetrate our customers’ roofs during the installation process and may incur liability for the failure to adequately weatherproof such penetrations following the completion of installation of solar energy systems. In addition, because the solar energy systems that we deploy are high-voltage energy systems, we may incur liability for the failure to comply with electrical standards and manufacturer recommendations. Because our profit on a particular installation is based in part on assumptions as to the cost of such project, cost overruns, delays, or other execution issues may cause us to not achieve our expected results or cover our costs for that project.

In addition, the installation of solar energy systems is subject to oversight and regulation in accordance with national, state, and local laws and ordinances relating to building, fire and electrical codes, safety, environmental protection, utility interconnection and metering, and related matters. We also rely on certain employees to maintain professional licenses in many of the jurisdictions in which we operate, and our failure to employ properly licensed personnel could adversely affect our licensing status in those jurisdictions. It is difficult and costly to track the requirements of every authority having jurisdiction over our operations and our solar energy systems. Any new government regulations or utility policies pertaining to our systems, or changes to existing government regulations or utility policies pertaining to our systems, may result in significant additional expenses to our customers and, as a result, could cause a significant reduction in demand for our systems.

If we experience a significant disruption in our information technology systems or if we fail to implement new systems and software successfully, our business could be adversely affected.

We depend on information systems throughout our company to process orders, manage inventory, process and bill shipments and collect cash from our customers, respond to customer inquiries, contribute to our overall internal control processes, maintain records of our property, plant and equipment, and record and pay amounts due vendors and other creditors. If we were to experience a prolonged disruption in our information systems that involve interactions with customers and suppliers, it could result in the loss of sales and customers and/or increased costs, which could adversely affect our overall business operation.

Compliance with occupational safety and health requirements and best practices can be costly, and noncompliance with such requirements may result in potentially significant monetary penalties, operational delays, and adverse publicity.

The installation of solar energy systems requires our employees to work at heights with complicated and potentially dangerous electrical systems. The evaluation and modification of buildings as part of the installation process requires our employees to work in locations that may contain potentially dangerous levels of asbestos, lead, mold or other materials known or believed to be hazardous to human health. We also maintain a fleet of trucks and other vehicles to support our installers and operations. There is substantial risk of serious injury or death if proper safety procedures are not followed. Our operations are subject to regulation under the U.S. Occupational Safety and Health Act (“OSHA”), the U.S. Department of Transportation (“DOT”), and equivalent state laws. Changes to OSHA or DOT requirements, or stricter interpretation or enforcement of existing laws or regulations, could result in increased costs.

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If we fail to comply with applicable OSHA regulations, even if no work-related serious injury or death occurs, we may be subject to civil or criminal enforcement and be required to pay substantial penalties, incur significant capital expenditures or suspend or limit operations. While we have not experienced a high level of injuries to date, high injury rates could expose us to increased liability. In the past, we have had workplace accidents and received citations from OSHA regulators for alleged safety violations, resulting in fines. Any such accidents, citations, violations, injuries or failure to comply with industry best practices may subject us to adverse publicity, damage our reputation and competitive position and adversely affect our business.

Problems with product quality or performance may cause us to incur warranty expenses, damage our market reputation, and prevent us from maintaining or increasing our market share.

If our products fail to perform as expected while under warranty, or if we are unable to support the warranties, sales of our products may be adversely affected, or our costs may increase, and our business, results of operations, and financial condition could be materially and adversely affected.

We may also be subject to warranty or product liability claims against us that are not covered by insurance or are in excess of our available insurance limits. In addition, quality issues can have various other ramifications, including delays in the recognition of revenue, loss of revenue, loss of future sales opportunities, increased costs associated with repairing or replacing products, and a negative impact on our goodwill and reputation. The possibility of future product failures could cause us to incur substantial expenses to repair or replace defective products. Furthermore, widespread product failures may damage our market reputation and reduce our market share causing sales to decline.

Seasonality may cause fluctuations in our financial results.

We often find that some customers tend to book projects by the end of a calendar year to realize the benefits of available subsidy programs prior to year-end. This results in third and fourth quarter sales being more robust usually at the expense of the first quarter. In the future, this seasonality may cause fluctuations in financial results. In addition, other seasonality trends may develop and the existing seasonality that we experience may change. Weather can also be an important factor affecting project timelines.

A failure to comply with laws and regulations relating to our interactions with current or prospective commercial or residential customers could result in negative publicity, claims, investigations, and litigation, and adversely affect our financial performance.

Our business includes contracts and transactions with commercial and residential customers. We must comply with numerous federal, state, and local laws and regulations that govern matters relating to our interactions with residential consumers, including those pertaining to privacy and data security, consumer financial and credit transactions, home improvement contracts, warranties, and door-to-door solicitation. These laws and regulations are dynamic and subject to potentially differing interpretations, and various federal, state and local legislative and regulatory bodies may expand current laws or regulations, or enact new laws and regulations, regarding these matters. Changes in these laws or regulations or their interpretation could dramatically affect how we do business, acquire customers, and manage and use information that we collect from and about current and prospective customers and the costs associated therewith. We strive to comply with all applicable laws and regulations relating to our interactions with residential customers. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Non-compliance with any such law or regulations could also expose us to claims, proceedings, litigation and investigations by private parties and regulatory authorities, as well as substantial fines and negative publicity, each of which may materially and adversely affect our business.

Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, investments and results of operations.

We are subject to laws and regulations enacted by national, regional and local governments, including non-U.S. governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations.

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Risks Related to the Regulation of Our Company

Because we were previously considered to be a “shell company” under applicable securities laws and regulations, investors may not be able to rely on the resale exemption provided by Rule 144 of the Securities Act until certain requirements have been satisfied. As a result, investors may not be able to easily re-sell our securities and could lose their entire investment.

Prior to June 20, 2019, we were considered to be a “shell company” under Rule 405 of Regulation C of the Securities Act. A “shell company” is a company with either no or nominal operations or assets, or assets consisting solely of cash and cash equivalents. In order to rely on the resale exemption provided by Rule 144, certain requirements must be met, including that the Company is current in the filings required by the Securities Exchange of 1934, as amended. Because shareholders may not be able to rely on an exemption for the resale of their securities other than Rule 144, they may not be able to easily re-sell our securities in the future and could lose their entire investment as a result. See “Shares Eligible For Future Sale – Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies”.

We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Common Stock less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We will remain an “emerging growth company” for up to five years, although we will cease to be an “emerging growth company” upon the earliest of (i) the last day of the fiscal year following the fifth anniversary of our initial public offering (“IPO”), (ii) the last day of the first fiscal year in which our annual gross revenues are $1.07 billion or more, (iii) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities or (iv) the date on which we are deemed to be a “large accelerated filer” as defined in the Exchange Act. We cannot predict if investors will find shares of our Common Stock less attractive or us less comparable to certain other public companies because we will rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our Common Stock price may be more volatile.

Pursuant to the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act for so long as we are an “emerging growth company.”

Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, and generally requires in the same report a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. We are required to provide management’s attestation on internal controls effective December 31, 2021. However, under the JOBS Act, our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an “emerging growth company.” We will be an “emerging growth company” until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of our IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. An “emerging growth company” can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we have chosen to “opt out” of such extended transition period and, as a result, we must comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

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If we are not able to comply with the applicable continued listing requirements or standards of Nasdaq, Nasdaq could delist our Common Stock.

Our Common Stock is currently listed on Nasdaq. In order to maintain such listing, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance requirements. There can be no assurances that we will be able to comply with the applicable listing standards. Although we are currently in compliance with such listing standards, we may in the future fall out of compliance with such standards. If we are unable to maintain compliance with these Nasdaq requirements, our Common Stock will be delisted from Nasdaq.

Our Common Stock currently trades on Nasdaq, and, to date, trading of our Common Stock has been limited. If a more active market does not develop, it may be difficult for you to sell the Common Stock you own or result in your sale at a price that is less than the price you paid.

To date, trading of our Common Stock on Nasdaq has been limited and there can be no assurance that there will be a more active market for our Common Stock either now or in the future. If a more active and liquid trading market does not develop or if developed cannot be sustained, you may have difficulty selling any of the shares of Common Stock that you purchased. The market price for our Common Stock may decline below the price you paid, and you may not be able to sell your shares of Common Stock at or above the price you paid, or at all.

In the event that our Common Stock is delisted from Nasdaq, U.S. broker-dealers may be discouraged from effecting transactions in shares of our Common Stock because they may be considered penny stocks and thus be subject to the penny stock rules.

The SEC has adopted a number of rules to regulate “penny stock” that restricts transactions involving stock which is deemed to be penny stock. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These rules may have the effect of reducing the liquidity of penny stocks. “Penny stocks” generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on NASDAQ if current price and volume information with respect to transactions in such securities is provided by the exchange or system). Our shares of Common Stock have in the past constituted, and may again in the future constitute, “penny stock” within the meaning of the rules. The additional sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in shares of our Common Stock, which could severely limit the market liquidity of such shares of common stock and impede their sale in the secondary market.

A U.S. broker-dealer selling penny stock to anyone other than an established customer or “accredited investor” (generally, an individual with a net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the “penny stock” regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a “penny stock”, a disclosure schedule prepared in accordance with SEC standards relating to the “penny stock” market, unless the broker-dealer or the transaction is otherwise exempt. A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer and the registered representative and current quotations for the securities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent price information with respect to the “penny stock” held in a customer’s account and information with respect to the limited market in “penny stocks”.

Stockholders should be aware that, according to the SEC, the market for “penny stocks” has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, resulting in investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.

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Anti-takeover provisions contained in our Third Amended and Restated Certificate of Incorporation and Bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

The Company’s Third Amended and Restated Certificate of Incorporation and Bylaws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our Board of Directors. These provisions include:

 
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A classified Board of Directors with three-year staggered terms, which may delay the ability of stockholders to the change the membership of a majority of our Board of Directors;

 
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no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

 
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the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors;

 
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the ability of our Board of Directors to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

 
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the requirement that an Annual Meeting of Stockholders may be called only by the Chairman of the Board of Directors, the Chief Executive officer, or the Board of Directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

 
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limiting the liability of, and providing indemnification to, our directors and officers;

 
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controlling the procedures for the conduct and scheduling of stockholder meetings;

 
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providing that directors may be removed prior to the expiration of their terms by stockholders only for cause; and

 
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advance notice procedures that stockholders must comply with in order to nominate candidates to our Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.

These provisions, alone or together, could delay hostile takeovers and changes in control of the Company or changes in our Board of Directors and management.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the General Corporation Law of the State of Delaware (“DGCL”), which prevents some stockholders holding more than 15% of our outstanding Common Stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding Common Stock. Any provision of our Third Amended and Restated Certificate of Incorporation or Bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Common Stock and could also affect the price that some investors are willing to pay for our Common Stock.

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Risks Related to Offerings and Ownership of Our Common Stock

The issuance of our Common Stock related to the Exchange and Subscription Agreement may be dilutive.

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”). Under the terms of the Exchange Agreement, the shares of Preferred Stock are convertible into shares of Common Stock. The shares of Preferred Stock were converted into 370,370 shares of Common Stock on February 22, 2021. In addition, on February 9, 2021 warrants issued to GSI to purchase shares of Common Stock were exercised on a cashless basis. An aggregate of 117,376 shares of Common Stock were issued in connection with such exercise. The issuance of our Common Stock pursuant to the Form S-3 Registration Statement) may cause dilution and could cause the price of our Common Stock to fall.

The issuance of our Common Stock pursuant to the Form S-3 Registration Statement may cause dilution and could cause the price of our Common Stock to fall.

A substantial majority of the outstanding shares of our Common Stock and exercisable options are freely tradable without restriction or further registration under the Securities Act of 1933, as amended.

The Company filed an S-3 Registration Statement which was declared effective by the SEC on December 11, 2020. The Registration Statement contains a Base Prospectus, which covers the offering, issuance and sale by iSun of up to $50,000,000 in the aggregate of our shares of Common Stock from time to time in one or more offerings.

Pursuant to a direct offering pursuant to the S-3 Registration Statement the Company sold an aggregate of 840,000 shares of Common Stock and received aggregate gross proceeds of approximately $10,500,000 to the Company. The Company entered into a Sales Agreement dated September 30, 2021 as amended (the “Sales Agreement”),  with B Riley Capital  (the “Agent”).  Pursuant to the Sales Agreement, iSun may offer and sell from time to time up to an aggregate of $39,500,000 of shares of Common Stock (the “Placement Shares”) through the Agent. Sales of the Placement Shares pursuant to the Sales Agreement, may be made in sales deemed to be “at the market offerings” (“ATM”) as defined in Rule 415 promulgated under the Securities Act. The Agent will act as sales agent and will use commercially reasonable efforts to sell on iSun’s behalf all of the Placement Shares requested to be sold by iSun, consistent with its normal trading and sales practices, on mutually agreed terms between the Agent and iSun. As of March 31, 2022, B. Riley has sold an aggregate of 2,735,056 shares of Common Stock in  ATM offerings and the Company has received aggregate gross proceeds of approximately $18.3 million.

Sales of a substantial number of shares of our Common Stock in the public market, future sales of substantial amounts of shares of our Common Stock in the public market, or the perception that these sales could occur, could cause the market price of our Common Stock to decline. Increased sales of our Common Stock in the market for any reason could exert significant downward pressure on our stock price.

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We may require additional financing to sustain our operations, without which we may not be able to continue operations, and the terms of subsequent financings may adversely impact our stockholders.

As of December 31, 2021, we had a working capital of $1.3 million, net of non-cash liabilities, and had a net loss of $6.9 million for the year ended December 31, 2021. We may utilize proceeds from the sale of shares in ATM offerings to fund our business and operations. The extent that we rely on the Shelf Registration as a source of funding will depend on a number of factors including, the prevailing market price of our Common Stock and the extent to which we are able to secure working capital from other sources. After the sale of shares in a registered direct offering for a purchase price of $10.5 million and sales in ATM offerings of an aggregate purchase price of $18.3 million through March 31, 2022, the Company has the potential   to generate approximately $21.2 million in gross proceeds from additional offerings.

We may still need additional capital to finance our future production plans and working capital needs, and we may have to raise funds through the issuance of equity or debt securities. Depending on the type and the terms of any financing we pursue, stockholders’ rights and the value of their investment in our Common Stock could be reduced. A financing could involve one or more types of securities including Common Stock, preferred stock, convertible debt or warrants to acquire Common Stock. These securities could be issued at or below the then prevailing market price for our Common Stock. In addition, if we issue secured debt securities, the holders of the debt would have a claim to our assets that would be prior to the rights of stockholders until the debt is paid. Interest on these debt securities would increase costs and negatively impact operating results. If the issuance of new securities results in diminished rights to holders of our Common Stock, the market price of our Common Stock could be negatively impacted.

Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences could be a material adverse effect on our business, operating results, financial condition and prospects.

Our management has broad discretion over the use of the net proceeds from our sale of shares of Common Stock under the Sales Agreement with B Riley Financial, LLC., you may not agree with how we use the proceeds and the proceeds may not be invested successfully.

Our management has broad discretion as to the use of the net proceeds from our sale of shares of Common Stock under the Sales Agreement with B Riley Financial, LLC and we could use them for purposes other than those contemplated at the time of commencement of the offerings. Accordingly, you will be relying on the judgment of our management with regard to the use of those net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that, pending their use, we may invest those net proceeds in a way that does not yield a favorable, or any, return for us. The failure of our management to use such funds effectively could have a material adverse effect on our business, financial condition, operating results and cash flows.

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The share price of our Common Stock is subject to fluctuation, has been and may continue to be volatile and may decline regardless of our operating performance, resulting in substantial losses for investors who have purchased shares of our Common Stock.

We expect that the market price of our Common Stock may continue to be volatile for the foreseeable future. The market price of our Common Stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including the factors listed below and other factors described in this “Risk Factors” section:

 
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actual or anticipated fluctuations in our operating results;

 
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the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

 
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failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

 
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ratings changes by any securities analysts who follow our company;

 
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announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments;

 
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changes in operating performance and Common stock market valuations of other technology companies generally;

 
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price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;

 
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changes in our Board of Directors or management;

 
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sales of large blocks of our Common Stock, including sales by our executive officers, directors and significant stockholders;

 
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potential lawsuits threatened or filed against us;

 
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short sales, hedging and other derivative transactions involving our Common Stock;

 
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general economic conditions in the United States and abroad; and

 
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other events or factors, including those resulting from war, incidents of terrorism or responses to these events.

In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many software companies. Stock prices of many software companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business, operating results, financial condition and cash flows.

We have no history of paying dividends on our Common Stock, and we do not anticipate paying dividends in the foreseeable future.

We have not previously paid dividends on our Common Stock. We currently anticipate that we will retain all of our available cash, if any, for use as working capital and for other general corporate purposes. Any payment of future dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends and other considerations that our Board of Directors deems relevant. Investors must rely on sales of their Common Stock after price appreciation, which may never occur, as the only way to realize a return on their investment.

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Our Third Amended and Restated Certificate of Incorporation authorizes us to issue shares of blank check preferred stock, and issuances of such preferred stock, or securities convertible into or exercisable for such preferred stock, may result in immediate dilution to existing stockholdersg.

If we raise additional funds through future issuances of preferred stock or debt securities convertible into preferred stock, our stockholders could suffer significant dilution, and any new preferred stock or debt securities that we issue could have rights, preferences and privileges superior to those of holders of shares of Common Stock. Although we have no present plans to issue any additional shares of preferred stock, in the event that we issue additional shares of our preferred stock, or securities convertible into or exercisable for such preferred stock , the holders of Common Stock will be diluted. We may choose to raise additional capital using such preferred stock or debt securities because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.

A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.

The price of our securities may fluctuate significantly due to general market and economic conditions. An active trading market for our securities may never develop or, if developed, it may not be sustained. In addition, the price of our securities can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if our securities become delisted from Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our Common Stock adversely, the price and trading volume of our Common Stock could decline.

The trading market for our Common Stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. Securities and industry analysts do not currently, and may never, publish research on us. If no securities or industry analysts commence coverage of us, our stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover us change their recommendation regarding our Common Stock adversely, or provide more favorable relative recommendations about our competitors, the price of our Common Stock would likely decline. If any analyst who may cover us were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our Common Stock price or trading volume to decline.

Our executive officers, directors and principal stockholders own a significant percentage of our Common Stock and will be able to exert significant control over matters subject to stockholder approval.

As of March 31, 2022, our directors, executive officers and holders of more than 5% of our equity securities, together with their affiliates, beneficially own approximately40% of our outstanding shares of Common Stock. As a result, these stockholders have significant influence to determine the outcome of matters submitted to our stockholders for approval, including the ability to control the election of our directors, amend or prevent amendment of our Third Amended and Restated Certificate of Incorporation or Bylaws or effect or prevent a change in corporate control, merger, consolidation, takeover or other business combination. In addition, any sale of a significant amount of our Common Stock held by our directors, executive officers and principal stockholders, or the possibility of such sales, could adversely affect the market price of our Common Stock. Our management’s stock ownership may also discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our Common Stock price or prevent our stockholders from realizing any gains from our Common Stock.

27
Implications of Being an “Emerging Growth Company”

As a public reporting company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company, we:

 
•
are not required to obtain an attestation and report from our auditors on our management’s assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act (the “Sarbanes-Oxley Act”);

 
•
are not required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing how those elements fit with our principles and objectives (commonly referred to as “compensation discussion and analysis”);

 
•
are not required to obtain a non-binding advisory vote from our stockholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on-frequency” and “say-on-golden-parachute” votes);

 
•
are exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and CEO pay ratio disclosure;

 
•
may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) disclosure; and

 
•
are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act.

We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act. Our election to use the phase-in periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under §107 of the JOBS Act.

Certain of these reduced reporting requirements and exemptions were already available to us due to the fact that we also qualify as a “smaller reporting company” under the SEC’s rules. For instance, smaller reporting companies are not required to obtain an auditor attestation and report regarding internal control over financial reporting, are not required to provide a compensation discussion and analysis, are not required to provide a pay-for-performance graph or CEO pay ratio disclosure, and may present only two years of audited financial statements and related MD&A disclosure.

Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant to a registration statement declared effective under the Securities Act, or such earlier time that we no longer meet the definition of an emerging growth company. In this regard, the JOBS Act provides that we would cease to be an “emerging growth company” if we have more than $1.07 billion in annual revenue, have more than $700 million in market value of our Common Stock held by non-affiliates, or issue more than $1 billion in principal amount of non-convertible debt over a three-year period. Under current SEC rules, however, we will continue to qualify as a “smaller reporting company” for so long as we have a public float (i.e., the market value of common equity held by non-affiliates) of less than $700 million and annual revenue of less than $100 million as of the last business day of our most recently completed second fiscal quarter.

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Item 1B.
Unresolved Staff Comments.

None.
 
Item 2.
Properties.

We leased space and occupy 6,250 square feet of office space and 6,750 square feet of warehouse space at 400 Avenue D, Suite 10, Williston, VT 05495. Solar Communities, Inc. our indirect wholly-owned subsidiary leases 8,640 square feet of office space and 5,360 square feet of warehouse space in Waterbury, Vermont and 15,000 square feet of warehouse space, 10,000 square feet of shop space and 5,000 square feet of office space in Rhinebeck, New York. We believe that this space is sufficient to meet our current needs across all business segments.
 
Item 3.
Legal Proceedings.

On January 27, 2022, the Company became aware of pending litigation in the U.S. District Court for the District of Vermont entitled Sassoon Peress and Renewz Sustainable Solutions, Inc. v. iSun, Inc. alleging various claims including breach of contract, defamation, and unjust enrichment. The Company was granted an extension to plead to Plaintiffs’ Amended Complaint to April 29, 2022. The Company plans to vigorously contest the litigation. It is not possible to evaluate the likelihood of an unfavorable outcome or provide an estimate or range of potential loss.

 
Item 4.
Mine Safety Disclosures.

Not applicable.

29
PART II
 
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our Common Stock is traded on Nasdaq under the symbol “ISUN.” The last reported sale price of our Common Stock on April 13, 2022 on Nasdaq was $4.10 per share

Holders of Common Stock.

On April 13, 2022, we had 10,138 registered holders of record of our Common Stock.

Dividends and dividend policy.

We have never declared or paid any cash dividend on our Common Stock, nor do we currently intend to pay any cash dividend on our Common Stock in the foreseeable future. We expect to retain our earnings, if any, for the growth and development of our business.
 
Item 6.
Selected Financial Data

As a smaller reporting company, we are not required to provide the information under this item, pursuant to Regulation S-K Item 301(c).

30
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Business Introduction / Overview

iSun, Inc., the principal office of which is located in Williston, Vermont, is one of the largest commercial solar engineering, procurement and construction (“EPC”) companies in the country and is expanding across the Northeastern United States (“U.S.”). The Company is a second-generation business founded under the name Peck Electric Co. (“Peck Electric”) in 1972 as a traditional electrical contractor. The Company’s core values are to align people, purpose, and profitability, and since taking leadership in 1994, Jeffrey Peck, the Company’s Chief Executive Officer, has applied such core values to expand into the solar industry. Today, the Company is guided by the mission to facilitate the reduction of carbon emissions through the expansion of clean, renewable energy and we believe that leveraging such core values to deploy resources toward profitable business is the only sustainable strategy to achieve these objectives.

The world recognizes the need to transition to a reliable, renewable energy grid in the next 50 years. Vermont and Hawaii are leading the way in the U.S. with renewable energy goals of 75% by 2032 and 100% by 2045, respectively. California committed to 100% carbon-free energy by 2045. The majority of the other states in the U.S. also have renewable energy goals regardless of current Federal solar policy. We are a member of Renewable Energy Vermont, an organization that advocates for clean, practical and renewable solar energy. The Company intends to use near-term incentives to take advantage of long-term, sustainable energy transformation with a commitment to the environment and to its shareholders. Our triple bottom line, which is geared towards people, environment, and profit, has always been our guide since we began installing renewable energy and we intend that it remain our guide over the next 50 years as we construct our energy future.

After installing more than 400 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 Jensyn Acquisition Corp. (“Jensyn”) on June 20, 2019, pursuant to which we acquired Peck Electric Co. (the “Reverse Merger and Recapitalization”), we have now opened our company to the public market as part of our strategic growth plan. We are expanding across the Northeastern U.S. to serve the fast-growing demand for clean renewable energy. We are open to partnering with others to accelerate our growth process, and we are expanding our portfolio of company-owned solar arrays to establish recurring revenue streams for many years to come. We have established a leading presence in the market after five decades of successfully serving our customers, and we are now ready for new opportunities and the next five decades of success.

We have a three-pronged growth strategy that includes (1) organic expansion across the Northeastern United States, (2) conducting accretive merger and acquisition transactions to expand geographically, and (3) investing into company-owned solar assets.

On January 19, 2021, we completed a business combination (the “Merger Agreement”) pursuant to which we acquired iSun Energy LLC (“iSun Energy”). The Business Combination was an acquisition treated as a merger and reorganization and iSun Energy became a wholly owned subsidiary of The Peck Company Holdings, Inc. Immediately prior to the Merger Agreement, we changed our name to iSun, Inc.

On April 6, 2021, iSun Utility, LLC (“iSun Utility”), a Delaware limited liability company and wholly-owned subsidiary of the Company, Adani Solar USA, Inc., a Delaware corporation (Adani”), and Oakwood Construction Services, Inc., a Delaware corporation (“Oakwood”) entered into an Assignment Agreement (the “Assignment”), pursuant to which iSun Utility acquired all rights to the intellectual property of Oakwood and its affiliates (the “Project IP”). Oakwood is a utility-scale solar EPC company and a wholly-owned subsidiary of Adani. The Project IP includes all of the intellectual property, project references, templates, client lists, agreements, forms and processes of Adani’s U.S. solar business.

On September 8, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, iSun Residential Merger Sub, Inc., a Vermont corporation (the “Merger Sub”) and wholly-owned subsidiary of iSun Residential, Inc., a Delaware corporation (“iSun Residential”) and wholly-owned subsidiary of the Company, SolarCommunities, Inc., a Vermont benefit corporation (“SunCommon”), and Jeffrey Irish, James Moore, and Duane Peterson as a “Shareholder Representative Group” of the holders of SunCommon’s capital stock (the “SunCommon Shareholders”), pursuant to which the Merger Sub merged with and into SunCommon (the “Merger”) with SunCommon as the surviving company in the Merger and SunCommon became a wholly-owned subsidiary of iSun Residential. The Merger was effective on October 1, 2021.

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With the filing of our Form S-3 Registration Statement on December 4, 2020, we have the ability to access the capital markets up to $50,000,000 in aggregate to support our statement growth strategy. The access to capital accelerates our growth process and allows us to continue our expansion plans into new territories, aggressively pursue accretive merger and acquisition transactions and continue investing in our company-owned solar assets which now consist of the product offerings of iSun Energy LLC. As of March 31, 2022, there is currently approximately $21.2 million in gross proceeds potentially available for additional sales pursuant to the Registration Statement as we received aggregate gross proceeds of approximately $10.5 million from a sale of Common Stock in  a Registered Direct Offering and gross proceeds of approximately $6.8 million through ATM offerings.

In February 2021, SolarCommunities, Inc, our indirect wholly-owned subsidiary, was fortunate to obtain a loan under the CARES Act Payroll Protection Program (“PPP”) of $2,000,000. The loan allowed us to maintain our workforce during the shutdown caused by the COVID-19 pandemic. On December 6, 2021, SunCommon received notification from Citizens Bank N.A. that the Small Business Administration has approved the forgiveness of the PPP loan in its entirety and as such, the full $2,000,000 has been recognized in the income statement as a gain upon debt extinguishment for the year ended December 31, 2021.

On April 24, 2020, the Company was fortunate to obtain a loan under the CARES Act Payroll Protection Program (“PPP”) of $1,487,624. The loan allowed us to maintain our workforce during the shutdown caused by the COVID-19 pandemic. On December 1, 2020, the Company received notification from NBT Bank that the Small Business Administration has approved the forgiveness of the PPP loan in its entirety and as such, the full $1,496,468 has been recognized in the income statement as a gain upon debt extinguishment for the year ended December 31, 2020.

Equity and Ownership Structure

On January 19, 2021, we completed a business combination (the “Merger Agreement”) pursuant to which we acquired iSun Energy LLC (“iSun Energy”). The Business Combination was an acquisition treated as a merger and reorganization and that iSun Energy became a wholly owned subsidiary of The Peck Company Holdings, Inc. Following the Merger Agreement, we changed our name to iSun, Inc. (formerly The Peck Company Holdings, Inc,).

On April 6, 2021, iSun Utility, LLC (“iSun Utility”), a Delaware limited liability company and wholly-owned subsidiary of iSun, Adani Solar USA, Inc., a Delaware corporation (Adani”), and Oakwood Construction Services, Inc., a Delaware corporation (“Oakwood”) entered into an Assignment Agreement (the “Assignment”), pursuant to which iSun Utility acquired all rights to the intellectual property of Oakwood and its affiliates (the “Project IP”). Oakwood is a utility-scale solar EPC company and was a wholly-owned subsidiary of Adani. The Project IP includes all of the intellectual property, project references, templates, client lists, agreements, forms and processes of Adani’s U.S. solar business.

On September 8, 2021, iSun, Inc. entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, iSun Residential Merger Sub, Inc., a Vermont corporation (the “Merger Sub”) and wholly-owned subsidiary of iSun Residential, Inc., a Delaware corporation (“iSun Residential”) and wholly-owned subsidiary of the Company, SolarCommunities, Inc., a Vermont benefit corporation (“SunCommon”), and Jeffrey Irish, James Moore, and Duane Peterson as a “Shareholder Representative Group” of the holders of SunCommon’s capital stock (the “SunCommon Shareholders”), pursuant to which the Merger Sub merged with and into SunCommon (the “Merger”) with SunCommon as the surviving company in the Merger and SunCommon became a wholly-owned subsidiary of iSun Residential. The Merger was effective on October 1, 2021.

We now conduct all of our business operations exclusively through our wholly-owned direct and indirect subsidiaries, iSun Residential, Inc., SolarCommunities, Inc. iSun Industrial, LLC, Peck Electric Co., Liberty Electric, Inc., iSun Utility, LLC, iSun Energy, LLC and iSun Corporate, LLC.

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 the United States of America (“GAAP”). The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.

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, impairment on investment, 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.

32
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. For the year ended December 31, 2021 and 2020, project profit was affected by less than 5% as a result of changes in contract estimates included in projects that were in process as of December 31, 2021 and 2020.

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.

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 National Joint Apprenticeship and Training Committee, the National Electrical Benefit Funds, Union Pension Plans and a union Health and Welfare Fund. Each employee contributes monthly to the International Brotherhood of Electrical Workers (“IBEW”). The Company’s contract with the IBEW expires May 31, 2022.

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.

Business Insurance / Captive Insurance Group

In 2018, Peck Electric joined a captive insurance group. The Company’s management believes that belonging to a captive insurance group will stabilize business insurance expenses and will lock in lower rates that are not subject to change from year-to-year and instead are based on the Company’s favorable experience modification rate.

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.

33
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2021 COMPARED TO THE YEAR ENDED DECEMBER 31, 2020

REVENUE AND COST OF EARNED REVENUE

For the year ended December 31, 2021, our revenue increased 115% to $45.3 million compared to $21.1 for the year ended December 31, 2020. Cost of earned revenue for the year ended December 31, 2021, was 108% higher at $38.9 million compared to $18.7 million for the year ended December 31, 2020. Our revenue increased as a result of multiple acquisitions throughout 2021 that added new revenue streams, of the 115% revenue, approximately 53% was organic and 62% was a result of acquisitions. In addition to our historical commercial and industrial customer base, we added the capabilities to serve residential, small commercial and utility customers as well as support the demand for electric vehicle infrastructure across all our customer demographics. Our fourth quarter resulted in record revenue of approximately $27.0 million with $12.6 million generated from residential customers and $14.4 million generated from commercial and industrial customers.

Gross profit was $6.4 million for the year ended December 31, 2021. This compares to $2.3 million of gross profit for the year ended December 31, 2020. The gross margin was 14.16% in the year ended December 31, 2021 compared to 11.13% in the year ended December 31, 2020. Approximately 89% of revenue in the year ended December 31, 2021 was from solar installations compared to 80% of revenues in the year ended December 31, 2020. The solar installation represents higher margin installation in comparison to our traditional electrical and data installations which lead to an increase in gross margin. While we did see an increase in overall gross margin in comparison to prior year, our margins for the first half of 2021 were negatively impacted by the industry wide increase in material and commodity pricing as well as inefficiencies related to the shortages in the labor markets.

For 2022, we anticipate an increase in revenue over 2021 due to several factors. The demand for solar and electric vehicle infrastructure continues to increase across all customer groups. Our residential division has customer orders of approximately $19.2 million expected to be completed within four to six months, our commercial division has a contracted backlog of approximately $9.3 million expected to be completed within six to eight months, our industrial division has a contracted backlog of approximately $73.8 million expected to be completed within twelve to eighteen months and our utility division has 550 MW of projects currently under development with an estimated commencement date in the third quarter of 2022. Historically, we have engaged with existing customers throughout the Northeast. The capabilities of our development and professional services team have allowed us to engage in project development in new geographic regions which will further our expansion opportunities.

SELLING AND MARKETING EXPENSES

We rely on referrals from customers and on its industry reputation, and therefore have not historically incurred significant selling and marketing expenses. For the year ended December 31, 2021, we recognized sales and marketing expenses of approximately $0.2 million that had been incurred by SunCommon. SunCommon is a wholly-owned subsidiary and our residential division brand and will incur marketing expenses as a means to generate sales demand.

GENERAL AND ADMINISTRATIVE EXPENSES

Total general and administrative (G&A) expenses were $13.4 million for the year ended December 31, 2021, compared to $3.3 million for the year ended December 31, 2020. As a percentage of revenue, G&A expenses increased to 29.0% in the year ended December 31, 2021 compared to 15.9% in the year ended December 31, 2020. In total dollars, G&A increased as we developed our internal platform to support the growth of our new customer revenue channels. With the acquisitions throughout 2021, we increased G&A significantly in order to maintain operational consistency across the newly acquired entities, approximately $1.235 million were related to non-recurring transactional expenses incurred as part of the acquisitions. As we assess efficiencies, we would anticipate the realization of operation synergies which would allow an overall reduction in G&A in future periods.

WAREHOUSE AND OTHER OPERATING EXPENSES

Warehousing and other operating expenses increase to $1.3 million for the year ended December 31, 2021, compared to $0.7 million for the year ended December 31, 2020. The main contributions to the increase were a move to a new facility in 2021 to support the revenue growth, additional warehousing facilities through the acquisitions and an increase in depreciation expense.

34
OTHER INCOME (EXPENSES)

Interest expense for the twelve months ended December 31, 2021, was $0.5 million compared to $0.3 million for the same period of the prior year as a result of the B Riley Capital credit facility utilized to support the acquisition of SunCommon. We recognized a gain on the forgiveness of the PPP loan of $2.0 million and $1.5 million for the twelve months ended December 31, 2021 and December 31, 2020. We recognized a gain from the change in fair value of the warrant liability of $1.0 million for the year ended December 31, 2021 and a loss of $1.0 million for the year ended December 31, 2020.

INCOME (BENEFIT) TAX EXPENSE

The US GAAP effective tax rate for the years ended December 31, 2021 was 23.48% and December 31, 2020 was 33.20%. The proforma effective tax rate for the years ended December 31, 2021 was 21.0% and December 31, 2020 was 21.0%. At December 31, 2021 and 2020, the change in the effective tax rate (“ETR”) is driven by the non-taxable income generated from the forgiveness of a loan under the CARES Act Payroll Protection Program (“PPP”) of $2.0 million and $1.5 million, respectively.

NET LOSS

The net loss for the year ended December 31, 2021 was $6.2 million compared to a net loss of $1.0 million for the year ended December 31, 2020.

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.

EBITDA 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 loss 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 Reverse Merger and Recapitalization 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.

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.

35
The reconciliations of EBITDA and Adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, are shown in the table below:

​
Year ended
December 31,
  
​
2021
    
2020
  
Net loss
$
(6,240,978
)
  
$
(980,056
)
Depreciation and amortization
  
981,975
      
585,690
  
Interest expense
  
517,718
      
302,542
  
Stock compensation
  
2,315,125
      
-
  
Change in fair value of warrant liability
  
(976,398
)
    
975,728
  
Income tax (benefit)
  
(1,914,841
)
    
(487,173
)
EBITDA
  
(5,317,399
)
    
396,731
  
Other costs(1)
  
1,418,135
      
-
  
Adjusted EBITDA
 $
(3,899,264
)
   $
396,731
  
Weighted Average shares outstanding
  
9,264,919
      
5,301,471
  
Adjusted EPS
$
(0.42
)
  
$
0.07
  
 
(1)
Other costs consist of one-time expenses related to the acquisitions of iSun Energy, LLC, Oakwood Construction Services, LLC and SolarCommunities, Inc. In addition, the Company was required to restate its financial statements for the years ended December 31, 2020 and 2019 due to a change in the accounting for the treatment of warrants. The Company also held two Special Meetings of Stockholders in order to amend its Second Amended and Restated Certificate of Incorporation.
 
(2)
As the forgiveness of the PPP loan is considered a one-time expense, the Company considered including the forgiveness of  $2.0 million and $1.5 million for the years ended December 31, 2021 and 2020, respectively, as a reconciling item. The Company excluded the forgiveness on the basis that had it not been awarded a PPP loan, the Company would have terminated, furlough or reduced its workforce during the COVID-19 pandemic shutdown.

LIQUIDITY AND CAPITAL RESOURCES

We had $2.2 million in unrestricted cash at December 31, 2021, as compared to $0.7 million at December 31, 2020.

As of December 31, 2021, our working capital deficit was $10.3 million, net of non-cash liabilities, compared to a working capital surplus of $0.2 million at December 31, 2020. Included in the working capital deficit was a short-term loan for approximately $6.0 million which was paid in full subsequent to year end and approximately $2.4 million in non-cash liabilities. To date, the Company has relied predominantly on operating cash flow to fund its operations, borrowings from its credit facilities, sales of Common Stock and exercise of public warrants. The availability of financing and the cash flow from operations mitigates the potential for substantial doubt.

We believe that the aggregate of our existing cash and cash equivalents, including our working capital line of credit and sales of Common Stock pursuant to our shelf registration, will be sufficient to meet our operating cash requirements for at least 12 months from the date these financial statements are made available. The demand for solar and electric vehicle infrastructure continues to increase across all customer groups. Our residential division has customer orders of approximately $19.2 million expected to be completed within four to six months, our commercial division has a contracted backlog of approximately $9.3 million expected to be completed within six to eight months, our industrial division has a contracted backlog of approximately $73.8 million expected to be completed within twelve to eighteen months and our utility division has 550 MW of projects currently under development with an estimated commencement date in the third quarter of 2022. The customer demand across our segments will provide short-term operational cash flow.

Sales of Common Stock pursuant to the  Form S-3 Registration Statement filed on December 4, 2020,  have provided funds to  support our  growth strategy. The access to capital accelerates our growth process and allows us to continue our expansion plans into new territories, aggressively pursue accretive merger and acquisition transactions and continue investing in our company-owned solar assets which now consist of the product offerings of iSun Energy LLC. As of March 31, 2022, there is currently approximately $21.2 million potentially available for sales pursuant to the Registration Statement as we received aggregate proceeds of  approximately $10.5 million through a Registered Direct Offering and approximately $6.8 million through the sale of Common Stock in ATM offerings.

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Cash flow used by operating activities was $5.2 million for the year ended December 31, 2021, compared to $0.4 million of cash provided by operating activities in the year ended December 31, 2020. The decrease in cash provided by operating activities was primarily the result of the increase in accounts receivable of $8.1 million and an increase in costs and estimated earning in excess of billings of $2.7 million.

Net cash used in investing activities was $36.7 million for the year ended December 31, 2021, compared to $0.1 million used in the year ended December 31, 2020. This increase was related to the acquisition of SunCommon of $25.2 million and minority investments of $8.0 million.

Net cash provided by financing activities was $43.4 million for the year ended December 31, 2021 compared to $0.2 million of cash provided by financing activities for the year ended December 31, 2020. The cash flow provided by financing activities was primarily driven by the proceeds from the exercise of public warrants of $20.9 million, a registered direct offering of Common Stock of $9.6 million and proceeds from the sale of Common Stock in ATM offerings of $6.9 million.

Item 7A.
Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

As of December 31, 2021, our variable interest rate debt was primarily related to our Credit Facility with NBT Bank. Interest on outstanding revolving loans and our term loan under our Credit Facility accrues at variable rates based on, prime rate, as defined in the Credit Facility, plus a margin. As of December 31, 2021, we had $4.5 million aggregate principal amount of outstanding revolving loans under our Credit Facility with a weighted average interest rate of 3.25%. A 100 basis point increase in the applicable interest rates under our credit facilities would have increased our interest expense by approximately $45,000 for the year ended December 31, 2021.
As of December 31, 2021, our fixed interest rate debt primarily included $6.5 million aggregate principal amount of with variable interest rates, which accrued interest at a weighted average interest rate of approximately 5.0%. None of this debt subjects us to interest rate risk, but we may be subject to changes in interest rates if and when we refinance this debt at maturity or otherwise.

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.

Item 8.
Financial Statements and Supplementary Data.

Index to Consolidated Financial Statements


37
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of
iSun, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of iSun, Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).  In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB . Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Marcum LLP

Marcum LLP

We have served as the Company’s auditor since 2019
New York, NY
April 15, 2021

38
iSun, Inc.
Consolidated Balance Sheets
December 31, 2021 and 2020

​
  
2021
    
2020
  
Assets
            
Current Assets:
            
Cash
  
$
2,242,083
    
$
699,154
  
Accounts receivable, net of allowance
    
14,337,310
      
6,215,957
  
Costs and estimated earnings in excess of billings
    
4,003,979
      
1,354,602
  
Inventory
     2,479,874       -  
Other current assets
    
1,070,632
      
214,963
  
Total current assets
    
24,133,878
      
8,484,676
  
Property and equipment:
                
Building and improvements
    
966,603
      
672,727
  
Vehicles
    
2,908,472
      
1,199,535
  
Tools and equipment
    
3,126,673
      
508,846
  
Software
     234,246       -  
Construction in process
     3,291       -  
Solar arrays
    
6,859,374
      
6,386,025
  
​
    
14,098,659
      
8,767,133
  
Less accumulated depreciation
    
(3,056,406
)
    
(2,647,333
)
​
    
11,042,253
      
6,119,800
  
Other Assets:
                
Captive insurance investment
    
270,430
      
198,105
  
Goodwill
     36,907,437       -  
Intangible assets
     18,906,330       -  
Investments
     12,420,496       4,820,496  
Other assets
     47,065       -  
​
    
68,551,758
      
5,018,601
  
Total assets
  
$
103,727,889
    
$
19,623,077
  
Liabilities and Stockholders’ Equity
                
Current Liabilities:
                
Accounts payable, includes book overdraft of $0 and $1.5 million at December 31, 2021 and 2020, respectively
  
$
13,187,456
    
$
4,086,173
  
Accrued expenses
    
7,628,212
      
172,021
  
Billings in excess of costs and estimated earnings on uncompleted contracts
    
2,388,501
      
1,140,125
  
Due to stockholders
    
-
      
24,315
  
Line of credit
    
4,468,298
      
2,482,127
  
Current portion of deferred compensation
    
31,000
      
28,656
  
Current portion of long-term debt
    
6,694,296
      
308,394
  
Total current liabilities
    
34,397,763
      
8,241,811
  
Long-term liabilities:
                
Deferred compensation, net of current portion
    
27,884
      
62,531
  
Deferred tax liability
    
771,656
      
610,558
  
Warrant liability
    
148,013
      
1,124,411
  
Other liabilities
     3,375,427       -  
Long-term debt, net of current portion
    
5,148,855
      
1,701,495
  
Total liabilities
    
43,869,598
      
11,740,806
  
Commitments and Contingencies (Note 9)
            
Stockholders’ equity:
                
Preferred stock – 0.0001 par value 200,000 shares authorized, 0 and 200,000 issued and outstanding at December 31, 2021 and December 31, 2020, respectively
    
-
      
20
  
Common stock – 0.0001 par value 49,000,000 shares authorized, 11,825,878 and 5,313,268 issued and outstanding as of December 31, 2021 and 2020, respectively
    
1,183
      
531
  
Additional paid-in capital
    
60,863,388
      
2,577,359
  
(Accumulated deficit)/Retained earnings
    
(1,006,280
)
    
5,304,361
  
Total Stockholders’ equity
    
59,858,291
      
7,882,271
  
Total liabilities and stockholders’ equity
  
$
103,727,889
    
$
19,623,077
  

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

39
iSun, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2021 and 2020

​
  
2021
    
2020
  
​
            
Earned revenue
  
$
45,311,660
    
$
21,052,211
  
Cost of earned revenue
    
38,920,493
      
18,709,074
  
Gross profit
    
6,391,167
      
2,343,137
  
​
                
Warehouse and other operating expenses
    
1,308,527
      
684,669
  
General and administrative expenses
    
13,382,014
      
3,343,895
  
Stock based compensation - general and administrative
     2,315,125       -  
Total operating expenses
    
17,005,666
      
4,028,564
  
Operating loss
    
(10,614,499
)
    
(1,685,427
)
​
                
Other expenses
                
​
                
Gain on forgiveness of PPP loan
    
2,000,000
      
1,496,468
  
Change in fair value of warrant liability
    
976,398
      
(975,728
)
Interest expense
    
(517,718
)
    
(302,542
)
​
                
Loss before income taxes
    
(8,155,819
)
    
(1,467,229
)
Benefit for income taxes
    
(1,914,841
)
    
(487,173
)
​
                
Net loss
    
(6,240,978
)
    
(980,056
)
​
                
Preferred stock dividend
    
(69,663
)
    
(275,556
)
​
                
Net loss available to shares of common stockholders
  
$
(6,310,641
)
  
$
(1,255,612
)
Weighted average shares of common stock outstanding
                
Basic and diluted
    
9,264,919
      
5,301,471
  
Basic and diluted
  
$
(0.67
)
  
$
(0.24
)

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

40
iSun, Inc.
Consolidated Statement of Changes in Stockholders’ Equity
December 31, 2021 and 2020

 
Preferred Stock
    
Common Stock
    
Additional
    
Retained Earnings/
        
​​
  
Shares
    
Amounts
    
Shares
    
Amounts
    
Paid-In Capital
    
(Accumulated Deficit)
    
Total
  
Balance as of January 1, 2020
    
-
    
$
-
      
5,298,159
    
$
529
    
$
(2,692,424
)
  
$
6,559,973
    
$
3,868,078
  
​
                                                        
Investment in GreenSeed Investors, LLC
    
200,000
      
20
      
-
      
-
      
4,999,980
      
-
      
5,000,000
  
​
                                                        
Investment in Solar Project Partners, LLC
    
-
      
-
      
-
      
-
      
96,052
      
-
      
96,052
  
​
                                                        
Preferred stock dividend
    
-
      
-
      
-
      
-
      
-
      
(275,556
)
    
(275,556
)
​
                                                        
Exercise of warrants
    
-
      
-
      
15,109
      
2
      
173,751
      
-
      
173,753
  
​
                                                        
Net loss
    
-
      
-
      
-
      
-
      
-
      
(980,056
)
    
(980,056
)
​
                                                        
Balance as of December 31, 2020
   
200,000
    
$
20
      
5,313,268
    
$
531
    
$
2,577,359
    
$
5,304,361
    
$
7,882,271
  
                                                         
Registered Direct Offering
     -       -       840,000       84       9,584,916       -       9,585,000  
 
                                                        
Acquisition of iSun Energy, LLC
     -       -       300,000       30       2,921,868       -       2,921,898  
 
                                                        
Exercise of Unit Purchase Option
     -       -       130,000       13       (13 )     -       -  
 
                                                        
Redemption of Common Stock
     -       -       (34,190 )     (3 )     (672,856 )     -       (672,859 )
 
                                                        
Conversion of Preferred Shares
     (200,000 )     (20 )     370,370       37       (17 )     -       -  
 
                                                        
Dividends payable on preferred shares
             -               -       -       (69,663 )     (69,663 )
 
                                                        
Conversion of Solar Project Partners, LLC warrant
     -       -       117,376       12       (12 )     -       -  
 
                                                        
Stock compensation under equity incentive plan
     -
       -       139,664       14       2,315,111       -       2,315,125  
 
                                                        
Exercise of options
     -       -       100,666       10       149,983       -       149,993  
 
                                                        
Exercise of public warrants
     -       -       1,820,509       182       20,905,833       -       20,906,015  
 
                                                        
Acquisition of SolarCommunities, Inc.
     -       -       1,810,915       181       15,964,846       -       15,965,027  
 
                                                        
Acquisition of Liberty Electric, Inc.
     -       -       29,749       3       249,993       -       249,996  
 
                                                        
Sale of Common Stock pursuant to S-3 registration statement
     -       -       887,551       89       6,866,377       -       6,866,466  
 
                                                        
Net loss
             -               -       -       (6,240,978 )     (6,240,978 )
 
                                                        
Balance as of, December 31, 2021
     -     $
-       11,825,878     $
1,183     $
 60,863,388     $
(1,006,280 )   $
 59,858,291  

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

41
iSun, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2021 and 2020

​
  
2021
    
2020
  
Cash flows from operating activities
            
Net loss
  
$
(6,240,978
)
  
$
(980,056
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
                
Depreciation
    
681,272
      
585,690
  
Bad debt expense
    
-
      
164,292
  
Gain on forgiveness of PPP loan
    
(2,000,000
)
    
(1,496,468
)
(Gain) on sale of fixed assets
     (62,963 )     -  
Change in fair value of warrant liability
    
(976,398
)
    
975,728
  
Stock based compensation
     2,315,125       -  
Deferred finance charge amortization
    
103,078
      
3,073
  
Amortization of intangibles
     300,703       -  
Deferred income taxes
    
(1,909,173
)
    
(487,923
)
Changes in operating assets and liabilities:
                
Accounts receivable
    
(8,121,353
)
    
914,356
  
Prepaid expenses
    
(825,332
)
    
(13,637
)
Costs and estimated earnings in excess of billings
    
(2,649,377
)
    
(82,230
)
Accounts payable
    
9,101,283
      
(188,344
)
Accrued expenses
    
3,956,191
      
52,810
  
Billings in excess of costs and estimated earnings on uncompleted contracts
    
1,248,376
      
1,014,099
  
Inventory
     (111,803 )     -  
Other assets
     (47,065 )     -  
Other liabilities
     75,427       -  
Deferred compensation
    
(32,303
)
    
(25,576
)
Net cash (used in) provided by operating activities
    
(5,195,290
)
    
435,814
  
Cash flows from investing activities:
                
Purchase of equipment
    
(975,552
)
    
(8,121
)
Acquisition of SolarCommunities, Inc.
     (25,649,622 )     -  
Acquisition of Liberty Electric, Inc.
     (1,194,824 )     -  
Acquisition of Oakwood Construction Services, LLC
     (1,000,000 )     -  
Acquisition of iSun Energy, LLC
     (85,135 )     -  
Dividend receivable
     300,000       -  
Minority investments
    
(8,000,000
)
    
-
  
Investment in captive insurance
    
(72,325
)
    
(57,230
)
Net cash used in investing activities
    
(36,677,458
)
    
(65,351
)
Cash flows from financing activities:
                
Proceeds from line of credit
    
30,683,668
      
18,080,985
  
Payments of line of credit
    
(29,697,497
)
    
(18,783,899
)
Proceeds from long-term debt
    
10,616,408
      
-
  
Exercise of stock options
     149,993       -  
Payments of long-term debt
    
(4,997,202
)
    
(416,143
)
Redemption of shares of Common Stock
     (672,859 )     -  
Due to stockholders
    
(24,315
)
    
(318,403
)
Proceeds from PPP loan
    
-
      
1,496,468
  
Proceeds from warrant exercise
    
20,906,015
      
173,753
  
Proceeds from sales of common stock, gross proceeds of $7,166,993 less issuance costs of $300,527
     6,866,466       -  
Registered direct offering
    
9,585,000
      
-
  
Net cash provided by financing activities
    
43,415,677
      
232,761
  
Net increase in cash
    
1,542,929
      
603,224
  
Cash, beginning of year
    
699,154
      
95,930
  
Cash, end of year
  
$
2,242,083
    
$
699,154
  
Supplemental disclosure of cash flow information
                
Cash paid during the year for:
                
Interest
  
$
36,493
    
$
293,751
  
Income taxes
    
-
      
750
  
Supplemental schedule of non-cash investing and financing activities:
                
Shares of Preferred Stock issued for investment
  
$
-
    
$
5,000,000
  
Warrants issued for investment
  
$
-
    
$
96,052
  
Preferred dividends satisfied with distribution from investment
  
$
69,663
    
$
275,556
  
Vehicles purchased and financed
  
$
-
    
$
30,658
  
Shares of Common Stock issued for conversion of Solar Project Partners, LLC
  
$
12
    
$
-
  
Shares of Common Stock issued for exercise of Unit Purchase Option
  
$
13
    
$
-
  
Shares of Common Stock issued for conversion of Preferred Stock
   $ 37     $ -  
Shares of Common Stock issued for acquisition of iSun Energy LLC
   $ 2,921,898     $ -  
Shares of Common Stock issued for acquisition of SolarCommunities, Inc.
   $ 15,965,027     $ -  
Shares of Common Stock issued for acquisition of Liberty Electric, Inc.
   $ 249,996     $ -  

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

42
iSUN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020

1.
SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

a)
Organization

iSun, 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.

On September 8, 2021, iSun, Inc. entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, iSun Residential Merger Sub, Inc., a Vermont corporation (the “Merger Sub”) and wholly-owned subsidiary of iSun Residential, Inc., a Delaware corporation (“iSun Residential”) and wholly-owned subsidiary of the Company, SolarCommunities, Inc., a Vermont benefit corporation (“SunCommon”), and Jeffrey Irish, James Moore, and Duane Peterson as a “Shareholder Representative Group” of the holders of SunCommon’s capital stock (the “SunCommon Shareholders”), pursuant to which the Merger Sub merged with and into SunCommon (the “Merger”) with SunCommon as the surviving company in the Merger and SunCommon became a wholly-owned subsidiary of iSun Residential. The Merger was effective on October 1, 2021.

Effective January 19, 2021, the Company changed its corporate name from The Peck Company Holdings, Inc. to iSun, Inc. (the “Name Change”). The Name Change was affected 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 19, 2021. The merger became effective on January 19, 2021 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 20, 2021.

On April 6, 2021, iSun Utility, LLC (“iSun Utility”), a Delaware limited liability company and wholly-owned subsidiary of iSun, Inc., a Delaware corporation (the “Company”), Adani Solar USA, Inc., a Delaware corporation (Adani”), and Oakwood Construction Services, Inc., a Delaware corporation (“Oakwood”) entered into an Assignment Agreement (the “Assignment”), pursuant to which iSun Utility acquired all rights to the intellectual property of Oakwood and its affiliates (the “Project IP”). Oakwood is a utility-scale solar EPC company and a wholly-owned subsidiary of Adani. The Project IP includes all of the intellectual property, project references, templates, client lists, agreements, forms and processes of Adani’s U.S. solar business.

43
b)
Principles of Consolidation

The accompanying consolidated financial statements include the accounts of iSun, Inc. and its direct and indirect wholly owned operating subsidiaries, iSun Residential, Inc., SolarCommunities, Inc., iSun Industrial, LLC, Peck Electric Co., Liberty Electric, Inc., iSun Utility, LLC and iSun Energy, LLC. All material intercompany transactions have been eliminated upon consolidation of these entities.

c)
Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”). Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

The Company would cease to be an “emerging growth company” upon the earliest to occur of: the last day of the fiscal year in which it has more than $1.07 billion in annual revenue; the date it qualifies as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; the issuance, in any three-year period, by it of more than $1.0 billion in non-convertible debt or December 31, 2021.

d)
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 December 31, 2021 and 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.

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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 years ended December 31:

​
  
2021
    
2020
  
Solar Operations
            
Performance obligations satisfied at a point in time
  
$
-
    
$
-
  
Performance obligations satisfied over time
  
$
40,511,603
    
$
17,354,852
  
Total​
  
$
40,511,603
    
$
17,354,852
  
​
                
Electric Operations
                
Performance obligations satisfied at a point in time
  
$
-
    
$
-
  
Performance obligations satisfied over time
  
$
3,631,105
    
$
2,459,373
  
Total​
  
$
3,631,105
    
$
2,459,373
  
​
                
Data and Network Operations
                
Performance obligations satisfied at a point in time
  
$
-
    
$
-
  
Performance obligations satisfied over time
  
$
1,168,952
    
$
1,237,986
  
Total​
  
$
1,168,952
    
$
1,237,986
  
​
                
Total
                
Performance obligations satisfied at a point in time
  
$
-
    
$
-
  
Performance obligations satisfied over time
  
$
45,311,660
    
$
21,052,211
  
Total
  
$
45,311,660
    
$
21,052,211
  

The following table disaggregates the Company’s Solar Operations revenue based operational segment for the years ended December 31:

​
  
2021
    
2020
  
Solar Operations
            
Residential
  
$
12,524,520
    
$
86,774
  
Commercial and Industrial
    
26,613,352
      
17,268,078
  
Utility
    
1,373,731
      
-
  
Total
  
$
40,511,603
    
$
17,354,852
  

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.

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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 606-10-50-14, 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.

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.

e)
Accounts Receivable

Accounts receivable are recorded when invoices are issued and presented on the balance sheet net of the allowance for doubtful accounts. The allowance, which was $84,000 at December 31, 2021 and $84,000 at December 31, 2020, 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 years ended December 31, 2021 and 2020, respectively.

g)
Property and Equipment

Property and equipment greater than $1,000 are recorded at cost. 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.
 
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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
Software
 3-7 years

Total depreciation expense for the years ended December 31, 2021 and 2020 was $681,272 and $585,690, 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 December 31, 2021 and 2020.

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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 (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 December 31, 2021 and 2020, the uninsured balances were approximately $914,000 and $422,000, respectively.

k)
Income Taxes

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 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, estimates in recording the business combinations, investments, impairment on investments and valuation of deferred tax assets. Actual results could differ from those estimates.

n)
Recently Issued Accounting Pronouncements

The Company is an emerging growth company until at minimum December 31, 2023. 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.

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In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers, as if it had originated the contracts. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, and early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

On May 03, 2021, the FASB issued Accounting Standards Update (ASU) 2021-04, 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 2021-04 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 15, 2021, 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.

In August 2020, the FASB issued ASU No. 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. The ASU is effective for public companies, excluding entities eligible to be smaller reporting companies, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020 and adoption must be as of the beginning of the Company’s annual fiscal year. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In September 2020, the FASB issued ASU No. 2020-09, Debt (Topic 470). This ASU amends SEC paragraphs pursuant to SEC release No. 33-10762. We are currently assessing the provisions of this guidance to determine whether or not its adoption will have an impact on our consolidated financial statements and related disclosures. This guidance is effective for fiscal years beginning after December 15, 2021 with early adoption permitted.

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 is effective for the Company’s annual reporting period beginning after December 15, 2021. We are currently assessing the provisions of this guidance to determine whether or not its adoption will have an impact on our consolidated financial statements and related 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 2021 annual reporting period and interim periods beginning first quarter of 2022. The Company is evaluating the impact of ASU 2016-13 will have on its consolidated financial statements and associated disclosures.

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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 $400,000 and $0 of deferred financing costs during the year ended December 31, 2021 and 2020, respectively. Amortization expense associated with deferred financing costs, which is included in interest expense, totaled $103,078 and $3,073 for the years ended December 31, 2021 and 2020, respectively.

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, 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.

q)
Goodwill

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill. At December 31, 2021 and 2020, no goodwill impairment was noted.

r)
Debt Extinguishment

Under ASC 470, debt should be derecognized when the debt is extinguished, in accordance with the guidance in ASC 405-20, Liabilities: Extinguishments of Liabilities. Under this guidance, debt is extinguished when the debt is paid, or the debtor is legally released from being the primary obligor by the creditor. On December 1, 2020, the Company received notification from NBT Bank that the Small Business Administration has approved the forgiveness of the PPP loan in its entirety and as such, the full $1,496,468 has been recognized in the income statement as a gain upon debt extinguishment for the year ended December 31, 2020 On December 6, 2021, SunCommon received notification from Citizens Bank N.A. that the Small Business Administration has approved the forgiveness of the PPP loan in its entirety and as such, the full $2,000,000 has been recognized in the income statement as a gain upon debt extinguishment for the year ended December 31, 2021.

s)
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. No inventory allowance exists at December 31, 2021 and December 31, 2020, respectively.

t)
Warrant liability

The Company accounts for warrants to acquire shares of Common Stock as liabilities held at fair value on the consolidated balance sheets. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a change in fair value of warrant liabilities in the Company’s consolidated statements of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants. At that time, the warrant liability will be reclassified to additional paid-in capital.

u)
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.

v)
Legal Contingencies

The Company accounts for liabilities resulting from legal proceedings when it is possible to evaluate the likelihood of an unfavorable outcome in order to provide an estimate for the contingent liability. At December 31, 2021 and 2020, there are no material contingent liabilities arising from pending litigation.

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2.
ACQUISITIONS
 
iSun Energy, LLC

On January 19, 2021, the Company entered into an Agreement and Plan of Merger and Reorganization with iSun Energy LLC.  iSun Energy LLC became a wholly-owned subsidiary of the Company. iSun Energy, LLC is a provider of products and services designed to support the electric vehicle market. In connection with Merger, Sassoon Peress, the sole member, will receive 400,000 shares of the Company’s Common Stock over five years valued at $2,404,000, 200,000 shares of which were issued at the closing, warrants to purchase up 200,000 shares of the Company’s Common Stock, valued at $517,898, cash considerations of $85,135 and up to 240,000 shares of the Company’s Common Stock based on certain performance milestones for an aggregate value of $3,007,033.



The 400,000 shares of Company’s Common Stock were valued utilizing the market close price of $6.01 on the date, December 30, 2020, which the binding letter of intent was executed. For the warrants, the Company determined the fair market value of these options by using the Black Scholes option valuation model. The key assumptions used in the valuation of the warrants were as follows; a) volatility of 103.32%, b) term of 3 years, c) risk free rate of 0.36% and d) a dividend yield of 0%.



At December 31, 2021, the amount of $2.7 million, net of amortization of $0.3 million, is included as an Intangible Asset. The Company deemed the acquisition an asset acquisition in as much as the acquired assets consisted primarily of the iSun brand and know-how and contained no other business processes. Amortization is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful life is 10 years. For the year ending December 31, 2021 and 2020, amortization expense is $0.3 million and $0, respectively.


Assignment Agreement

On April 6, 2021, iSun Utility, LLC (“iSun Utility”), a Delaware limited liability company and wholly-owned subsidiary of Company, Adani Solar USA, Inc., a Delaware corporation (Adani”), and Oakwood Construction Services, Inc., a Delaware corporation (“Oakwood”) entered into an Assignment Agreement (the “Assignment”), pursuant to which iSun Utility will acquire all rights to the intellectual property of Oakwood and its affiliates (the “Project IP”). Oakwood was a utility-scale solar EPC company and a wholly-owned subsidiary of Adani. The Project IP includes all of the intellectual property, project references, templates, client lists, agreements, forms and processes of Adani’s U.S. solar business.

Under the Assignment, iSun Utility purchased the Project IP from Adani and Oakwood for total consideration of $2.7 million, with $1.0 million due immediately and the remaining $1.7 million contingent upon the achievement of certain milestones, as described in this paragraph. Under the Assignment provides that iSun Utility acquired all membership interests in Hartsel Solar, LLC (“Hartsel”), and through this transaction iSun Utility acquired all rights to Hartsel’s in-process solar project (the “Hartsel Project”). If Hartsel achieves certain milestones, iSun Utility will pay to Adani $0.7 million to secure equipment previously purchased allowing for safe harbor of the 30% ITC and an additional amount of $1.0 million for key development milestones. The contingent provisions of the Assignment Agreement entered into with Oakwood and Adani 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.

At December 31, 2021, the amount of $1.0 million is included as an Intangible Asset. The Company deemed the acquisition an asset acquisition in as much as the acquired assets consisted primarily of the know-how and contained no other business processes. Amortization is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful life is 10 years. For the year ending December 31, 2021 and 2020, amortization expense is $0 as the project for which the asset pertains was not placed into service until 2022.

Business Combination

On September 8, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, iSun Residential Merger Sub, Inc., a Vermont corporation (the “Merger Sub”) and wholly-owned subsidiary of iSun Residential, Inc., a Delaware corporation (“iSun Residential”) and wholly-owned subsidiary of the Company, SolarCommunities, Inc., a Vermont benefit corporation (“SunCommon”), and Jeffrey Irish, James Moore, and Duane Peterson as a “Shareholder Representative Group” of the holders of SunCommon’s capital stock (the “SunCommon Shareholders”), pursuant to which the Merger Sub merged with and into SunCommon (the “Merger”) with SunCommon as the surviving company in the Merger and SunCommon became a wholly-owned subsidiary of iSun Residential. In connection with Merger, the SunCommon Shareholders received merger consideration totaling $48,300,000 consisting of (i) cash in the amount of $25,534,621; (ii) Common Stock of the Company (“Common Stock”) in the amount of $15,965,027, priced at $8.816 per share; and (iii) earn out consideration of up to $10,000,000 upon the fulfillment of certain conditions. The net present value of the earnout provision was determined to be $6.8 million and the Company has included the $3.5 million and $3.3 million as current in accrued expenses and long-term liabilities in other liabilities, respectively. The shares of the Common Stock issued in connection with the Merger were listed on the NASDAQ Capital Market. The Merger closed and was effective on October 1, 2021.

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The Company will report begin reporting in segments in the future as we do not currently allocate labor amongst the operating divisions.

The purchase price for SolarCommunities, Inc. consisted of approximately $48,300,000 in cash, equity and earnout provision subject to post-closing adjustments related to working capital, cash, indebtedness and transaction expenses. The Acquisition was accounted for under ASC 805 and the financial results of SunCommon have been included in the Company’s consolidated financial statements since the date of the Acquisition.

Purchase Price Allocation

Under the purchase method of accounting, the transaction was valued for accounting purposes at approximately $48,300,000 which was the fair value of SolarCommunities, Inc. at the time of acquisition. The assets and liabilities of SolarCommunities, Inc. were recorded at their respective fair values as of the date of acquisition. Any difference between the cost of SolarCommunities, Inc. and the fair value of the assets acquired and liabilities assumed is recorded as goodwill. The acquisition date preliminary estimated fair value of the consideration transferred consisted of the following:

Purchase price (in 000’s):
            
Fair value of iSun’s shares of Common Stock issued (1,810,955 shares), at $8.816 per share
        
$
15,965
  
Cash paid
          
25,535
  
Earnout provision
          
6,800
  
Total consideration transferred
        
$
48,300
  
Fair value of identifiable assets acquired:
              
Cash and cash equivalents
  
$
581
          
Accounts receivable
    
3,409
          
Inventory
    
2,653
          
Contract assets
    
610
          
Premises and equipment
    
4,447
          
Trademark and brand
     11,980          
Backlog
    
3,220
          
Other current assets
    
762
          
Total identifiable assets
  
$
27,662
          
Fair value of identifiable liabilities assumed:
                
Accounts payable and accrued liabilities
  
$
5,562
          
Contract liabilities
    
1,103
          
Customer deposits
    
355
          
Deferred tax liabilities
    
2,070
          
Loans payable
    
6,282
          
Other liabilities
    
17
          
Total identifiable liabilities
  
$
15,389
          
Net assets acquired including identifiable intangible assets
            
12,273
  
Goodwill
          
$
36,027
  

During the year ended December 31, 2021, we recorded non-recurring total transaction costs related to the Acquisition of $1.235 million. These expenses were accounted for separately from the net assets acquired and are included in general and administrative expense.

We will continue to conduct assessments of the net assets acquired and recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values. We expect that it may take into the second quarter of 2022 until all post-closing assessments and adjustments are finalized.

52
Business Combination

On November 18, 2021, John Stark Electric, Inc., a New Hampshire corporation (“JSI”) and wholly-owned subsidiary of iSun, Inc., a Delaware corporation (the “Company”), Liberty Electric, Inc., a New Hampshire Corporation (“Liberty”) and John P. Comeau (“Comeau”) after obtaining required consents  released signature pages and closed an Asset Purchase Agreement (the “Asset Purchase Agreement”), pursuant to which JSI acquired all of the assets of Liberty for a purchase price of $1.4 million, subject to a post-closing working capital adjustment. The purchase price was paid as follows: (i) cash in the amount of $1.2 million; (ii) Common Stock of the Company in the amount of $250,000, priced at $8.4035 per share, which is the 10-day volume weighted average Nasdaq closing price immediately prior to the Closing Date; and (iii) earn out consideration of up to $300,000 (1) upon the fulfillment of certain conditions.

The purchase price for Liberty Electric, Inc. consisted of $1.4 million in cash, equity and cash consideration for existing working capital subject to post-closing adjustments related to working capital, cash, indebtedness and transaction expenses. The Acquisition was accounted for under ASC 805 and the financial results of Liberty have been included in the Company’s consolidated financial statements since the date of the Acquisition.

Purchase Price Allocation

Under the purchase method of accounting, the transaction was valued for accounting purposes at $1.4 million which was the fair value of Liberty Electric, Inc. at the time of acquisition. The assets and liabilities of Liberty Electric, Inc. were recorded at their respective fair values as of the date of acquisition. Any difference between the cost of Liberty Electric, Inc. and the fair value of the assets acquired and liabilities assumed is recorded as goodwill. The acquisition date estimated fair value of the consideration transferred consisted of the following:

Purchase price (in 000’s):
            
Fair value of iSun’s shares of Common Stock issued (29,749 shares), at $8.4035 per share
        
$
250
  
Cash paid
          
1,195
  
Earnout provision
          
-
  
Total consideration transferred
        
$
1,445
  
Fair value of identifiable assets acquired:
              
Accounts receivable
  
$
562
          
Inventory  
    
90
          
Contract assets
    
97
          
Premises and equipment
    
38
          
Other current assets
    
2
          
Total identifiable assets
  
$
789
          
Fair value of identifiable liabilities assumed:
                
Accounts payable and accrued liabilities
  
$
219
          
Contract liabilities
    
5
          
Total identifiable liabilities
  
$
224
          
Net assets acquired including identifiable intangible assets
          

565
  
Goodwill           $
880
  

(1)
The earnout provision has been deemed unlikely to be achieved and has not been included in the allocation of the purchase price.

53
Pro Forma Information (Unaudited)

The results of operations for the Acquisitions of SolarCommunities, Inc. and Liberty Electric, Inc. since the October 1, 2021 and November 1, 2021 closing dates, respectively, have been included in our December 31, 2021 consolidated financial statements and include approximately $12.5 million and $0.7 million of total revenue. The following unaudited pro forma financial information represents a summary of the consolidated results of operations for the years ended December 31, 2021 and 2020, assuming the acquisition had been completed as of January 1, 2020. The pro forma financial information includes certain non-recurring pro forma adjustments that were directly attributable to the business combination. The proforma adjustments include the elimination of Acquisition transaction expenses totaling $1.235 million incurred in 2021. The pro forma financial information is not necessarily indicative of the results of operations that would have been achieved if the acquisition had been effective as of these dates, or of future results.

   
Year Ended December 31,
  
(in 000’s)
  
2021
    
2020
  
Revenue, net
  
$
72,501
    
$
58,524
  
                 
Net loss
  
$
(9,202
)
  
$
(2,147
)
                 
Weighted average shares of common stock outstanding, basic and diluted
     10,657,665       7,112,386  
                 
Net loss per share, basic and diluted
   $ (0.86 )   $ (0.30 )

3.
LIQUIDITY AND FINANCIAL CONDITION

In 2021, the Company experienced a net operating loss and negative cash flow from operations. At December 31, 2021, the Company had balances of cash of $2.2 million, working capital deficit of $10.3 million, and total stockholders’ equity of $59.9 million. Included in the working capital deficit was a short-term loan for approximately $6.0 million which was paid in full subsequent to year end and approximately $2.0 million in non-cash liabilities. To date, the Company has relied predominantly on operating cash flow to fund its operations, borrowings from its credit facilities, sales of Common Stock and exercise of public warrants. The availability of financing and the cash flow from operations mitigates the potential for substantial doubt.

The Company does not expect to continue to incur losses from operations as the net operating loss was a result of the negative impact of the COVID-19 pandemic. The Company’s operations were delayed for approximately six months of the year ended December 31, 2020, which resulted in an overall reduction in revenue. For the year ended December 31, 2021, margin was impacted significantly due to material and commodity price increases and inefficiencies resulting from labor shortages. The Company modified contract terms to allow for an adjustment in contract terms to account for any fluctuations in material pricing.

The demand for solar and electric vehicle infrastructure continues to increase across all customer groups. Our residential division has customer orders of approximately $19.2 million expected to be completed within four to six months, our commercial division has a contracted backlog of approximately $9.3 million expected to be completed within six to eight months, our industrial division has a contracted backlog of approximately $73.8 million expected to be completed within twelve to eighteen months and our utility division has 550 MW of projects currently under development with an estimated commencement date in the third quarter of 2022. The customer demand across our segments will provide short-term operational cash flow.

54
On January 8, 2021 we entered into a Securities Purchase Agreement with two institutional investors providing for the issuance and sale by the Company of an aggregate 840,000 shares of our Common Stock in a registered direct offering at a purchase price of $12.50 per Share for gross proceeds of approximately $10.5 million before deducting fees and offering expenses. The Company’s Form S-3 Registration Statement is effective and allows the Company to offer, issue and sell up to $50,000,000 in the aggregate of our shares of Common Stock. After the registered direct offering, the Company had potential gross proceeds of approximately $39.5 million available from sales of Common Stock pursuant to the S-3 Registration Statement. The Company entered into a Sales Agreement with B. Riley Securities providing for the sale of shares of Common Stock in at the market (“ATM”) offerings.  As of December 31, 2021, the Company had sold 887,551 shares of Common Stock under ATM offerings and received aggregate gross proceeds of $7,166,993. As of March 31, 2022, the Company had sold 1,847,505 additional shares of Common Stock in ATM offerings.

On various dates from January 1, 2021 through April 12, 2021, certain holders of the Company’s Public Warrants exercised the right to convert the warrants into shares of Common Stock. As of April 12, 2021, a total of 3,641,018 Public Warrants were submitted for exercise resulting in an issuance of 1,820,509 with net proceeds of $20,906,015 being received by the Company.

As of March 31, 2022, the Company had approximately $21.2 million in gross proceeds potentially available from sales of Common Stock pursuant to the S-3 Registration Statement which could be utilized to support any short-term deficiencies in operating cash flow.

The Company believes its current cash on hand, proceeds generated from the registered direct offering and additional sales of Common Stock, 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.

4.
ACCOUNTS RECEIVABLE

Accounts receivable consist of:

​
  
December 31,
2021
    
December 31,
2020
  
Accounts receivable - contracts in progress
  
$
13,886,454
    
$
6,206,760
  
Accounts receivable - retainage
    
534,856
      
93,197
  
​
    
14,421,310
      
6,299,957
  
Allowance for doubtful accounts
    
(84,000
)
    
(84,000
)
Total
  
$
14,337,310
    
$
6,215,957
  

Bad debt expense was $0 and $164,292 for the years ended December 31, 2021 and 2020, 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 December 31, 2021 and 2020:

​
  
December 31,
2021
    
December 31,
2020
  
Costs in excess of billings
  
$
3,451,705
    
$
216,261
  
Unbilled receivables, included in costs in excess of billings
    
552,274
      
1,138,341
  
​
    
4,003,979
      
1,354,602
  
Retainage
    
534,856
      
93,197
  
​
  
$
4,538,835
    
$
1,447,799
  

55
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 December 31, 2021 will be billed and collected within one year. Contract liabilities were as follows at December 31, 2021 and 2020:

​
  
December 31,
2021
    
December 31,
2020
  
Billings in excess of costs
  
$
2,388,501
    
$
1,140,125
  

5.
CONTRACTS IN PROGRESS

Information with respect to contracts in progress are as follows:

​
  
December 31,
2021
    
December 31,
2020
  
Expenditures to date on uncompleted contracts
  
$
13,715,664
    
$
7,764,622
  
Estimated earnings thereon
    
2,783,733
      
2,178,868
  
​
    
16,499,397
      
9,943,490
  
Less billings to date
    
(15,436,193
)
    
(10,867,354
)
​
    
1,063,204
      
(923,864
)
Plus under billings remaining on contracts 100% complete
    
552,274
      
1,138,341
  
Total
  
$
1,615,478
    
$
214,477
  

Included in accompany balance sheets under the following captions:

​
  
December 31,
2021
    
December 31,
2020
  
Cost and estimated earnings in excess of billings
  
$
4,003,979
    
$
1,354,602
  
Billings in excess of costs and estimated earnings on uncompleted contracts
    
(2,388,501
)
    
(1,140,125
)
​
  
$
1,615,478
    
$
214,477
  

6.
LONG-TERM DEBT

A summary of long-term debt is as follows:

​
  
December 31,
2021
    
December 31,
2020
  
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.
  
$
641,464
    
$
683,268
  
NBT Bank, National Association, repaid in January 2021
    
-
      
12,050
  
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.
    
216,533
      
246,135
  
NBT Bank, National Association, 4.15% interest rate, secured by all business assets, payable in monthly installments of $3,677 through April 2026.
    
174,525
      
210,475
  
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.
    
376,651
       426,624  
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.
     48,039       80,001  
Various vehicle loans, interest ranging from 0% to 10.09%, total current monthly installments of approximately $34,878 secured by vehicles, with varying terms through 2027.
    
1,147,255
      
294,799
  
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 5/10 – 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.     47,700       73,467  
B. Riley Commercial Capital, LLC, 8.0% interest rate, payable in full on October 15, 2022     6,045,852        
Unsecured note payable in connection with the PPP, established by the federal government Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which bears interest at 1% through April 2026. The Company has not yet applied for forgiveness.     2,591,500       -  

56
​
  
December 31,
2021
    
December 31,
2020
  
CSA 5: Payable in monthly installments of $2,414, including interest at 5.5%, due August 2026.     118,997       -  
CSA 17: Payable in monthly installments of $2,414, including interest at 5.5%. The interest rate will become variable at the VEDA Prime Rate from April 2025 through maturity in April 2027.​
    
132,563
       -
  
CSA 36: Payable in monthly installments of $2,414, including interest at 5.5%. The interest rate will become variable at the VEDA Prime Rate from June 2025 through maturity in June 2027.     137,213       -  
CSA 5: Payable in monthly interest only installments of $1,104 through August 2019; then payments of $552, representing half of monthly interest only payments, through August 2026 with other half of interest only payments capitalized into principal; then $2,485 monthly payments of principal and interest, with a balloon payment of $20,142 due August 2034; interest at 11.25% throughout the loan term.     117,712       -  
CSA 17: Payable in monthly interest only installments of $1,104 through April 2020; then payments of $552, representing half of monthly interest only payments, through April 2027 with other half of interest only payments capitalized into principal; then $2,485 monthly payments of principal and interest, with a balloon payment of $20,142 due April 2035; interest at 11.25% throughout the loan term.     117,712       -  
CSA 36: Payable in monthly interest only installments of $1,104 through June 2020; then payments of $552, representing half of monthly interest only payments, through June 2027 with other half of interest only payments capitalized into principal; then $2,485 monthly payments of principal and interest, with a balloon payment of $20,142 due June 2035; interest at 11.25% throughout the loan term.     117,712       -  
Equipment loans     94,493       -  
Easement liabilities     31,081       -  
      12,157,002       2,026,819  
Less current portion
    
(6,694,296
)
    
(308,394
)
​
    
5,462,706
      
1,718,425
  
Less debt issuance costs
    
(313,851
)
    
(16,930
)
Long-term debt
  
$
5,148,855
    
$
1,701,495
  

57
Maturities of long-term debt are as follows:

Year ending December 31:
  
Amount
  
2022
  
$
6,694,296
  
2023
    
577,240
  
2024
    
532,735
  
2025
    
442,963
  
2026
    
2,932,173
  
Thereafter
    
977,595
  
​
  
$
12,157,002
  

Payroll Protection Loan

On April 24, 2020, the Company entered into a Promissory Note with NBT Bank, N.A. as the lender (“Lender”), pursuant to which the Lender agreed to make a loan to the Company under the Payroll Protection Program (“PPP Loan”) offered by the U.S. Small Business Administration (“SBA”) in a principal amount of $1,487,624 pursuant to Title 1 of the Coronavirus Aid, Relief and Economic Security Act (“CARES”).

The PPP Loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves; rent; utilities; and interest on certain other outstanding debt. The amount that will be forgiven will be calculated in part with reference to the Company’s full-time headcount during the 24-week period following the funding of the PPP Loan.

On December 1, 2020, the Company received notification from NBT Bank that the Small Business Administration has approved the forgiveness of the PPP loan in its entirety and as such, the full $1,496,468 has been recognized in the income statement as a gain upon debt extinguishment for the year ended December 31, 2020.

In June, 2020, SolarCommunities, Inc. entered into a Promissory Note with Citizens Bank, N.A. as the lender (“Lender”), pursuant to which the Lender agreed to make a loan to the Company under the Payroll Protection Program (“PPP Loan”) offered by the U.S. Small Business Administration (“SBA”) in a principal amount of $2,591,500 pursuant to Title 1 of the Coronavirus Aid, Relief and Economic Security Act (“CARES”). On January 21, 2022, SolarCommunities, Inc. received notification from Citizens Bank, N.A. that the Small Business Administration has approved the forgiveness of the PPP loan in its entirety and as such, the full $2,591,500 will be recognized in the income statement as a gain upon debt extinguishment for the three months ending March 31, 2022.

In February 2021, SolarCommunities, Inc., an indirect wholly-owned subsidiary of the Company, entered into a Promissory Note with Citizens Bank, N.A. as the lender (“Lender”), pursuant to which the Lender agreed to make a loan to the Company under the Payroll Protection Program (“PPP Loan”) offered by the U.S. Small Business Administration (“SBA”) in a principal amount of $2,000,000 pursuant to Title 1 of the Coronavirus Aid, Relief and Economic Security Act (“CARES”).

The PPP Loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves; rent; utilities; and interest on certain other outstanding debt. The amount that will be forgiven will be calculated in part with reference to the Company’s full-time headcount during the 24-week period following the funding of the PPP Loan.

On December 6, 2021, SolarCommunities, Inc. received notification from Citizens that the Small Business Administration has approved the forgiveness of the PPP loan in its entirety and as such, the full $2,000,000 has been recognized in the income statement as a gain upon debt extinguishment for the year ended December 31, 2021.

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 and subject to an annual review in September 2022. The balance outstanding was $4,468,298 and $2,482,127 at December 31, 2021 and December 31, 2020, respectively Borrowing is based on 80% of eligible accounts receivable. 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. As of December 31, 2021, the Company was not in compliance with the financial covenants but received a waiver of covenant default from NBT Bank.

58
8.
COMMITMENTS AND CONTINGENCIES


In 2020, the Company entered into a ten-year lease agreement for a new headquarters in Williston, Vermont consisting of approximately 6,250 square feet of office space and 6,500 square feet of warehouse. The lease has annual rent of $108,162 with an annual increase of 2%.



The Company leases an office and warehouse facilities in Waterbury, Vermont under agreements expiring in May 2028 and August 2026, respectively.  Monthly base rent for the office and warehouse facilities currently approximates $27,500, subject to annual 3% increases.



The Company leases an office and warehouse facility in Rhinebeck, New York from a stockholder.  Monthly base rent currently approximates $7,100 and is on a month-to-month basis.

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 lease has an annual rent of $49,805 and expired in 2021.

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 $353,160 and $62,021 for the years ended December 31, 2021 and 2020, respectively.

The Company leases vehicles and office equipment under various agreements expiring through June 2026. As of December 31, 2021, aggregate monthly payments required under these leases approximates $35,000.

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 $700,375 and $228,667 for the year ended December 31, 2021 and 2020, respectively.

Future minimum lease payments required under all of the non-cancelable operating leases are as follows:

Year ending December 31:
  
Amount
  
2022
  
$
818,765
  
2023
    
783,878
  
2024
    
778,540
  
2025
    
768,149
  
2026
    
705,029
  
Thereafter
    
1,328,415
  
​
  
$
5,182,776
  

59
9. WARRANTS

On March 9, 2021, the Company announced its intention to redeem all of its outstanding public warrants to purchase shares of the Company’s Common Stock that were issued under the Warrant Agreement.

On April 12, 2021, the Company redeemed approximately 453,764 Warrants for $0.01 per warrant that remained outstanding on the Redemption Date, in accordance with the Public Warrant terms. After the redemption, as of April 12, 2021, the Company had no outstanding public warrants outstanding.
 
As of December 31, 2021, the Company received notification that (3,641,018) warrants issued in connection with the Company’s (Jensyn Acquisition Corp.) initial public offering were exercised and 1,820,509 shares of Common Stock were issued in connection with such exercise resulting in cash proceeds to the Company of $20,906,015.

   
December 31,
2021
    
December 31,
2020
  
Beginning balance
    
4,163,926
       4,194,144  
Granted
    
-
       -  
Exercised
    
(3,641,018
)
     (30,218 )
Redeemed
    
(453,764
)
     -  
Ending balance
    
69,144
       4,163,926  

10.
FAIR VALUE MEASUREMENTS

The Public Warrants were traded under the symbol ISUNW and the fair values were based upon the closing price of the Public Warrants at each measurement date. The Private Warrants were valued using a Black-Scholes model, pursuant to the inputs provided in the table below:

Input
  
Mark-to-Market
Measurement at
December 31, 2021
    
Mark-to-Market
Measurement at
December 31, 2020
  
Risk-free rate
    
0.06
%
    
0.214
%
Remaining term in years
    
2.47
      
3.47
  
Expected volatility
    
152.90
%
    
81.0
%
Exercise price
  
$
11.50
    
$
11.50
  
Fair value of common stock
  
$
5.96
    
$
5.95
  

60
The following table sets forth the Company’s assets and liabilities which are measured at fair value on a recurring basis by level within the fair value hierarchy:

              
Fair Value Measurement as of
December 31, 2021
   
   
Total
    
Level 1
    
Level 2
    
Level 3
  
Liabilities:
                        
Public Warrants
  
$
-
    
$
-
    
$
-
    
$
-
  
Private Warrants
    
148,013
      
-
      
-
      
148,013
  

           
Fair Value Measurement as of
December 31, 2020
   
   
Total
    
Level 1
    
Level 2
    
Level 3
  
Liabilities:
                        
Public Warrants
  
$
773,956
    
$
773,956
    
$
-
    
$
-
  
Private Warrants
    
350,455
      
-
      
-
      
350,455
  

The following is a roll forward of the Company’s Level 3 instruments:

​
  
December 31,
2021
    
December 31,
2020
  
Beginning balance
  
$
350,455
    
$
70,680
  
Fair value adjustment – Warrant liability
    
(202,442
)
    
279,775
  
Ending balance
  
$
148,013
    
$
350,455
  

61
11.
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 that expires May 31, 2022. During the years ended December 31, 2021 and 2020, the Company incurred the following union assessments.


  
December 31,
2021
    
December 31,
2020
  
Pension fund
  
$
321,920
    
$
310,023
  
Welfare fund
    
981,427
      
971,720
  
National employees benefit fund
    
91,180
      
90,993
  
Joint apprenticeship and training committee
    
33,163
      
20,233
  
401(k) matching
    
110,840
      
43,998
  
Total
  
$
1,538,530
    
$
1,436,967
  

Multiemployer Plans

The Company is party to collective bargaining agreements with unions representing certain of their employees, which require the Company to pay specified wages, provide certain benefits to their union employees and contribute certain amounts to Multi-Employer Pension Plans (“MEPP”). The Pension Plan Agreement (“PPA”) defines the funding rules for defined benefit pension plans and establishes funding classifications for U.S.-registered multiemployer pension plans. Under the PPA, plans are classified into one of the following five categories, based on multiple factors, also referred to as a plan’s “zone status”: Green (safe), Yellow (endangered), Orange (seriously endangered), and Red (critical or critical and declining). Factors included in the determination of a plan’s zone status include: funded percentage, cash flow position and whether the plan is projecting a minimum funding deficiency.

A multiemployer plan that is so underfunded as to be in “endangered,” “seriously endangered,” “critical,” or “critical and declining” status (as determined under the PPA) is required to adopt a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”), which, among other actions, could include decreased benefits and increased employer contributions, which could take the form of a surcharge on benefit contributions. These actions are intended to improve their funding status over a period of years. If a pension fund is in critical status, a participating employer must pay an automatic surcharge in addition to contributions otherwise required under the collective bargaining agreement (“CBA”). With some exceptions, the surcharge is equal to 5% of required contributions for the initial critical year and 10% for each succeeding plan year in which the plan remains in critical status. The surcharge ceases on the effective date of a CBA (or other agreement) that includes contribution and benefit terms consistent with the rehabilitation plan. Certain plans in which the Company participates are in “endangered,” “seriously endangered,” “critical,” or “critical and declining” status. The amount of additional funds, if any, that the Company may be obligated to contribute to these plans in the future cannot be estimated due to the uncertainty of the future levels of work that could be required of the union employees covered by these plans, as well as the required future contribution rates and possible surcharges applicable to these plans.

Details of significant multiemployer pension plans as of and for the periods indicated, based upon information available to the Company from plan administrators as well as publicly available information on the U.S. Department of Labor website, are provided in the following table:

​Multiemployer
  
Employer
Identification
      Plan    
Contributions
For the Years Ended
December 31,
  
Expiration
Date of
​
Pension Protection Act Zone Status
​
  FIP/RP
 
Pension Plan
  
Number
    
Number
    
2021
    
2020
  
CBA
​
2021
​
As of
​
2020
​
As of
​
Status
Surcharge
National Electrical Benefit Fund
    
53-0181657
      
1
      
91,180
      
90,993
  
5/31/2022
​
Green
​
12/31/2020
​
Green
​
12/31/2019
​
NA
​
No

62
12.
INCOME TAXES

The provision for income taxes for the year ended December 31, 2021 and 2020 consists of the following:

​
  
2021
    
2020
  
Current
            
Federal
  
$
(658
)
   $ -  
State
    
(5,010
)
    
750
  
​
                
Total Current
    
(5,668
)
    
750
  
​
                
Deferred
                
Federal
     (1,446,680 )    
(369,705
)
State
     (462,493 )    
(118,218
)
​
                
Total Deferred
   $ (1,909,173 )    
(487,923
)
​
                
Benefit for Income Taxes
   $ (1,914,841 )  
$
(487,173
)

The Company’s total deferred tax assets and liabilities at December 31, 2021 and 2020 are as follows:

​
  
2021
    
2020
  
Deferred tax assets (liabilities)
            
Accruals and reserves
   $ 169,693    
$
23,758
  
Tax credits
     514,216       -  
Net operating loss
     6,182,372      
812,996
  
Total deferred tax assets
     6,866,281      
836,754
  
​
                
Property and equipment
     (3,465,745 )    
(1,447,312
)
Intangibles
     (3,856,597 )     -  
Stock-based compensation
     (315,595 )     -  
Total deferred tax liabilities
     (7,637,937 )    
(1,447,312
)
​
                
Net deferred tax liability
  
$
(771,656
)
  
$
(610,558
)

The Company 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. There were no uncertain tax positions as of December 31, 2021 and 2020. If the Company were to incur interest and penalties related to income taxes, these would be included in the provision for income taxes, there were none for the year ended December 31, 2021 and 2020 respectively. Generally, the three tax years previously filed remain subject to examination by federal and state tax authorities. The Company does not expect a material change in uncertain tax positions to occur within the next 12 months.

63
Reconciliation between the effective tax on income from operations and the statutory tax rate is as follows:

​
  
2021
    
2020
 
Income tax expense at federal statutory rate
   $ (1,683,335 )  
$
(308,119
)
Paycheck Protection Program tax exempt loan forgiveness
     (420,000 )    
(412,295
)
Permanent differences
     22,627      
44,816
  
Permanent differences for change in fair value of warrants
    
(205,044
)
    
204,904
  
Stock compensation subject to §162(m) limitation
     204,752       -  
Non-deductible intangible assets     833,399       -  
Other adjustments
     3,852      
15,726
  
State and local taxes net of federal benefit
     (671,092 )    
(32,205
)
Income tax benefit
   $ (1,914,841 )  
$
(487,173
)

The Company received a loan under the CARES Act Payroll Protection Program (“PPP”) of $1,487,624. The Company’s acquisition of SolarCommunities, Inc. & Subsidiaries included the acquisition of outstanding “PPP” loans of $2,591,500 and $2,000,000. Proceeds from the loans were used to cover documented expenses related to payroll, rent and utilities, during the 24-week period, subsequent to the cash being received by the Company, are eligible to be forgiven. The “PPP” loan was forgiven in its entirety in 2020 and the income is deemed to be non-taxable which results in the Company’s effective tax rate differing from the statutory rate.  The SolarCommunities, Inc & Subsidiaries PPP loan of $2,000,000 was forgiven in its entirety in 2021.

The Company has federal net operating losses of approximately $23,000,000 of which $2,200,000 will expire beginning in 2035, $20,800,000 of the net operating losses do not expire. Net operating losses incurred beginning in 2018 are not subject to expiration under the Tax Cuts and Jobs Act, but the annual usage is limited to 80% of pre net operating loss taxable income for years beginning after December 31, 2020. The Company has tax credit carryforwards of approximately $514,000 which will expire beginning in 2034. We believe that it is more likely than not that the tax benefit of these net operating losses will be fully realized, as such no valuation allowance has been recorded. The deferred tax assets for the net operating losses are presented net with deferred tax liabilities, which primarily consist of book and tax depreciation differences.

13.
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 $248,450 and $189,958 for the years ended December 31, 2021 and 2020, 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, 2021 is:

Total assets
  
$
133,377,815
  
Total liabilities
  
$
63,743,334
  
Comprehensive income
  
$
12,495,600
  

NCL’s fiscal year end is September 30, 2021.

​
  
December 31,
2021
    
December 31,
2020
  
Investment in NCL
            
Capital
  
$
36,000
    
$
36,000
  
Cash security
    
194,167
      
158,785
  
Investment income in excess of losses (incurred and reserves)
    
40,263
      
3,320
  
Total
  
$
270,430
    
$
198,105
  

64
14.
RELATED PARTY TRANSACTIONS

In 2014, the minority stockholders of Peck Electric Co., who sold the building that the Company formerly occupied, lent the proceeds to the majority stockholders of Peck Electric Co. who contributed $400,000 of the net proceeds as paid in capital. At December 31, 2021 and December 31, 2020, the amount owed of $21,000 and $73,000, respectively, 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 December 31, 2021 and December 31, 2020, the amounts due of $38,530 and $602,463, respectively, are included in the “due to stockholders” as there is a right to offset.

In 2019, the Company’s majority stockholders lent proceeds to the Company to help with cash flow needs. At December 31, 2021 and December 31, 2020, the amounts owed of $59,530 and $286,964, respectively, are included in the “due to stockholders” as there is a right to offset.

The amounts below include amounts due to/from stockholders as of December 31, 2021 and December 31, 2020:

​
  
December 31,
2021
    
December 31,
2020
  
Due to stockholders consists of unsecured notes to stockholders with interest at the mid-term AFR rate (1.60% at December 31, 2021).
  
$
-
    
$
24,315
  

15.
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 $58,884. 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 December 31, 2021 and 2020 and recorded in the statement of operations when incurred.

16.
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.

65
​
  
Years Ended December 31,
  
​
  
2021
    
2020
  
Option to purchase Common Stock, from Jensyn’s IPO
    
429,000
      
429,000
  
Warrants to purchase Common Stock, from Jensyn’s IPO
    
34,572
      
2,277,141
  
Warrants to purchase Common Stock, from Solar Project Partners, LLC. Exchange and Subscription Agreement
    
-
      
275,000
  
Conversion of Preferred Stock to Common Stock from GreenSeed Investors, LLC Exchange and Subscription Agreement
    
-
      
370,370
  
Unvested restricted stock awards
     160,667       -  
Unvested options to purchase Common Stock
     201,334       -  
Totals
    825,573       3,351,511  

The Company has contingent share arrangements and warrants with 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.

17.
PREFERRED STOCK

The Company has authorized and designated 200,000 shares of convertible preferred stock (the “Preferred Stock”). 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.

The Preferred Stock has the following rights and privileges:

Voting – The holders of the Preferred Stock are not entitled to voting rights.

Conversion – Each share of Preferred Stock, is convertible at the option of the holder into 1.85185 shares of Common Stock. The outstanding shares of Preferred Stock automatically convert into Common Stock upon the occurrence of (i) the trading of the shares of Common Stock is equal to or greater than $15.00 per share for any 20 days in a 30 day trading period, or (ii) when there is a change in control and the holder would receive consideration equal to or greater than the preferred liquidation preferences.

66
Dividends – The holders of the Preferred Stock in preference to the holders of Common Stock, are entitled to receive, if and when declared by the Board of Directors, dividends at the rate of $2.00 per share per annum.

Liquidation – In the event of any liquidation, dissolution, winding-up or sale or merger of the Company, whether voluntarily or involuntarily, each holder of Preferred Stock is entitled to receive, in preference to the holders of Common Stock, a per-share amount equal to the original issue price of $25.00 (as adjusted, as defined), plus all declared but unpaid dividends.

Redemption – The Company may redeem any or all of the shares at any time by paying in cash $27.50 per share plus any accrued and unpaid dividends solely at the Company’s option.

Pursuant to the First Amended Certificate of Designation, on February 22, 2021 the Company notified all holders of the Preferred Shares of the mandatory conversion of the Preferred Shares into shares of Common Stock. A total of 370,370 shares of Common Stock were issued pursuant to the conversion.

18.
RESTRICTED STOCK AND STOCK OPTIONS

Options
As of December 31, 2021, the Company has 201,334 non-qualified stock options outstanding to purchase 201,334 shares of Common Stock, per the terms set forth in the option agreements. The stock options vest at various times and are exercisable for a period of five years from the date of grant at an exercise price of $1.49 per share, the fair market value of the Company’s Common Stock on the date of each grant. The Company determined the fair market value of these options to be $1.7 million by using the Black Scholes option valuation model. The key assumptions used in the valuation of the options were as follows; a) volatility of 187.94%, b) term of 2 years, c) risk free rate of 0.13% and d) a dividend yield of 0%.

​
  
December 31, 2021
  
 
  
Number of
Options
    
Weighted average
exercise price
  
Outstanding, beginning January 1, 2021
    
-
    
$
-
  
Granted
    
302,000
    
$
1.49
  
Exercised
    
100,666
    
$
1.49
  
Outstanding, ending December 31, 2021
    
201,334
    
$
1.49
  
Exercisable at December 31, 2021
    
-
    
$
-
  

The above table does not include the 429,000 options issued as part of the Jensyn IPO.

Aggregate intrinsic value of options outstanding at December 31, 2021 was $0.9 million. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the fiscal period which was $5.96 as of December 31, 2021 and the exercise price multiplied by the number of options outstanding.
 
During the years ended December 31, 2021 and 2020, the Company charged a total of $1.1 million and $0, respectively to operations to recognize stock based compensation expense for stock options. As of December 31, 2021, the Company had $0.6 million in unrecognized stock-based compensation expense related to 201,334 stock option awards, which is expected to be recognized over a weighted average period of less than three years. All units are expected to vest.
The stock options were exercised for 100,666 shares of Common Stock providing approximately $0.1 million of cash flow to the Company.
67
Restricted Stock Grant to Executives
With an effective date of January 4, 2021, subject to the iSun, Inc. 2020 Equity Incentive Plan, (the “2020 Plan”), the Company entered into a restricted stock grant agreement with our Chief Executive Officer Jeffrey Peck, Chief Financial Officer John Sullivan, Chief Operating Officer Fredrick Myrick, and Chief Strategy Officer Michael dAmato in January 2021 (the January 2021 RSGAs). All shares issuable under the January 2021 RSGA are valued as of the grant date at $6.15 per share representing the fair market value. The January 2021 RSGA provides for the issuance of up to 241,000 shares of the Company’s Common Stock. The restricted shares shall vest as follows: 80,333 of the restricted shares shall vest immediately, 80,333 of the restricted shares shall vest on the one (1) year anniversary of the effective date, and the balance, or 80,334 restricted shares, shall vest on the two (2) year anniversary of the effective date.
During the year ended December 31, 2021 and 2020, stock-based compensation expense of $0.9 million and $0, respectively was recognized for the January 2021 RSGA.
Stock-based compensation, excluding the January 2021 RSGA, related to employee and director options totaled $0.3 million and $0 for the year ended December 31, 2021 and 2020, respectively.
On December 17, 2021, the stockholders approved an amendment to the 2020 Equity Incentive Plan increasing the available shares of Common Stock to 3,000,000 shares of Common Stock.
19.
INVESTMENTS
 
Investments consist of:

​
  
December 31,
2021
    
December 31,
2020
  
GreenSeed Investors, LLC
  
$
4,324,444
    
$
4,724,444
  
Investment in Solar Project Partners, LLC
    
96,052
      
96,052
  
Investment in Gemini Electric Mobility Co.
    
2,000,000
      
-
  
Investment in NAD Grid Corp. d/b/a AmpUp
    
1,000,000
      
-
  
Investment in Encore Renewables
    
5,000,000
      
-
  
Total
  
$
12,420,496
    
$
4,820,496
  

GreenSeed Investors, LLC and Solar Project Partners, LLC

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”).

The primary purpose of GSI is to facilitate the green bond platform and provide capital for the acquisition of solar projects by SPP. The investment in GSI provides access to early stage financing to support the Company’s EPC operations while establishing a large pipeline of projects. The investment in SPP provides the Company with the opportunity to retain a long-term ownership in the completed solar projects. As such, the Company recorded the investments as long-term other assets.

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 to the investment by GSI in the Preferred Shares, GSI obtained additional capital contributions which valued the Units at $10.00 per Unit. As the Company acquired 500,000 Units, the market transactions were utilized as a Level 1 fair value instruments in determining the valuation of the investment. As of April 22, 2020, the fair value of the investment in GSI was $5,000,000. Separately, 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. As of December 31, 2021, the warrant was converted to 117,376 shares of Common Stock on a cashless basis.

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. For the year ended December 31, 2021, the Company received a return of capital from GSI in the amount of $400,000. The dividend receivable of $100,000 is included in other current assets as of December 31, 2021.

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 $10.00 per Unit totaling $4,000,000.

68
The Company granted to GSI registration rights with respect to the Preferred Shares, the Warrant, and the Common Stock underlying the Warrant.

The GSI and SPP investments are measured at cost, less impairment, if any, plus or minus changes resulting from observable price changes in ordinary transactions for the identical or similar investment of the same issuer. As the Company does not have significant influence over operating or financial policies of GSI and SPP, the cost method of accounting for the investment was determined to be appropriate. Changes in the fair value of the investment are recorded as net appreciation in fair value of investment in the Consolidated Statements of Operations. No net appreciation or depreciation in fair value of the investments was recorded during the year ended December 31, 2021, as there were no observable price changes.

Gemini and AmpUp

On March 18, 2021, the Company made a minority investment of $1,500,000 in Gemini Electric Mobility Co. (“Gemini”) utilizing a Simple Agreement for Future Equity. On May 6, 2021, the Company made an additional minority investment of $500,000 in Gemini.

On March 18, 2021, the Company made a minority investment of $1,000,000 in Nad Grid Corp (“AmpUp”) utilizing a Simple Agreement for Future Equity.

The Gemini and AmpUp investments are measured at cost, less impairment, if any, plus or minus changes resulting from observable price changes in ordinary transactions for the identical or similar investment of the same issuer. These investments are minority investments intended to support electric vehicle infrastructure development. The Company has no control in these entities. Changes in the fair value of the investment are recorded as net appreciation in fair value of investment in the Consolidated Statements of Operations. At December 31, 2021, the equity investment for Gemini and AmpUp was $2,000,000 and $1,000,000, respectively. No net appreciation or depreciation in fair value of the investments was recorded during the nine months ending December 31, 2021, as there were no observable price changes.

Encore Renewables

On November 24, 2021, the Company entered into a Membership Unit Purchase Agreement pursuant to which the Company invested $5,000,000 in Encore Redevelopment, LLC (“Encore”) representing a fully-diluted 9.1% ownership interest.

The Encore investment is measured at cost, less impairment, if any, plus or minus changes resulting from observable price changes in ordinary transactions for the identical or similar investment of the same issuer. As the Company does not have significant influence over operating or financial policies of Encore, the cost method of accounting for the investment was determined to be appropriate. Changes in the fair value of the investment are recorded as net appreciation in fair value of investment in the Consolidated Statements of Operations. No net appreciation or depreciation in fair value of the investments was recorded during the year ended December 31, 2021, as there were no observable price changes.

20.
INTANGIBLES

The Company’s intangible assets at December 31, 2021 consist of:
Amortization
periods
  
December 31,
2021
  
iSun Trademark and Brand
10 Years
  
$
3,007,033
  
Intellectual property
10 Years
    
1,000,000
  
Backlog of projects
12 Months
    
3,220,000
  
SunCommon Trademark and Brand
10 Years
    
11,980,000
  
Accumulated amortization
 
    
(300,703
)
       
$
18,906,330
  

69
Estimated future amortization expense for the Company’s intangible assets as of December 31, 2021 is as follows:

   
Cost
  
2022
  
$
4,818,703
  
2023
    
1,598,703
  
2024
    
1,598,703
  
2025
    
1,598,703
  
2026
    
1,598,703
  
Thereafter
    
7,692,815
  
Total
   $
18,906,330  

21.
STOCK REDEMPTION

On January 25, 2021, the Company purchased 34,190 shares of Common Stock from certain executives at $19.68, which was the 5-day average of the closing prices for the Common Stock as reported by the Nasdaq Capital Market for the five trading days immediately preceding January 22, 2021, for a total of approximately $673,000. Upon redemption, the shares of Common Stock were retired.

22.
SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.

Sale of Common Stock pursuant to S-3 Registration Statement

Subsequent to December 31, 2021, 2,049,006 shares of Common Stock were sold under the B. Riley Sales Agreement between January 3, 2022 and April 14, 2022, pursuant to a prospectus supplement that was filed with the SEC on February 10, 2021. Total gross proceeds for the shares were $11.97 million or $5.84 per share. Net proceeds after issuance costs were $11.61 million or $5.66 per share.

Repayment of loan obligation with B. Riley Commercial Capital, LLC

On March 14, 2022, iSun, Inc. (the “Company”) and B. Riley Commercial Capital, LLC (“B. Riley”) terminated the Loan and Security Agreement (the “Loan Agreement”), dated September 30, 2021, as amended, by and among the Company and certain of its affiliates, as borrowers, and B. Riley, as lender. The Loan Agreement provided for a loan of up to $10,000,000 for acquisition finance, general corporate purposes, and working capital for the Company. All outstanding amounts due under the Loan Agreement were repaid in full. The Company repaid outstanding principal in the amount of $10,000,000 and approximately $224,000 in accrued interest under the Loan Agreement.

Exercise of Put Agreements

Pursuant to the terms of the Put Agreement issued in connection with the Agreement and Plan of Merger with SolarCommunities, Inc., certain shareholders exercised their right to cause the Company to purchase shares of Common Stock at the Put Purchase Price. As of March 31, 2022, a total of 549,690 shares of Common Stock were sold to the Company for $4,861,810.

70
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.
 
Item 9A.
Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, including our principal executive officer and principal financial and accounting officer, did not carry out an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Management has determined there is a lack of supervisory review of the financial statement closing process due to limited resources and formal documentation of procedures and controls. These control deficiencies constitute material weaknesses in internal control over financial reporting. As a result, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective. We plan to take steps to remedy this material weakness in with the implementation of an “Internal Control-Integrated Framework”

Disclosure controls and procedures are designed to ensure that the information that is required to be disclosed by us in our Exchange Act report is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Controls

Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls and procedures or our internal controls will prevent all errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013).

Management previously identified control deficiencies regarding the need for a stronger internal control environment relating to the financial statement closing process, formal documentation and designed disclosure controls and procedures and testing of the operating effectiveness of the controls. In 2021, Management took additional steps to remediate these control deficiencies including implementing revised work in process review procedures, enhanced financial reporting reviews processes, and the retention of additional qualified personnel. Management identified control deficiencies related to segregation of duties and access with the IT environment. Management continues to enhance the internal control environment but has not completed the implementation and testing of the new and revised internal controls. Management believes that these control deficiencies constitute material weaknesses in internal control over financial reporting for the year ended December 31, 2021.

Based upon the criteria established in “Internal Control-Integrated Framework” issued by the COSO, management believes that the controls currently in place are not adequate. As such, a material weakness existed as of December 31, 2021.

Changes in Internal Control Over Financial Reporting

Other than the control improvements discussed in Management’s Report on Internal Control Over Financial Reporting above, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal fourth quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

No Attestation Report by Independent Registered Accountant

The effectiveness of our internal control over financial reporting as of December 31, 2020 has not been audited by our independent registered public accounting firm by virtue of our exemption from such requirement as a non-accelerated smaller reporting company.
 
Item 9B.
Other Information.

None.

71
PART III
 
Item 10.
Directors, Executive Officers and Corporate Governance

The information about directors required for item is incorporated by reference from our Proxy Statement to be filed in connection with our 2022 Annual Meeting of Shareholders.
 
Item 11.
Executive Compensation

The information required for this item is incorporated by reference from our Proxy Statement to be filed in connection with our 2022 Annual Meeting of Shareholders.
 
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required for this item is incorporated by reference from our Proxy Statement to be filed in connection with our 2022 Annual Meeting of Shareholders.
 
Item 13.
Certain Relationships and Related Transactions and Director Independence

The information required for this item is incorporated by reference from our Proxy Statement to be filed in connection with our 2022 Annual Meeting of Shareholders.
 
Item 14.
Principal Accounting Fees and Services

The information required for this item is incorporated by reference from our Proxy Statement to be filed in connection with our 2022 Annual Meeting of Shareholders.

72
PART IV
 
Item 15.
Exhibits, Financial Statement Schedules.

(1) Financial Statements.

The financial statements required by item 15 are submitted in a separate section of this report, beginning on Page F-1, incorporated herein and made a part hereof.

(2) Financial Statement Schedules.

Schedules have been omitted because of the absence of conditions under which they are required or because the required information is included in the financial statements or notes thereto.

(3) Exhibits.

The following exhibits are filed with this report, or incorporated by reference as noted:

(a)
101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*
Filed herewith.

(b)
Exhibits.

See (a)(3) above.

(c) Financial Statement Schedules.

See (a)(2) above.

See (a)(2) above.

73
Exhibits Index

Exhibit
No.
​
​
Description
​
​
Included
​
​
Form
​
​
Filing Date
1.1
​
​
​
​
By Reference
​
​
8-K
​
​
March 10, 2016
 
​
​
 
​
​
 
​
​
 
​
​
 
1.2
​
​
​
​
By Reference
​
​
S-3
​
​
December 4, 2020
 
​
​
 
​
​
 
​
​
 
​
​
 
2.4
​
​
​
​
By Reference
​
​
8-K
​
​
April 28, 2020
 
​
​
 
​
​
 
​
​
 
​
​
 
2.5
​
​
​
​
By Reference
​
​
8-K
​
​
January 25, 2021
                         
2.6
        
By Reference
    
8-K
    
September 13, 2021
                         
2.7
        
By Reference
    
8-K
    
October 5, 2021
                         
2.8
        
By Reference
    
8-K
    
November 19, 2021
 
​
​
 
​
​
 
​
​
 
​
​
 
3.1(a)
​
​
​
​
By Reference
​
​
8-K
​
​
April 28, 2020
                         
3.1(b)
        
By Reference
    
8-K
    
February 2, 2022

74
3.1(c)
        
By Reference
    
8-K
    
Februay 26, 2021
                         
3.1(d)
        
By Reference
    
8-K
    
December 30, 2021
 
​
​
 
​
​
 
​
​
 
​
​
 
3.2
​
​
​
​
By Reference
​
​
S-1
​
​
November 23, 2015
 
​
​
 
​
​
 
​
​
 
​
​
 
4.1
​
​
​
​
By Reference
​
​
S-1
​
​
November 23, 2015
 
​
​
 
​
​
 
​
​
 
​
​
 
4.2
​
​
​
​
By Reference
​
​
10-Q
​
​
November 18, 2019
 
​
​
 
​
​
 
​
​
 
​
​
 
4.3
​
​
​
​
By Reference
​
​
8-K
​
​
March 10, 2016
 
​
​
 
​
​
 
​
​
 
​
​
 
4.4
​
​
​
​
By Reference
​
​
8-K
​
​
April 28, 2020
 
​
​
 
​
​
 
​
​
 
​
​
 
4.5
​
​
​
​
By Reference
​
​
8-K
​
​
April 28, 2020
 
​
​
 
​
​
 
​
​
 
​
​
 
4.6
​
​
​
​
By Reference
​
​
8-K
​
​
April 28, 2020
                         
4.7
        
By Reference
    
8-K
    
March 9, 2021
                         
4.8
        
By Reference
    
8-K
    
March 9, 2021
                         
4.9
        
By Reference
    
8-K
    
January 12, 2021

75
10.1
​
​
​
​
By Reference
​
​
10-Q
​
​
November 18, 2019
 
​
​
 
​
​
 
​
​
 
​
​
 
10.2
​
​
​
​
By Reference
​
​
10-Q
​
​
November 18, 2019
 
​
​
 
​
​
 
​
​
 
​
​
 
10.3
​
​
​
​
By Reference
​
​
10-Q
​
​
November 18, 2019
                         
10.4
​
​
​
​
By Reference
​
​
10-K
​
​
April 14, 2020
 
​
​
 
​
​
 
​
​
 
​
​
 
10.5
​
​
​
​
By Reference
​
​
8-K
​
​
April 28, 2020
 
​
​
 
​
​
 
​
​
 
​
​
 
10.6
​
​
​
​
By Reference
​
​
8-K
​
​
April 28, 2020
 
​
​
 
​
​
 
​
​
 
​
​
 
10.7
​
​
​
​
By Reference
​
​
8-K
​
​
December 10, 2020
                         
10.8
        
By Reference
    
S-8
    
October 28, 2020
                         
10.9
        
By Reference
    
8-K
    
January 12, 2021
                         
10.10
        
By Reference
    
8-K
    
January 25, 2021
                         
10.11
        
By Reference
    
8-K
    
January 25, 2021

76
10.12
        
By Reference
    
8-K
    
January 25, 2021
 
​
​
 
​
​
 
​
​
 
​
​
 
10.13
        
By Reference
    
8-K
    
January 25, 2021
                         
10.14
        
By Reference
    
8-K
    
April 8, 2021
                         
10.15
        
By Reference
    
8-K
    
April 8, 2021
                         
10.16
        
By Reference
    
8-K
    
June 22, 2021
                         
10.17
        
By Reference
    
8-K
    
September 13, 2021
                         
10.18
        
By Reference
    
8-K
    
September 13, 2021
                         
10.19
        
By Reference
    
8-K
    
September 13, 2021
                         
10.20
        
By Reference
    
8-K
    
September 13, 2021
                         
10.21
        
By Reference
    
8-K
    
October 5, 2021
                         
10.22
        
By Reference
    
8-K
    
October 5, 2021

77
10.23
        
By Reference
    
8-K
    
October 5, 2021
                         
10.24
        
By Reference
    
10-Q
    
November 15, 2021
                         
10.25
        
By Reference
    
10-Q
    
November 15, 2021
                         
10.26
        
By Reference
    
10-Q
    
November 15, 2021
                         
10.27
        
By Reference
    
10-Q
    
November 15, 2021
                         
10.28
        
By Reference
    
10-Q
    
November 15, 2021
                         
10.29
        
By Reference
    
10-Q
    
November 15, 2021
                         
10.30
        
By Reference
    
10-Q
    
November 15, 2021
                         
10.31
        
By Reference
    
10-Q
    
November 15, 2021
                         
10.32
        
By Reference
    
8-K
    
November 19, 2021
                         
10.33
        
By Reference
    
8-K
    
November 19, 2021
                         
10.34
        
By Reference
    
8-K
    
December 1, 2021
                         
10.35
        
By Reference
    
8-K
    
December 1, 2021
   
Industrial Building Lease by and Between Industry Landing 115 LLC and SolarCommunities, Inc., dated August 1, 2021
    
Herewith
            
                         
   
Lease Agreement between Malone Route 2 Waterbury Properties, LLC and SolarCommunities, Inc., dated October 19, 2015
    
Herewith
            
                         
   
Addendum #1 to Lease Agreement between Malone Route 2 Waterbury Properties, LLC and SolarCommunities, Inc., dated July 19, 2016
    
Herewith
            
                         
   
Addendum #2 to Lease Agreement between Malone Route 2 Waterbury Properties, LLC and SolarCommunities, Inc., dated March 2, 2019
    
Herewith
            
                         
14
​
​
​
​
By Reference
​
​
S-1
​
​
November 23, 2015
 
​
​
 
​
​
 
​
​
 
​
​
 
​
​
List of subsidiaries of iSun, Inc.
​
​
Herewith
​
​
  
​
​
  
 
​
​
 
​
​
 
​
​
 
​
​
 
​
​
Independent Registered Public Accounting Firm’s Consent
​
​
Herewith
​
​
  
​
​
  
 
​
​
 
​
​
 
​
​
 
​
​
 
​
​
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
​
​
Herewith
​
​
  
​
​
  
 
​
​
 
​
​
 
​
​
 
​
​
 
​
​
Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
​
​
Herewith
​
​
  
​
​
  
 
​
​
 
​
​
 
​
​
 
​
​
 
​
​
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
​
​
Herewith
​
​
  
​
​
  

79
101.INS
    
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
                  
 
    
 
                  
101.SCH
    
Inline XBRL Taxonomy Extension Schema Document.
                  
 
    
 
                  
101.CAL
    
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
                  
 
    
 
                  
101.DEF
    
Inline XBRL Taxonomy Extension Definition Linkbase Document.
                  
 
    
 
                  
101.LAB
    
Inline XBRL Taxonomy Extension Label Linkbase Document.
                  
 
    
 
                  
101.PRE
    
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
                  
 
    
 
                  
104
    
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
                  

Item 16.
Form 10-K Summary.

Not applicable
 
80
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
iSUN, INC.
 
 
By:
/s/ Jeffrey Peck
   
Jeffrey Peck
   
Chief Executive Officer
   
(Principal Executive Officer)
   
​
 
By:
/s/ John Sullivan
   
John Sullivan
   
Chief Financial Officer
   
(Principal Financial and Accounting Officer)
     
Dated: April 15, 2022
  

81
POWER OF ATTORNEY

The undersigned directors and officers of iSun, Inc., hereby constitute and appoint Jeffrey Peck and John Sullivan, and each of them, with full power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in-fact with full power to execute in our name and on behalf in the capacities indicated below, this annual report on Form 10-K and any and all amendments thereto and to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, and hereby ratify and confirm all that such attorneys-in-fact, or any of them, or their substitutes shall lawfully do or cause to be done by virtue hereof.

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in such capacities and on the dates indicated.

 
By:
/s/ Jeffrey Peck
   
Jeffrey Peck
   
Chief Executive Officer and Chairman of the Board
   
(Principal Executive Officer)
     
 
By:
/s/ John Sullivan
   
John Sullivan
   
Chief Financial Officer
   
(Principal Financial and Accounting Officer)
     
 
By:
/s/ Fredrick Myrick
   
Fredrick Myrick
   
Executive Vice President and Director
     
 
By:
/s/ Stewart Martin
   
Stewart Martin
   
Director
     
 
By:
/s/ Andrew Matthy
   
Andrew Matthy
   
Director
     
 
By:
/s/ Claudia Meer
   
Claudia Meer
   
Director
     
Dated: April 15, 2022
    


Exhibit 10.36
 
INDUSTRIAL BUILDING LEASE

BY AND BETWEEN
 
INDUSTRY LANDING 1155 LLC

(“Landlord”)
 
and
 
SOLARCOMMUNITIES, INC.

(“Tenant”)
 
For
 
1155 Flatbush Road, Kingston, New York
 
(“Premises”)
 
TABLE OF CONTENTS
 
1.
Leased Premises.
1
2.
Term.
1
3.
Tenant’s Use of the Premises.
3
4.
Fixed Annual Rent, Additional Rent and Other Sums to Be Paid By Tenant.
3
5.
Condition, Repair, Replacement and Maintenance of the Premises.
10
6.
Insurance.
11
7.
Compliance with Laws and Insurance Requirements.
13
8.
Alterations, Additions and Improvements.
17
9.
Fire and Other Casualty Affecting the Premises.
17
10.
Assignment and Subletting.
19
11.
Landlord’s Right to Inspect and Repair.
20
12.
Landlord’s Right to Exhibit Premises.
20
13.
Signs.
20
14.
Landlord Not Liable.
20
15.
Force Majeure.
21
16.
Indemnification and Waiver of Liability.
22
17.
Subordination; Attornment.
22
18.
Condemnation.
24
19.
Bankruptcy or Insolvency of Tenant.
25
20.
Default by Tenant and Landlord’s Remedies.
27
21.
Tenant’s Trade Fixtures and Removal.
29
22.
Estoppel Certificates and Financial Information.
30
23.
Limitations on Landlord’s Liability.
31
24.
Security Deposit.
31
25.
Qualification to Do Business.
32
26.
Notices.
33
27.
Brokers.
34
28.
Tenant’s Right to Quiet Enjoyment.
34
29.
Miscellaneous.
34
 
INDUSTRIAL BUILDING LEASE

This Industrial Building Lease (the “Lease”) made as of August __, 2021 between INDUSTRY LANDING 1155 LLC, having an address at c/o Duna Real Estate Group, 77 Cornell Street, Kingston, New York 12401, referred to in this Lease as “Landlord”,

-and-

SOLARCOMMUNITIES, INC., having an address at 442 U.S. Route 2, Waterbury, Vermont 05676, referred to in this Lease as “Tenant.”


 1.
Leased Premises.

Landlord leases to Tenant and Tenant hires from Landlord, in accordance with the provisions of this Lease, the land, together with the building and improvements thereon, located at 1155 Flatbush Road, Kingston, New York, more particularly described in Schedule A annexed to and made part of this Lease; the land, building and improvements being referred to in this Lease as the “Premises.” This Lease is made subject to such facts as an accurate survey may disclose, easements, rights of way and restrictions of record.

 
2.
Term.

(a)  Initial Term. The term of this Lease shall commence on the date on which a fully-executed counterpart of this Lease is delivered by Landlord to Tenant (the “Commencement Date”), and shall conclude on the last day of the sixty-third (63rd) calendar month after the calendar month in which the Commencement Date occurs (the “Expiration Date”) (the period between the Commencement Date and the Expiration Date, inclusive, the “Initial Term”).  If Landlord is unable to give possession of the Premises on the Commencement Date because of the holding-over or retention of possession of any tenant, undertenant or occupant; or if the Premises are located in a building being constructed, because such  building  has not been sufficiently completed  to make the Premises ready for occupancy or because of the fact that a certificate of occupancy has not been procured; or for any other reason, then Landlord shall not be subject to any liability for failure to give possession on the Commencement Date, and the validity of the lease shall not be impaired under such circumstances,  nor shall the same be construed  in any wise to extend the term of this lease, but the rent payable hereunder shall be abated (provided Tenant is not responsible for Landlord's  inability to obtain  possession) until after Landlord shall have given Tenant  written  notice that  Landlord is able to give Tenant possession of the Premises.  If permission is given to Tenant to enter into possession of the Premises, or to occupy areas other than the Premises prior to the Commencement Date, Tenant covenants and agrees that such occupancy shalt be deemed to be under all the terms, covenants, conditions and provisions of this lease, except as to the covenant to pay rent. The provisions of this clause are intended to constitute an “express provision to the contrary” within the meaning of Section 223-a of the New York Real Property Law.

1
(b)   Renewal Term.

(i)    Option to Renew. Provided Tenant is not at the time notice is given or at the expiration of the initial term, in default of the terms and provisions of this Lease beyond the expiration of any applicable notice and/or cure periods, and that Tenant is in occupancy of the entire Premises at the expiration of the Initial Term, or the First Renewal Term (as that term is defined below), as applicable: (a) Tenant shall have the right and option, exercisable by giving written notice thereof at least twelve (12) months but not more than fifteen (15) months prior to the expiration of the Initial Term, to extend the term for one (1) period of five (5) years beginning on the day after the Expiration Date (the “First Renewal Term Commencement Date”) and ending on the day immediately preceding the fifth (5th) anniversary of the First Renewal Term Commencement Date (the “First Renewal Term Expiration Date”) (such period, the “First Renewal Term”); and (b) Tenant shall have the right and option, exercisable by giving written notice thereof at least twelve (12) months but not more than fifteen (15) months prior to the First Renewal Term Expiration Date, to extend the term for a second period of five (5) years beginning on the day after the First Renewal Term Expiration Date (the “Second Renewal Term Commencement Date”) and ending on the day immediately preceding the fifth (5th) anniversary of the Second Renewal Term Commencement Date (the “Second Renewal Term Expiration Date”) (such period, the “Second Renewal Term”). Upon the giving of such notice, this Lease shall automatically be extended for such five (5) year period and no instrument of extension need be executed but a party shall, upon the request of the other party, enter into such reasonable amendment or supplement to this Lease to evidence the extension. In the event that Tenant fails to give such notice to Landlord as herein provided, this Lease shall automatically terminate at the end of the then-current term and Tenant shall have no further right or option to extend this Lease. As used in this Lease, the word “Term” shall mean the Initial Term and the First Renewal Term and the Second Renewal Term, to the extent applicable.

(ii)  Terms of Renewal. The extended term shall be upon the same covenants, agreements, provisions, terms and conditions as the initial term, except that Tenant shall have no further options to renew or extend the term beyond those set forth above, and that Fixed Rent (as that term is defined below) during the First Renewal Term and Second Renewal Term shall be as set forth in Section 4(a) of this Lease.

2
(c)   Holding Over.  Should Tenant remain in possession of the Premises after the Expiration Date, or the First Renewal Term Expiration Date or the Second Renewal Term Expiration Date, as applicable, or sooner termination of the Term of this Lease, in addition to any other rights or remedies Landlord may have hereunder or at law (including, but not limited to, the right, but not the obligation, to treat Tenant as a month-to-month tenant at the Fixed  Annual Rent payable during the last month of this Lease plus all Additional Rent) and without in any manner limiting Landlord’s right to demonstrate and collect any damages suffered by Landlord and arising from Tenant’s failure to surrender the Demised Premises as provided herein, Tenant shall pay to Landlord for each month or portion of a month during which Tenant holds over in the Demised Premises after the Expiration Date or sooner termination of this Lease, a sum equal to two (2) times the aggregate of that portion of the Fixed Annual Rent and Additional Rent which was payable under this Lease during the last month of the term hereof.  Nothing herein contained shall be deemed to permit Tenant to retain possession of the Demised Premises after the Expiration Date or sooner termination of this Lease or to limit in any manner Landlord’s right to regain possession of the Demised Premises through summary proceedings, or otherwise, and no acceptance by Landlord of payments from Tenant after the Expiration Date or sooner termination of this Lease shall be deemed to be other than on account of the amount to be paid by Tenant in accordance with the provisions of this Article 43.  Tenant agrees to indemnify and save Landlord harmless from all costs, claims, losses or liability resulting from delay by Tenant in surrendering the Demised Premises, including, without limitation, any claims made by any succeeding owner and/or tenant founded on such delay.

3.      Tenant’s Use of the Premises.

(a)   Use by Tenant and Certificate of Occupancy. Tenant shall use and occupy the Premises only as and for warehouse and distribution activities and general office activities, and training activities and assembly of pre-manufactured components (but not manufacturing of any kind) only, and for no other purpose. In the event a certificate of occupancy or its equivalent is required, Tenant shall, at Tenant’s own expense, apply for and obtain the same with respect to the Premises, based upon the use set forth above, from the appropriate authority, prior to taking occupancy under this Lease. Tenant shall deliver to Landlord a copy of the certificate of occupancy or its equivalent, and any other governmental license or permit relating to the Premises or Tenant’s occupancy and use of the Premises, promptly upon receiving it.

(b)   Prohibited Use. Tenant shall not occupy nor use all or any part of the Premises nor permit or suffer the Premises to be occupied or used for any purpose other than as provided for in this Lease, nor for any unlawful or disreputable purpose, nor for any extra hazardous purpose.

4.      Fixed Annual Rent, Additional Rent and Other Sums to Be Paid By Tenant.

(a)   Fixed Annual Rent. During the Term, Tenant shall pay Landlord the fixed annual rent (“Fixed Rent”) on the first day of each month, in advance, with the exception that the first monthly installment of Fixed Rent shall be paid upon execution and delivery of this Lease. The rent for any partial calendar month at the beginning or end of the term shall be pro-rated at one-twelfth (1/12th) of the then-applicable fixed annual rent and then further pro-rated based on a fraction, the numerator of which is the actual number of calendar days in that month that are within the term and the denominator of which is 30. All sums payable under this Lease shall be paid in United States Dollars.  Fixed Rent shall be payable at the following rates:

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 (i)
Subject to subsection (b) below, for the period beginning on the Commencement Date and ending on the last day of the twenty seventh (27th) calendar month after the calendar month in which the Commencement Date occurs, at the annual rate of $225,000.00 ($18,750.00 monthly);


(ii)
For the thirty six (36) month period thereafter, concluding on the Expiration Date, at the annual rate of $240,000.00 ($20,000.00 monthly);


(iii)
To the extent Tenant exercises its option to extend the Term for the First Renewal Term:


(A)
For the period beginning on the First Renewal Term Commencement Date and ending on the day immediately preceding the first anniversary of the First Renewal Term Commencement Date, at the annual rate of $246,000.00 ($20,500.00 monthly);


(B)
For the twelve (12) month period thereafter, at the annual rate of $252,150.00 ($21,012.50 monthly);


(C)
For the twelve (12) month period thereafter, at the annual rate of $258,453.75 ($21,537.81 monthly);


(D)
For the twelve (12) month period thereafter, at the annual rate of $264,915.09 ($22,076.26 monthly); and


(E)
For the twelve (12) month period thereafter, ending on the First Renewal Term Expiration Date, at the annual rate of $271,537.97 ($22,628.16 monthly).

  (iv)
To the extent Tenant exercises its option to extend the Term for the Second Renewal Term:

(A)      The Fixed Rent during the Second Renewal Term as of the Second Renewal Term Commencement Date shall be the greater of: (i) 102.5% of the fully-escalated Fixed Annual Rent as of the First Renewal Term Expiration Date; or (ii) one hundred percent (100%) of the fair market rental rate for the Premises as of the Second Renewal Term Commencement Date, based on prevailing rentals and concessions then being charged to renewal tenants in the Building and in other comparable buildings in the general vicinity, for comparably improved space of equivalent quality, size and location to the Premises ((i) or (ii), the “Market Rate”).  The Market Rate shall be increased by 2.5% on each anniversary of the Second Renewal Term Commencement Date.
 
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(B)         Within fifteen (15) days following Tenant’s exercise of the option to extend by the Second Renewal Term pursuant hereto, Landlord shall deliver written notice to Tenant specifying Landlord’s determination of the Market Rate (“Landlord’s Determination”).  Within fifteen (15) days following Tenant’s receipt of such Landlord’s notice specifying Landlord’s Determination of the Market Rate, Tenant shall deliver either: (i) written notice to Landlord agreeing with Landlord’s Determination of the Market Rate; or (ii) written notice to Landlord disagreeing with Landlord’s Determination and specifying Tenant’s determination of the Market Rate (“Tenant’s Determination”).  In the event Tenant so disagrees with Landlord’s Determination of the Market Rate, then Landlord and Tenant shall promptly meet and endeavor in good faith to reach agreement upon the Market Rate for the Renewal Term.  In the event Landlord and Tenant are unable to agree upon the Market Rate prior to one hundred (100) days before the commencement of the Renewal Term, Landlord and Tenant shall each appoint, by written notice delivered to the other prior to ninety (90) days before the commencement of the Renewal Term, a real estate appraiser who is a member of the American Institute of Real Estate Appraisers (or its equivalent) and who has significant current experience appraising office rental rates for commercial real property in the County of Ulster, to participate in the determination of the Market Rate.  The two appraisers so appointed shall be instructed to appoint, within twenty (20) days thereafter, a third appraiser who is similarly qualified.  If either Landlord or Tenant fails timely to appoint a qualified appraiser as provided above, then the determination of Market Rate to be made hereunder shall be made solely by such qualified appraiser as may have been appointed by the other party, and such determination of the Market Rate by such sole appraiser shall be binding upon both Landlord and Tenant.  If the two appraisers appointed by Landlord and Tenant cannot agree on the appointment of a third appraiser within the time period provided, either Landlord or Tenant may seek the appointment of the same by the Supreme Court of the State of New York, County of Ulster.  Such appraisers shall work together and share information in their efforts to determine and agree upon the Market Rate.  The Market Rate shall be determined in accordance with the procedure set forth in the following paragraph.
 
(C)        The role of the appraisers shall be to select from Landlord’s Determination and Tenant’s Determination which is closest to the actual Market Rate as determined by the appraisers.  The appraisers shall have no power to adopt a compromise or “middle ground” between the contended Market Rates submitted by the parties or to adopt any Market Rate other than the contended Market Rate submitted by the party which is closest to the appraisers’ determinations as to actual Market Rate (and if the difference between each of the contended Market Rates submitted by the parties and the Market Rate determined by the appraisers is the same, the average of Landlord’s Determination and Tenant’s Determination shall be adopted).  If the appraisers do not agree upon the actual Market Rate, then each appraiser shall determine which of Landlord’s Determination or Tenant’s Determination is closest to the actual Market Rate determined by such appraiser and the contended Market Rate so selected by at least two of the appraisers shall be the Market Rate.  The Market Rate as so determined by the appraisers as provided herein shall be binding upon both Landlord and Tenant as the Market Rate, which rate shall thereafter be payable throughout the Renewal Term commencing on the first day of the Renewal Term, as provided in the following paragraph.
 
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(D)         Landlord and Tenant will use all reasonable diligence to cause their appointed appraisers to perform in good faith and in a timely manner in order to make the determination of the Market Rate on or before the commencement of the Renewal Term.  In the event such appraisers do not make such determination prior to the commencement of the Renewal Term, this Lease shall nevertheless continue in full force and effect until such determination is made, and Tenant shall pay as Base Rent during such period the amount paid by Tenant as of the Termination Date.  Upon the determination by such appraisers of the Market Rate, the deficiency or excess (if any) in the amount paid to Landlord by Tenant as provided above below the Fixed Annual Rent as so determined hereunder applicable to the period from the commencement of the Second Renewal Term to the date on which the Market Rate was so determined shall be paid by Tenant to Landlord, in the event of a deficiency (and by Landlord to Tenant in the amount of any excess) not later than ninety (90) days after the date on which the Market Rate is established.  The payment by Tenant of Fixed Annual Rent in the amount of the Market Rate as so determined shall commence on the first day of the month following the date of such determination (but not earlier than the Second Renewal Term Commencement Date), and in addition to such monthly installments of Fixed Annual Rent, Tenant shall pay to Landlord the deficiency, if any, in the amount earlier paid by Tenant as Fixed Annual Rent in relation to the amount ultimately determined hereunder as the Market Rate.  Landlord and Tenant shall each bear the costs and fees of the appraiser appointed by each of them and shall share equally the cost of the third appraiser.
 
(b)  Fixed Rent Allowance. Provided Tenant is not then, and has not been, in default under the terms, covenants and conditions of this Lease beyond any applicable grace periods, Tenant shall have the right to use and occupy the Premises free of Fixed Rent (the "Fixed Rent Allowance") for four (4) months beginning on the Commencement Date, provided that Tenant shall pay all other payments and charges otherwise due hereunder.  Except for the Fixed Rent Allowance as herein provided, Tenant shall use and occupy the Demised Premises pursuant to all of the other terms, covenants and conditions of this Lease.  It is understood and agreed that the Fixed Rent Allowance is given by Landlord in consideration of Tenant's paying when due all rents under this Lease, and otherwise complying with the terms hereof, and that in the event of any uncured monetary default by Tenant under this Lease which results in the early termination hereof,  the unamortized portion of the Fixed Rent Allowance given pursuant to this paragraph shall become immediately due and payable to Landlord as Additional Rent under this Lease, provided that, on the First Renewal Term Commencement Date, and each anniversary thereof, the portion of the Fixed Rent Allowance for which Tenant is liable shall be recomputed by subtracting one-quarter (1/4) of the Fixed Rent Allowance and recalculating the amortization based upon the remaining portion of the Fixed Rent Allowance.  In the event that such uncured monetary default occurs prior to the conclusion of the period during which the Fixed Rent Allowance is in effect, Tenant shall not be entitled to the Fixed Rent Allowance for the period after the occurrence of such default.

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(c)   Additional Rent Based upon Real Estate Taxes.   “Taxes” shall mean governmental levies, municipal taxes, county taxes, school taxes or any other governmental or quasi-governmental (including business improvement district) charges, general or special, ordinary or extraordinary, unforeseen as well as foreseen, of any kind or nature whatsoever, which are or may be assessed, levied or imposed upon all or any part of the Premises.  If, due to a future change in the method of taxation or in the taxing authority, a new or additional real estate tax, or a franchise, income, transit, profit or other tax or governmental imposition, however designated, shall be levied against Landlord, and/or the Premises, or in substitution in whole or in part for any tax which would constitute "Taxes", or in lieu of additional Taxes, such tax or imposition shall be deemed for the purposes hereof to be included within the term "Taxes."  As additional rent, Tenant shall pay Landlord the Taxes, on the first (1st) day of each month, in advance, in a sum equal to 1/12th of the annual Taxes due and payable for the then-calendar year. If at a time a payment is required the amount of the Taxes for the then-calendar year shall not be known, Tenant shall pay Landlord, as additional rent, 1/12th of the Taxes for the preceding calendar year; and upon ascertaining the Taxes for the current calendar year, Tenant shall pay Landlord any difference upon demand, or if Tenant shall be entitled to a credit, Landlord shall credit the excess against the next monthly installment(s) of additional rent falling due. Additional rent based upon Taxes payable for the first and last years of the Term shall be adjusted and pro rated by the same method set forth in paragraph 4(a) above, so that Landlord shall be responsible for Landlord’s pro rated share for the period prior to and subsequent to the Term and Tenant shall pay Landlord its pro rated share for the Term. Provided this Lease has not been previously cancelled or terminated, and there shall be no Event of Default or an event that with the giving of notice or the lapse of time, or both, would constitute an Event of Default, then Tenant shall have the right to contest the amount or validity of any Taxes assessed and levied against the Premises during the Term, or to seek a reduction in the valuation of the building on the Premises assessed for real estate tax purposes, by appropriate proceedings diligently conducted in good faith (the “Tax Appeal”), but only after payment of such Taxes. Except as set forth below, Landlord shall not be required to join in any Tax Appeal. If required by law, Landlord shall, upon written request of Tenant, join in the Tax Appeal or permit the Tax Appeal to be brought in Landlord’s name, and Landlord shall reasonably cooperate with Tenant, at the cost and expense of Tenant. Tenant shall pay any increase that may result in Taxes as a consequence of the Tax Appeal, which payment obligations shall survive the expiration or earlier termination of this Lease.  Notwithstanding anything to the contrary contained in this Section, Tenant, at its option, may pay Taxes directly to the collecting authority, provided that: (i) Tenant pays any installment of Taxes not later than ten (10) days prior to the due date thereof; (ii) Tenant providing proof of such payment to Landlord within three (3) business days of making payment; (iii) Tenant being responsible for all interest, late fees and/or charges arising from late payment; and (iv) Tenant reimbursing Landlord for any installment of Taxes paid by Landlord, including all interest, late fees and/or charges, to the extent Tenant does not make payment in accordance with the terms and provisions of this Section.  Upon notice to Tenant that Landlord’s lender, at any time, requires escrows of Taxes in connection with any mortgage, Tenant shall have no further right to pay Taxes directly to the collecting authority, and shall make payment to Landlord as otherwise set forth in this Section.

(d)   Additional Rent Based Upon Other Sums. Tenant shall pay Landlord, as additional rent, all other sums of money on Tenant’s part to be paid pursuant to the terms, covenants and conditions of this Lease.

(e)   Additional Rent Based Upon Reimbursement to Landlord. If Tenant shall fail to comply with or to perform any of the terms, conditions and covenants of this Lease, Landlord may (but with no obligation to do so) carry out and perform such terms, conditions and covenants, at the expense of Tenant, which expense shall be payable by Tenant, as additional rent, upon the demand of Landlord, together with interest at the prime rate per annum for money center banks as then most-recently published in The Wall Street Journal (or, if The Wall Street Journal is no longer published, in some comparable listing chosen by Landlord), plus five (5%) percent (the “Prime Rate”), which interest shall accrue from the date of Tenant’s failure to perform.

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(f)   Additional Rent Based Upon Late Payment. If Tenant defaults for more than five (5) days in the payment of any monthly installment of any rent required of Tenant under this Lease, or if Tenant, within five (5) days after demand from Landlord, fails to reimburse Landlord for any expenses incurred by Landlord pursuant to this Lease, together with any interest due under the terms of this Lease, then Tenant shall pay Landlord, as additional rent, a late charge of five (5%) percent of the rent or expense.

(g)  Additional Rent Based Upon Taxes Based on Rent. If at any time during the term of this Lease a tax or charge shall be imposed by the State, county or municipality in which the Premises is located, pursuant to any future law, which tax or charge shall be based upon the rent due or paid by Tenant to Landlord, then Tenant shall pay Landlord, as additional rent, such tax or charge. The foregoing shall not require payment by Tenant of any income taxes assessed against Landlord or of any capital levy, franchise, estate, succession, inheritance or transfer tax due from Landlord.

(h)   Carbon Taxes. Should any tax or charge be imposed by any government on fuel consumption, energy usage, energy efficiency, emissions or any similar matter, whether called a “carbon tax” or otherwise, then Tenant shall pay such tax or charge during the term on a timely basis. Landlord shall determine whether such tax shall be paid by Tenant to Landlord or directly by Tenant to the appropriate governmental agency, and Tenant shall abide by Landlord’s determination. If payment is made directly to the appropriate governmental agency, Tenant shall promptly provide Landlord with evidence of each such payment.

(i)    Net Lease, No Setoff and Application; Evidence.

(i)   Net Lease. It is the intention of the parties that this Lease is a “triple net lease” and Landlord shall receive the Fixed Rent, additional rent and other sums required of Tenant under this Lease, undiminished from all costs, expenses and obligations of every kind relating to the Premises, which shall arise or become due during the Lease term, all of which shall be paid by Tenant.

(ii)   No Setoff. Tenant shall pay Landlord all rent required of Tenant under this Lease without abatement, deduction or setoff, and irrespective of any claim Tenant may have against Landlord; and this covenant shall be deemed independent of any other terms, conditions or covenants of this Lease.

(iii)  No Accord and Satisfaction. No payment by Tenant or receipt by Landlord of an amount less than the full rent required of Tenant under this Lease shall be deemed anything other than a payment on account of the earliest rent due from Tenant under this Lease. No endorsements or statements on any check or any letter accompanying any check or payment of rent shall be deemed an accord and satisfaction of Landlord. Landlord may accept any check for payment from Tenant without prejudice to Landlord’s right to recover the balance of the rent due from Tenant, or to pursue any other right or remedy provided under this Lease or by Legal Requirements (as defined below).

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(iv) Evidence. Landlord shall provide written evidence of any Additional Rent stating  in reasonable detail the vendor, the item or service provided, the date provided and the status of payment.  Tenant shall have fifteen (15) business days from its receipt of any Additional Rent statement to notify Landlord, by certified mail, return receipt requested, or overnight courier, that it disputes the correctness of such statement.  After the expiration of such fifteen (15) business day period, such statement shall be binding and conclusive upon Tenant.  If Tenant disputes the correctness of any such statement Tenant shall, as a condition precedent to its right to contest such correctness, make payment of the Additional Rent billed, without prejudice to its position.  If such dispute is finally determined in Tenant’s favor, Landlord shall refund to Tenant the amount overpaid.  If Tenant has timely notified Landlord of its dispute of the correctness of any Additional Rent statement as set forth in this paragraph, and has made payment of such disputed amount of Additional Rent, and provided no Event of Default shall have occurred and be continuing, Tenant may audit Landlord’s records and books concerning the disputed amount of Additional Rent subject to the following conditions (and Landlord hereby agrees to maintain the records for same): (A) the audit occurs during Landlord’s normal business hours and in Landlord’s principal offices upon at least ten (10) days advance written notice ; (B) Tenant may only audit said records and books once during each calendar year; (C) the audit of a Lease year’s books and records must be conducted and completed within twelve (12) months after receipt of the disputed Additional Rent statement; (D) Tenant gives Landlord a copy of the auditor’s report; (E) Tenant keeps the results of such audit and Landlord’s books and records strictly confidential except that it may share such results with its legal, financial and accounting advisors and in any legal action arising from such audit; (F) the audit must be conducted by an accountant experienced in conducting such audits; and (G) the auditor shall not be retained on a contingency basis, i.e., the auditor’s fee shall not be based upon the results of the audit.  If the audit determines that Landlord overcharged Tenant for the disputed Additional Rent by more than fifteen (15%) percent than the actual amount of Additional Rent for which Tenant was obligated to pay, then Landlord shall reimburse Tenant for the cost of the audit within thirty (30) days, provided, however, that Landlord shall not be required to reimburse Tenant for any audit costs which equal an amount greater than the amount of excess Additional Rent Landlord is required to reimburse Tenant.

(j)  Place of Payment of Rent. The rent shall be paid by Tenant to Landlord at such place as Landlord may notify Tenant from time to time.

(k)  “Rent” Defined. All Fixed Rent, additional rent, and any other sums and charges payable by Tenant under this Lease, are collectively “rent” for all purposes and the nonpayment of any of them shall be of equal importance.  Landlord shall have all remedies available against Tenant for the nonpayment of additional rent and other sums and charges as available against Tenant for the nonpayment of Fixed Rent.

(l)   Certain Contingencies. To the extent the office tenant occupying approximately 5,000 rentable square feet of the Premises as indicated on Exhibit “A” does not vacate prior to October 31, 2021, Tenant shall be entitled to a credit against Fixed Rent of $5,000.00 for each month in which such portion of the Premises is occupied by the existing office tenant, subject to proration for any partial month, and all additional rent obligations (except those set forth in Subsection (f) of this Section), shall be reduced to the rate of 83% thereof for the period the existing office tenant continues to occupy such portion of the Premises.

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5.      Condition, Repair, Replacement and Maintenance of the Premises.

(a)  Condition of the Premises. Tenant acknowledges examining the Premises prior to the execution of this Lease, that Tenant is fully familiar with the condition of the Premises and that Tenant accepts the Premises “as-is” and without any obligation on the part of Landlord to perform or pay for any improvements or alterations except as may be expressly set forth in this Lease. Tenant enters into this Lease without any representations or warranties on the part of Landlord, express or implied, as to the condition of the Premises, including, but not limited to, the cost of operations and the condition of its fixtures, improvements and systems.  Notwithstanding the foregoing, Landlord agrees to deliver the Premises to Tenant with all mechanical, water and septic, electrical and overhead door systems in working order on the Commencement Date.

(b)    Tenant’s Obligations.

(i)   Tenant’s Maintenance. Tenant shall, at Tenant’s own expense, maintain, keep in good condition, the Premises, including, without limitation, the exterior of the building on the Premises (including, but not limited to, the roof, roof system, windows and doors) and interior of the building on the Premises (including, but not limited to, the plumbing system, the sprinkler system, if any, the heating system, the air conditioning system, if any, the electric system and any other system of the building on the Premises), and the driveways, parking areas, shrubbery and lawn on the Premises, and at the expiration or other sooner termination of the Lease term, deliver them up in good order and condition and broom clean; provided that Landlord shall be responsible for major/capital repairs to the structural elements of the Premises and the systems therein and/or serving the Premises (e.g., the well).  For purposes of this Lease, “major/capital repairs” shall be those repairs made to a single component of the Premises which, in a single repair or series of related repairs, costs more than $4,100.00.

(ii)   Damage Caused by Tenant. Notwithstanding any contrary provisions set forth in this Lease, any damage to the Premises, including, but not limited to, the building or its systems, or the improvements, caused by Tenant or a Tenant Representative (as defined below), shall be promptly repaired or replaced to its former condition by Tenant, as required by Landlord, at Tenant’s own expense. The term “Tenant Representative” shall mean any shareholder, officer, director, member, partner, employee, agent, licensee, assignee, sublessee or invitee of Tenant, or any third party other than Landlord.

(iii)  Tenant to Keep Premises Clean. In addition to the foregoing, and not in limitation of it, Tenant shall also, at Tenant’s own expense, undertake all replacement of all plate glass and light bulbs, fluorescent tubes and ballasts, and decorating, redecorating and cleaning of the interior of the Premises, and shall keep and maintain the Premises in a clean condition, free from debris, trash, refuse, snow and ice.

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(iv)  Tenant’s Negative Covenants. Tenant shall not injure, deface, permit waste nor otherwise harm any part of the Premises, permit any nuisance at the Premises, permit the emission of any objectionable noise or odor from the Premises, place a load on the floor on the Premises exceeding the floor load per square foot the floor was designed to carry, or install, operate or maintain any electrical equipment in the Premises that shall not bear an underwriters approval.

(v)  Maintenance/Service Contract. Tenant shall, at Tenant’s own expense, enter into a maintenance/service contract with Trane Technologies that shall provide for regularly scheduled servicing of all hot water, heating, ventilation and air conditioning systems and equipment in the Premises. The maintenance contractor and the maintenance/service contract shall be subject to the approval of Landlord, which approval shall not be unreasonably withheld. The maintenance/service contract shall include, without limitation, all servicing suggested by the manufacturer within the operations/maintenance manual pertaining to such system and/or equipment, and shall be effective (and a copy thereof delivered to Landlord) no later than thirty (30) days after the commencement date of this Lease.

(vi) Services and Utilities. Tenant shall, at Tenant’s own expense, obtain all utility services supplying the Premises, including but not limited to electricity, water, sewer, standby water for sprinkler, gas, telephone and all other utilities and other communication services, in its own name, effective as of the commencement of this Lease, and shall pay the cost directly to the applicable utility, including any fine, penalty, interest or cost that may be added thereto for non-payment thereof.  In the event Tenant fails to establish its own utility accounts prior to the Commencement Date, and Landlord is charged for any utility service to the Premises, Tenant agrees to pay such charges to Landlord as additional rent on demand.  Landlord shall have no obligation whatsoever to provide any services or utilities to Tenant and/or the Premises except to the extent expressly set forth in this Lease.

6.     Insurance.

(a)   Insurance Coverage. Tenant shall, during the lease term, at Tenant’s own expense, obtain and keep in force the following insurance:

(i)    Intentionally Omitted.

(ii)   Sprinkler Insurance. If sprinklers are installed in the Premises, Tenant shall obtain sprinkler leakage insurance in an amount equal to at least ten percent (10%) of the amount of insurance required to be carried by Tenant pursuant to subparagraph (i) above. This insurance may be included as a part of the All-Risk Insurance policy. This insurance shall (A) name only Landlord and Landlord’s mortgagees, if any, as their respective interests may appear; (B) provide that no act of Tenant shall impede the right of Landlord or Landlord’s mortgagees, if any, to receive and collect the insurance proceeds; and (C) provide that the right of Landlord and Landlord’s mortgagees, if any, to the insurance proceeds shall not be diminished because of any insurance carried by Tenant for Tenant’s own account.

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(iii) Liability Insurance. Comprehensive general liability insurance coverage (either primary and/or umbrella policies), which shall include personal injury, bodily injury, broad form property damage, operations hazard, owner’s protective coverage, contractual liability and products and completed operations liability, in limits not less than $1,000,000.00 per occurrence/$2,000,000.00 in the aggregate, subject to reasonable increase from time to time as Landlord may determine. This insurance shall insure Landlord and “Landlord’s Indemnitees” (as defined below) and Tenant, and such other parties as Landlord may designate, naming each as the insured on a primary, non-contributory basis. Notwithstanding any contrary provisions contained in this paragraph, if any liability insurance policy excludes coverage of any claim made by one insured against another, or any action or suit filed by one insured against another, then Tenant shall deliver to Landlord a separate liability insurance policy that insures only Landlord and Landlord’s Indemnitees and such other parties as Landlord may designate in accordance with the provisions of this paragraph, and a certificate of insurance evidencing a separate liability insurance policy insuring Tenant in accordance with the provisions of this paragraph. The term “Landlord’s Indemnitees” shall mean Landlord’s affiliates, mortgagees, if any, and their respective officers, shareholders, directors, employees, agents and representatives, as well as the officers, shareholders, directors, employees, agents and representatives of Landlord.

(iv)  Worker’s Compensation and Employer’s Liability Insurance. Worker’s Compensation and Employer’s Liability insurance in a form and in an amount as required to comply with State law and that shall contain a waiver of subrogation against Landlord.

(v)  Additional Insurance. Any other form or forms of insurance as Landlord or Landlord’s mortgagees may reasonably require from time to time, in form and amounts, and for insurance risks against which a prudent tenant of a comparable size and in a comparable business would protect itself.

(b)  Insurance Requirements Generally. All policies shall be taken out with insurers that are acceptable to Landlord and in form satisfactory to Landlord. Tenant agrees that certificates of insurance, or, if required by Landlord or the mortgagees of Landlord, certified copies of each such insurance policy, will be delivered to Landlord as soon as practicable after the placing of the required insurance. Tenant shall, contemporaneously with the execution of this Lease, provide Landlord with a certificate of insurance as written evidence of the insurance in force, and renewals thereof shall be delivered to Landlord at least thirty (30) days prior to the expiration of the respective policy terms. All policies shall contain an undertaking by the insurers to notify Landlord and the mortgagees of Landlord in writing not less than thirty (30) days before any material change, reduction in coverage, cancellation, or other termination thereof.

(c)   Waiver of Subrogation. To the extent that the parties may legally so agree, neither Landlord nor Tenant shall be liable by way of subrogation or otherwise to the other party, or to any insurance company insuring the other party for any loss or damage to any of the property of Landlord or Tenant, as the case may be, which loss or damage is covered by any insurance policies carried by the parties and in force at the time of any such damage, even though such loss or damage might have been occasioned by the negligence of Landlord or Tenant, and the party hereto sustaining such loss or damage so protected by insurance waives its rights, if any, of recovery against the other party hereto to the extent and amount that such loss is covered by such insurance. This release shall be in effect only so long as the applicable insurance policies shall contain a clause or endorsement to the effect that the aforementioned waiver shall not affect the right of the insured to recover under such policies; Tenant shall use its best efforts (including payment of any additional premium) to have its insurance policies contain the standard waiver of subrogation clause. In the event Tenant’s insurance carrier declines to include in such carrier’s policy the standard waiver of subrogation clause, Tenant shall promptly notify Landlord in writing.

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7.      Compliance with Laws and Insurance Requirements.

(a)   General Compliance with Laws and Legal Requirements. Landlord is delivering possession of the Premises to Tenant in the Premises’ “as is, where is” condition, without any representation or warranty about the Premises. Tenant shall, at Tenant’s own expense, promptly comply with: (i) each and every federal, State, county and municipal statute, ordinance, code, rule, regulation, order, directive or requirement, currently or hereafter existing, including, but not limited to, the Americans with Disabilities Act of 1990 and all environmental laws, together with all amending and successor federal, State, county and municipal statutes, ordinances, codes, rules, regulations, orders, directives or requirements, and the common law, regardless of whether such laws are foreseen or unforeseen, ordinary or extraordinary, applicable to the Premises, Tenant, Tenant’s use of or operations at the Premises, or all of them (the “Legal Requirements”); (ii) the requirements of any regulatory insurance body; or (iii) the requirements of any insurance carrier insuring the Premises; regardless of whether compliance (X) results from any condition, event or circumstance existing on or after the commencement of the Lease term, (Y) interferes with Tenant’s use or enjoyment of the Premises, or (Z) requires structural or non-structural repairs or replacements. The failure to mention any specific statute, ordinance, rule, code, regulation, order, directive or requirement shall not be construed to mean that Tenant was not intended to comply with such statute, ordinance, rule, code, regulation, order, directive or requirement.  Notwithstanding anything to the contrary contained in this paragraph 7(a), Tenant shall not be responsible for monetary fines or curing violations arising from any of the foregoing arising from events or conditions that occurred or arose prior to the Commencement Date of the Lease, but nothing in this sentence shall be construed as excusing Tenant from otherwise complying with all Legal Requirements.

(b)   Environmental Law.

(i)    Transaction Triggered Environmental Law. Tenant shall, at Tenant’s own expense, comply with any transaction triggered environmental law requiring Tenant to file statements, forms, reports or other documentation with any governmental body (including, without limitation, a law whose applicability is triggered upon sale of the Premises, a cessation of operations at the Premises, a corporate reorganization, or other commercial transaction), the regulations promulgated thereunder, and any amending and successor legislation and regulations now or hereafter existing in the State in which the Premises are located (the “Cleanup Law”). Tenant shall, at Tenant’s own expense, make all submissions to, provide all information to and comply with all requirements of, the applicable environmental protection or conservation agency enforcing the Cleanup Law. Tenant’s obligations under this subparagraph shall arise if any action or omission by Landlord or Tenant triggers the applicability of the Cleanup Law.  Nothing in this paragraph shall require Tenant to remediate any pre-existing environmental condition at the Premises, and Tenant’s obligations with respect to remediation of environmental conditions shall be governed by the remaining paragraphs of this Section.

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(ii)  Information to Landlord. At no expense to Landlord, Tenant shall promptly provide all information and sign all documents requested by Landlord with respect to compliance with Legal Requirements; however, this shall not in any way be deemed to impose upon Landlord any obligation to comply with any Legal Requirements. In addition, Tenant shall promptly notify Landlord of any environmental condition of which Tenant has knowledge, which may exist in, on, under or about, or may be migrating from or onto the Premises.

(iii) Landlord Access. Tenant shall permit Landlord and its representatives access to the Premises from time to time upon at least 48 hours’ prior notice (which may be by email to luke@suncommon.com) to conduct an environmental assessment, investigation and sampling of the Premises, at Landlord’s expense.

(iv)  Environmental Audit Required of Tenant. Landlord shall have the right, from time to time, during the Lease term, and in the event Landlord in good faith believes there to be Contaminants (as defined below) Discharged (as defined below) during the Lease term at the Premises, to require that Tenant hire, and in such event Tenant shall, at Tenant’s own expense, hire an environmental consultant satisfactory to Landlord to undertake sampling at the Premises sufficient to determine whether Contaminants (as defined below) have been Discharged (as defined below) during the Lease term.  In the event that the sampling reveals that Contaminants (as defined below) were not Discharged (as that term is defined below), then Landlord shall reimburse Tenant for the actual cost paid by Tenant for the sampling.

(v)   No Installation of Tanks. Tenant shall not install any underground or above ground storage tanks at the Premises without the prior written consent of Landlord, and upon demand of Landlord, shall, prior to the expiration or sooner termination of the Lease term, remove, at Tenant’s own expense, all underground or above ground tanks installed at the Premises during the Lease term, and in so doing, Tenant shall comply with all closure requirements and other Legal Requirements.

(vi)  Tenant Remediation. Should any assessment, investigation or sampling undertaken during the Term reveal the existence of any Contaminants in, on, under, or about, or migrating from or onto the Premises as a result of a Discharge during the Lease term, then, in addition to such event constituting an Event of Default under this Lease, and Landlord having all rights available to Landlord under this Lease and by law by reason of such Event of Default, Tenant shall, at Tenant’s own expense, in accordance with all Legal Requirements, undertake all action required by Landlord and any Governmental Authority (as defined below), including, but not limited to, promptly obtaining and delivering to Landlord an unconditional written determination by the applicable environmental protection or conservation agency that there are no Discharged Contaminants present at the Premises originating during the term of this Lease or at any other site to which a Discharge originating at the Premises migrated during the term of this Lease, or that any Discharged Contaminants present at the Premises originating during the term of this Lease or that have migrated from the Premises during the term of this Lease have been remediated in accordance with all applicable requirements (“No Further Action Letter”). In no event shall any of Tenant’s remedial action involve engineering or institutional controls, a groundwater classification exception area or well restriction area. Promptly upon completion of all required investigatory and remedial activities, Tenant shall, at Tenant’s own expense, and to Landlord’s satisfaction, restore the affected areas of the Premises from any damage or condition caused by the investigatory or remedial work.

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(vii) Hold-Over Tenancy. If prior to the expiration or earlier termination of the Lease term, Tenant fails to remediate all Contaminants pursuant to subparagraph (vi) above and deliver to Landlord a No Further Action Letter, then upon the expiration or earlier termination of the Lease term, Landlord shall have the option either to consider this Lease as having ended or treat Tenant as a hold-over tenant in possession of the Premises. If Landlord considers this Lease as having ended, then Tenant shall nevertheless be obligated to promptly obtain and deliver to Landlord the No Further Action Letter and otherwise fulfill all of the obligations of Tenant set forth in this paragraph 7. If Landlord treats Tenant as a hold-over tenant in possession of the Premises, then Tenant shall pay, monthly to Landlord, on the first day of each month, in advance, the fixed annual rent that Tenant would otherwise have paid under this Lease during the final scheduled year of the Lease term until such time as Tenant delivers to Landlord the No Further Action Letter and otherwise fulfills its obligations to Landlord under this paragraph 7, provided that, if the hold-over period pursuant to this paragraph continues for more than six (6) months, and the reason for such continuation is other than awaiting the issuance of the No Further Action Letter alone, then Tenant shall thereafter pay rent at double the fixed annual rent that Tenant would otherwise have paid under this Lease during the final scheduled year of the Lease term until such time and during the hold-over period all other terms of this Lease shall remain in full force and effect.

(viii) Permits. Tenant shall not commence or alter any operations at the Premises prior to: (A) obtaining all permits, registrations, licenses, certificates and approvals from all Governmental Authorities required pursuant to any Legal Requirements; and (B) delivering a copy of each permit, registration, license, certificate and approval to Landlord, together with a copy of the application upon which such permit, registration, license, certificate and approval is based.

(ix)  Environmental Documents. During the term of this Lease, and subsequently, promptly upon receipt by Tenant or a Tenant Representative, Tenant shall deliver to Landlord all environmental documentation concerning the Premises or its environs in the possession or under the control of Tenant, including but not limited to plans, reports, correspondence and submissions, concerning or generated by or on behalf of Tenant with respect to the Premises, whether during or after the Lease term, and whether currently or hereafter existing.  During the term of this Lease, and subsequently, promptly upon receipt by Landlord, Landlord shall deliver to Tenant all reports generated as a result of environmental investigations performed by or on behalf of Landlord pursuant to subsection (iv) of this Section, and any notices received by Landlord of any alleged Discharge (as that term is defined below) of, or the presence of Contaminants (as that term is defined below)  at the Premises.

(x)   Attendance at Meetings. Tenant shall notify Landlord in advance of all meetings scheduled between Tenant or Tenant’s Representatives and any Governmental Authority pertaining to the Premises, and Landlord and Landlord’s agents, representatives and employees, including, but not limited to, legal counsel and environmental consultants and engineers, shall have the right, without the obligation, to attend and participate in all such meetings.

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(xi)  Landlord’s Right to Perform Tenant’s Obligations. Notwithstanding anything to the contrary set forth in this Lease, in the event, pursuant to this Lease, Tenant is required to undertake any sampling, assessment, investigation or remediation with respect to the Premises, then, at Landlord’s discretion, Landlord shall have the right (but without any obligation to do so), upon notice to Tenant, from time to time, to perform such activities at Tenant’s expense, and all sums incurred by Landlord shall be paid by Tenant, as additional rent, upon demand, together with interest at the Prime Rate, accruing from the date of Landlord’s demand.

(xii) Interpretation and Definitions.

(A) Interpretation. The obligations imposed upon Tenant under this subparagraph (b) are in addition to and are not intended to limit, but to expand upon, the obligations imposed upon Tenant under subparagraph (a).

(B) Contaminants. The term “Contaminants” shall include, without limitation, any regulated substance, toxic substance, hazardous substance, hazardous waste, pollution, pollutant or contaminant, as defined or referred to in the Resource Conservation and Recovery Act, as amended, 42 U.S.C. § 6901 et seq.; the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. § 9601 et seq.; the Water Pollution and Control Act, 33 U.S.C. § 1251 et seq.; analogous State laws; together with any amendments thereto, regulations promulgated thereunder and all substitutions thereof, as well as words of similar purport or meaning referred to in any other federal, State, county or municipal environmental statute, ordinance, code, rule, regulation, order, directive or requirement, including, without limitation, radon, asbestos, polychlorinated biphenyls, urea formaldehyde and petroleum products and petroleum based derivatives. Where a statute, ordinance, code, rule, regulation, order, directive or requirement defines any of these terms more broadly than another, the broader definition shall apply.

(C) Discharge. The term “Discharge” shall mean the releasing, spilling, leaking, leaching, disposing, pumping, pouring, emitting, emptying or dumping of Contaminants at, into, onto or migrating from or onto the Premises, regardless whether the result of an intentional or unintentional action or omission.

(D) Governmental Authority/Governmental Authorities. The term “Governmental Authority” or “Governmental Authorities” shall mean the federal, State, county or municipal government with jurisdiction over the Premises, or any department, agency, bureau or other similar type body obtaining authority therefrom, or created pursuant to any Legal Requirements.

(c)   Survival. This paragraph 7 shall survive the expiration or earlier termination of this Lease for a period that is the greater of: (i) six (6) years; or (ii) the limitations period for enforcement set forth in any Legal Requirement applicable to Tenant’s obligations under this paragraph 7. Without limiting any other remedy available to Landlord under this Lease or by Legal Requirements, Tenant’s failure to abide by the terms of this paragraph 7 shall be restrainable or enforceable, as the case may be, by injunction.

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8.      Alterations, Additions and Improvements.

 No alterations, additions or improvements shall be made by Tenant to the building and improvements on the Premises, nor to any air conditioning system, heating system, plumbing system, electrical system, nor shall antennas or fixtures be installed in or on the building or improvements to the Premises, without the prior written consent of Landlord, which consent may be granted or withheld by Landlord in Landlord’s reasonable discretion. Subject to Section 21, all alterations, additions or improvements and systems installed in or attached to the Premises by Tenant shall, at the option of Landlord, upon the expiration or earlier termination of this Lease, belong to and become the property of Landlord without any payment from Landlord and if such option is exercised, shall be surrendered by Tenant in good order and condition as part of the Premises upon the expiration or sooner termination of the Lease term. At Landlord’s request, Tenant shall restore the Premises to the condition it was in prior to Tenant’s occupancy, normal wear and tear excepted, such restoration to be completed on or before the expiration of the Lease term, at Tenant’s own expense. Tenant shall not use or penetrate the roof of the building on the Premises for any purpose whatsoever without the prior written consent of Landlord, which consent may be granted or withheld by Landlord in Landlord’s sole and absolute discretion. All alterations, additions or improvements consented to by Landlord shall be performed by Tenant in a good and workmanlike manner, in compliance with all Legal Requirements.  Tenant shall reimburse Landlord, upon demand, for any actual out-of-pocket costs, expenses or disbursements incurred by Landlord, including reasonable counsel fees, in connection with any request by Tenant for consent pursuant to this Section, whether or not Landlord grants consent.

9.     Fire and Other Casualty Affecting the Premises.

(a)  Notice of Casualty by Tenant. If the improvements situated upon the Premises shall be damaged or destroyed by any peril, including, but not limited to, fire, wind storm or other casualty (each such occurrence, a “Casualty”) at any time, whether covered by insurance to be provided by Tenant under this Lease or not, Tenant shall give prompt notice thereof to Landlord and this Lease shall continue in full force and effect.

(b)   Restoration After Partial Damage. If the Premises are partially damaged or rendered partially unusable by fire or other casualty, the damages thereto shall be repaired by and at the expense of Landlord and the rent and other items of additional rent, until such repair shall be substantially completed, shall be apportioned from the day following the casualty according to the part of the Premises which is usable.

(c)  Total Damage or Inability to Use. If the Premises are totally damaged or rendered wholly unusable by fire or other casualty, then the rent and other items of additional rent as hereinafter expressly provided shall be proportionately paid up to the time of the casualty and thenceforth shall cease until the date when the Premises shall have been repaired and restored by Landlord (or sooner reoccupied in part by Tenant then rent shall be apportioned as provided in subsection (b) above), subject to Landlord's right to elect not to restore the same as hereinafter provided.

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(d)  Restoration Upon Total Damage or Inability to Use. If the Premises are rendered wholly unusable or (whether or not the Premises are damaged in whole or in part) if the Premises shall be so damaged that Landlord shall decide to demolish it or to rebuild it, then, in any of such events, Landlord may elect to terminate this lease by written notice to Tenant given within 90 days after such fire or casualty or 30 days after adjustment of the insurance claim for such fire or casualty, whichever is sooner, specifying a date for the expiration of the lease, which date shall not be more than 60 days after the giving of such notice, and upon the date specified in such notice the term of this lease shall expire as fully and completely as if such date were the date set forth above for the termination of this lease and Tenant shall forthwith quit, surrender and vacate the Premises without prejudice however, to Landlord's rights and remedies against Tenant under the lease provisions in effect prior to such termination, and, subject to abatement as set forth in Section 9(c) above, any rent owing shall be paid up to such date and any payments of rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenant.  Unless Landlord shall serve a termination notice as provided for herein, Landlord shall make the repairs and restorations under the conditions of (b) and (c) hereof, with all reasonable expedition subject to delays due to adjustment of insurance claims, labor troubles and causes beyond Landlord's control.  After any such casualty, Tenant shall cooperate with Landlord's restoration by removing from the premises as promptly as reasonably possible, all of Tenant's salvageable inventory and moveable equipment, furniture, and other property.  Upon Tenant’s request, Landlord shall provide Tenant with updates, but not more than once each calendar month during the restoration as to the status and projected substantial completion date.  Such updates  may be sent my email to luke@suncommon.com.  Tenant's liability for rent shall resume five (5) days after written notice from Landlord that the Premises are substantially ready for Tenant's occupancy. In the event Landlord fails to complete restoration of the Premises within one (1) year following the date of the casualty, or, if the casualty occurs in the final year of the lease term, Tenant may terminate this Lease on notice to Landlord, and the Lease shall terminate as of the date Tenant delivers such notice to Landlord.

(e)  Tenant’s Liability not Excused; Insurance Proceeds. Nothing contained hereinabove shall relieve Tenant from liability that may exist as a result of damage from fire or other casualty.  Notwithstanding the foregoing, including Landlord's obligation to restore under subparagraph (b) above, each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent permitted by law, Landlord and Tenant each hereby releases and waives all right of recovery with respect to subparagraphs (b), (d) and (e) above, against the other or any one claiming through or under each of them by way of subrogation or otherwise.  The release and waiver herein referred to shall be deemed to include any loss or damage to the Demised Premises and/or to any personal property, equipment, trade fixtures, goods and merchandise located therein.  The foregoing release and waiver shall be in force only if both releasors' insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance.   If, and to the extent, that such waiver can be obtained only by the payment of additional premiums, then the party benefiting from the waiver shall pay such premium within ten days after written demand or shall be deemed to have agreed that the party obtaining insurance coverage shall be free of any further obligation under the provisions hereof with respect to waiver of subrogation.  Tenant acknowledges that Landlord will not carry insurance on Tenant's furniture and/or furnishings or any fixtures or equipment, improvements, or appurtenances removable by Tenant and agrees that Landlord will not be obligated to repair any damage thereto or replace the same.

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(f) Statutory Risk of Loss.  Tenant hereby waives the provisions of Section 227 of the Real Property Law and agrees that the provisions of this article shall govern and control in lieu thereof.

10.   Assignment and Subletting.

(a)  Landlord’s Consent Required. Tenant shall not voluntarily or by operation of law assign, sublet, or otherwise transfer all or any part of Tenant’s interest in this Lease or in the Premises without Landlord’s prior written consent, which consent may be granted or withheld in Landlord’s commercially reasonable discretion. Any attempted assignment, subletting, mortgage, transfer or encumbrance without such consent shall be void as against Landlord, and shall constitute an Event of Default by Tenant under this Lease. In no event whatsoever shall Tenant mortgage or encumber its interest in this Lease and in no event whatsoever shall Tenant assign this Lease in part. Any direct or indirect assignment, transfer or sale of ownership rights in Tenant shall be deemed an assignment in violation of this Lease. In the event of an assignment of this Lease, Tenant shall deliver to Landlord a duplicate original of the assignment by the assignor Tenant of this Lease and the assumption by the assignee Tenant of Tenant’s obligations under this Lease. In the event of a sublease, Tenant shall deliver to Landlord a duplicate original of the sublease. No assignment or sublease, whether made with or without Landlord’s consent, or the need under this subparagraph to obtain Landlord’s consent, shall in any way release the assigning or sublessor Tenant from any obligation or liability hereunder and, in the event of an assignment, the assignor-Tenant shall be jointly and severally liable with the assignee-Tenant for all obligations and liabilities of Tenant’s arising during the remainder of the term of this Lease.

(b)  No Release of Tenant. Acceptance of fixed annual rent and additional rent from any other person shall not be deemed a waiver by Landlord of any provision of this Lease. Consent to one assignment or subletting shall not be deemed a consent to any subsequent assignment or subletting.

(c)   Participation by Landlord. In the event of any assignment or sublease involving consideration paid to Tenant in excess of Fixed Rent and additional rent required under this Lease (“Excess Rent”), Landlord shall participate in the Excess Rent. Tenant shall promptly pay to Landlord, as additional rent, fifty (50%) percent of all such Excess Rent collected from the assignee or subtenant.

(d)   Exclusions. The provisions of this Article shall not apply to an assignment in connection with a merger of Tenant into another entity in connection with a corporate transaction involving Tenant and all entities now or at the time of the such merger under common control with Tenant, or an acquisition of Tenant by another entity (but not merely a sale of Tenant’s operations at the Premises in a “spin-off” transaction), provided that Tenant provides Landlord prompt notice of any such assignment and a description of the transaction giving rise to the assignment.

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11.    Landlord’s Right to Inspect and Repair.

 Landlord and Landlord’s agents, employees or representatives shall have the right to enter into and upon all or any part of the Premises during the Lease term at all reasonable hours upon at least 48 hours’ prior notice (which may be by email to luke@suncommon.com) for the purpose of: (a) examination; (b) determination whether Tenant is in compliance with its obligations under this Lease; (c) making repairs, alterations, additions or improvements to the Premises, including those as may be necessary by reason of Tenant’s failure to make same; and (d) inspection by prospective lenders or purchasers. This paragraph shall not be deemed nor construed to create an obligation on the part of Landlord to make any inspection of the Premises or to make any repairs, alterations, additions or improvements to the Premises for its safety or preservation.

12.    Landlord’s Right to Exhibit Premises.

 Upon at least 48 hours’ prior notice (which may be by email to luke@suncommon.com), Landlord and Landlord’s agents, employees or representatives shall have the right to show the Premises during the Lease term to persons wishing to purchase or grant fee mortgages on the Premises. Landlord and Landlord’s agents, employees or other representatives shall have the right within the last six (6) months of the Lease term (if Tenant has not exercised any available option to renew the term of this Lease) to place notices on any parts of the Premises, offering the Premises for lease and at any time during the Lease term, offering the Premises for sale, and Tenant shall permit the signs to remain without hindrance or molestation.

13.    Signs.

 Tenant shall not cause any signs to be placed at the Premises, except of a design and structure and at such places as Landlord shall reasonably consent to in writing prior to the installation. If Landlord or Landlord’s agents, employees or other representatives wish to remove any such signs in order to make any repairs, alterations, additions or improvements to the Premises, such signs may be removed, and shall be replaced, at Landlord’s expense, when the repairs, additions, alterations or improvements shall be completed; however, such provision shall not create an obligation on the part of Landlord to make any repairs, alterations, additions or improvements to the Premises. All signs of Tenant at the Premises shall conform with all municipal ordinances or other laws and regulations applicable to such signs.

14.   Landlord Not Liable.

Except for Landlord’s failure to perform its obligations under Section  5(b)(i), Landlord shall not be liable for any damage or injury to any person or any property as a consequence of the failure, breakage, leakage or obstruction of water, well, plumbing, septic tank, sewer, waste or soil pipes, roof, drains, leaders, gutters, down spouts or the like, or of the electrical system, gas system, air conditioning system or other system, or by reason of the elements, or resulting from any act or failure to act on the part of Landlord or Landlord’s agents, employees, invitees or representatives assignees or successors, or attributable to any interference with, interruption of or failure beyond the control of Landlord.

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Notwithstanding the foregoing, if any essential services (such as HVAC, electricity or water) are interrupted and such interruption results from Landlord’s gross negligence or intentional misconduct, Tenant is entitled to an abatement of Fixed Rent and Additional Rent beginning on the later of (i) the tenth (10th) consecutive business day following such interruption.  If such interruption occurs in the final fifteen (15) months of the lease Term and is not remedied within one hundred twenty (120) days, Tenant shall have the right to terminate this Lease on notice to Landlord.  If Tenant has exercised its option to renew the term of the Lease pursuant to Section 2(b) of this Lease, and such interruption occurs prior to, and continues through, the date that is one (1) year prior to the Expiration Date, Tenant may rescind the exercise of its option to renew upon written notice to Landlord, and Tenant’s option to renew shall thereafter terminate and be irrevocably waived.

15.    Force Majeure.

 Whenever a period of time is herein prescribed for the taking of any action by Landlord or Tenant, such party shall not be liable or responsible for, and there shall be excluded from the computation of such period of time, any delays due to strikes, lockouts, riots, acts of God, shortages of labor or materials, war, civil commotion, fire or other casualty, catastrophic weather conditions, a court order that causes a delay, governmental laws, regulations, or restrictions, or any other cause whatsoever beyond the control of such party (any of the foregoing being referred to an “Unavoidable Delay”). Each party shall use reasonable efforts to notify the other party not later than ten (10) business days after the notifying party knows of the occurrence of an Unavoidable Delay; provided, however, that the notifying party’s failure to notify the other party of the occurrence of an event constituting an Unavoidable Delay shall not alter, detract from, or negate its character as an Unavoidable Delay or otherwise result in the loss of any benefit or right granted to each party under this Lease.

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16.    Indemnification and Waiver of Liability.

 Neither Landlord nor Landlord’s Indemnitees shall be liable for, and Tenant shall indemnify and save harmless Landlord and Landlord’s Indemnitees from and against, any and all liabilities, damages, claims, suits, costs (including costs of suit, attorneys’ fees and costs of investigation) and actions of any kind, foreseen or unforeseen, arising or alleged to arise by reason of injury to or death of any person or damage to or loss of property, occurring on, in, or about the Premises, or by reason of any other claim whatsoever of any person or party, occasioned, directly or indirectly, wholly or partly: (a) by any act or omission on the part of Tenant or any Tenant Representative; (b) by any breach, violation or non-performance of any covenant of Tenant under this Lease; or (c) by a Discharge of Contaminants during the Lease term; regardless of whether such liability, claim, suit, cost, injury, death or damage arises from or is attributable to the concurrent negligence, willful misconduct or gross negligence of Landlord or any Landlord Indemnitee, provided that nothing herein shall preclude Tenant from asserting a defense or claim of contributory fault or of a similar nature. If any action or proceeding shall be brought by or against Landlord or any Landlord Indemnitee in connection with any such liability, claim, suit, cost, injury, death or damage, Tenant, on notice from Landlord or any Landlord Indemnitee, shall defend such action or proceeding, at Tenant’s expense, by or through attorneys reasonably satisfactory to Landlord or the Landlord Indemnitee. The provisions of this paragraph shall apply to all activities of Tenant or any Tenant Representative with respect to the Premises, whether occurring before or after execution of this Lease. Tenant’s obligations under this paragraph shall not be limited to the coverage of insurance maintained or required to be maintained by Tenant under this Lease. Neither Landlord nor any Landlord Indemnitee shall be liable in any manner to Tenant or any Tenant Representative for any injury to or death of persons or for any loss of or damage to property, regardless of whether such loss or damage is occasioned by casualty, theft or any other cause of whatsoever nature, unless such loss or damage is caused solely by the willful misconduct or gross negligence of Landlord or any Landlord Indemnitee. In no event shall Landlord or any Landlord Indemnitee be liable in any manner to Tenant or any Tenant Representative as the result of the acts or omissions of Tenant or a Tenant Representative and all liability therefore shall rest with Tenant. All personal property upon the Premises shall be at the risk of Tenant only, and neither Landlord nor any Landlord Indemnitee shall be liable for any damage thereto or theft thereof, unless due in whole or to the extent due in part to the willful misconduct or gross negligence of Landlord or any Landlord Indemnitee.

17.    Subordination; Attornment.

(a)   Subordination. This Lease shall be subject and subordinate to any mortgage, deed of trust, trust indenture, assignment of leases or rents or both, or other instrument evidencing a security interest, which may now or hereafter affect any portion of the Premises or be created as security for the repayment of any loan or any advance made pursuant to such an instrument or in connection with any sale-leaseback or other form of financing transaction, and all renewals, extensions, supplements, consolidations, and other amendments, modifications, and replacements of any of the foregoing instruments (“Mortgage”), and to any ground lease or underlying lease of the Premises or any portion of the Premises whether presently or hereafter existing and all renewals, extensions, supplements, amendments, modifications, and replacements of any of such leases (“Superior Lease”). Tenant shall, at the request of any successor-in-interest to Landlord claiming by, through, or under any Mortgage or Superior Lease, attorn to such person or entity as described below within ten (10) days after the request is made. The foregoing provisions of this subparagraph (a) shall be self-operative and no further instrument of subordination shall be required to make the interest of any lessor under a Superior Lease (a “Superior Lessor”) or any mortgagee, trustee or other holder of or beneficiary under a Mortgage (a “Mortgagee”) superior to the interest of Tenant hereunder; provided, however, Tenant shall execute and deliver within ten (10) days after request is made any certificate or instrument that Landlord, any Superior Lessor or Mortgagee may request in confirmation of such subordination.

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(b)  Rights of Superior Lessor or Mortgagee. Any Superior Lessor or Mortgagee may elect that this Lease shall have priority over the Superior Lease or Mortgage that it holds and, upon notification to Tenant by such Superior Lessor or Mortgagee, this Lease shall be deemed to have priority over such Superior Lease or Mortgage whether this Lease is dated prior to or subsequent to the date of such Superior Lease or Mortgage. If, in connection with the financing of the Premises or with respect to any Superior Lease, any Mortgagee or Superior Lessor shall request reasonable modifications of this Lease that do not increase the monetary obligations of Tenant under this Lease, materially increase Tenant’s other obligations, or materially and adversely affect the rights of Tenant under this Lease, then Tenant shall make such modifications within ten (10) days after request.

(c)   Attornment. If at any time prior to the expiration of the term of this Lease, any Superior Lease shall terminate or be terminated or any Mortgagee comes into possession of the Premises or the estate created by any Superior Lease by receiver or otherwise, Tenant shall, at the election and upon the demand of any owner of the Premises, or of the Superior Lessor, or of any Mortgagee-in-possession of the Premises, attorn from time to time to any such owner, Superior Lessor or Mortgagee, or any person or entity acquiring the interest of Landlord as a result of any such termination or as a result of a foreclosure of the Mortgage or the granting of a deed in lieu of foreclosure, upon the then-executory terms and conditions of this Lease, for the remainder of the term. In addition, in no event shall any such owner, Superior Lessor or Mortgagee, or any person or entity acquiring the interest of Landlord be bound by (i) any payment of rent or additional rent for more than one (1) month in advance, or (ii) any security deposit or the like not actually received by such successor, or (iii) any amendment or modification in this Lease made without the consent of the applicable Superior Lessor or Mortgagee, or (iv) any construction obligation, free rent, or other concession or monetary allowance, or (v) any set-off, counterclaim, or the like otherwise available against any prior landlord (including Landlord), or (vi) any act or omission of any prior landlord (including Landlord).

(d)   Rights Accruing Automatically. The provisions of this paragraph 17 shall inure to the benefit of any such successor-in-interest to Landlord, shall apply notwithstanding that, as a matter of law, this Lease may terminate upon the termination of any such Superior Lease, and shall be self-operative upon any such demand, and no further instrument shall be required to give effect to such provisions. Tenant, however, within ten (10) days after demand of any such successor-in-interest to Landlord, shall execute, from time to time, instruments in confirmation of the foregoing provisions of this paragraph, reasonably satisfactory to any such successor-in-interest to Landlord, acknowledging such attornment and setting forth the terms and conditions of its tenancy.

(e)   Limitation on Termination by Tenant. As long as any Superior Lease or Mortgage shall exist, Tenant shall not seek to terminate this Lease by reason of any act or omission of Landlord until Tenant shall have given written notice of such act or omission to all Superior Lessors and Mortgagees at such addresses as shall have been furnished to Tenant by such Superior Lessors and Mortgagees and, if any such Superior Lessor or Mortgagee, as the case may be, shall have notified Tenant within ten (10) business days following receipt of such notice of its intention to remedy such act or omission, until a reasonable period of time shall have elapsed following the giving of such notice (but not to exceed sixty (60) days), during which period such Superior Lessors and Mortgagees shall have the right, but not the obligation, to remedy such act or omission. The foregoing shall not, however, be deemed to impose upon Landlord any obligations not otherwise expressly set forth in this Lease.

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(f)   Agreement with Mortgagee.          Landlord, at Tenant’s sole cost and expense, shall make commercially reasonable efforts to obtain a subordination, non-disturbance and attornment agreement (“SNDA”) in favor of Tenant from any future mortgagee on such mortgagee’s standard form.  In the event Tenant does not execute the mortgagee’s standard form of SNDA, or does not agree to changes thereto acceptable to the mortgagee in the mortgagee’s sole discretion, the provisions of this Article shall control and be self-operative.  Tenant shall be liable to Landlord, as additional rent, for all of Landlord’s actual costs and expenses, including, without limitation, reasonable legal fees, in connection with the procurement, negotiation and execution of the SNDA, without regard to whether or not the SNDA is actually executed.

18.    Condemnation.

(a)   Permanent Condemnation.

(i)    Lease Termination. If all or any portion of the Premises is taken under the power of eminent domain or sold under the threat of the exercise of the power (both called “Condemnation”), this Lease shall terminate as to the part taken as of the first date the condemning authority takes either title or possession. If more then twenty-five percent (25%) of the leasable area of the Premises is taken or the balance of the Premises is unfit for Tenant’s use, Tenant has the option to terminate this Lease as of the date the condemning authority takes possession. The option shall be exercised in writing (A) within thirty (30) days after Landlord or the condemning authority has given Tenant written notice of the taking or (B) absent such notice, within ten (10) days after the condemning authority has taken possession. If Tenant does not terminate, this Lease shall remain in full force and effect as to the portion of the Premises remaining. The fixed annual rent and additional rent shall be reduced in the same proportion as the area of the Premises taken bears to the entire area leased hereunder.

(ii) Award. Any award for Condemnation is Landlord’s, whether the award is made as compensation for diminution in value of the leasehold or for the taking of the fee, or as severance damages. If this Lease is not terminated, Landlord shall diligently repair any damage to the Premises caused by such Condemnation, subject to Unavoidable Delays.

(b)  Temporary Condemnation. Upon condemnation of all or any portion of the Premises for temporary use, this Lease shall continue without change or abatement in Tenant’s obligations as between Landlord and Tenant, except that Fixed Rent and Additional Rent shall proportionally abate relative to the percentage of the Premises condemned for temporary use for the period of the condemnation. Tenant is entitled to the award made for the use, except that Landlord shall be entitled to recover any award for lost rent. If the Condemnation extends beyond the term of this Lease, the award shall be prorated between Landlord and Tenant as of the expiration date of the term. Landlord is responsible, at its sole cost and expense, for performing any restoration work required to place the Premises in the condition it was in prior to Condemnation, unless the term of the period of Condemnation extends beyond the expiration date of the Lease term. In such case, Tenant shall assign to Landlord any claim it may have against the condemning authority for the cost of restoration, and if Tenant has received restoration funds, it shall give the funds to Landlord within ten (10) days after demand.

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19.    Bankruptcy or Insolvency of Tenant.

(a)   Landlord’s Right to Terminate Lease. If Tenant is the subject of an order for relief under the existing or any future Federal Bankruptcy Code or law, as amended or modified (the “Bankruptcy Code”), or if Tenant files a petition or if a petition is filed against Tenant under the Bankruptcy Code, then, in addition to any such event constituting an Event of Default under this Lease, and Landlord having all rights as a result thereof, Landlord shall have the option to either re-enter and re-possess the Premises pursuant to the provisions of this Lease or to terminate this Lease, pursuant to the provisions of this Lease, or both.

(b)  Tenant’s Filing of Chapter 7 Proceedings. If a petition is filed by, or an order for relief is entered against, Tenant under Chapter 7 of the Bankruptcy Code, and the trustee-in-bankruptcy of Tenant (the “Bankruptcy Trustee”) elects to assume this Lease for the purpose of assigning it, the election or assignment, or both, may be made only if all of the provisions of subparagraphs (c) and (e) below are satisfied. Nothing in the preceding sentence shall be deemed to grant the Bankruptcy Trustee any right to assume this Lease if it has been terminated previously. If the Bankruptcy Trustee fails to elect to assume this Lease for the purpose of assigning it within sixty (60) days after the Bankruptcy Trustee’s appointment, this Lease shall be deemed to have been rejected by the Bankruptcy Trustee. Landlord shall then immediately become entitled to possession of the Premises without any further obligation to Tenant or the Bankruptcy Trustee, and this Lease shall automatically terminate at the end of the sixty (60) day period, but Landlord’s right to compensation for damages in the bankruptcy proceedings shall survive. In such case, Landlord shall be entitled to recover from Tenant as damages an amount equal to the fixed annual rent and additional rent reserved under this Lease from the date of the automatic termination to the expiration date of this Lease (exclusive of any unexercised renewal rights), and the damages shall be due and payable to Landlord immediately.

(c)   Tenant’s Filing of Chapter 11 or 13 Proceedings. If Tenant files a petition for reorganization under Chapters 11 or 13 of the Bankruptcy Code, or a proceeding that is filed by or against Tenant under any other chapter of the Bankruptcy Code is converted to a Chapter 11 or 13 proceeding and the Bankruptcy Trustee or Tenant as a debtor-in-possession (“Debtor-in-Possession”) fails to assume this Lease within sixty (60) days from the date of filing the petition or the conversion, the Bankruptcy Trustee or the Debtor-in-Possession shall be deemed to have rejected this Lease and this Lease shall automatically terminate at the expiration of the sixty (60) day period, but Landlord’s right to compensation for damages in the bankruptcy proceedings shall survive. Nothing in the preceding sentence shall be deemed to grant the Bankruptcy Trustee or the Debtor-in-Possession any right to assume this Lease if it has been terminated previously. In such a case, Landlord shall be entitled to recover from Tenant, as damages, an amount equal to the fixed annual rent and additional rent reserved under this Lease from the date of the automatic termination to the expiration date of this Lease (exclusive of any unexercised renewal rights), and the damages shall be due and payable to Landlord immediately. In order to assume this Lease, the Bankruptcy Trustee or the Debtor-in-Possession shall notify Landlord of the election to assume within the sixty (60) day period, but in such event all of the following conditions, which Landlord and Tenant acknowledge are commercially reasonable, must be satisfied by the Bankruptcy Trustee or the Debtor-in-Possession to the extent Landlord determines, in Landlord’s sole discretion:

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(i)  Adequate Assurances. The Bankruptcy Trustee or the Debtor-in-Possession cures, or provides “Adequate Assurance” (as defined below) to Landlord that the Bankruptcy Trustee or the Debtor-in-Possession can cure, all monetary Events of Default under this Lease by full and complete payment within ten (10) days from the date of the assumption, and the Bankruptcy Trustee or the Debtor-in-Possession cures all non-monetary Events of Default under this Lease within thirty (30) days from the date of the assumption;

(ii)  Landlord Compensation. The Bankruptcy Trustee or the Debtor-in-Possession compensates Landlord, or provides Adequate Assurance to Landlord that within ten (10) days from the date of the assumption, Landlord shall be compensated by full and complete payment for any pecuniary loss Landlord suffers as a result of any Event of Default of Tenant, the Bankruptcy Trustee or the Debtor-in-Possession, as set forth in Landlord’s notice (which contains a statement of Landlord’s pecuniary loss) given to the Bankruptcy Trustee or the Debtor-in-Possession; and

(iii)  Future Performance. The Bankruptcy Trustee or the Debtor-in-Possession provides Landlord with Adequate Assurance of the future performance of Tenant’s obligations under this Lease, including, without limitation, depositing with Landlord, as security, in addition to that otherwise established pursuant to the provisions of this Lease, an amount equal to three (3) monthly installments of fixed annual rent and additional rent then accruing under this Lease.

For purposes of this subparagraph (c), “Adequate Assurance” shall mean that (i) Landlord determines that the Bankruptcy Trustee or Debtor-in-Possession has, and shall continue to have, sufficient unencumbered assets after the payment of all secured obligations and administrative expenses to assure Landlord that the Bankruptcy Trustee or the Debtor-in- Possession has sufficient funds to fulfill Tenant’s obligations under this Lease, and/or that third-party guaranties of Tenant’s obligations under this Lease have been provided; and (ii) an order was entered segregating sufficient sums payable to Landlord, or a valid and perfected lien and security interest are granted to Landlord in the property of Tenant, Trustee or the Debtor-in-Possession, as may be acceptable to Landlord, to secure the obligations of the Bankruptcy Trustee or the Debtor-in-Possession to cure the monetary or non-monetary defaults under this Lease within the time periods set forth above.

(d)  Landlord’s Right to Terminate Lease on Further Filing of Bankruptcy Petition. If this Lease is assumed by the Bankruptcy Trustee or Debtor-in-Possession pursuant to subparagraph (c) above, and thereafter Tenant is the subject of an order for relief under the Bankruptcy Code, then Landlord has the option to terminate this Lease pursuant to the provisions of this Lease.

(e)   Condition Upon Assignment. If the Bankruptcy Trustee or Debtor-in-Possession pursuant to subparagraphs (b) and (c) above desires or elects to assign Tenant’s interest or the estate created by the interest under this Lease to any other person, the interest or estate may be assigned only if Landlord acknowledges in writing that the intended assignee has provided to Landlord Adequate Assurance of future performance of all of the obligations of Tenant under this Lease.

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(f)   State Law Action. Neither Tenant’s interest in this Lease nor any estate of Tenant created in this Lease shall pass to any trustee, receiver, assignee for the benefit of creditors, or any other person or entity, or otherwise by operation of law under the laws of any State having jurisdiction of the person or property of Tenant unless Landlord consents in writing to this transfer. Landlord’s acceptance of rent or any other payments from any trustee, receiver, assignee, person, or other entity shall not be deemed to have waived, or waive, the need to obtain Landlord’s consent or Landlord’s right to terminate this Lease for any transfer of Tenant’s interest under this Lease without that consent, and any such event, without Landlord’s written consent, shall be deemed an Event of Default.

(g)  Charges for Use and Occupancy. When, pursuant to the Bankruptcy Code, the Bankruptcy Trustee or the Debtor-in-Possession is obligated to pay reasonable use and occupancy charges for the use of the Premises, the charges shall not be less than the fixed annual rent and additional rent due under this Lease.

20.    Default by Tenant and Landlord’s Remedies.

(a)  Event of Default. If any one or more of the following events shall occur and be continuing beyond the period set forth in any default notice provided to be given, an Event or Events of Default shall have occurred under this Lease:

(i)    Non-Payment. If Tenant shall fail to pay any installment of fixed annual rent, additional rent or other sums due from Tenant to Landlord under this Lease for five (5) days after notice from Landlord, provided that nothing in this Section shall be deemed to impair or impose further obligations or conditions upon, Landlord’s maintaining a proceeding pursuant to Real Property Actions and Proceedings Law Section 711(2); or

(ii)  Non-Performance. If Tenant shall fail to comply with any of the other terms, covenants, conditions or obligations of this Lease and such failure in compliance shall continue for (A) the specific period of time stated elsewhere in this Lease as applicable to that performance, if such a period is stated, or (B) if no such specific period is stated, then thirty (30) days after delivery of notice from Landlord to Tenant specifying the failure, or, if such failure cannot with due diligence be remedied within thirty (30) days but is curable, Tenant shall not, in good faith have commenced within said thirty (30) day period to remedy such failure and continued diligently and continuously thereafter to prosecute the same to completion but in no event shall such extension be for more than forty five (45) additional days; or

(iii) Vacation or Abandonment. If Tenant shall vacate or abandon the Premises with the rent unpaid.

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(b)  Landlord’s Remedies. If an Event of Default shall exist, Landlord shall have the following remedies:

(i)    Right of Eviction. Tenant’s right of possession shall thereupon cease and terminate, and to the extent permitted by law Landlord shall be entitled to the possession of the Premises and to re-enter the same without demand of rent or demand of possession and may forthwith proceed to recover possession of the Premises by process of law. Any other NOTICE TO QUIT OR VACATE or of intention to re-enter the same is hereby expressly WAIVED by Tenant. In the event of such re-entry by process of law or otherwise, Tenant nevertheless agrees to remain answerable for any and all damage, deficiency or loss of rent that Landlord may sustain by such re-entry, including reasonable attorneys’ fees and court costs. Landlord reserves full power to relet the Premises for the benefit of Tenant, in liquidation and discharge, in whole or in part, as the case may be, of the liability of Tenant under the terms and provisions of this Lease. In determining the rent due for the balance of the Lease term under this subparagraph or any other part of this paragraph, additional rent shall be determined by projecting into the future the additional rent payable on the date the default (after the expiration of any applicable notice and cure period) exists, increased by a compounding five percent (5%) per lease year. Landlord’s determination of the sum due under this subparagraph shall be determinative unless Tenant proves that it is manifestly unreasonable. The words “re-entry” and “re-enter,” as used herein, shall not be construed as limited to their strict legal meaning.

(ii)  Right of Termination and Acceleration. To terminate this Lease and collect liquidated damages from Tenant in an amount equal to (A) the sum of all amounts due hereunder to the effective date of termination, plus (B) the aggregate fixed annual rent remaining over what would have been the remainder of the Lease term, reduced to present value to using a discount rate equal to the interest rate of a U.S. Government security having a maturity date closest to the expiration date of the Lease term, plus all repairs and other anticipated costs of re-letting (including, without limitation, marketing costs, brokerage commissions, tenant build-out costs, and other concessions payable to or for the benefit of a replacement tenant), less (C) the aggregate fixed annual rent that the Premises could be re-let for what would have been the remainder of the Lease term (provided, however, that a reasonable period of time, not to exceed eighteen (18) months, may be considered a lease-up period for the Premises for which no rental income would be realized), reduced to present value by the same method set forth in clause (B) above, plus (D) Landlord’s costs and expenses (including, without limitation, reasonable attorney’s fees) incurred in enforcing Landlord’s rights and remedies. Landlord’s determination of the sum due under this subparagraph shall be determinative unless Tenant proves that it is manifestly unreasonable.

(iii)  Equitable Relief. To bring an action for specific performance, injunction, or other equitable relief. Landlord shall also have the right to bring an action for specific performance, injunction, or other equitable relief to prevent any threatened or impending default.

(iv)  Suit for Rent. To bring suit against Tenant for unpaid rent. Such suit may, in Landlord’s sole and absolute discretion, be brought as rent accrues under this Lease or deferred until the expiration of the Lease term and brought within any applicable statute of limitations following the end of the Lease term, any shorter statute of limitations or requirement that suit be instituted as rent would otherwise be due and payable being hereby waived.

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(v)   Self-Help. Landlord may perform any obligation that Tenant has failed to perform after the expiration of any applicable notice and/or cure period (except in an emergency, when no notice or cure period shall be necessary or afforded), all at the cost of Tenant as additional rent payable upon demand.

(vi)  Reimbursement of Expenses. Tenant shall pay all expenses (including, without limitation, reasonable attorneys’ fees) incurred by Landlord following a default in enforcing Landlord’s rights and remedies, whether or not suit is instituted. Such expenses shall be additional rent payable upon demand.

All rights and remedies specified herein or otherwise provided by law shall be cumulative, and the taking of any one remedy shall not preclude or impair Landlord’s right to pursue any other remedy. No waiver of any breach of any covenant, condition, or agreement herein contained shall operate as a waiver of the covenant, condition or agreement itself, or of any subsequent breach thereof. No provision of this Lease shall be deemed to have been waived by Landlord unless such waiver shall be in writing signed by Landlord. No payment by Tenant or receipt by Landlord of a lesser amount than the rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy provided in this Lease. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of the Premises, by reason of the violation by Tenant of any of the covenants and conditions of this Lease, or otherwise.

21.    Tenant’s Trade Fixtures and Removal.

 Any trade equipment, trade fixtures, goods or other property of Tenant shall be removed by Tenant on or before the expiration of the Lease term or sooner termination of the Lease term. Any trade equipment, trade fixtures, goods or other property of Tenant not removed by Tenant on the expiration of the Lease term or sooner termination of the Lease term, or upon any deserting, vacating or abandonment of the Premises by Tenant with the rent unpaid, or upon Tenant’s eviction, shall, at Landlord’s discretion, be considered as abandoned. Landlord shall have the right (without any obligation to do so), without notice to Tenant, to sell or otherwise dispose of Tenant’s abandoned property at the expense of Tenant, and Landlord shall not be accountable to Tenant for any proceeds of the sale, or for any damage or loss to Tenant’s abandoned property.

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22.    Estoppel Certificates and Financial Information.

(a)   Estoppel Certificates. Within ten (l0) days after request from Landlord, Tenant shall execute, acknowledge and deliver to Landlord a written instrument certifying: (i) that this Lease has not been modified and is in full force and effect, or if there has been a modification, that this Lease is in full force and effect as modified, stating the modification; (ii) the rent due and the dates to which rent and other sums due from Tenant under this Lease have been paid; (iii) whether or not to the knowledge of Tenant, Landlord is in default, and if so, the reasons for the default, and any other claims Tenant may have against Landlord relating to the Premises or arising under this Lease; (iv) whether Tenant has received any notice of default from Landlord or if Tenant has knowledge that it is in default of its obligations under this Lease; (v) the commencement date of the Lease term, the stated expiration date of the Lease term, and the rent commencement date (if different from the Lease commencement date); (vi) whether Tenant has any renewal, termination, expansion or contraction options and, if so, if any have been exercised; (vii) whether Tenant has any right or option to purchase the Premises; (viii) the outstanding balance of any security deposit posted by Tenant; (ix) whether Tenant has assigned this Lease or subleased the Premises in whole or in part; and (x) such other matters as may reasonably be requested. Such an estoppel certificate may be relied upon by Landlord, by any actual or proposed Mortgagee or Superior Lessor, and by any purchaser of the Premises.  In the event Tenant requires an estoppel certificate from Landlord in connection with any financing Tenant may seek, Landlord shall provide a commercially reasonable estoppel certificate at Tenant’s sole cost and expense, including, without limitation, any legal fees incurred by Landlord in connection with the review and/or negotiation of the estoppel certificate.

(b)   Financial Information. Tenant agrees to deliver to Landlord upon request from time to time, in connection with any mortgage financing Landlord may seek, and at the time Tenant exercises any option to extend the term of this Lease, such financial information, including balance sheets, income and expense statements, cash flow statements, and statements of net worth, as Landlord may request and which Tenant routinely generates regarding Tenant or any guarantor of Tenant’s obligations under this Lease. Any such information provided to Landlord shall be deemed to be certified as true, correct and complete as of the date thereon, and not omitting any information necessary or appropriate to make any statement therein not misleading. By delivering the same, Tenant shall also be deemed to have certified that there has been no material adverse change in Tenant’s or any such guarantor’s financial condition since the date of the material delivered. If Tenant is a publicly traded or regulated entity that files regular and publicly available reports with the Securities and Exchange Commission or any other comparable Federal regulatory agency, the foregoing provisions of this subparagraph shall not apply. Landlord shall keep all information delivered to it by Tenant or any guarantor under this subparagraph confidential except (i) for distribution to Landlord’s accountants, appraisers, attorneys, financial advisors, actual and prospective lenders, actual and prospective buyers of the Building, and regulatory agencies, (ii) as may be required by law, (iii) in the course of any litigation, arbitration, mediation or other dispute resolution proceeding involving Landlord and Tenant, or (iv) as may otherwise by publicly available through no action of Landlord.

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23.    Limitations on Landlord’s Liability.

Notwithstanding any provision of this Lease to the contrary, Tenant agrees that it shall look only to the Premises (which includes all of Landlord’s equity or interest therein, including rent and the proceeds of sale, insurance and condemnation) in seeking to enforce any obligations or liabilities whatsoever of Landlord under this Lease or to satisfy a judgment (or any other charge, directive or order) of any kind against Landlord. Tenant shall not look to any other property of Landlord, or the property or assets of any of the officers, directors, shareholders, partners, members, other principals, employees, agents, or legal representatives of Landlord in seeking to enforce any obligations or liabilities whatsoever of Landlord under this Lease or to satisfy a judgment (or any other charge, directive or order) of any kind against Landlord, and in no event shall any deficiency judgment be sought or obtained against Landlord. No person who is an officer, director, shareholder, partner, member, other principal, employee, agent, or legal representative of Landlord shall be personally liable for any obligations or liabilities of Landlord under this Lease.

24.    Security Deposit.

Upon execution and delivery of this Lease, Tenant shall deposit the sum of $75,000.00 with Landlord, as security for the full and faithful performance by Tenant of all of the terms, conditions and covenants of this Lease on Tenant’s part to be performed, which sum shall be returned to Tenant following the expiration of the Lease term, provided there shall not then be an Event of Default or an event that with the giving of notice or the lapse of time, or both, shall constitute an Event of Default. Landlord shall have the right (but not the obligation), to apply any part of the deposit to cure an Event of Default of Tenant, and if Landlord does so, Tenant shall, within five (5) days after demand, deposit with Landlord the amount applied, so that Landlord shall have the full deposit on hand at all times. If Landlord shall sell the Premises, the selling Landlord shall transfer the security to the new landlord, and upon so doing the selling Landlord shall be released by Tenant from all liability for the return of the security and Tenant shall look solely to the new Landlord for the return of the security, and this shall apply to every transfer made of the security to a new Landlord. The security deposited by Tenant under this Lease shall not be mortgaged, assigned or encumbered by Tenant. The security deposit is only additional security for the performance of Tenant’s obligations under this Lease and is not a measure of liquidated damages or a limitation on liability.

Tenant shall deposit and maintain the security deposit as an unconditional, irrevocable commercial standby letter of credit in form and substance acceptable to Landlord. A letter of credit meeting the terms of this paragraph is referred to as the “Letter of Credit.”

The Letter of Credit must be issued by a commercial bank (the “Issuer”) reasonably acceptable to Landlord and must be presentable in the metropolitan area in which the Building is located. The Letter of Credit must also be payable at sight without presentation of any other documents, statements, or authorizations, must allow for partial and multiple draws, and must have a term of not less than one (1) year from the Commencement Date. The Letter of Credit must also provide for its automatic renewal on a year-to-year basis unless the Issuer gives Landlord at least two (2) months’ written notice of nonrenewal, and the final expiration date of the Letter of Credit may not be any earlier than the date that is three (3) months after the scheduled Lease expiration date. The Letter of Credit must also be freely transferable to any successor Landlord under this Lease, and Tenant shall be responsible for the payment of any transfer fee or other cost incident thereto, except in connection with a sale of the Premises by Landlord; if Tenant fails to make such payment, Landlord may do so at Tenant’s expense and Tenant shall reimburse Landlord for such costs upon demand as Additional Rent. In all other respects, the Letter of Credit shall be governed by the Uniform Customs and Practices for International Standby Practices, 1998, International Chamber of Commerce Publication No. 590.

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The Letter of Credit may be drawn upon by Landlord without notice to Tenant, in the event of any default by Tenant under this Lease beyond the expiration of any applicable notice or cure period, or if the Issuer gives notice of nonrenewal to Landlord and a replacement Letter of Credit (or the cash equivalent) is not delivered to Landlord at least thirty (30) days prior to the non-renewed Letter of Credit’s expiration date, or if there is a dispute between Landlord and Tenant on the date which is thirty (30) days prior to the stated expiration date of the Letter of Credit over whether Landlord may draw on the Letter of Credit, or if Landlord at any time reasonably determines that the Issuer is not solvent or that the Issuer has been put into conservatorship or receivership (or any similar program) by any governmental authority having regulatory oversight over the Issuer, or if Landlord at any time reasonably determines that there is a likelihood for any other reason that the Issuer would not honor the Letter of Credit if it was to be presented for payment.

Notwithstanding any implication to the contrary contained in the foregoing, it is understood and agreed that Tenant bears all risk of the Issuer failing, refusing or being unable to honor a proper draw thereon. If the Issuer fails, refuses or is unable to honor a proper presentment of the Letter of Credit, Tenant shall be obligated to immediately deliver a replacement Letter of Credit meeting the terms of this paragraph (or, in Landlord’s discretion, the cash equivalent) to serve as the security deposit.

Provided Tenant has timely paid all Fixed Rent and Additional Rent, and has not been in default of its obligations under this Lease beyond the expiration of any applicable notice and/or cure periods, Tenant shall be entitled to reduce the amount of the Security Deposit by $12,500.00 on each of: (i) the first (1st) day of the sixteenth (16th) calendar month after the calendar month in which the Commencement Date occurs; (ii) the first (1st) day of the twenty eighth (28th) calendar month after the calendar month in which the Commencement Date occurs; and (iii) the first (1st) day of the fortieth (40th) calendar month after the calendar month in which the Commencement Date occurs.  In the event that, prior to any of the dates on which Tenant would otherwise be entitled to reduce the amount of the Security Deposit, Tenant either (x) fails to timely pay any item of Fixed Rent or Additional Rent, whether or not such failure gives rise to an event of default, and without regard to whether Landlord commences an action or proceeding; or (y) is in default of its obligations beyond the expiration of any applicable notice and/or cure periods, then, in either such event, Tenant shall not be entitled to reduce the amount of the Security Deposit on any subsequent date.  In connection with the reduction of the Security Deposit set forth in this paragraph, Tenant shall be obligated to take all actions necessary to amend the Letter of Credit at Tenant’s sole cost and expense.

25.    Qualification to Do Business.

Tenant represents and warrants to Landlord that Tenant has qualified with the Secretary of State or its equivalent to do business in the State of New York.

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26.    Notices.

All notices, consents, demands, communications or approvals required or permitted by this Lease shall be in writing and shall be delivered personally, by overnight courier, by telecopier/facsimile, or by certified or registered mail, return receipt requested, addressed as follows:

If to Landlord, at the address first set forth above, attention: Mr. Hagai Barlev:

  With copy to:
Jeffrey M. Rosenberg, P.C.
15 Engle Street, Suite 207
Englewood, New Jersey 07631
Attention: Jeffrey M. Rosenberg, Esq.

If to Tenant, at the Premises,

With copies to:

Solarcommunities, Inc.
442 U.S. Route 2
Waterbury, VT 05676

And:

Dinse P.C.
209 Battery Street
Burlington, VT 05401
Attention:  David R. Gurtman, Esq.

Any copy of any notice to Tenant delivered to an address other than the Premises shall be neither a condition precedent nor a jurisdictional prerequisite for the commencement of a summary proceeding pursuant to Article 7 of the New York Real Property Actions and Proceedings Law.  Landlord and Tenant may, by notice given in the same manner set forth above, designate a different address to which subsequent notices shall be sent. Notice shall be deemed given when delivered to the intended recipient or, if the intended recipient refuses to accept delivery or has provided an incorrect or out-of-date address, at the time delivery was attempted.

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27.    Brokers.

Each party represents and warrants to the other no real estate broker was instrumental in effecting this Lease except Keller Williams and SVN Deegan-Collins Commercial Realty. Landlord shall be solely responsible for the payment of any commission or compensation owed to said broker(s) relating to this Lease pursuant to separate agreement, with Landlord disbursing the commission to Keller Williams, which shall in turn disburse any sums payable to SVN Deegan-Collins Realty.  Each party shall indemnify and defend the other party, including counsel fees, against the claim of any broker (except any broker named in the first sentence of this paragraph) that such broker was authorized on behalf of that party to make an offer to the indemnified party with respect to this transaction.

28.    Tenant’s Right to Quiet Enjoyment.

Upon paying the rents and other sums required of Tenant under this Lease and faithfully and fully performing the terms, conditions and covenants of this Lease on Tenant’s part to be performed, Tenant shall peaceably and quietly have, hold and enjoy the Premises for the Lease term.

29.    Miscellaneous.

(a)   Validity of Lease. The provisions of this Lease are severable. If any provision of this Lease is adjudged to be invalid or unenforceable by a court of competent jurisdiction, it shall not affect the validity of any other provision of this Lease.

(b)   Non-Waiver by Landlord. The rights, remedies, options or elections of Landlord in this Lease are cumulative, and the failure of Landlord to enforce performance by Tenant of any provision of this Lease applicable to Tenant, or to exercise any right, remedy, option or election, or the acceptance by Landlord of the annual fixed rent or additional rent from Tenant after any default by Tenant, in any one or more instances, shall not act as a waiver or a relinquishment at the time or in the future, of Landlord of such provisions of this Lease, or of such rights, remedies, options or elections, and they shall continue in full force and effect.

(c)  Entire Agreement. This Lease contains the entire agreement between the parties. No representative, agent or employee of Landlord has been authorized to make any representations, warranties or promises with respect to the letting, or to vary, alter or modify the provisions of this Lease. No additions, changes, modifications, renewals or extensions of this Lease shall be binding unless reduced to writing and signed by both parties. This Lease supersedes in its entirety any prior letter of intent, proposal, counterproposal, discussion, negotiation, promise or other offer made by either party to the other prior to the date hereof and relating to the Premises or other subject matter of this Lease.

(d)   Effective Law. This Lease shall be governed by, construed and enforced in accordance with the laws of the State of New York, without giving effect to its principles of conflicts of law.

(e)   Waiver of Jury Trial and Counterclaims. Landlord and Tenant waive their right to trial by jury in any action, proceeding or counterclaim brought by either of the parties against the other, or with respect to any issue or defense raised therein, on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant’s use and occupancy of the Premises, including summary proceedings and possession actions, and any emergency statutory or other statutory remedy.   In any action or proceeding brought by Landlord to recover possession of the Premises from Tenant, Tenant waives the right to interpose any counterclaims, except those required by law to be interposed.

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(f)   Commercial Lease. This Lease is and shall be construed as a commercial lease, not as a residential lease.

(g)   Captions. The captions of the paragraphs in this Lease and the Table of Contents are for reference purposes only and shall not in any way affect the meaning or interpretation of this Lease.

(h)   Obligations Joint and Several. If there is more than one party as Tenant, their obligations under this Lease are joint and several. If Tenant is a partnership, the obligations of Tenant under this Lease are joint and several obligations of each of the partners and of the partnership.

(i)   Counterparts. This Lease may be executed in one or more counterparts, each of which shall be an original, and all of which constitute one and the same Lease, and facsimile, electronic or PDF signatures shall have equal force and effect as originals.

(j)    Landlord’s Performance of Tenant’s Obligations. The performance by Landlord of any obligation required of Tenant under this Lease shall not be construed to modify this Lease, nor shall it create any obligation on the part of Landlord with respect to any performance required of Tenant under this Lease, whether Landlord’s performance was undertaken with the knowledge that Tenant was obligated to perform, or whether Landlord’s performance was undertaken as a result of mistake or inadvertence.

(k)   Remedies and Rights Not Exclusive. No right or remedy conferred upon Landlord shall be considered exclusive of any other right or remedy, but shall be in addition to every other right or remedy available to Landlord under this Lease or by law. Any right or remedy of Landlord may be exercised from time to time, and as often as the occasion may arise. The granting of any right, remedy, option or election to Landlord under this Lease shall not impose any obligation on Landlord to exercise the right, remedy, option or election.

(l)   Signature and Delivery by Landlord. This Lease is of no force and effect unless it is signed by Landlord and Tenant and a signed copy of this Lease delivered by Landlord to Tenant. The mailing, delivery or negotiation of this Lease by Landlord or Tenant or any agent or attorney of Landlord or Tenant prior to the execution and delivery of this Lease as set forth in this subparagraph shall not be deemed an offer by Landlord or Tenant to enter into this Lease, whether on the terms contained in this Lease or on any other terms. Until the execution and delivery of this Lease as set forth in this subparagraph, Landlord or Tenant may terminate all negotiations and discussions of the subject matter of this Lease, without cause and for any reason, without recourse or liability.

35
(m)  Surrender. Neither the acceptance of keys to the Premises nor any other act or thing done by Landlord or any agent, employee or representative of Landlord shall be deemed to be an acceptance of a surrender of the Premises, excepting only an agreement in writing, signed by Landlord, accepting or agreeing to accept a surrender of the Premises.

(n)  Drafting Ambiguities; Interpretation. In interpreting any provision of this Lease, no weight shall be given to nor shall any construction or interpretation by influenced by the fact that counsel for one of the parties drafted this Lease, each party recognizing that it and its counsel have had an opportunity to review this Lease and have contributed to the final form of this Lease. Unless otherwise specified, the words “include” and “including” and words of similar import shall be deemed to be followed by the words “but not limited to” and the word “or” shall be “and/or.”

(o)   Gender; Plural and Singular. In all references to any persons, entities or corporations, the use of any particular gender or the plural or singular number is intended to include the appropriate gender or number as the text of this Lease may require.

(p)   Binding Effect. This Lease is binding upon and shall inure to the benefit of the parties, their legal representatives, successors and permitted assigns.

(q)   Landlord Defined. The term “Landlord” in this Lease means and includes only the owner at the time in question of the Premises. In the event of the sale or transfer of the Premises, the selling, assigning or transferor Landlord shall be released and discharged from the provisions of this Lease thereafter accruing, but such provisions shall be binding upon each new owner of the Premises as successor Landlord while such party is an owner.

(r)    Time of the Essence. Time is of the essence of this Lease.

(s)    No Recordation. Neither this Lease, nor any memorandum, affidavit or other writing with respect to this Lease, shall be recorded by Tenant or by anyone acting through, under or on behalf of Tenant, and the recording thereof in violation of this provision shall make this Lease voidable at Landlord’s election.

(t)   Parties Authorized.  Landlord and Tenant each represent and warrant to the other that no consent or approval of any third party is required for either party to enter into this Lease, and that the individuals executing this Lease on behalf of each party have the requisite authority to bind such party hereto.

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IN WITNESS WHEREOF, the parties have executed this Lease as an instrument under seal.

 
LANDLORD:
   
 
INDUSTRY LANDING 1155 LLC
     
 
By:
  
   
Name:
   
Title:
     
 
TENANT:
   
 
SOLARCOMMUNITIES, INC.
     
 
By:
  
   
Name:
   
Title:

37
SCHEDULE A
 
LEGAL DESCRIPTION OF THE PREMISES
 
A-1

A-2


A-3
Exhibit 10.37

LEASE AGREEMENT

between

MALONE US ROUTE 2 WATERBURY PROPERTIES, LLC
(“Landlord”)

and

SOLAR COMMUNITIES, INC.
DBA SUNCOMMON
(“Tenant”)

Dated as of October 19, 2015

TABLE OF CONTENTS

 
Page
   
SECTION 1.  LEASE OF PREMISES
1
SECTION 2.  TERM OF LEASE
2
SECTION 3.  USE OF PREMISES
3
SECTION 4.  MINIMUM RENT
3
SECTION 5.  SECURITY DEPOSIT
3
SECTION 6.  COMMON AREA CHARGES
3
SECTION 7.  TENANT’S TAXES
4
SECTION 8.  TENANT’S MAINTENANCE AND UTILITIES
4
SECTION 9.  CASUALTY INSURANCE
4
SECTION 10.  LIABILITY INSURANCE
5
SECTION 11.  NET LEASE
5
SECTION 12.  ALTERATIONS
5
SECTION 13.  REPAIRS, REPLACEMENTS
6
SECTION 14.  TENANT TO COMPLY WITH LAWS, ETC
7
SECTION 15.  NO WAIVER
7
SECTION 16.  LANDLORD’S RIGHT OF ACCESS
7
SECTION 17.  PRIORITY OF MORTGAGES
8
SECTION 18.  ASSIGNMENT, SUBLETTING
8
SECTION 19.  DAMAGE OR DESTRUCTION
8
SECTION 20.  EMINENT DOMAIN
9
SECTION 21.  INDEMNITY
9
SECTION 22.  EVENTS OF DEFAULT, REMEDIES, DAMAGES
10
SECTION 23.  SIGNS
12
SECTION 24.  BROKER COMMISSIONS
12
SECTION 25.  ENVIRONMENTAL COVENANTS
12
SECTION 26.  LEASE NOT TO BE RECORDED
13
SECTION 27.  QUIET ENJOYMENT
13
SECTION 28.  NOTICES
13
SECTION 29.  DISCLAIMER FOR SECURITY
14
SECTION 30.  WAIVER OF RULE OF CONSTRUCTION
14
SECTION 31.  DELINQUENT RENT AND ADDITIONAL RENT
14
SECTION 32.  HOLDING OVER
14

SECTION 33.  FORCE MAJEURE
15
SECTION 34.  SUCCESSORS AND ASSIGNS
15
SECTION 35.  TERMINATION
15
SECTION 36.  LANDLORD NOT PERSONALLY LIABLE
15
SECTION 37.  AUTHORIZATION AND BINDING EFFECT OF AGREEMENT
15
SECTION 38.  ENTIRE AGREEMENT, APPLICABLE LAW
16
SECTION 39.  NO OPTION
16
SECTION 40.  LANDLOR'S REPRESENTATIONS AND WARRANTIES
16
SECTION 41.  RIGHT TO MAINTAIN SOLAR PV INSTALLATIONS
17

Exhibits
  
   
Exhibit “A” -
Property Site Plan
Exhibit “B”
Floor Plan of Premises
Exhibit “C”
Building Specifications
Exhibit “D”
Computation Of Cost Of Initial Construction And Annual Base Rent For Initial Ten Year Term
Exhibit “E”
Budgetary Estimate for Building Development and Construction Costs
Exhibit “F”
Projected Construction Schedule and Completion Date
Exhibit “G”
Form of Rent Commencement Agreement
Exhibit “H”
Estimate of Common Area Charges for Landlord’s Building:  Lease Year 1 of Term

LEASE AGREEMENT

This Lease Agreement (this “Lease”) is by and between MALONE RTE 2 WATERBURY PROPERTIES, LLC, a Vermont limited liability company with a place of business in Montpelier, Vermont (the “Landlord”) and SOLAR COMMUNITIES, INC. dba SUNCOMMON, a Vermont benefit corporation and certified B corporation with a place of business in Waterbury, Vermont (the “Tenant”).  Landlord and Tenant are sometimes collectively referred to herein as the “Parties” and individually referred to herein as a “Party”.

Background

1.       Landlord is the owner of a parcel of land on Route 2 in Waterbury, VT (the “Property”) whereas a new 14,000 +/- sq.ft. commercial building will be constructed to which SunCommon will lease and occupy 8,640 +/- sq.ft (“Landlord’s Building”), as depicted on the site plan attached hereto as Exhibit “A” (the “Site Plan”).

2.        Tenant wishes to lease from Landlord, and Landlord wishes to lease to Tenant, a portion Landlord’s Building according to the following terms and conditions.

N O W ,  T H E R E F O R E ,

In consideration of the promises and the mutual covenants and agreements herein set forth, and in reliance on the representations and warranties contained herein, the parties hereby agree as follows:

Section 1.  Lease of Premises.  Landlord hereby leases and rents to Tenant, and Tenant hereby takes from Landlord, the following described land, premises and property (herein after referred to as the “Premises” or “Leased Premises”):

Being a portion of Landlord’s Building containing 8,640 +/- square feet, as shown on the floor plan attached hereto as Exhibit “B.”

The Premises include the right of Tenant, its agents, invitees, licensees, business visitors, and guests, in common with Landlord and others:  (i) to cross and re-cross the driveways, parking lots, walkways and open lands depicted on the Site Plan for the purpose of ingress and egress; (ii) to use up to 40 parking spaces within the parking area depicted on the Site Plan in common with Landlord and other tenant’s in Landlord’s Building, without additional charge from Landlord, to the extent reasonably required for the uses specified herein, subject to the requirements of applicable laws and ordinances; and (iii) to use a portion of the signage for the Landlord’s Building, subject to the requirements of applicable laws and ordinances and the specific provisions of Section 23 of this Lease.  Landlord shall retain the right to relocate such parking areas, roadways, and walkways and to establish reasonable rules and regulations for their use, but no such relocation, rule or regulation will materially adversely affect Tenant’s ability to use and enjoy the Leased Premises for the purposes hereinafter specified.

The Leased Premises are subject to: (i) all covenants, restrictions and easements of record provided none of the foregoing unreasonably limit the use of the Premises for Tenant’s intended use; and (ii) all zoning regulations, ordinances, building restrictions, regulations and permits of any municipal, county, state or federal department having jurisdiction over the Leased Premises.

Section 1A.     Construction of Building and Fit-Up of Premises.


 a.
Upon the Commencement Date, Landlord will deliver the Premises to Tenant as finished space, substantially in conformance with the drawings, floor plans and specifications attached hereto as Exhibit “A”, “B”, and “C”.  Such work to be performed by Landlord and reflected in the referenced Exhibits is referred to hereafter as the “Initial Construction”.  Landlord shall use its best efforts to cause the required certificates of occupancy from the Town of Waterbury and/or the State of Vermont Department of Labor & Industry for the Initial Construction (if applicable) to be issued no later than June 1, 2016, subject to (i) delay caused by Tenant or (ii) force majeure including extreme winter weather related delays in construction.


b.
The cost of the Initial Construction shall initially be paid for by Landlord.  During the Term, Tenant shall pay Annual Base Rent for the Premises in an amount computed in accordance with Exhibit “D” and herein, which amount shall be reflected in a Rent Commencement Agreement in the form of Exhibit “G” attached hereto.

Section 2.  Term of Lease.  (a)  The Premises are hereby leased to Tenant, subject to all of the terms and conditions herein contained, for a term of ten (10) years (the “Term”) which shall commence on the “Commencement Date” which is defined as ten (10) days following the later of the following:  the issuance by the Town of Waterbury, Vermont of certificate(s) of occupancy for the Premises (if applicable) under (i) permits issued by the Town of Waterbury under its development review/planning and zoning laws and (ii) permits issued by the Vermont Department of Public Safety Division of Fire Safety, and shall end at midnight on the day preceding the tenth (10th) anniversary of the Commencement Date.  The parties shall execute a Rent Commencement Agreement in the form of Exhibit “D” memorializing the Commencement Date and the Rent Commencement Date.  The Commencement Date shall not extend beyond May 1, 2016 unless agreed to by Tenant.  If the Commencement Date has not occurred by June 1, 2016, unless Landlord is delayed in performance by (i) delays caused by Tenant or (ii) force majeure, as hereinafter defined and subject to the provisions of Section 33 hereof (together, clauses (i) and (ii) being referred to as the “Permitted Delays”) and (iii) extreme winter weather, Landlord shall reduce the initial monthly rent payments by an equivalent of one day’s rent for each one day delay in the Commencement Date beyond June 1, 2016. If the Commencement Date has not occurred by August 1, 2016, Tenant may, at its sole option, either elect to proceed subject to Landlord’s obligation to make such penalty payments until the Commencement Date occurs, or terminate this Lease.

(b)          Tenant shall have the right, provided it is not then in default, to extend the term of the Lease for two (2) additional five (5) year terms, by written notice to Landlord not less than six (6) months prior to the expiration of the term to be renewed.   Annual Base Rent for each of the two additional five year terms shall be negotiated and mutually agreed in writing by the Parties based on then current market conditions not less than six months prior to the expiration of the term to be renewed.

(c)          The "Term" means the initial ten (10) year term and any exercised extension term(s) under this Lease.  All terms, covenants and conditions of this Lease shall remain in full force and effect during the Term, with the exception of the Annual Base Rent as provided for in Section 2(b).

(d)          The term “Lease Year” means the twelve-month period beginning on the Commencement Date and each successive twelve-month period thereafter during the Term.

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Section 3.  Use of Premises.  Tenant shall use and occupy the Premises for Tenant’s business which includes general office and light storage, and for no other purpose without the Landlord’s consent, which consent shall not be unreasonably withheld, conditioned or delayed.  Tenant will operate the Premises and Tenant’s business in a manner consistent with the character and quality of Landlord’s Building.  Subject to Landlord’s Maintenance Obligations, Tenant shall keep the area of the Premises in a neat, clean and safe condition.  Tenant shall have 24-hour access to the Premises seven (7) days a week; provided, however, that in occupying the Premises, Tenant shall not operate its business so as to overburden or exceed the capacity of the utility services installed in the building within which the Premises are located.  Notwithstanding anything else contained herein, Tenant shall be permitted to park oversized vehicles and trailers in the parking lot for extended periods.

Section 4.  Minimum Base Annual Rent.  The Tenant shall pay to the Landlord, without offset, set-off or deduction for any reason other than as provided for in Section 1A, Annual Base Rent for Leased Premises during the Term, except as expressly set forth in this Lease.  The Annual Base Rent will be paid in equal monthly installments beginning on the Commencement Date, in accordance with the schedule set forth below.

The Annual Base Rent will be determined in accordance with Exhibit “D”, based upon the Landlord’s actual costs to develop and construct the Building plus a fixed 12% markup on construction costs, a portion of which shall be allocated to Tenant based on the actual square footage of space occupied by Tenant as a percent of the total square footage of the building (8640sf/14000f = 62%).  The Annual Base Rent shall increase by 3% per annum, starting on the first anniversary of the Rent Commencement Date.

*Annual Base Rent is subject to change and based upon the terms of Exhibit “D”.  Landlord retains option to build all or a portion of planned building and may phase the project in which case Tenant’s pro rata share as described in Section 6 shall be adjusted accordingly.

Section 5.  Security Deposit. Tenant shall pay Landlord a security deposit (the “Security Deposit”) on or before the Commencement Date in an amount equal to one month’s rent in Year 1 of the Term (1/12 of the Annual Base Rent in Year 1).  The Security Deposit shall be retained by Landlord in a non-interest bearing account.  Except as otherwise provided herein, Landlord shall refund the Security Deposit to Tenant within fifteen (15) days after the termination of this Lease, less any amounts reasonably required to repair or restore the Premises to the condition that existed on the Commencement Date, reasonable wear and tear excepted, or to pay or satisfy any outstanding terms or requirements of this Lease, including Tenant’s obligation to pay all Minimum Rent and Additional Rent due hereunder.

Section 6.  Common Area Charges.  Tenant shall pay, as Additional Rent, Tenant’s pro rata share of the common area maintenance charges for Landlord’s Building (“CAM”).  Tenant’s pro rata share is 62% (i.e., 8,640 sq. ft ÷ 14,000 sq. ft).  CAM includes all municipal charges and taxes assessed against the real estate upon which the Premises are located (including municipal and state-wide property tax assessments), insurance premiums for all insurance carried by the Landlord with respect to the real estate and Landlord’s Building, all common utility costs such as costs for lighting, electricity and other utility expenses charged to Landlord and not separately metered to Tenant, all common and routine maintenance costs, including routine maintenance of and snow and ice removal from the parking lot and walkways, rubbish removal for the building, routine maintenance and repairs of common areas, landscaping and lawn maintenance, maintenance and repairs to the building within which the Premises are located, and routine maintenance and repairs to the infrastructure serving the Premises (but not including maintenance and repairs which are Tenant’s individual responsibility under the terms of this Lease), and all other costs reasonably incurred by the Landlord in operating Landlord’s Building and the Property.  CAM shall exclude costs of a capital nature, including capital improvements, capital repairs, capital equipment, and capital tools, as determined under generally accepted accounting principles consistently applied (together, “Capital Repairs”), except that Landlord may include as CAM the annual amortization over its useful life with a reasonable salvage value on a straight-line basis of the costs of any equipment or capital improvements made by Landlord after the Building was fully assessed as a completed and occupied unit and the Lease signed, as a labor-saving measure or to accomplish other savings in operating, repairing, managing, or maintaining the Property, but only to the extent of the savings.  For the convenience of the Landlord, CAM shall be paid in monthly installments due and payable at the time of the payment of Minimum Rent.  Landlord shall determine a reasonable estimate of the CAM and shall advise Tenant of the estimated amount of CAM and Tenant’s pro rata share of CAM.  Not less frequently than once each year, Landlord shall compare the actual expense for CAM to the estimated expenses and shall provide Tenant with a statement indicating whether the estimated CAM was greater or less than the actual CAM together with supporting figures and, upon Tenant’s request, documentation.  To the extent the actual CAM was less than the estimated CAM, Landlord will credit the excess against future CAM payments due from Tenant, or if in the last year of the Lease Term, Landlord shall refund such excess to Tenant within twenty (20) days of the date of the statement.  To the extent actual CAM exceeds the estimated CAM, Tenant shall pay the difference to Landlord within twenty (20) days of the date the statement is delivered to Tenant.  Landlord will preserve the records of the actual CAM for inspection by Tenant for two (2) years from the date of the annual statement to which the receipts apply.  Landlord’s estimate of CAM for the first (1st) year of the Lease Term is included in Exhibit “H”.

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Section 7.  Tenant’s Taxes.  Tenant shall pay when due all taxes assessed against the Tenant on account of the Tenant’s personal property on the Premises, and Tenant’s use and occupancy of the Premises under this Lease.  The term “when due” as used in this Lease means on or before the date Tenant will incur penalties for the failure to pay such taxes.

Section 8.  Tenant’s Maintenance and Utilities.  Subject to Landlord’s obligations under Section 13, Tenant shall operate and maintain the Leased Premises and each and every part thereof and the facilities, mechanical systems, machinery and equipment therein contained at its own cost and expense and, beginning on the Commencement Date, shall pay or cause to be paid directly all separately metered charges for water, sewer, gas, electricity, light, heat, power, telephone and any other services used, rendered or supplied upon or in connection with the Leased Premises, including, without limitation, connection fees or costs charged for the supply of such services or the installation of Tenant’s meters, and Tenant shall indemnify and save harmless Landlord on such account.  Landlord shall not be responsible for the failure of water supply, gas, heat, power, electric current, telephone or other service, or for any damage to property occasioned by the breakage, leakage or obstruction of any pipes or other leakage in or about the Leased Premises, unless caused by the gross negligence or willful misconduct of Landlord, its employees, agents or contractors. Notwithstanding the foregoing sentence, if any essential services are interrupted and such interruption does not result from Tenant’s gross negligence or willful misconduct, Tenant is entitled to an abatement of rent beginning on the later of (i) the fourth (4th) consecutive business day following such interruption, or (ii) the date when Tenant stops using the Premises because of the interruption.  If such interruption is not remedied within one hundred twenty (120) days from the date it commenced, then Tenant shall have the right to terminate this Lease.

Section 9.  Casualty Insurance.  Landlord will insure the building within which the Premises are located and all of Landlord’s personal property therein against loss by fire, in such amounts as Landlord may consider reasonable, by policies which shall include standard extended coverage endorsements.  The cost of the premiums for such insurance shall be included in the CAM.  Tenant shall be responsible for maintaining any and all insurance upon Tenant’s property in and upon the Leased Premises, by policies which shall name Landlord as an additional insured, as Landlord’s interests may appear, and Landlord shall not be held responsible for any damage thereto unless caused by Landlord’s failure to comply with Landlord’s Maintenance Obligations or Landlord’s gross negligence or willful misconduct.  Neither Tenant nor Landlord, nor their respective agents, employees or guests, shall be liable to the others for any loss or damage to the Leased Premises by fire or any other cause within the scope of such fire and extended coverage insurance, it being understood that provided any such damage is covered by existing insurance policies, the parties shall look solely to the insurer for reimbursement for such loss or damage.

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Section 10.  Liability Insurance.  Tenant, at Tenant’s own cost and expense, will maintain a policy or policies of liability insurance insuring Landlord and Tenant against all claims or demands for personal injuries to or death of any person, and damage to or destruction or loss of property, which may or may be claimed to have occurred on the Leased Premises or in the vicinity of the same.  Such policies shall cover such risks and be in an amount not less than Two Million Dollars and 00/100 ($2,000,000.00) for injury to or death of any one person or for damage to or des-truction or loss of property.  Tenant shall deliver to Landlord certificates of such insurance coverage upon demand by Landlord, which certificates shall name Landlord as an additional insured.

Landlord, at Landlord’s own cost and expense, will maintain a policy or policies of liability insurance insuring Landlord and Tenant against all claims or demands for personal injuries to or death of any person, and damage to or destruction or loss of property, which may or may be claimed to have occurred on the Property or in the vicinity of the same.  Such policies shall cover such risks and be in an amount not less than Two Million Dollars and 00/100 ($2,000,000.00) for injury to or death of any one person or for damage to or destruction or loss of property.  Landlord shall deliver to Tenant certificates of such insurance coverage upon demand by Tenant, which certificates shall name Tenant as an additional insured.

Section 11.  Net Lease.  It is understood and agreed that the Minimum Rent and Additional Rent to be paid to Landlord by Tenant hereunder shall be absolutely net to the Landlord, and this Lease shall be interpreted and construed to that effect.

Section 12.  Alterations.


 (a)
Except as hereinafter expressly provided, Tenant shall not make or permit to be made any alterations, additions, changes or improvements in or to the Leased Premises or any part thereof costing in excess of five thousand Dollars ($5,000.00) without first obtaining the written consent of Landlord thereto (which consent Landlord agrees not to unreasonably withhold, condition or delay, provided Tenant is then in compliance with each and every term, covenant and condition in this Lease and, with respect to such alterations, additions, changes or improvements, has provided Landlord with such liability insurance policies and/or surety bonds as Landlord may reasonably request).  Landlord shall inform Tenant at the time it gives such consent whether or not Tenant will be required to remove such alterations, additions, changes or improvements in or to the Leased Premises at the time the Lease terminates.


(b)
Before requesting Landlord’s consent, Tenant shall submit to Landlord detailed plans and specifications in duplicate of such proposed alterations, changes, additions or improvements, one of which copies may be retained by Landlord.  Landlord shall be entitled to condition its consent to any such alterations, additions, changes, or improvements, upon Tenant providing Landlord with reasonable evidence of the approval of such alterations, additions, changes or improvements by any and all municipal, state, federal or other governmental or other authorities, offices and departments now existing or hereafter created having jurisdiction over the Premises, and of the Board of Fire Underwriters or other like body, which approvals Tenant shall obtain at its own cost and expense.  Landlord agrees to co-sign all applications necessary for such approvals

-5-

 (c)
Landlord, its architect, agents and employees, shall, upon reasonable notice, have the right to enter upon the Leased Premises in a reasonable manner and at all reasonable times during the course of any such alterations, additions, changes or improvements for the purpose of inspection and of finding out whether such work conforms to the approved plans and specifications and with the agreements herein contained.


(d)
Any and all alterations, additions, improvements and changes made by Tenant at any time and all governmental approvals therefor shall immediately be and become the property of Landlord without any payment therefor by Landlord; provided, however, that it is expressly understood and agreed that any trade fixtures or other fixtures added by Tenant (other than those which are required by the terms of this Lease to be provided by Tenant as a result of its obligation to repair or replace property furnished by Landlord) shall remain the property of Tenant and may be removed by Tenant, at Tenant’s expense, upon the expiration or earlier termination of this Lease, provided that any damage caused thereby is immediately repaired by Tenant.


(e)
Tenant, at its own cost and expense, will cause any and all mechanics’ liens and perfections of the same which may be filed against the Leased Premises to be paid and satisfied of record within forty-five (45) days after Landlord shall send to Tenant written notice by registered mail of the filing of any notice thereof against the Premises or the owner, for or purporting to be for labor or materials alleged to be furnished or to be charged by or for Tenant at the Leased Premises, or will bond such mechanics’ liens and use its good faith efforts to have such liens discharged by an order of a court of competent jurisdiction within said forty-five (45) day period.


(f)
Any alterations, improvements or other work once begun must be prosecuted with reasonable diligence to completion and, subject to the provisions of Subsection 12(e), above, be paid for by Tenant in full, free and clear of liens or encumbrances against the Leased Premises or Landlord, and must be performed in all respects in accordance with law.

Section 13.  Repairs, Replacements.  Tenant will inspect and become familiar with the condition of the Leased Premises on or before the Commencement Date, and Tenant shall either notify Landlord of any objections to the condition of the Leased Premises pursuant to Section 1A or take and accept the same “as is,” with no further representations or warranties of any kind with respect to the quality of the Premises or the suitability of the Premises for Tenant’s intended use.  Landlord shall be responsible for maintaining and repairing the exterior and structural components of the building within which the Premises are located, the cost of which shall be allocable as CAM in accordance with Section 6 of this Lease and for all Capital Repairs (together, “Landlord’s Maintenance Obligations”).  Tenant shall make all routine maintenance, routine repairs and routine replacements to the interior portions of the Leased Premises and its systems as may be reasonably required to place, keep and maintain the same in good order and state of repair, including repairs to any glass which may become broken.  Tenant shall perform or cause to be performed regular periodic and preventative maintenance on the heating, air conditioning, plumbing and similar systems and on all machinery and equipment located wholly within the Leased Premises, and shall at all times keep the Leased Premises and such systems, machinery and equipment clean and in good order and repair, subject to Landlord’s Maintenance Obligations.  Landlord will have the right to cause its agents to inspect the Leased Premises in a reasonable manner, upon reasonable notice, and at all reasonable times to assure that Tenant is complying with its duties to repair, replace and maintain hereunder.  Any defect or deficiency noted as a result of such inspection shall be reported to Tenant and, provided such defect or deficiency is Tenant’s responsibility as specified herein, unless the same is corrected and remedied forthwith by Tenant, Landlord shall have the right to correct and remedy the same, at Tenant’s expense, and the costs of doing so shall immediately be paid by Tenant to Landlord, as Additional Rent.  Tenant shall notify Landlord of any defect or deficiency noted by Tenant with respect to Landlord’s Maintenance Obligations and Landlord shall promptly correct and remedy the same, at Landlord’s expense.

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Section 14.  Tenant and Landlord to Comply with Laws, etc.  Tenant shall and will at its own cost and expense promptly execute and comply with any and all requirements at any time affecting the Leased Premises imposed by any present or future, foreseen or unforeseen, law, statute, or governmental authority now existing or hereafter created (excluding, however, any violations existing, entered or filed against or noticed with respect to the Leased Premises on or before the Commencement Date), relating to changes or requirements uniquely incidental to or the result of any use or occupation of the Premises by Tenant.  Tenant shall further so comply with each and every rule, order and requirement of any federal, state, municipal, legislative, executive, judicial or other governmental body, commissioner or officer or of any bureau or department thereof, whether now existing or hereafter created, having jurisdiction over the Leased Premises or any part thereof, or exercising any power relative thereto or to the owners, tenants or occupants thereof provided, however, that such compliance shall not require Tenant to undertake any actions that are the Landlord’s responsibility pursuant to the Landlord’s Maintenance Obligations or the following paragraph.

Landlord shall and will at its own cost and expense promptly execute and comply with, or cause other tenants at the Property to execute and comply with as required by such tenants’ leases, any and all requirements at any time affecting the Property imposed by any present or future, foreseen or unforeseen, law, statute, or governmental authority now existing or hereafter created.  Landlord shall further so comply with each and every rule, order and requirement of any federal, state, municipal, legislative, executive, judicial or other governmental body, commissioner or officer or of any bureau or department thereof, whether now existing or hereafter created, having jurisdiction over the Property or any part thereof, or exercising any power relative thereto or to the owners, tenants or occupants thereof other than those as to which compliance is the obligation of Tenant as described in the above-paragraph or of other tenants at the Property pursuant to the terms of their leases.

Section 15.  No Waiver.  The failure of Landlord to insist in any one or more instances upon the strict performance of any of the terms, covenants, conditions and agreements of this Lease, or to exercise any option herein conferred, shall not be considered as waiving or relinquishing for the future any such terms, covenants or conditions, agreements or options, but the same shall continue and shall remain in full force and effect; and the receipt of any rent or any part thereof, whether the rent be that specifically reserved or that which may become payable under any of the covenants herein contained, and whether the same be received from Tenant or from any one claiming under or through Tenant or otherwise shall not be deemed to operate as a waiver of the rights of Landlord to enforce the payment of rent or charges of any kind previously due or which may thereafter become due, or the right to terminate this Lease and to recover possession of the Premises by summary proceedings or otherwise, as Landlord may deem proper, or to exercise any of the rights or remedies reserved to Landlord hereunder or which Landlord may have at law, in equity or otherwise.

Section 16.  Landlord’s Right of Access.  Landlord or Landlord’s agents shall have the right to enter the Premises upon reasonable prior notice and in a reasonable manner during normal business hours to examine the same, and to show them to prospective purchasers, mortgagees, or, during the last three (3) months of the Term, lessees.  In so doing, Landlord shall use commercially reasonable efforts to minimize interruption of or interference with Tenant’s operations.  Nothing herein contained, however, shall be deemed or construed to impose upon Landlord any obligations, responsibility or liability whatsoever, for the care, supervision or repair, of the Leased Premises or any part thereof, other than as herein expressly provided.

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Section 17.  Priority of Mortgages.  This Lease and any assignment or sublet undertaken pursuant to Section 18 hereof shall automatically and without further act or deed be and remain subject and subordinate to any existing mortgage and any mortgage or mortgages that may hereafter be placed against the Leased Premises, and to all renewals, modifications, consolidations, replacements and extensions thereof.  Tenant will execute estoppel certificates and Subordination and Non-Disturbance Agreements in such reasonable form as may be requested in connection with such mortgages.

Section 18.  Assignment, Subletting.  Without the prior written consent of Landlord (which consent Landlord shall not unreasonably withhold, condition or delay, due consideration being given to the experience of the proposed assignee or subtenant in the conduct of businesses permitted by this Lease and also to the financial stature of such proposed assignee or subtenant), neither Tenant, nor Tenant’s legal representatives or successors in interest shall assign this Lease, by operation of law or otherwise, or sublet the whole or any part of the Leased Premises; and no assignment shall in any way release Tenant from its primary obligations to Landlord, or limit or otherwise reduce its liability to Landlord.  Without limitation, the term “assign” as used herein, shall include:  (i) an assignment of a part interest in this Lease or a part interest in the Premises; and (ii) any merger, consolidation, transfer (singly or in combination) of shares or interests constituting more than half of the total shares or interests outstanding or any other transaction the effect of which is directly or indirectly to transfer to any third party the benefits of this Lease unless the surviving entity following such merger, consolidation, transfer or other transaction has an equal or better creditworthiness than Tenant immediately prior to such transaction.  Landlord shall consent to Tenant’s assignment of its rights under this Lease: (a) to a any entity controlled by, or under common control with,  Tenant (“control” meaning the right to vote more than 50% of the voting rights of the entity); or (b) as security in favor of any bank or lending institution to secure any loan or other financial accommodation by such bank or lending institution to Tenant, provided that such assignment shall not encumber, and shall remain subordinate to, the interest of Landlord or Landlord’s mortgagee in the Leased Premises and that such collateral assignment shall be consistent with the terms of this Lease, and provided, further, that Landlord and such mortgagee shall enter into a written agreement to that effect, in form reasonably satisfactory to Landlord.

Section 19.  Damage or Destruction.  If the Premises, Common Areas or infrastructure required for Tenant’s use of the Premises (together, the “Relevant Space”) are damaged by fire or by any other cause, the following provisions shall apply:


 (a)
If the damage is to such extent that the restoration thereof cannot be completed within one hundred twenty (120) days, as mutually agreed by the Parties,, Landlord or Tenant may, no later than sixty (60) days following the damage, give a notice to the other Party stating that it elects to terminate this Lease.  If such notice shall be given:  (i) this Lease shall terminate on the third day after the giving of said notice; (ii) Tenant shall surrender possession of the Premises within a reasonable time thereafter; and (iii) all rent shall be apportioned as of the date of such surrender and any rent paid for any period beyond said date shall be repaid to Tenant.


(b)
If the restoration can be completed in less than one hundred twenty (120) days, as  mutually agreed to by the Parties, Landlord shall restore the Premises with reasonable promptness, subject to delays beyond Landlord’s control, and Tenant shall not have the right to terminate this Lease on account of such damage (unless such restoration cannot be completed within one hundred twenty (120) days of the date of casualty, in which event Tenant will have the right to terminate this Lease forthwith, by written notice to Landlord).

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 (c)
If the damage described in either clause (a) or (b) above occurs during the last twelve (12) months of the Term, then Tenant may, no later than sixty (60) days following the damage, give a notice to the other Party stating that it elects to terminate this Lease.  If such notice shall be given:  (i) this Lease shall terminate on the third day after the giving of said notice; (ii) Tenant shall surrender possession of the Premises within a reasonable time thereafter; and (iii) all rent shall be apportioned as of the date of such surrender and any rent paid for any period beyond said date shall be repaid to Tenant.

Landlord need not restore fixtures, improvements or other property of Tenant unless such damage is caused by Landlord’s gross negligence or willful misconduct.

In any case in which the use of the Premises is affected by any such damage, there shall be either an abatement or a reduction in rent during the period for which the Premises are not reasonably usable for the purposes for which they are leased hereunder, the amount of such abatement or reduction to fairly and appropriately reflect the degree to which Tenant is thereby prevented from using the Premises for such purposes.  The words “restoration” and “restore” as used in this Section shall include repairs.

Section 20.  Eminent Domain.  If, at any time during the term of this Lease, title to a substantial portion of the Premises (meaning thereby so much as shall render the remaining portion substantially unusable by the Tenant for its business purposes without material dimunition) shall be taken by exercise of the right to condemnation or eminent domain or by agreement between Landlord and those authorized to exercise such right (all such proceedings being collectively referred to as a “Taking”), this Lease shall terminate and expire on the date of such Taking and rent shall be apportioned and paid to the date of such Taking.  Except as expressly set forth below, any award for the value of the Premises, land, buildings and improvements, and loss of rent from Tenant, shall belong to Landlord, and Tenant shall not be entitled to share in any such award.  To the extent such compensation award or recovery to Tenant does not diminish the amount of the compensation award or recovery otherwise awardable to Landlord, Tenant shall have the right to claim and recover from the condemning authority, but not from the Landlord, such compensation as may be separately awarded or recoverable by Tenant in Tenant’s own right on account of any and all damage to Tenant’s business by reason of any condemnation, for and on account of any cost or loss to which Tenant might be put in relocating its business or removing Tenant’s merchandise, furniture, fixtures and equipment from the Premises, for any cost or loss to Tenant’s improvements, or for loss of the value, if any, of Tenant’s leasehold interest at the time of the Taking.

If the title to less than a “substantial portion” of the Premises shall be taken in condemnation so that the business conducted on said Premises can be continued without material diminution, this Lease shall continue in full force and effect.  If the Taking does not amount to a substantial portion but does materially adversely affect the Tenant’s ability to conduct its business, then Tenant shall have the right to terminate this Lease, and the rent from and after the date of the vesting of title in the condemnor shall be equitably adjusted to reflect the diminished value of the Premises to the Tenant as a direct result of the condemnation prior to such termination.

Section 21.  Indemnity.  Tenant shall indemnify and save harmless Landlord from and against any and all liability, claims, demands, damages, expenses, fees, fines, penalties, suits, proceedings, actions and causes of action of every kind and nature, including Landlord’s costs and reasonable attorneys’ fees, suffered or incurred as a result of any breach by Tenant, its agents, servants, employees, visitors or licensees of any covenant or condition of this Lease, or as a result of Tenant’s use or occupancy of the Leased Premises, or the carelessness, negligence or improper conduct of Tenant, its agents, servants, employees, visitors or licensees; provided, however, that it is understood and agreed that the obligations of Tenant hereunder shall not extend to the gross negligence or willful misconduct of Landlord, its employees, agents or representatives or to any consequential damages or lost profits.

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Landlord shall indemnify and save harmless Tenant from and against any and all liability, claims, demands, damages, expenses, fees, fines, penalties, suits, proceedings, actions and causes of action of every kind and nature, including Tenant’s costs and reasonable attorneys’ fees, suffered or incurred as a result of any breach by Landlord, its agents, servants, employees, visitors or licensees of any covenant or condition of this Lease, or as a result of Landlord’s use or occupancy of the Common Areas or any unused portion of the Landlord’s Building or the carelessness, negligence or improper conduct of Landlord, its agents, servants, employees, visitors or licensees; provided, however, that it is understood and agreed that the obligations of Landlord hereunder shall not extend to the gross negligence or willful misconduct of Tenant, its employees, agents or representatives or to any consequential damages or lost profits.

Section 22.  Events of Default, Remedies, Damages.

 
(a)
Each of the following shall constitute an Event of Default:


(i)
Tenant shall fail to pay when and as due any Minimum Rent or Additional Rent payable under this Lease, and such default shall continue for a period of ten (10) days after written notice of such default from Landlord to Tenant; or


(ii)
Tenant shall fail to perform or comply with any of the agreements, terms, covenants or conditions in this Lease, other than those referred to in Subsection 22(a), for a period of thirty (30) days after notice from Landlord to Tenant specifying the items in default, or in the case of a default or contingency which cannot with due diligence be cured within said thirty (30) day period, Tenant shall fail to commence within said thirty (30) day period the steps necessary to cure the same and thereafter to prosecute the curing of such default with due diligence (it being understood that the time of Tenant within which to cure shall be extended for such period as may be necessary to complete the same with all due diligence); or


(iii)
Tenant shall file a voluntary petition in bankruptcy or shall be adjudicated a bankrupt or insolvent, or a receiver or trustee shall be appointed of all or substantially all of the property of Tenant or Tenant shall make any assignment for the benefit of Tenant’s creditors, or Tenant shall vacate the Premises.


(b)
For so long as an Event of Default shall exist and be continuing, Landlord may give written notice to Tenant specifying the Event of Default and stating that Tenant’s rights to the possession, use and occupancy of the Premises under this Lease shall expire and terminate on the date specified in such notice, which date shall be at least ten (10) days after the giving of notice, and upon the date so specified, all rights of Tenant under this Lease shall so expire and terminate unless Tenant cures such default within such ten (10) day period.


(i)
Upon termination of Tenant’s rights to possession, use and occupancy of the Premises under this Lease in accordance with the provisions of Subsection 22(b), above, Landlord shall by prompt written notice to Tenant elect to receive from Tenant either the damages specified below in Subsection 22(c)(i) or Subsection 22(c)(ii).

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 (ii)
Tenant shall pay Landlord an amount equal to:  (x) any Minimum Rent, Additional Rent and any damages which shall have been due or sustained prior to such termination, all reasonable costs, fees and expenses (including, but not limited to, reasonable attorneys’ fees) incurred by Landlord in pursuit of its remedies hereunder; plus an additional amount equal to (y) the present worth (as of the date of such termination) of the Minimum Rent and Additional Rent which, but for such termination of this Lease, would have become due during the remainder of the term as then constituted; less (z) the fair rental value of the Premises as of the date of such termination, as reasonably determined by an independent real estate appraiser selected by Landlord.  Such damages shall be payable to Landlord in one lump sum on demand and shall bear interest at the rate set forth below in Section 31 until paid.  For purposes of this clause, “present worth” shall be computed by discounting such Minimum Rent and Additional Rent to present worth at a discount rate equal to one percentage point above the discount rate then in effect at the Federal Reserve Bank of Boston; or


(iii)
Tenant shall pay Landlord an amount equal to:  (x) any Minimum Rent, Additional Rent and any damages which shall have been due or sustained prior to such termination, all reasonable costs, fees and expenses (including, but not limited to, reasonable attorneys’ fees) incurred by Landlord in pursuit of its remedies hereunder or in thereafter renting the Premises to others from time to time (which costs may include preparing the Premises for re-letting and of re-letting the Premises); plus (y) an amount equal to the Minimum Rent and Additional Rent which, but for such termination would have become due during the remainder of the term as then constituted, less the amount of Minimum Rent and Additional Rent, if any, which Landlord shall receive during such period from others to whom the Premises may be rented (other than any Additional Rent received by Landlord as a result of any failure of such other person to perform any of its obligations to Landlord).  Any payments due under clause (x) of this Subsection 22(c)(ii) shall be immediately due and payable.  Payments due under clause (y) of this Subsection 22(c)(ii) shall be due and payable in monthly installments, in advance, on the first day of each calendar month following termination of this Lease and continuing until the date on which the term would have expired but for such termination, provided, however, that in the event Tenant fails to pay such installments as and when due then the entire amount of such installments shall become immediately due and payable in full, discounted to present value as provided in Subsection 22(c)(i) above, at the option of Landlord.

The failure by Landlord to provide such notice shall constitute an election by Landlord to receive the damages specified in Subsection 22(c)(ii).  If Landlord elects to receive the damages specified in Subsection 22(c)(ii), Landlord shall mitigate its damage by making commercially reasonable efforts to relet the Premises on reasonable terms.  If Landlord relets for a period of time longer than the current  Term, then any special concessions given to the new tenant shall be allocated throughout the entire reletting term to not unduly reduce the amount of consideration received by Landlord from such new tenant during the remaining period of Tenant's Term.

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Upon any termination of this Lease, Tenant shall immediately vacate the Premises and surrender the same to Landlord in the same condition as received, reasonable wear and tear and casualty excepted.  In the event Tenant fails to so vacate and surrender the premises, Tenant shall pay all costs reasonably incurred by Landlord in requiring Tenant to vacate, including reasonable attorneys’ fees and disbursements and, further, will pay Landlord a daily occupancy charge equal to one hundred twenty-five percent (125%) of the average daily rental payable by Tenant during the most recent Lease Agreement year until Tenant vacates the Premises as provided in the terms of this Lease.  Tenant expressly agrees that, for so long as any Event of Default shall exist and be continuing, Landlord shall have the right to immediately regain possession of the Premises and to exclude Tenant from further use, occupancy and enjoyment thereof, and Tenant waives any and all claims which it may have against Landlord, regardless of when the same arise, on account of such regaining of possession by Landlord or such exclusion.  Upon the termination of this Lease, Tenant will remove all goods and effects not the property of Landlord, at Tenant’s expense.  Any damage thereby caused to the Premises shall be promptly repaired by Tenant, at Tenant’s expense.  At Landlord’s option, any goods and effects not so removed shall be deemed abandoned by Tenant and thereupon shall become the sole property of Landlord.  In the event Tenant shall fail or refuse to vacate the Premises without breach of the peace after termination, Landlord may obtain a court order for the payment of rent into court in accordance with the terms of 12 V.S.A. § 4853a.  Landlord shall also have all other rights and remedies as may be available under applicable law at the time of the occurrence of the Event of Default.

Section 23.  Signs.  Tenant shall not install or display any sign, logo or advertising medium on the outside of the Premises or any other portion of Landlord’s property unless Landlord shall have given its prior consent to the sign, display or advertising medium, which consent shall not be unreasonably withheld or delayed, and Tenant shall have obtained from such others including government authorities and agencies with or claiming jurisdiction over the Premises all necessary permits and approvals for the proposed sign, display or advertising medium.  If Landlord chooses to install one common sign for entire Landlord’s Building, Tenant will pay pro rata share of available signage.

Section 24.  Broker Commission.  The parties hereto warrant and represent to each other that they have no knowledge of any other real estate broker or agent to whom a commission may be payable as a result of this transaction or any such knowledge of any other finder’s fees or commissions related thereto.  Each party agrees to indemnify and hold harmless the other for all claims or demands of any real estate agent or broker claiming by, through, or under such party.  This indemnification shall also include payment of costs and attorneys’ fees incurred by a party in defense of a claim for such real estate commissions or fees.

Section 25.  Environmental Covenants.  Tenant shall comply with all environmental laws, rules, regulations, statutes and ordinances, including, without limitation, those applicable to “hazardous substances.”  Tenant shall unconditionally, absolutely and irrevocably agree to indemnify, defend and hold harmless Landlord and its officers, employees, agents, and contractors, from and against and to pay in full on demand by Landlord all loss, cost and expense (including, without limitation, attorneys’ fees and disbursements and fees of other professionals advising Landlord) of whatever nature suffered or incurred by Landlord on account of the existence on the Leased Premises, or the release or discharge from the Leased Premises, of hazardous substances caused by Tenant or its employees, agents, licensees and subcontractors after the Commencement Date,” including, without limitation, any claims, costs, losses, liabilities and expenses arising from the violation (or claimed violation) of any environmental laws or the institution of any action by any party against Tenant, Landlord or the Leased Premises based upon nuisance, negligence or other tort theory alleging liability due to the improper generation, storage, disposal, removal, transportation or treatment of hazardous substances by Tenant or its employees, agents, licensees and subcontractors, or the imposition of a lien on any part of the Leased Premises under the Comprehensive Environmental Response Compensation and Liability Act of 1980, 42 U.S.C. 9601, et seq., as amended (“CERCLA”), and the Vermont Waste Management Statutes, Vt. Stat. Ann. Title 10, Ch. 159, or any other laws pursuant to which a lien or liability may be imposed on Landlord due to the existence of hazardous substances by Tenant or its employees, agents, licensees and subcontractors.

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Landlord shall comply with all environmental laws, rules, regulations, statutes and ordinances, including, without limitation, those applicable to hazardous substances,  Landlord shall unconditionally, absolutely and irrevocably agree to indemnify, defend and hold harmless Tenant and its officers, employees, agents, and contractors, from and against and to pay in full on demand by Tenant all loss, cost and expense (including, without limitation, attorneys’ fees and disbursements and fees of other professionals advising Tenant) of whatever nature suffered or incurred by Tenant on account of the existence on the Property, or the release or discharge from the Property, of hazardous substances prior to the Commencement Date or caused by Landlord or its employees, agents, licensees and subcontractors after the Commencement Date,” including, without limitation, any claims, costs, losses, liabilities and expenses arising from the violation (or claimed violation) of any environmental laws or the institution of any action by any party against Tenant, Landlord, the Property or the Leased Premises based upon nuisance, negligence or other tort theory alleging liability due to the improper generation, storage, disposal, removal, transportation or treatment of hazardous substances by Landlord or its employees, agents, licensees and subcontractors, or the imposition of a lien on any part of the Property under the Comprehensive Environmental Response Compensation and Liability Act of 1980, 42 U.S.C. 9601, et seq., as amended (“CERCLA”), and the Vermont Waste Management Statutes, Vt. Stat. Ann. Title 10, Ch. 159, or any other laws pursuant to which a lien or liability may be imposed on Tenant due to the existence of hazardous substances by Landlord or its employees, agents, licensees and subcontractors.

Section 26.  Lease Not to be Recorded.  Tenant agrees not to record this Lease except at the express request of Landlord, at the option of Landlord; provided, however, that the parties expressly agree that a notice or memorandum of lease complying with the terms of 27 V.S.A. Section 341(c) and signed by both of them, may be recorded by either Landlord or Tenant.  Each Party agrees to sign such a notice or memorandum promptly upon the request of the other Party.

Section 27.  Quiet Enjoyment.  Landlord covenants that the said Tenant, on paying all rent required to be paid by Tenant, and observing and performing all covenants and undertakings by Tenant to be performed hereunder, shall and may peaceably have and enjoy said Premises for the term aforesaid in accordance with the terms of this Lease.

Section 28.  Notices.  Any notice or other communication to be given hereunder shall be in writing and mailed or telecopied to such party at the address or number set forth below:

  If to Landlord:
Malone US Route 2 Waterbury Properties, LLC
c/o Malone Properties, Inc.
122 Gallison Hill Road
Montpelier, VT  05602
Telephone (802) 223-9954
Telecopier (802) 223-9023
 
  With a copy to:
Robert H. Rushford, Esq.
Gravel and Shea
76 St. Paul Street, 7th Floor
P. O. Box 369
Burlington, VT  05402-0369
Telephone No.:  (802) 658-0220
Telecopier No.:  (802) 658-1456

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  If to Tenant:
Solar Communities, Inc. dba Sun Common
Attn:  Duane Peterson, President
Waterbury, VT  05676
Telephone No.:  (802) 882-8181
Telecopier No.:  (866) 536-7209
 
  With a copy to:
Molly K. Langan, Esq.
Dinse, Knapp & McAndrew, P.C.
209 Battery Street
P. O. Box 988
Burlington, VT  05402-0988
Telephone No.:  (802) 864-5751
Telecopier No.:  (802) 859-8730

or to such other person, address or number as the party entitled to such notice or communication shall have specified by notice to the other party given in accordance with the provisions of this Section.  Any such notice or other communication shall be deemed given:  (i) if mailed, three (3) business days after  deposited in the mail, properly addressed and with postage prepaid; or (ii) if sent by telecopy, when transmitted.

Section 29.  Disclaimer for Security.  Tenant acknowledges that neither Landlord’s Building nor the Premises are furnished with a security system and Tenant, if it so desires, shall be responsible, at its own cost and expense, for installing a security system and or other security measures for the protection of the Premises and Tenant’s personal property stored therein.  The Landlord shall not be held liable for any loss or damage to Tenant’s personal property, fixtures or fit-up by reason of failure to provide adequate security or ineffectiveness of security measures undertaken.  Tenant acknowledges that the Landlord is not an insurer and Tenant assumes all risk of loss to its personal property, fixtures and fit-up, and further acknowledge that neither the Landlord nor its agents have made any representation or warranty, nor has Tenant relied upon any representation or warranty, express or implied, including any warranty of merchantability or fitness for any particular purpose relative to any security measures recommended or undertaken.

Section 30.  Waiver of Rule of Construction.  The parties waive the benefit of any rule that this Lease is to be construed strictly against one party or the other.

Section 31.  Delinquent Rent and Additional Rent.  If Tenant shall fail to pay any Minimum Rent or any Additional Rent within ten (10) days of when the same is due and payable hereunder, the unpaid amount shall bear interest from the due date thereof to the date of payment at the rate of 1-1/2% per month; provided, however, that if such rate is higher than the maximum rate of interest allowed under applicable law, the interest payable hereunder shall be the maximum rate allowed.

Section 32.  Holding Over.  Any holding over after the expiration of the term hereof shall be construed to be a tenancy from month to month only, at the rate of one hundred twenty-five percent (125%) of the rent in effect immediately prior to such expiration (prorated on a daily basis) and otherwise on the terms and conditions herein specified so far as applicable.

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Section 33.  Force Majeure.  In the event that Landlord or Tenant shall be delayed, hindered in or prevented from the performance of any act required hereunder, by reason of strikes, lock-outs, labor troubles, inability to procure materials, failure of power, restrictive governmental laws or regulations, riots, insurrection, the act, failure to act or default of the other party, war or other reason beyond its control which is not the fault of the non-performing Party, and the non-performing party has been unable to overcome the act or event by the exercise of due diligence (together, “Force Majeure”), then performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay.  “Force Majeure” specifically excludes economic hardship, changes in market conditions, insufficiency of funds, unavailability of equipment or supplies, or, except as provided above, strike, work-to-rule action, go-slow or other labor disturbances.

Section 34.  Successors and Assigns.  All the terms and conditions of this Lease shall be binding upon and shall inure to the benefit of the legal representatives, successors and permitted assigns of the parties hereto.  The term “Landlord” means only the owner of the Leased Premises for the time, and upon any transfer of title to the Leased Premises, the transferor shall automatically be relieved of all further liability under this Lease arising after the date of transfer, and the transferee shall automatically be and become responsible for all obligations of Landlord hereunder.

Section 35.  Termination.  On the termination date of the Term, Tenant shall:  (a) immediately vacate the Premises and surrender the same to Landlord; (b) repair all damage to the Premises and the fixtures and personal property of Landlord located on the Premises caused by Tenant’s removal of its furniture and trade fixtures; and (c) at the option of Landlord either:  (i) abandon all improvements, alterations and modifications made by Tenant to the Leased Premises prior to the date of termination if Landlord indicated at the time of approval of the same that they would become the property of Landlord at the end of the Lease Term, in which event such improvements, alterations and modifications shall be and become, without further action on the part of Tenant, the property of Landlord, free and clear of all claims by Tenant and any person claiming by, through or under Tenant; or (ii) remove said improvements, alterations and modifications if Landlord indicated at the time of approval of the same that Tenant would have to remove them from the Premises at the end of the Lease Term, and restore the Premises to the same condition which existed on the Commencement Date, reasonable wear and tear excepted.

The Parties’ mutual obligation to indemnify under Section 21 and under Section 25 shall survive the termination or expiration of this Lease.

Section 36. Landlord Not Personally Liable.  If Landlord or any successor in interest of Landlord is a mortgagee, or an individual, joint venture, tenancy in common, corporation, limited liability company, firm or partnership, general or limited, it is specifically understood and agreed that there shall be absolutely no personal liability on the part of such mortgagee or such individual or on the part of the members of such corporation, limited liability company, firm, partnership or joint venture with respect to any of the terms, covenants and conditions of this Lease, and that Tenant shall look solely to the equity of Landlord or such successor in interest in the Premises for the satisfaction of each and every remedy of Tenant in the event of any breach by Landlord or by Landlord’s successor of any of the terms, covenants and conditions of this Lease to be performed by Landlord, such exculpation of personal liability to be absolute and without any exception whatsoever.

Section 37.  Authorization and Binding Effect of Agreement.  The execution, delivery and performance of this Lease and each other document or instrument required to be delivered pursuant hereto by the Tenant and the Landlord have been duly authorized by their respective Boards of Directors and by their respective shareholders, and this Lease and each other document or instrument required to be delivered pursuant hereto is the legal, valid and binding obligation of the Tenant and the Landlord and is enforceable against the Tenant and the Landlord in accordance with its respective terms; subject, as to enforcement only, to bankruptcy, insolvency, reorganization, moratorium or similar laws at the time in effect affecting the enforceability of the rights of creditors generally.

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Section 38.  Entire Agreement, Applicable Law.  This Lease with any exhibits and riders attached hereto contains the entire agreement of the parties and no representations, inducements, promises or agreements not embodied herein shall be of any force or effect, unless the same are in writing and signed by or on behalf of the party to be charged.  The captions of particular Sections are inserted as a matter of convenience only and are in no way to affect or define the scope or intent of this Lease or any provision thereof.  This Lease shall be governed by and interpreted in accordance with the laws of the State of Vermont.

Section 39.  No Option.  Submission of this Lease for examination does not constitute a reservation of or option for the Premises and this Lease becomes effective as a lease only upon execution and delivery of this Lease by Landlord and Tenant.

Section 40.     Landlord’s Representations and Warranties.  Landlord represents and warrants to the best of its knowledge as follows which representations and warranties will be true and correct as of the Commencement Date as well:

(a)          Landlord is duly organized and in good standing under the laws of the State of Vermont.

(b)          Landlord has been duly authorized and has the full power, right and authority to enter into this Lease and to perform all of its obligations under this Lease and to execute and deliver all documents required by this Lease, and neither this Lease nor the transactions contemplated hereby constitute a violation or breach of Landlord's operating agreement.

(c)          Landlord has good and marketable title to the Property, subject only to the encumbrances set forth in Exhibit A-1 attached hereto.

(d)          The Property is in conformity with all applicable zoning, subdivision, Act 250, environmental, building, land use, sign, fire and safety, handicapped access and health laws, regulations and codes of governmental authorities having jurisdiction over the Property and with any applicable covenants or restrictions.

(e)          Landlord (or its predecessor(s)) has obtained all governmental permits, approvals, entitlements, or other authorizations required for the construction, use and operation of the Property, and the Property is in compliance with all of the conditions and requirements of such authorizations.

(f)        The Property is presently zoned _______________________ under the Town of Waterbury Land Zoning Regulations; Landlord has no knowledge of any pending or threatened proceedings to change the zoning of the Property, either with respect to use or dimensional limitations.

(g)          Landlord has no knowledge of any pending or threatened condemnation proceedings or other proceedings in the nature of eminent domain in connection with the Property.

(h)          Landlord has no knowledge of any special or general assessment levied, pending or threatened against the Property.

(i)          All basic public utilities (water, sewer, electricity) required for the operation and use of the Premises are or will be connected to the Building on or before the Commencement Date.

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(j)          There are no litigation or proceedings pending, or to Landlord's knowledge threatened, against or relating to the Premises.

(k)          Landlord is fully familiar with the present uses of the Property and it has no knowledge that any hazardous substances (as defined in Section 25) has ever been used, handled, manufactured, generated, produced, stored, treated, processed, transferred, or disposed of at the Property except in compliance with applicable federal, state and local laws, ordinances, rules and regulations, that any release or discharge of any hazardous material has occurred on, at, to or from the Property, except in compliance with laws as aforesaid, that any hazardous material exists on the Property, except in compliance with laws as aforesaid, that any condition currently exists which poses a substantial likelihood of such a release or discharge, and that any litigation or proceedings are pending or threatened alleging a violation of federal, state or local laws, ordinances, rules or regulations pertaining to hazardous substances or the existence, release or discharge of hazardous substances at, on, from, or to the Property.

41.          Right to Maintain Solar PV Installations.  Tenant shall have the right to build, own, and operate solar photovoltaic installations on the roof of Landlord’s Building and elsewhere in the Common Areas at its sole expense provided the same do not materially interfere with the use, maintenance and operation of such areas by Landlord or other tenants of Landlord’s Building.  If Tenant removes any such installations, Tenant shall restore the Building and/or Common Areas to their original condition, utilizing professional roofing contractors.

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IN WITNESS WHEREOF, the parties, as evidenced by the signatures of their duly authorized agents, do hereby execute this Lease as of the ____ day of _______________, 2015.

IN PRESENCE OF:
  
MALONE US ROUTE 2 WATERBURY
   
PROPERTIES, LLC
     
   
By:
    
Witness
      
Patrick Malone,
       
Duly Authorized Agent
         
STATE OF VERMONT
 
        
COUNTY OF __________________, SS.
        

On this _____ day of ________________, 2015, personally appeared PATRICK MALONE, Duly Authorized Agent of MALONE US ROUTE 2 WATERBURY PROPERTIES, LLC, to me known to be the person who executed the foregoing instrument, and he acknowledged this instrument, by him signed, to be his free act and deed and the free act and deed of MALONE US ROUTE 2 WATERBURY PROPERTIES, LLC.

 
Before me,
  
   
Notary Public
     
 
My commission expires: ____________

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IN WITNESS WHEREOF, the parties, as evidenced by the signatures of their duly authorized agents, do hereby execute this Lease as of the ____ day of _______________, 2015.

IN PRESENCE OF:
  
SOLAR COMMUNITIES, INC. DBA
   
SUNCOMMON
     
   
By:
    
Witness
        
       
Duly Authorized Agent
         
STATE OF VERMONT
        
COUNTY OF _________________, SS.
        

On this _____ day of ________________, 2015, personally appeared ____________________, Duly Authorized Agent of SOLAR COMMUNITIES, INC. DBA SUNCOMMON, to me known to be the person who executed the foregoing instrument, and he acknowledged this instrument, by him signed, to be his free act and deed and the free act and deed of SOLAR COMMUNITIES, INC. DBA SUNCOMMON.

 
Before me,
   
Notary Public
     
 
Notary commission issued in ______________ County
 
My commission expires: ____________

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Exhibit “A”
 
Property Site Plan

Exhibit “B”

Floor Plan of Premises

Exhibit “C”

Building Specifications

Exhibit “D”

COMPUTATION OF COST OF INITIAL CONSTRUCTION
AND ANNUAL BASE RENT FOR INITIAL TEN (10) YEAR TERM

The Annual Base Rent will be determined not less than 10 days prior to the Commencement Date based upon Landlord’s actual costs to develop and construct the Building plus a fixed mark up on certain such costs (the “Initial Construction Cost”), as further defined below.  A portion of the Initial Construction Cost shall be allocated to Tenant based on the square footage of space leased by Tenant as a percent of the total square footage of the Building (8,640sf/14,000f = 62%).  The Annual Base Rent will be determined by dividing the Tenant portion of the Initial Construction Cost by the initial Term of the lease (10 years). The Annual Base Rent shall increase by 3% per annum, starting on the first anniversary of the Rent Commencement Date.

The Initial Construction Cost will include the line items listed in Exhibit “E”, grouped into two categories:  Construction Costs and Development Costs.

All Construction Costs will be determined based on actual cost from vendors, suppliers or sub-contractors, or actual costs incurred by Landlord for self-performed work based on the labor and equipment rates in the Rate Sheet attached below, plus a markup of twelve percent (12%) to cover Landlord’s overhead and administrative expenses.

All Development Costs will be determined based on actual costs from vendors, suppliers or sub-contractors, or actual costs incurred by Landlord for self-performed work based on the labor and equipment rates in the Rate Sheet attached below, with no additional mark up.

All Construction and Development Costs will be based on actual invoices from vendors, suppliers and sub-contractors, and time sheets prepared by Landlord for self-performed work, with one exception:  The total cost of the Land (including acquisition and holding costs) will be fixed at three-hundred and fifty thousand dollars ($350,000.00).

For purposes of determining the Annual Base Rent, 62% of all Construction and Development Costs will be allocated to Tenant based on the square footage of space leased by Tenant as a percent of the total square footage of the Building (8,640sf/14,000f = 62%), EXCEPT FOR the following items which shall be allocated 100% to Tenant:

 a)
MEP Design costs,

b)
Additions to the Building specifications requested by Tenant to increase energy efficiency and reduce energy usage (identified as Net Zero Adders in Exhibit “E”,

c)
Electrical service specific to Tenant’s Premises (cost to bring electrical service from the street to the main electrical panel on the Building will be shared pro rata by Landlord and Tenant)

d)
Other Construction Costs that relate specifically to interior build out and fit up of Tenant’s Premises, in the event that Landlord chooses not to finish the build out and fit up of the space not leased by Tenant in the Initial Construction.

Annual Base Rent will be calculated by dividing the Initial Construction Costs allocated to Tenant by the length of the initial Term of the lease in years.  For example purposes only, a calculation of the Annual Base Rent based on the Budget Estimate in Exhibit “E” and the ten years lease term is provided here:

Initial Construction Costs allocated to Tenant:     $1,896,632 ÷ 10 = $189,663 Annual Base Rent

Cost Management and Tracking:  During the Initial Construction period, Landlord shall provide Tenant with the following at periodic intervals of not more than one month:

 a)
an accounting of actual costs incurred plus mark up where applicable for the line items in the Budgetary Estimate in Exhibit “E”, for the period and in total since commencement of the Initial Construction, including actual invoices from vendors, suppliers and subcontractors;

b)
a comparison of actual costs incurred to date to the Budget Estimate in Exhibit “E”, by line item;

c)
an estimate of the percentage of the work completed at the end of the reporting period for each line item on the Budget Estimate, so that Tenant and Landlord can compare the percentage of costs incurred to the percentage of work completed.

Change Orders:  In the event that Landlord or Tenant request changes to the Property Site Plan, Floor Plan of Premises, or Building Specifications after execution of this Agreement and at any time during the Initial Construction Period, Landlord shall provide, within 10 days of the receipt of the request, an estimate of the costs to make the requested change (cost increase or savings relative to the Budget Estimate) and the estimated impact on the Construction Schedule, if any.  Landlord will not proceed with any work related to the requested changes unless and until the Parties have agreed in writing on the scope of work, estimated cost, and estimated schedule impact of the requested changes.

Rate Sheet for Equipment, Labor and Services provided by Landlord:  See attached


Labor & Equipment Rates
   
Labor:
  
Supervisor:  $60.00hr.
  
Foreman: $48.50hr.
  
Carpenter: $42.50hr.
  
Carpenter Helper: $38.50hr.
  
Labors: $32.50hr.
  
   
Equipment:
  
Tri-Axle Dump: $78.00hr.
  
Single Axle Dump: $55.00hr.
  
Volvo 140 Excavator: $150.00hr.
  
Demo Hammer (Excavator) $600.00day
  
Cat. 308 Excavator: $125.00hr.
  
Cat. 259B Skid Steer: $95.00hr.
  
John Deere 444 Loader: $110.00hr.
  
John Deere 440 Dozer: $120.00hr.
  
Lull Material Handler: $3,200.00 Month / $100.00hr. (2hr. Min.)
  
Big Vibration Roller: $75.00day
  
Big Plate Compactor: $68.50day
  
Small Plate Compactor: $45.00day
  
Jumping Jack Compactor: $65.00day
  
Pipe Saw: $52.00day
  
Harley Rake: $80.00day
  
Auger: $75.00day
  
Rotor Tiller: $125.00day
  
Temp. Heat: $1,200.00month (400BTU)
  
Generator: $75.00day / $275.00week / $800.00month
  
Paint Sprayers: $90.00day / $245.00week
  
19’ Scissor Lift: $400.00month
  
26’ Scissor Lift: $650.00month
  
40’ Boom Lift: $2,500.00month
  
30’ Scissor Lift 4x4: $1,895.00month
  
Site Laser:  $35.00day
  
Pump Jacks: $45.00day (Per Pole)
  
25’ Staging Plank: $35.00day
  
Electric Concrete Saw: $125.00day
  
Blade Change: $175.00
  
Electric Jackhammer: $95.00day
  
Rotary Concrete Hand Drill: $45.00day
  
Job Trailer: $175.00month
  

Exhibit “E”

Budget Estimate for Building Construction and Development Costs

The following budget estimate is based upon Landlord’s development and construction of a new shared use 14,000 Sq. Ft. building, of  which SunCommon occupies 8,640 Sq Ft. or sixty-two percent (62%) of the total square footage.  All common areas are shared.   Sixty-two percent (62%) of common/site improvement and procurement costs are allocated to SunCommon.

   
Total Costs
    
Allocated to Tenant
  
Site Work
  
$
365,315
    
$
226,495
  
Site Lighting
    
10,000
      
6,200
  
Concrete
    
132,880
      
132,880
  
Metals
    
121,231
      
121,231
  
Wood & Plastic
    
131,335
      
131,225
  
Net Zero Adder
    
21,885
          
Thermal & Moisture
    
256,577
      
256,577
  
Net Zero Adder
            
93,369
  
Doors & Windows
    
83,132
      
83,132
  
Net Zero Adder
            
12,940
  
Finishes
    
107,734
      
107,734
  
HVAC & Mech
    
89,571
      
89,571
  
Net Zero Adder
            
90,429
  
Electrical
    
141,826
      
130,000
  
Plumbing
    
33,934
      
33,934
  
Overhead Admin @ 2%
    
41,370
      
25,649
  
Supervision
    
100,000
      
62,000
  
Sub Total Construction Costs
  
$
1,614,905
    
$
1,554,932
  
                 
Land –Including
                
Acquisition, holding costs
  
$
350,000
    
$
217,000
  
Construction Interest
    
50,000
      
31,000
  
Builders Risk Insurance
    
5,000
      
5,000
  
Civil Design & Consultation
    
30,000
      
18,600
  
Architectural Services
    
50,00
      
31,000
  
MEP Design (SunCommon only)
            
10,000
  
Permit Fees
    
40,000
      
24,800
  
Legal Fees
    
10,000
      
6,200
  
(Lease preparation & negotiation)
                
Sub Total Development Costs
  
$
535,000
    
$
341,700
  
                 
TOTAL INITIAL CONSTRUCTION COST
  
$
2,149,905
    
$
1,896,632
  

Exhibit “F”

Projected Construction Schedule and Completion Date

Exhibit “G”

Form of Rent Commencement Agreement

RENT COMMENCEMENT AGREEMENT

ROUTE 2
WATERBURY, VERMONT

THIS RENT COMMENCEMENT AGREEMENT (this “Agreement”) is made and entered into this ____ day of _________, 201_, between MALONE RTE 2 WATERBURY PROPERTIES, LLC, a Vermont limited liability company with a place of business in Montpelier, Vermont (the “Landlord”) and SOLAR COMMUNITIES, INC. dba SUNCOMMON, a Vermont benefit corporation and certified B corporation with a place of business in Waterbury, Vermont (the “Tenant”) pursuant to that certain Lease Agreement dated as of October __, 2015 by and between Tenant and Landlord (the “Lease”).  Landlord and Tenant are sometimes collectively referred to herein as the “Parties” and individually referred to herein as a “Party”.  All capitalized terms used but not defined herein shall have the meanings given to such terms in the Lease.

Pursuant to Section 4 of the Lease, Annual Base Rent will be payable commencing on the Rent Commencement Date.  As of the Rent Commencement Date, the Parties are obligated to execute a Rent Commencement Agreement. The Commencement Date specified in the Parties' executed Rent Commencement Agreement for the payment of Rent will establish the “Commencement Date” and the "Rent Commencement Date" for purposes of the Lease.

Pursuant to Section 1A and Section 4 of the Lease, Tenant’s pro rata share of the Initial Construction will be payable as Annual Base Rent during the initial ten (10) year Term.

NOW THEREFORE, the parties hereby agree that

1.          The “Commencement Date” and the “Rent Commencement Date” for the purposes of the Lease is _________________, 201_.

2.          The total Initial Construction cost is _______ Dollars ($______).

3.          The monthly payment of Annual Base Rent during the initial ten (10) year Term attributable to Tenant’s pro rata share of the Initial Construction based upon a direct reduction basis with equal monthly payments over a term of 120 months is _______ and __/100 Dollars ($_________).

Lease Year
Rent PSF
Annual Rent
Monthly Rent *
1
$____
$_______
$_______
2
$____
$_______
$_______
3
$____
$_______
$_______
4
$____
$_______
$_______
5
$____
$_______
$_______
6
$____
$_______
$_______
7
$____
$_______
$_______
8
$____
$_______
$_______
9
$____
$_______
$_______
10
$____
$_______
$_______

4.          Schedule A attached hereto reflects the calculation in Section 3 above.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day first above written.

   
TENANT
     
   
SOLAR COMMUNITIES, INC. DBA
   
SUNCOMMON
     
   
By:
    
Witness
      

       
Duly Authorized Agent
   
   
LANDLORD
         
   
MALONE US ROUTE 2 WATERBURY

 
PROPERTIES, LLC
         
   
By:
    
Witness
      
Patrick Malone,
       
Duly Authorized Agent

SCHEDULE A

COMPUTATION OF COST OF INITIAL CONSTRUCTION AND ANNUAL BASE RENT FOR INITIAL TEN (10) YEAR TERM

Exhibit “H”

Estimate of Common Area Charges for Landlord’s Building

Lease Year 1 of Term

The following estimated Annual Common Area Charges represent Landlord’s estimate of annual common area maintenance charges as defined in Section 6 of the Agreement.  Tenant shall be responsible to pay a pro rata share of such charges equal to 62% of the total.

Taxes
  
$
14,000
  
Insurance
  
$
3,000
  
Snow Removal
  
$
2,000
  
Lawn Care and Landscaping
  
$
4,000
  
Driveway & Parking Area Maintenance
  
$
2,000
  
Septic/Storm Water Maintenance
  
$
2,000
  
Exterior Lighting, including parking area
  
$
1,000
  
         
TOTAL Estimated Annual CAM Charges
  
$
28,000
  
         
Tenant’s estimated pro rata share @ 62%
  
$
17,360
  


Exhibit 10.38

ADDENDUM #1 TO LEASE AGREEMENT DATED OCTOBER 19, 2015

between

MALONE US ROUTE 2 WATERBURY PROPERTIES, LLC
(“Landlord”)

and

SOLAR COMMUNITIES, INC.
DBA SUNCOMMON
(“Tenant”)

Dated as of July 19, 2016

ADDENDUM #1 TO LEASE AGREEMENT

This ADDENDUM #1 to Lease Agreement (this “Lease”) is by and between MALONE RTE 2 WATERBURY PROPERTIES, LLC, a Vermont limited liability company with a place of business in Montpelier, Vermont (the “Landlord”) and SOLAR COMMUNITIES, INC. dba SUNCOMMON, a Vermont benefit corporation and certified B corporation with a place of business in Waterbury, Vermont (the “Tenant”).  Landlord and Tenant are sometimes collectively referred to herein as the “Parties” and individually referred to herein as a “Party”.

Background

1.          Landlord and Tenant entered into a Lease Agreement on October 19, 2015 (the “Original Lease Agreement”) in which Tenant and Landlord agreed that Tenant would lease and occupy 8,640 +/- square feet of office space in a new 14,000 +/- square foot commercial building which Landlord constructed and owns in Waterbury, Vermont (“Landlord’s Building”).

2.          Landlord and Tenant now wish to enter into an Addendum #1 to the original Lease Agreement in which Tenant agrees to lease from Landlord, and Landlord agrees to lease to Tenant, the remaining 5,850 +/- square feet of Landlord’s Building for use by Tenant as warehouse space.

N O W ,  T H E R E F O R E ,

In consideration of the promises and the mutual covenants and agreements set forth in the original Lease Agreement, and in reliance on the representations and warranties contained therein and herin, the parties hereby agree as follows:

Lease of Additional Premises.  Landlord hereby leases and rents to Tenant, and Tenant hereby takes from Landlord, the remaining portion of Landlord’s Building containing 5,850 +/- square feet, for use by Tenant as warehouse space (the “Warehouse Space”).  Landlord and Tenant shall be bound by the same terms, conditions, rights, obligations and covenants as in the original Lease Agreement, with the following modifications applicable only to the new Warehouse Space unless otherwise stated:

Fit up of Warehouse Space:  Landlord shall deliver the Warehouse Space to Tenant substantially in conformance with the designs and specifications agreed to by the parties, and attached herein as Exhibit A.  Landlord shall use its best efforts to cause the required certificates of occupancy from the Town of Waterbury and/or the State of Vermont Department of Labor & Industry for Warehouse Space (if applicable) to be issued no later than 60 days from the execution date of this Addendum #1 to Lease Agreement, subject to (i) delay in receipt of permits for the requested changes from the responsible local and state authorities, (ii) delay caused by Tenant or (iii) force majeure including extreme winter weather related delays in construction.

Annual Base Rent:  The cost of the fit up of the Warehouse Space shall be initially paid for by the Landlord.  The Tenant shall pay to the Landlord, without offset, set-off or deduction for any reason other than as provided for in Section 1A of the original Lease Agreement, Annual Base Rent for the Warehouse Space during the Term, in an amount equal to $13.40 per square foot or $78,390 per year.  The Annual Base Rent will be paid in equal monthly installments beginning on the Commencement Date, The Annual Base Rent shall increase by 3% per annum, starting on the first anniversary of the Rent Commencement Date.

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Term of Lease.  (a)  The Warehouse Space is hereby leased to Tenant, subject to all of the terms and conditions contained in the original Lease Agreement and this Addendum #1, for a term of ten (10) +/-years (the “Term”) which shall commence on the “Commencement Date” which is defined as ten (10) days following the later of the following:  the issuance by the Town of Waterbury, Vermont of certificate(s) of occupancy for the Warehouse Space (if applicable) under (i) permits issued by the Town of Waterbury under its development review/planning and zoning laws and (ii) permits issued by the Vermont Department of Public Safety Division of Fire Safety, and shall end at midnight on the day preceding the tenth (10th) anniversary of the Commencement Date of the Leased Premises (office space) in the Original Lease Agreement.  The parties shall execute a Rent Commencement Agreement in the form of Exhibit “B” memorializing the Commencement Date and the Rent Commencement Date.  The Commencement Date shall not extend beyond September 1, 2016 unless agreed to by Tenant.  If the Commencement Date has not occurred by September 1, 2016, unless Landlord is delayed in performance by (i) delays caused by Tenant or (ii) force majeure, as defined in the Original Lease Agreement and subject to the provisions of Section 33 of the Original Lease Agreement (together, clauses (i) and (ii) being referred to as the “Permitted Delays”), Landlord shall reduce the initial monthly rent payments by an equivalent of one day’s rent for each one day delay in the Commencement Date beyond September 1, 2016. If the Commencement Date has not occurred by September 1, 2016, Tenant may, at its sole option, either elect to proceed subject to Landlord’s obligation to make such penalty payments until the Commencement Date occurs, or terminate this Lease.

Use of Premises.  Tenant shall use and occupy the Warehouse Space for Tenant’s business which includes receipt, storage and distribution of equipment and materials, and light manufacturing and assembly, and for no other purpose without the Landlord’s consent, which consent shall not be unreasonably withheld, conditioned or delayed.

Security Deposit. Tenant shall pay Landlord a security deposit (the “Security Deposit”) on or before the Commencement Date in an amount equal to one month’s rent in Year 1 of the Term (1/12 of the Annual Base Rent in Year 1).  The Security Deposit shall be retained by Landlord in a non-interest bearing account.  Except as otherwise provided herein, Landlord shall refund the Security Deposit to Tenant within fifteen (15) days after the termination of this Lease, less any amounts reasonably required to repair or restore the Premises to the condition that existed on the Commencement Date, reasonable wear and tear excepted, or to pay or satisfy any outstanding terms or requirements of this Lease, including Tenant’s obligation to pay all Minimum Rent and Additional Rent due hereunder.

Common Area Charges.  Section 6: Common Area Charges of the Original Lease Agreement shall be replaced with the following:  Tenant shall pay, as Additional Rent, 100% of the common area maintenance charges for Landlord’s Building (“CAM”), including both the original Leased Premises and the Warehouse Space. CAM includes all municipal charges and taxes assessed against the real estate upon which the Premises are located (including municipal and state-wide property tax assessments), insurance premiums for all insurance carried by the Landlord with respect to the real estate and Landlord’s Building, all common utility costs such as costs for lighting, electricity and other utility expenses charged to Landlord and not separately metered to Tenant, all common and routine maintenance costs, including routine maintenance and repairs of common areas, maintenance and repairs to the building within which the Premises are located, and routine maintenance and repairs to the infrastructure serving the Premises (but not including maintenance and repairs which are Tenant’s individual responsibility under the terms of this Lease), and all other costs reasonably incurred by the Landlord in operating Landlord’s Building and the Property.  Tenant shall be responsible for and shall pay for routine maintenance of and snow and ice removal from the parking lot and walkways, rubbish removal for the building, landscaping and lawn maintenance.  CAM shall exclude costs of a capital nature, including capital improvements, capital repairs, capital equipment, and capital tools, as determined under generally accepted accounting principles consistently applied (together, “Capital Repairs”), except that Landlord may include as CAM the annual amortization over its useful life with a reasonable salvage value on a straight-line basis of the costs of any equipment or capital improvements made by Landlord after the Building was fully assessed as a completed and occupied unit and the Lease signed, as a labor-saving measure or to accomplish other savings in operating, repairing, managing, or maintaining the Property, but only to the extent of the savings.  For the convenience of the Landlord, CAM shall be paid in monthly installments due and payable at the time of the payment of Minimum Rent.  Landlord shall determine a reasonable estimate of the CAM and shall advise Tenant of the estimated amount of CAM and Tenant’s pro rata share of CAM.  Not less frequently than once each year, Landlord shall compare the actual expense for CAM to the estimated expenses and shall provide Tenant with a statement indicating whether the estimated CAM was greater or less than the actual CAM together with supporting figures and, upon Tenant’s request, documentation.  To the extent the actual CAM was less than the estimated CAM, Landlord will credit the excess against future CAM payments due from Tenant, or if in the last year of the Lease Term, Landlord shall refund such excess to Tenant within twenty (20) days of the date of the statement.  To the extent actual CAM exceeds the estimated CAM, Tenant shall pay the difference to Landlord within twenty (20) days of the date the statement is delivered to Tenant.  Landlord will preserve the records of the actual CAM for inspection by Tenant for two (2) years from the date of the annual statement to which the receipts apply.  Landlord’s estimate of CAM for the first (1st) year of the Lease Term is included in Exhibit “C”.

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IN WITNESS WHEREOF, the parties, as evidenced by the signatures of their duly authorized agents, do hereby execute this Addendum #1 to the Lease Agreement as of the 19th day of June, 2016.

IN PRESENCE OF:
  
MALONE US ROUTE  WATERBURY  PROPERTIES, LLC
     
   
By:
  
Witness
  
Patrick Malone,
   
Duly Authorized Agent

STATE OF VERMONT
COUNTY OF __________________, SS.

On this 19th day of July, 2016, personally appeared PATRICK MALONE, Duly Authorized Agent of MALONE US ROUTE 2 WATERBURY PROPERTIES, LLC, to me known to be the person who executed the foregoing instrument, and he acknowledged this instrument, by him signed, to be his free act and deed and the free act and deed of MALONE US ROUTE 2 WATERBURY PROPERTIES, LLC.

 
Before me,
  
 
Notary Public

 
My commission expires:
  

-4-
IN WITNESS WHEREOF, the parties, as evidenced by the signatures of their duly authorized agents, do hereby execute this Addendum #1 to the Lease Agreement as of the 19th day of June, 2016.

IN PRESENCE OF:
  
SOLAR COMMUNITIES, INC. DBA
   
SUNCOMMON
       
   
By:
Witness
    
 
     
Duly Authorized Agent

STATE OF VERMONT
COUNTY OF _________________, SS.

On this 19th day of June, 2016, personally appeared ____________________, Duly Authorized Agent of SOLAR COMMUNITIES, INC. DBA SUNCOMMON, to me known to be the person who executed the foregoing instrument, and he acknowledged this instrument, by him signed, to be his free act and deed and the free act and deed of SOLAR COMMUNITIES, INC. DBA SUNCOMMON.
Before me,
  
 
Notary Public
   
 
Notary commission issued in ___________County
 
My commission expires: ____________

-5-
Exhibit “A”

Fit Up Requirements and Specifications for the Warehouse Space

Same insulated slab floor and exterior wall envelope as office building

8’ high plywood siding at ground level on three of four interior walls (excluding the wall between warehouse nad office), with wall board above to ceiling

Fire door between kitchen area of office space and warehouse space

Wash sink against wall dividing office and warehouse space, in South East corner

4’ tractor trailer loading dock with ramp and railing, interior dock leveler, exterior bumpers and insulated overhead door located in North East corner of building facing parking area

Two (2) insulated overhead garage doors each 10’ wide by 12’ high, one on North side of building facing parking area (next to loading dock), one on West side of building facing septic field

Sloped floor in front of overhead garage door on North side, to drain trailer melt water towards loading dock door and exterior drain in base of loading dock ramp

Two rows of LED or equivalent energy efficient lighting running the length of the Warehouse Space, centered between posts

Heat pumps per quote from Vermont Energy to Malone Properties dated May 20, 2016, located on South side of building facing Route 2

Security system and key card entry and related data drop per quote from Omega Electric dated May 6, 2016

Data drop on wall between office space and warehouse, for wireless router

Sufficient electrical outlets for multiple work stations, fork lift charging

Free standing outdoor storage shed measuring 18’ W by 10’ D by 12’ H, located near North West wall of building facing septic field:  Concrete pad underneath, corner posts but no walls, shed roof overhead.  Same hard surface as parking lot surrounding shed for fork lift access.  Landlord can build in racking inside shed or Tenant can add free-standing rack.

Tenant to provide all interior racking for materials storage and all portable work stations for picking and packing of materials

Exhibit “B”

Form of Rent Commencement Agreement

WAREHOUSE RENT COMMENCEMENT AGREEMENT

ROUTE 2
WATERBURY, VERMONT

THIS WAREHOUSE RENT COMMENCEMENT AGREEMENT (this “Agreement”) is made and entered into this 1st day of September, 2016, between MALONE RTE 2 WATERBURY PROPERTIES, LLC, a Vermont limited liability company with a place of business in Montpelier, Vermont (the “Landlord”) and SOLAR COMMUNITIES, INC. dba SUNCOMMON, a Vermont benefit corporation and certified B corporation with a place of business in Waterbury, Vermont (the “Tenant”) pursuant to that certain Lease Agreement dated as of October 19, 2015 and Addendum #1 to such Lease Agreement dated as of June 19, 2016 by and between Tenant and Landlord (the “Lease and Addendum #1”).  Landlord and Tenant are sometimes collectively referred to herein as the “Parties” and individually referred to herein as a “Party”.  All capitalized terms used but not defined herein shall have the meanings given to such terms in the Lease.

Pursuant to Section 4 of the Lease and the Addendum #1, Annual Base Rent will be payable commencing on the Warehouse Rent Commencement Date.  As of the Warehouse Rent Commencement Date, the Parties are obligated to execute a Warehouse Rent Commencement Agreement. The Warehouse Commencement Date specified in the Parties' executed Warehouse Rent Commencement Agreement for the payment of Rent will establish the “Warehouse Commencement Date” and the "Warehouse Rent Commencement Date" for purposes of the Lease.

Pursuant to Addendum #1 to the Lease Agreement, Tenant shall pay a fixed amount of Annual Base Rent for the Warehouse Space during the initial ten (10) year Term, subject to a 3% annual increase starting on the first anniversary of the Commencement Date.

NOW THEREFORE, the parties hereby agree that

1.          The “Warehouse Commencement Date” and the “Warehouse Rent Commencement Date” for the purposes of the Lease is September 1, 2016.

2.          The monthly payment of Annual Base Rent for the Warehouse Space during the initial ten (10) year Term with equal monthly payments over a term of 120 months is _______ and __/100 Dollars ($_________).

Lease Year
Rent PSF
Annual Rent
Monthly Rent *
1
$13.40
$78,390
$6,532
2
$13.80
$80,741
$6,728
3
$14.21
$83,163
$6,930
4
$14.64
$85,658
$7,138
5
$15.08
$88,228
$7,352
6
$15.53
$90,875
$7,572
7
$15.99
$93,601
$7,800
8
$16.48
$96,409
$8,034
9
$16.97
$99,302
$8,275
10
$17.48
$102,281
$8,523

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day first above written.

   
TENANT
     
   
SOLAR COMMUNITIES, INC. DBA SUNCOMMON
     
   
By:
  
Witness
      
   
Duly Authorized Agent
     
   
LANDLORD
     
   
MALONE US ROUTE WATERBURY
   
PROPERTIES, LLC
     
   
By:
  
Witness
  
Patrick Malone,
   
Duly Authorized Agent

Exhibit “C”

Estimate of Common Area Charges for Landlord’s Building

Lease Year 1 of Term

The following estimated Annual Common Area Charges represent Landlord’s estimate of annual common area maintenance charges as defined in Section 6 of the Lease Agreement.  Tenant shall be responsible to pay 100% of these CAM charges during the term of the Lease Agreement.

Taxes
  
$
14,000
  
Insurance
  
$
3,000
  
Driveway & Parking Area Maintenance
  
$
2,000
  
Septic/Storm Water Maintenance
  
$
2,000
  
Exterior Lighting, including parking area
  
$
1,000
  
         
TOTAL Estimated Annual CAM Charges
  
$
22,000
  


Exhibit 10.39

ADDENDUM #2 TO LEASE AGREEMENT DATED OCTOBER 19, 2015

between

MALONE US ROUTE 2 WATERBURY PROPERTIES, LLC
(“Landlord”)

and

SOLAR COMMUNITIES, INC.
DBA SUNCOMMON
(“Tenant”)

Dated as of March 2nd, 2017

ADDENDUM #2 TO LEASE AGREEMENT

This ADDENDUM #2 to Lease Agreement (this “Lease”) is by and between MALONE RTE 2 WATERBURY PROPERTIES, LLC, a Vermont limited liability company with a place of business in Montpelier, Vermont (the “Landlord”) and SOLAR COMMUNITIES, INC. dba SUNCOMMON, a Vermont benefit corporation and certified B corporation with a place of business in Waterbury, Vermont (the “Tenant”).  Landlord and Tenant are sometimes collectively referred to herein as the “Parties” and individually referred to herein as a “Party”.

Background

1.          Landlord and Tenant entered into a Lease Agreement on October 19, 2015 (the “Original Lease Agreement”) in which Tenant and Landlord agreed that Tenant would lease and occupy 8,640 +/- square feet of office space in a new 14,000 +/- square foot commercial building which Landlord constructed and owns in Waterbury, Vermont (“Landlord’s Building”).

2.          Landlord and Tenant now wish to enter into an Addendum #2 to the original Lease Agreement in order to extend the Term of the lease and adjust the Annual Base Rent.

N O W ,  T H E R E F O R E ,

In consideration of the promises and the mutual covenants and agreements set forth in the original Lease Agreement, and in reliance on the representations and warranties contained therein and herein, the parties hereby agree as follows:

Extension of Lease Term.  Landlord hereby agrees to extend the original 10 year lease Term to 12 years for the office space only.  Landlord shall lease and rent the Premises to Tenant for a term of twelve (12) years commencing on the Rent Commencement Date, as documented in the Rent Commencement Agreement, a copy of which is attached herein by reference.

Adjustment to Annual Base Rent.  Annual Base Rent for the 8,640 square feet of office space (the “Premises”) shall be adjusted from $189,663 to $212,301 in accordance with the attached Rent Commencement Agreement signed by the Parties as of March 1, 2017.  This Rent Commencement Agreement dated March 1, 2017 shall supersede and replace any earlier Rent Commencement Agreements signed by the Parties.

The adjusted Annual Base Rent is calculated in accordance with Exhibit D of the Original Lease Agreement:

Initial Construction Cost allocated to Tenant:  $2,547,606 ÷ 12 = $212,301 Annual Base Rent

Tenant shall owe Landlord an amount equal to the difference in actual monthly rent payments made for the initial ten months of the lease term ($15,805.25 X 10 months  = $158,052.50 from June 2016 through March 2016) compared to the adjusted Monthly Base Rent for the same period ($17,691.71 X 10 months = $176,917.10).  The total payment due is $18,864.60.  Tenant shall make such payment to Landlord within 10 days of the Execution Date of this Addendum #2.

-2-
Common Area Charges.  Since Tenant is now leasing the entire Building (office space and warehouse space), Tenant shall pay 100% of Common Area Charges as defined in Section 6 of the Original Lease Agreement directly to the providers of such goods and services, as opposed to reimbursing Landlord for Tenant’s pro rata share in the form of Additional Rent.  Notwithstanding the foregoing, Landlord shall continue to insure the Premises in accordance with Section 9: Common Area Charges of the Original Lease Agreement and shall continue to be responsible for maintaining and repairing the exterior and structural components of the Building in accordance with Section 13; Repairs, Replacements of the Original Lease Agreement.

Excepting the modifications above in this Addendum #2, Landlord and Tenant shall be bound by the all other terms, conditions, rights, obligations and covenants as in the Original Lease Agreement.

-3-
IN WITNESS WHEREOF, the parties, as evidenced by the signatures of their duly authorized agents, do hereby execute this Addendum #2 to the Lease Agreement as of the 2nd day of March, 2017.

IN PRESENCE OF:
  
MALONE US ROUTE 2 WATERBURY  PROPERTIES, LLC
     
     
     

 
By:
Witness
  
Patrick Malone,
   
Duly Authorized Agent

STATE OF VERMONT
COUNTY OF __________________, SS.

On this 2nd day of March, 2017, personally appeared PATRICK MALONE, Duly Authorized Agent of MALONE US ROUTE 2 WATERBURY PROPERTIES, LLC, to me known to be the person who executed the foregoing instrument, and he acknowledged this instrument, by him signed, to be his free act and deed and the free act and deed of MALONE US ROUTE 2 WATERBURY PROPERTIES, LLC.

 
Before me,
 
 
Notary Public
 
My commission expires:
 

-4-
IN WITNESS WHEREOF, the parties, as evidenced by the signatures of their duly authorized agents, do hereby execute this Addendum #2 to the Lease Agreement as of the 2nd day of March, 2017.

IN PRESENCE OF:
  
SOLAR COMMUNITIES, INC. DBA SUNCOMMON
     
   
By:
  

   

Duly Authorized Agent
     
Witness
    
     

STATE OF VERMONT
COUNTY OF _________________, SS.

On this 2nd day of March, 2017, personally appeared ____________________, Duly Authorized Agent of SOLAR COMMUNITIES, INC. DBA SUNCOMMON, to me known to be the person who executed the foregoing instrument, and he acknowledged this instrument, by him signed, to be his free act and deed and the free act and deed of SOLAR COMMUNITIES, INC. DBA SUNCOMMON.

 
Before me,
  
 
Notary Public
   
 
Notary commission issued in ______________ County
 
My commission expires: _________

-5-
Exhibit “A”

Form of Rent Commencement Agreement

RENT COMMENCEMENT AGREEMENT

ROUTE 2
WATERBURY, VERMONT

THIS RENT COMMENCEMENT AGREEMENT (this “Agreement”) is made and entered into this 2nd day of March,  2017, between MALONE RTE 2 WATERBURY PROPERTIES, LLC, a Vermont limited liability company with a place of business in Montpelier, Vermont (the “Landlord”) and SOLAR COMMUNITIES, INC. dba SUNCOMMON, a Vermont benefit corporation and certified B corporation with a place of business in Waterbury, Vermont (the “Tenant”) pursuant to that certain Lease Agreement dated as of October 19, 2015 by and between Tenant and Landlord (the “Lease”).  Landlord and Tenant are sometimes collectively referred to herein as the “Parties” and individually referred to herein as a “Party”.  All capitalized terms used but not defined herein shall have the meanings given to such terms in the Lease.

Pursuant to Section 4 of the Lease, Annual Base Rent will be payable commencing on the Rent Commencement Date.  As of the Rent Commencement Date, the Parties are obligated to execute a Rent Commencement Agreement. The Commencement Date specified in the Parties' executed Rent Commencement Agreement for the payment of Rent will establish the “Commencement Date” and the " Rent Commencement Date" for purposes of the Lease.

Pursuant to Section 1A and Section 4 of the Lease, Tenant’s pro rata share of the Initial Construction will be payable as Annual base Rent during the initial twelve (12) year term.

NOW THEREFORE, the parties hereby agree that


 1.
The “Commencement Date” for the purposes of the Lease is June 1, 2016.

2.
The Total Initial Construction Cost is Two Million five hundred and forty seven thousand and six hundred and six dollars ($2,547,606).

2.          The monthly payment of Annual Base Rent during the initial twelve (12) year Term attributable to Tenant’s pro rata share of the Initial Construction based upon a direct reduction basis with equal monthly payments over a term of 144 months is seventeen thousand, six hundred and ninety-one and 71/100 Dollars ($17,691.71).

Lease Year
Rent PSF
Annual Rent
Monthly Rent *
1
$24.57
$212,300.50
$17,691.71
2
$25.31
$218,669.52
$18,222.46
3
$26.07
$225,229.60
$18,769.13
4
$26.85
$231,986.49
$19,332.21
5
$27.66
$238,946.08
$19,912.17
6
$28.49
$246,114.47
$20,509.54
7
$29.34
$253,497.90
$21,124.82
8
$30.22
$261,102.84
$21,758.57
9
$31.13
$268,935.92
$22,411,33
10
$32.06
$277,004.00
$23,083.67
11
$33.02
$285,314.12
$23,776.18
12
$34.01
$293,873.54
$24,489.46

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day first above written.

   
TENANT
     
   
SOLAR COMMUNITIES, INC. DBA
   
SUNCOMMON
     
   
By:
  
Witness
  

 
   
Duly Authorized Agent
   

   
LANDLORD
     
   
MALONE US ROUTE 2 WATERBURY
   
PROPERTIES, LLC
     

 
By:
  
Witness
  
Patrick Malone,
   
Duly Authorized Agent


 
EXHIBIT 21

LIST OF SUBSIDIARIES OF iSUN, INC.

Name:
​
Jurisdiction of
Incorporation/Organization:
Peck Electric Co.
​
Vermont
iSun Residential, Inc.
  
Delaware
SolarCommunities, Inc.
  
Vermont
iSun Industrial, LLC
  
Delaware
Liberty Electric, Inc.
  
Delaware
iSun Utility, LLC
  
Delaware
iSun Corporate, LLC
  
Delaware
iSun Energy LLC
​
Delaware
 
Exhibit 23.1

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT

We consent to the incorporation by reference in the Registration Statement Nos. 333-261237 and  333-251154 of iSun, Inc. on Form S-3 and the Registration Statement No. 333-249714 of iSun, Inc. on Form S-8 of our report dated April 15, 2022 with respect to our audits of the consolidated financial statements of iSun, Inc. as of December 31, 2021 and 2020 and for the two years in the period ended December 31, 2021, which report is included in this Annual Report on Form 10-K of iSun, Inc. for the year ended December 31, 2021.

/s/ Marcum llp

Marcum llp
New York, NY
April 15, 2022
 
Exhibit 31.1

CERTIFICATION

I, Jeffrey Peck, certify that:
 

 1.
I have reviewed this Annual Report on Form 10-K of iSun, Inc..;


2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15 (f) and 15 (d)-15(f)) for the registrant and we have:


a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;


b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over the financial reporting; and


5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)
all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 
/s/ Jeffrey Peck
 
Chief Executive Officer & President

 (Principal Executive Officer)
   
Date: April 15, 2022  


Exhibit 31.2

CERTIFICATION

I, John Sullivan, certify that:
 

 1.
I have reviewed this Annual Report on Form 10-K of iSun, Inc.;


2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15 (f) and 15 (d)-15(f)) for the registrant and we have:


a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;


b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over the financial reporting; and


5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)
all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 
/s/ John Sullivan
 
Chief Financial Officer
 
(Principal Financial and Accounting Officer)
   
Date: April 15, 2022
  


EXHIBIT 32.1

Certification
Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002
(Subsections (A) And (B) Of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of iSun, Inc, (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “Form 10-K”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

 
/s/ Jeffrey Peck
 
Chief Executive Officer

 
/s/ John Sullivan
 
Chief Financial Officer
   
Dated: April 15, 2022