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ALLOWANCE FOR CREDIT LOSSES

6 Months Ended

Jun. 30, 2023

NOTE 4—ALLOWANCE FOR CREDIT LOSSES

For the Company, ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” applies to its contract assets (deferred COGS and deferred sales commissions), lease receivables (sublease, see Note 6) and trade receivables. There are no expected or estimated credit losses on the Company’s contract assets or its lease receivable based on the Company’s implementation of ASU 2016-13.

The Company’s trade receivables primarily arise from the sale of our products to independent residential dealers, industrial distributors and dealers, national and regional retailers, equipment distributors, solar installers, and certain end users with payment terms generally ranging from 30 to 60 days. The Company evaluates the credit risk of a customer when extending credit based on a combination of various financial and qualitative factors that may affect the customers’ ability to pay. These factors include the customers’ financial condition and past payment experience.

The Company maintains an allowance for credit losses, which represents an estimate of expected losses over the remaining contractual life of its receivables considering current market conditions and estimates for supportable forecasts when appropriate. The Company measures expected credit losses on its trade receivables on an entity-by-entity basis. The estimate of expected credit losses considers a historical loss experience rate that is adjusted for delinquency trends, collection experience, and/or economic risk where appropriate. Additionally, management develops a specific allowance for trade receivables known to have a high risk of expected future credit loss.

The Company has historically experienced immaterial write-offs given the nature of the customers that receive credit. As of June 30, 2023, the Company had gross receivables of $707,000 and an allowance for credit losses of $6,000.

The following is a tabular reconciliation of the Company’s allowance for credit losses:

	June 30, 2023			December 31, 2022
	As of
	June 30, 2023			December 31, 2022
	(in thousands)
Balance at beginning of period	$	10		$	6
Provision for credit losses		2			3
Net (charge-offs) credits		(6	)		1
Balance at end of period	$	6		$	10