SolarMax Technology - 10-K annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K

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(Mark One)

For the fiscal year ended December 31, 2025

OR

Commission file number 001-41959

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(951) 300-0788

Registrant’s telephone number, including area code

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

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 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 such files). Yes ☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer,” "accelerated filer,” "smaller reporting company,” and "emerging growth company” in Rule 12b-2 of the Exchange Act.

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 its 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. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

State the aggregate market value of the voting and non-voting common equity held by nonaffiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $50,381,290, based on the closing price of the common stock on June 30, 2025.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes ☐     No ☐

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

The number of the registrant’s common stock outstanding as of March 31, 2026 was 56,906,572.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any annual report filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). None.

Table of Contents

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements that involve risks and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the reasons described in "Item 1A. Risk Factors,” "Item 7. Management Discussion and Analysis of Financial Condition and Result of Operations,” and "Item 1. Business” sections of this annual report. In some cases, you can identify these forward-looking statements by terms such as "anticipate,” "believe,” "continue,” "could,” "depends,” "estimate,” "expects,” "intend,” "may,” "ongoing,” "plan,” "potential,” "predict,” "project,” "should,” "will,” "would” or the negative of those terms or other similar expressions, although not all forward-looking statements contain those words.

Our operations and business prospects are always subject to risks and uncertainties including, among others:

The forward-looking statements in this annual report represent our views as of the date of this annual report. We anticipate that subsequent events and developments will cause our views to change. We have no current intention to update this information except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this annual report.

Part I

Item 1. Business

Introduction

We are an integrated solar and renewable energy company. A solar energy system retains the direct current (DC) electricity from the sun and converts it to alternating current (AC) electricity that can be used to power residential homes and commercial businesses. The solar business is based on the ability of the users of solar energy systems to save on energy costs and reduce their carbon imprint as compared with power purchased from the local electricity utility company. We were founded in 2008 to engage in the solar business in the United States, where our business is primarily conducted.

The photovoltaic market in the United States has experienced significant growth with the help of the Inflation Reduction Act, with solar accounting for approximately 16% of the country’s electricity generation. Solar remains the fastest-growing renewable energy source in the U.S., with projections estimating that total installed solar capacity will exceed 250 GW by 2030, contributing substantially to the nation’s clean energy goals. The U.S. solar market is expected to be valued at over $125 billion by 2030 as investment in large-scale utility projects and distributed generation continues to expand. However, the market for solar energy may be affected by federal and state regulations and policies, including state regulations such as California’s NEM 3.0, which has resulted in reduced solar energy sales since its introduction in 2024, and any federal policies that favor petroleum-based energy and nuclear energy at the expense of renewable energy such as solar and wind, which are discouraged.

Since the third quarter of 2025, our primary business has been negotiating contracts and performing EPC services for solar-based BESS commercial systems. As of December 31, 2025, we had commenced EPC services on a 430 MWh battery storage project in Texas pursuant to an agreement dated July 31, 2025 with Longfellow BESS I, LLC (“Longfellow”). During the year ended December 31, 2025, we generated revenue of $60.2 million, representing 66.1% of our revenue, from our EPC services pursuant to this contract. All of this revenue was generated during the second half of 2025. On December 31, 2025, we entered into three EPC agreements for large scale BESS systems, two in Puerto Rico and one in Corpus Christi, Texas. We cannot assure you that any of these projects or any other projects will be completed, that we will generate a gross profit from any commercial projects or that we will be successful in developing our commercial business as planned.

Prior to the third quarter of 2025, our primary business was the sale and installation of photovoltaic and battery backup systems for residential and commercial customers sales of LED systems and services to government and commercial users. We are continuing to develop this business but, because of changes in California law, this part of our business is developing slowly. We also generate revenue from financing the sale of our photovoltaic and battery backup systems. Because we did not have the capital to support such operations, we ceased making future loans to our solar customers since 2022, and we do not currently plan to engage in such activities. Our finance revenue reflects revenue earned on our current portfolio, with nominal new loans having been added since early 2020 and none since 2022.

In 2015, we commenced operations in the PRC, and we engaged in business in China through 2021. During the period from 2015 through 2021, most of our revenue from our China operations was generated from EPC contracts for large solar farms. Our business in China initially consisted primarily of identifying and procuring solar farm system projects for resale to third party developers and related services in China, identifying potential buyers of solar farms, and providing EPC services. Approximately 95% of our China revenue in 2019 was generated from Changzhou Almaden Co., Ltd., which was a related party that we refer to in this annual report as AMD. We have not generated any revenue from AMD since 2019. Substantially all of our China revenues for 2021 and 2020 were generated from projects for SPIC. Subsequent to December 31, 2021 through the date of this annual report, we did not generate revenues from China, and we are not engaged in any negotiations with SPIC or any other potential customer, and we are not engaged in any marketing activities. In the event that we do not seek to recommence operations in China, we may discontinue our China operations.

Initial Public Offering

In March 2024, we issued 5,039,950 shares of common stock in our initial public offering at a public offering price of $4.00 per share less a 6% underwriting discount pursuant to an underwriting agreement (the “Underwriting Agreement”) with Kingswood, a division of Kingswood Capital Partners, LLC (the “Representative”), as representative of the underwriters. The shares issued include the partial exercise of the underwriters’ overallotment option. Pursuant to the Underwriting Agreement, we paid the Representative a 1% non-accountable expense allowance and reimbursed the Representative for certain accountable expenses of $175,000. The aggregate gross proceeds from the offering was approximately $20.2 million, prior to deducting the underwriting discounts, commissions and offering expenses payable by us. Net proceeds from our initial public offering of approximately $18.6 million reflects the gross proceeds net of underwriting discounts, the non-accountable expense allowance, accountable expenses of the underwriters that were paid by the Company and other expenses that were deducted from gross proceeds at the closing.

Pursuant to the Underwriting Agreement, we issued to the Representative warrants (the “Representative’s Warrants”) to purchase 403,196 shares of common stock at an exercise price of $4.80 per share, the Representative’s Warrants were fully exercised on a cashless basis. Based on the formula for cashless exercise, the Company issued a total of 207,311 shares of common stock, and, as a result of the exercise, no Representative’s Warrants remained outstanding.

The net proceeds of $18.6 million from our initial public offering were used as follows:

Our Corporate Structure

We are a Nevada corporation formed in January 2008. We have the four wholly-owned subsidiaries in the United States:

SolarMax Renewable Energy Provider, Inc., a California corporation ("SREP”), was established on July 19, 2011 and is engaged in the business of developing, selling and installing integrated photovoltaic systems and energy storage systems for residential and commercial customers in the United States and performs EPC services pursuant to our four commercial EPC agreements.

SolarMax LED, Inc., a California corporation ("LED”), was established on July 15, 2013 in connection with the 2013 acquisition of Act One and is engaged in the business of commercial LED light integration projects, customized governmental special projects, commercial consulting projects, as well as battery storage system projects in the U.S.

SolarMax Financial, Inc., a California corporation ("SolarMax Financial”), was established on September 9, 2009 and was engaged in the business of providing secured installment financing to purchasers of residential and commercial photovoltaic systems, and servicing installment sales for SREP and LED customers in the United States. We have not provided financing to purchasers since 2020, and all revenues from SolarMax Financial reflects revenue earned on its current portfolio, with no new loans having been added since early 2020.

SMX Capital, Inc., a New Jersey corporation ("SMX Capital”), was acquired by the Company in June 2011. SMX Capital is engaged in the business of owning and funding renewable energy projects in the U.S. and operates its business through operating leases and power purchase agreements primarily in the commercial markets. Its business is conducted directly and indirectly through a 30% equity interest in three companies. SMX Capital has not been engaged in leasing new systems since 2014 and its primary business is the ownership and maintenance of systems under existing leases.

We have four wholly-owned subsidiaries outside the U.S., through which we conducted our China operations and which are not actively engaged in any business activities since we are not actively involved in any business activities in China.

Our principal executive offices are located at 3080 12^th Street, Riverside, California 92507. Our telephone number is (951) 300-0788. Our website is http://www.solarmaxtech.com. Any information contained on, or that can be accessed through, our website or any other website or any social media is not a part of this annual report.

Large-scale Battery Energy Storage Systems

In 2024, we initiated marketing efforts for large-scale EPC projects, centering on our BESS. These systems function by storing power—sourced either from the grid or integrated solar arrays—as direct current (DC) and converting it to alternating current (AC) for distribution during peak demand.

The core architecture of a BESS consists of a Power Conversion System (PCS), a high-capacity battery pack (DC block), and an Energy Management System (EMS) to oversee charging cycles. By leveraging these components, operators can drive revenue and reduce overhead through four primary strategies:

On July 31, 2025, SREP entered into an EPC agreement (the “Longfellow Contract”) with Longfellow, a Texas limited liability company, for an industrial project to develop a BESS facility. Based on the terms of the contract, the contract is expected to generate revenues of approximately $120.1 million and interest income of $7.2 million from a financing component related to milestone payments that extend beyond the project completion date. Longfellow will own and operate the facility, which will be located in Pecos County, Texas and is expected to have a storage capacity of 430 megawatt-hours. The construction of the BESS facility is expected to be completed in 2026.

We have committed to make a $5.0 million capital contribution to Longfellow, in which we have an 8% equity interest. This capital contribution was due by December 31, 2025, but as of the date of this annual report, has not been made and Longfellow has indicated to us that such contribution can be made at a later date, which date has not been determined as of the date of the annual report.

The Longfellow Contract is a fixed-price contract consisting of batteries of $75.3 million and services of $52.0 million. As of December 31, 2025, batteries of $58.8 million were procured and delivered to the customer’s premises but have not yet been installed, resulting in revenues related to batteries being reported at our cost. Additionally, we completed engineering and pre-construction services under the contract totaling $1.0 million, representing 2.9% progress of completion, which is included in cost of revenue for the year ended December 31, 2025. Accordingly, we recorded revenues of $60.2 million and cost of revenues of $59.8 million at December 31, 2025. As of December 31, 2025, accounts receivable from Longfellow was $9.4 million, and the contract asset, representing unbilled revenue was $45.8 million.

On December 31, 2025, SREP entered into three EPC agreements for large scale BESS projects, two in Puerto Rico and one in Corpus Christi, Texas.

Pursuant to an EPC agreement with Naguabo BESS, LLC, a Texas limited liability company (“Naguabo”), SREP is to develop a BESS facility in Ceiba Municipality, Puerto Rico. The contract is expected to generate revenues of approximately $122.3 million. Naguabo will own and operate the facility, which is expected to have a storage capacity of 320 megawatt-hours.

Pursuant to an EPC agreement with Yabucoa BESS, LLC, a Texas limited liability company (“Yabucoa”), SREP is to develop a BESS facility in Humacao Municipality, Puerto Rico. The contract is expected to generate revenues of approximately $35.9 million. Yabucoa will own and operate the facility, which is expected to have a storage capacity of 80 megawatt-hours.

Pursuant to an EPC agreement with Navboot Holdco, LLC, a Delaware limited liability company (“Navboot”), SREP is to develop a BESS facility in Corpus Christi, Texas. The contract is expected to generate revenues of approximately $258.1 million. Navboot will own and operate the facility, which is expected to have a storage capacity of 600 megawatt-hours.

The foregoing descriptions of the EPC contracts do not purport to be complete and are subject to and qualified in their entireties by reference to the EPC contracts, copies of which are filed as exhibits to this annual report and are incorporated herein by reference.

We market our BESS systems by leveraging strategic relationships in project financing and using established supply chain relationships. Our reputation within the renewable energy sector, combined with technical expertise, allows for the delivery of integrated BESS and solar solutions tailored to specific operational requirements..

We maintain supply chain resilience through a network of tier-1 vendors, with a view to obtaining hardware availability and cost-effective procurement. Our technical staff provides end-to-end expertise in system design. This approach enable the integration of solar generation and storage assets for stable energy performance.

A dedicated staff of industry professionals manages every stage of the project lifecycle. This internal team provides consistent communication and technical oversight, focusing on proactive project management and long-term system reliability. By maintaining these specialized resources in-house, we seek to provide that each BESS and solar installation meets rigorous performance standards and operational objectives.

Residential and Business Solar Installations

California remains the leading state for installed solar capacity, currently accounting for more than 26% of the net generation for solar installations in the United States for 2024 based on United States Energy Information Administration statistics. The state has set ambitious renewable energy targets, with legislation requiring 100% clean electricity by 2045, far surpassing its previous 50% renewable energy goal by 2050. ¹ However, federal energy policy which discourages renewable energy may affect California’s ability to reach this target.

We design, install and sell high performance photovoltaic solar energy systems and battery systems for residential and business in California. These systems designed for use in residential units or small business and are significantly smaller than our BESS systems. We have installations at more than 12,000 homes and businesses. A photovoltaic system generates electricity directly from sunlight via an electric process that occurs naturally in certain types of materials. A system consists of one or more photovoltaic modules and an inverter. Photovoltaic modules, which are manufactured in different sizes and shapes, generate direct current (DC) electricity. The electricity current is then fed through an inverter to produce the alternating current (AC) electricity that can be used to power residences and commercial businesses. The major components of our solar energy systems include solar panels that convert sunlight into electrical current, inverters that convert the DC electrical output from the panels to AC current compatible with the electric grid, racking that attaches the solar panels to the roof or ground and electrical hardware that connects the solar energy system to the electric grid. The battery systems we sell are rechargeable and can be used not only to store solar energy for backup protection when the power grid goes down, but also to reduce the reliance on the electrical grid by storing solar energy to be used when the sun in not shining or when power costs are the highest during the day. We currently install these solar systems only in California.

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¹https://www.theverge.com/news/628369/solar-wind-beat-coal-us-ember-report

https://seia.org/research-resources/us-solar-market-insight/

Senate Bill (SB) 1020—the Clean Energy, Jobs, and Affordability Act of 2022

We provide and install both grid-tied and off-grid systems. Grid-tied systems remain connected to the electric grid, so that the energy generated by the system is sent back to the grid during the day and power is drawn back at night. The electric grid thus serves as a "storage device” for photovoltaic-generated power. If consumers use more power than is generated by their solar energy system, they can purchase power from the regional utility company. If consumers use less power than the system generates, they can sell the electricity back to their local utility companies and receive a credit on their electric bills. In order to sell power back to the utility company, the owners need to make an application to the utility company and the utility company then gives the owners a standard agreement covering the purchase of the excess power. Grid-tied systems generally represent the most common, affordable and feasible option for urban and suburban residences.

Off-grid systems are not connected to the utility grid and therefore require battery backup. Off-grid solutions are less common and are mostly employed for residences that do not have the option of connecting to the utility grid. Almost all of our installations are grid-tied systems.

Sale and Installation Process

Our system sale and installation process for these systems consists of five stages – feasibility, design, permitting, procurement and installation. In addition, when a customer requests additional services, we will enter into post-installation maintenance agreements with customers who own the systems. We have a dedicated team to handle every detail of the customer’s solar panel, battery or LED installation.

We market to our customers using print ad, internet, radio and television advertising along with customer referrals. We are in the process of shifting our focus from traditional radio advertisements to sponsorships and other public relation initiatives. After the initial contact with a prospective customer, our construction and solar engineers visit the customer to conduct an on-site evaluation and assess the customer’s electricity needs. The site assessment includes a shading analysis, roof inspection and review of any existing mechanical systems. Additionally, we review the customer’s recent utility bills so that we can present a proposal designed to meet the customer’s energy requirements and answer the customer’s questions. At this stage, the customer has not made any commitment to purchase a system from us.

At the design stage, we analyze the information obtained during the feasibility stage to design a proposed solar energy solution, based on the customer’s stated energy needs, financial means and the specifics of the building location. Upon completion of the design stage, we present the customer with a detailed written proposal outlining the components of the system, the proposed timeline of the system implementation, the estimated price and estimated energy savings as well as the expected return on the investment based on existing rate information. Approved customers who purchase our systems sign a purchase agreement and tender to us a down payment equal to the lesser of 10% of the overall cost or $1,000, which can be refunded within three days.

The period of time between the initial customer contact at the feasibility stage and the signing of the contract upon the completion of the design stage (the negotiation period) may range from less than a month to more than a year, with six to twelve months being the average negotiation period for larger commercial projects.

Before installing any solar or backup battery system, we must obtain required permits and approvals from the local fire department and the department of building and safety and other applicable state and local agencies, as well as from utility companies. We prepare a full permitting package and apply for these permits on behalf of the customer. We may also assist the customer with necessary paperwork to apply for and obtain the tax rebates and incentives. The permitting process typically takes four to eight weeks. Upon completion of this stage, we require customers to pay 40% of the total purchase price.

Once the customer orders the system, we order products, parts and materials necessary to implement the project. Upon delivery of the materials to the customer’s site, we require an additional 40% of the purchase price.

Finally, we assemble and install the system at the customer’s site. Once installation is complete, we meet with the customer to conduct a final walk-through of the system and review its components. Upon the final walk-through and sign-off by the city inspector, the system becomes fully operational, and we require the remaining 20% of the purchase price. The payment schedules do not apply to customers for whom we are providing financing. We provide end-to-end customer service during the lifetime of the product.

Warranty Obligations; Production Guarantee

All parts of the system provided by us are under manufacturers’ warranties, typically for up to 25 years for the panels and inverters. The manufacturer’s warranty on the solar energy systems’ components, which is typically passed through to the customers, ranges from one to ten years. We provide a limited installation services warranty that warrants the installation services related to the system owner’s photovoltaic modules and inverters to be free from defects in the installation services under normal application, use and service conditions for a period of ten years from the date of the original installation services. Our agreement with our customers provides that we are not responsible for damage resulting from natural disasters, such as hurricanes, floods or other weather conditions. For leased systems we require the customer to maintain insurance covering these risks.

For commercial BESS systems, our workmanship warranty period is typically three years from the date of completion. The equipment installed is covered by manufacturer warranty for up to 10 years.

Prior to 2015, we entered into power purchase agreements that have a term of up to 20 years. We own and maintain the systems and sell the power generated by the systems to commercial customers pursuant to the power purchase agreement. Revenue from power purchase agreements is not material.

Commencing in 2015, our standard contract for residential systems provides for a production guarantee, which means that we guarantee that the system will generate a specified minimum solar energy during a given year. The agreements generally have a ten-year term. In the standard form of contract, we specify a minimum annual production and provide that if the power generated by the system is less than 95% of the estimate, we will reimburse the owner for the cost of the shortfall. Because our obligations are not contingent upon external factors, such as sunlight, changes in weather patterns, forest fires, or increases in air pollution, these factors could affect the amount of solar power that is generated and could increase our exposure under the production guarantee. The contract also provides that the purchasers of these systems are not entitled to reimbursement for shortfalls caused by overshadowing, shading or other interference not attributable to the design of the system and the accompanying equipment. Our only production guarantees are pursuant to agreements with our customers.

In 2017, we incurred unanticipated liability based on the failure to of our systems to meet the production guarantee or otherwise perform in accordance with our warranty. Our only production guarantees are pursuant to agreements with our customers. Although we believe we have taken steps designed to prevent a misalignment of system designs and production guarantees which affected us in 2017, we cannot assure you that we will not be subject to unanticipated liability based on the failure of our systems to meet production guarantees or otherwise perform in accordance with our warranty. Any such failure may be based on forces beyond our control such as weather conditions, fires and floods.

With respect to leases with a leasing company, the leasing company establishes its own production guarantees, conducts its own review of those guarantees in conjunction with system design, and is responsible for any necessary modification in its contracts.

Our warranty for the LED products sold and services rendered ranges from one year for labor and up to seven years for certain products sold to governmental municipalities.

Leasing Agreements with us as the Lessor

Prior to 2014, we leased systems primarily to commercial and not-for-profit customers through our subsidiaries and three entities in which we have a 30% interest. These leases are operating leases and we own the systems, which are leased to the customers. Although we no longer lease new systems, we continue to own the equipment subject to the existing leases. The leases do not include a production guarantee. At the end of the lease, the customer has an option to purchase the equipment at its then fair market value for commercial customers. For not-for-profit customers, we generally have agreed up front to donate the system to the customers at the end of the lease. We have not leased systems for our account after 2014.

Power Purchase Agreements

We entered into solar power purchase agreements with some commercial customers, and many of these agreements remain in effect. Pursuant to these agreements, we are responsible for the design, permitting, financing and installation of a solar energy system on a customer’s property after which we sell the power generated by the system to the customer at an agreed upon rate. To the extent that the system does not generate sufficient power to meet its obligations, we may have to purchase power from a local utility company, which will be a cost of revenues. We receive the income from the sales of electricity pursuant to these agreements as well as any tax credits and other incentives generated from the system, and we are responsible for the operation and maintenance of the system for the duration of the agreement. At the end of the term, a customer may extend the agreement, have us remove the system or buy the solar energy system from us. We have generated nominal revenue from power purchase agreements.

Seasonality

Since the inception of our business in 2008, we have experienced different levels of seasonality for our residential sales, small commercial and large commercial projects.

Our residential sales are prone to seasonal fluctuations. It has been our experience that we generate a larger percentage of sales in March and April, when residential customers focus on possible tax advantages of solar energy, and in the summer months of July and August, when utility rates and bills typically increase. We believe that the increase in residential sales during March and April results from consumers’ increased awareness of the tax benefits of solar energy system systems. We believe that the higher volume of sales in the summer months results from typically higher electrical bills in the summer, when electricity use is highest, which we think heightens consumers’ awareness of the opportunity to reduce their energy costs in the future through the use of solar energy. However, our increased revenues in 2023 and significant reduction in revenues in 2024 was affected by the introduction of NEM 3.0, which became effective in April 2023, rather than seasonality.

We have historically experienced a slight increase for small commercial projects during the summer season. As with residential sales, we attribute higher volume in small commercial sales to small business owners’ reaction to the generally higher electricity bills during the summer months.

We have generally not experienced any significant seasonal fluctuations for our large commercial projects in the United States. We believe that customers committing to large commercial purchases or leases of solar energy systems have generally made more studied decisions and are therefore less sensitive to seasonal variations or immediate market conditions. The negotiation period for larger projects may range from a couple of months to a year or more. We therefore believe that the timing of the execution of large commercial deals depends largely on the progress of contract negotiations.

Financing Activities

Because we believe the high cost of buying and installing solar energy systems remains a major barrier for a typical residential customer, we had developed financing programs to enable customers who meet our credit standards to finance the purchase of our solar energy systems through SolarMax Financial. Because we did not have the capital to support such operations, we ceased making future loans to our solar customers since 2022, and we do not plan to re-commence financing operations. Our finance revenue reflects revenue earned on our current portfolio, with no new loans having been added since 2022.

The following table sets forth customer loan receivables at December 31, 2025 and 2024:

Financing Program

We have financing programs with third-party financing companies, the most significant of which is a home improvement financing program agreement executed on February 28, 2019, with Dividend, a division of Fifth Third Bank (“Dividend”), pursuant to which Dividend provides financing to our customers who meet Dividend’s credit criteria. We sell the systems to our customers, and Dividend pays us the purchase price, less a program fee. The financing agreement is between the customer and Dividend, and we are not a party to the finance agreement.

LED Projects

We provide LED products that help commercial customers save money by lowering electricity costs through the advanced technology of LED light bulbs. The energy-saving incandescent bulbs use approximately 25% less energy than traditional varieties, while the LED light bulbs use approximately 75% less energy, last 40 times longer, and are considered safer to use.

We have relationships with a number of LED system manufacturers that provide us with access to a variety of high-performance products and enables us to meet customers’ energy needs and budgets. Our LED streetlight system has an exclusive ETL Mark under our company name, which is evidence that our product complies with North American safety standards and is a requirement for contracts with municipal customers.

There are several steps to completing an LED installation with a customer. The first step is to review the customer’s previous year’s power bill and to look at its financial statements for the last three years. The next step is to conduct a lighting survey to effectively present an energy saving proposal to the potential customer. We typically offer financing services similar to our solar system financing. Some commercial projects require us to engage a third-party vendor to help install the LED lighting systems for our clients while other projects customers choose to be responsible for the installation of the system.

Marketing

We have an in-house sales and marketing staff of 23, of whom 18 market solar and battery backup projects and five market LED products and systems. While we use a variety of marketing and advertising tools, we believe that word of mouth is one of our most effective marketing strategies. We estimate that approximately 30% of our sales are generated through referrals by our customers.

We also participate in industry trade shows, use telemarketing, radio, television, Internet advertising and social media as well as participating in local community events such as local festivals and door-to-door sales.

In the fourth quarter of 2023, we began to work with several independent dealers which form our dealer network. Our dealer network is comprised of independent licensed sales companies that sell our residential solar products pursuant to non-exclusive agreements. The dealers sell our products as well as products sold by our competitors. The dealer handles the sales process, and once the sales agreement with the customer is signed, we install the solar system pursuant to an installation agreement with customer. The dealers earn a commission which is included in cost of revenue.

Although we had nominal sales through the dealer network prior to 2024, during the years ended December 31, 2025 and 2024, approximately 47% and 21%, respectively, of our revenues from residential solar and battery contracts, and 11% and 22% of our total revenues were generated through the dealer network program. We believe that our participation in the dealer network enhances our ability to attract residential customers.

Personal meetings with prospective customers and site visits at the feasibility stage are also part of our advertising budget. In our experience, on average, we make three to four visits at the feasibility stage before we can generate a contract from the customer. As we expand the breadth of our operations, we plan to hire additional professionals and general sales personnel to market our systems to a larger number of prospective customers.

In February 2025, we entered into a contract with a California homebuilder pursuant to which we have the right to design and install solar energy systems in a new home project consisting of a proposed 146 new residential homes at a fixed price. Any installations will be made pursuant to contracts with the home owners, and we will pay the homebuilder a commission on the transaction.

Our marketing effort includes our ability to offer financing in connection with purchases of our systems through third-party equipment leasing companies.

Competition

Solar energy systems in general compete with both the local and regional providers of electricity as well as a number of independent companies that offer to provide electricity at prices that are lower than the regional utility company. Our primary competition is with the local utility companies that supply power to our potential customers.

With respect to BESS systems, we compete and operate alongside established industry leaders such as Sungrow, Tesla, and NextEra Energy. Sungrow and Tesla are currently recognized as top-tier system integrators, with Sungrow leading in power electronics and liquid-cooled storage technology, while Tesla remains a benchmark for software integration and vertical manufacturing through its Megapack systems. Additionally, NextEra Energy represents significant competition as one of the world’s largest owners and developers of renewable assets, consistently driving the market forward with massive solar-plus-storage projects. By positioning our specialized services and dedicated staff within this competitive landscape, we seek to provide our clients with solutions that meets their requirements.

Within the solar energy industry, we face intense and increasing competition from other solar energy system providers. The solar energy industry is highly fragmented, consisting of many small, privately-held companies with limited resources and operating histories, and we believe that no solar energy provider has a significant percentage of the California market. We also compete with major companies, as well as a large number of smaller companies. We have experienced price erosion as a result of increased competition which has affected our gross margin. Because California has much sun and little rain, solar power companies seek to market in California rather than in states with less sun and more rain. We cannot estimate the effects of the recent increased wildfires, rain and flooding in Southern California on our business and the solar market in general. We believe that the number of new solar energy installation companies that have entered the industry in California has increased significantly since 2008 when we commenced business, and the increased competition is reflected in lower margins as we may have to reduce our prices to generate business. We expect additional companies to enter the business in the future, considering that the entry barrier in this industry is relatively low and the government incentives currently remain high although we cannot give assurance that changes in government policy will not negatively impact our business and the solar industry in general. In seeking to generate business from commercial customers for major projects, we will compete with both national and regional companies that offer solar systems.

We believe that competition is primarily based on price and, if financing is required, the availability and terms of financing, and, to a lesser extent, the ability to schedule installation to meet the customer’s schedule. Some of our competitors may offer financing terms with payments over a longer period and with either a lower down payment or no down payments than are available with third party lessors with whom we work, which may make them more attractive to potential customers.

Source of Supply

We do not have a supply agreement with any supplier. We purchase solar panels from a number of suppliers. Battery systems are available from a number of suppliers, including Tesla, Enphase and LG.

Two suppliers accounted for 10% or more of our purchases for the years ended December 31, 2025 and 2024. Renewable Energy Resolution, Inc. accounted for purchases of approximately $58.8 million, or 76.4% of our purchases, and Consolidated Electrical Distributors accounted for purchases of approximately $8.6 million, or 11.1% of our purchases for the year ended December 31, 2025. Consolidated Electrical Distributors accounted for purchases of approximately $4.0 million, or 12% of our purchases, and CDH Trading, Inc., accounted for purchases of approximately $4.0 million, or 12% of our purchases, for the year ended December 31, 2024.

Government Regulation

Although we are not a regulated utility company, our operations are subject to regulation, supervision and licensing under various federal, state and local statutes, regulations and ordinances. Additionally, our business is materially affected by federal and state programs and policies related to financial incentives for solar energy users and providers. Local utility companies work with all solar companies to connect their systems to the grid. Title 24 of the California Code of Regulations governs energy savings and efficiency standards for new and remodelled construction for indoor and outdoor lighting requirements. The federal energy policy which favors gas and oil over renewable energy such as solar and wind affects our ability to market solar systems.

Construction Licenses and Permits

As a company performing general contractor and design work, we must take steps such that we obtain and timely renew appropriate general contractor and other required licenses. In connection with each installation, we are required to obtain building permits and comply with all applicable local ordinances and building codes. Our operations are also subject to generally applicable laws and regulations relating to discharge of materials into the environment and protection of the environment. We are also subject to federal and state occupational health and safety regulations. We may also be subject to federal or state wage requirements, at least in connection with any solar projects on government land or buildings or other public works projects. With respect to our BESS systems in jurisdictions such as Texas and Puerto Rico, we need to work with a licensed general contractor.

Consumer Protection Laws

In negotiating and entering into contracts with our residential customers, we must comply with state and federal consumer protection laws. In conducting our marketing campaigns, we must comply with the federal Telemarketing and Consumer Fraud and Abuse Prevention Act, and Telemarketing Sales Rule promulgated by the Federal Trade Commission, as well as state regulations governing telemarketing and door-to-door sales practices. In negotiating and entering into contracts with our residential customers, we must comply with a number of state regulations governing home solicitation sales, home improvement contracts and installment sales contracts.

Consumer Financing Regulations

Since we no longer conduct financing operations in California our operations are no longer subject to the federal and state consumer protection laws and regulations, including the need to be registered as a California finance lender pursuant to a license issued by the California Department of Corporations, which regulates and enforces laws relating to consumer finance companies, with the regulations pertaining to consumer financing, including the Truth in Lending Act, the Equal Credit Opportunity Act, Fair Debt Collection Practices Act and the Fair Credit Reporting Act, the federal Gramm-Leach-Bliley financial reform legislation.

Government Subsidies and Incentives

The solar energy industry depends on the continued effectiveness of various government subsidies and tax incentive programs existing at the federal and state level to encourage the adoption of solar power. Government policies, in the form of both regulation and incentives, have accelerated the adoption of solar technologies by businesses and consumers. We and our customers benefit from these regulations in the form of federal tax incentives, state utility rebates and depreciation. Because of the high cost of installing solar energy systems, the existence of tax incentives as well as regulations requiring utility companies to purchase excess power from solar energy systems connected to the grid are important incentives to the installation of a solar energy system.

Federal Tax Incentive. Solar PV systems installed in 2020 and 2021 are eligible for a 26% tax credit. The Inflation Reduction Act has made changes to the existing tax credit and extends the provisions of the Solar Investment Tax Credit so owners who install designated solar energy systems between January 1, 2022 through the end of 2032 will receive a tax credit of 30% of the cost of the solar energy system from their federal income taxes. Owners who owe less federal income tax than the 30% tax credit can carry over any unused credit until January 1, 2032. After 2032, the residential investment tax credit will be reduced to 26% for installations completed in 2033 and to 22% for -installations completed in 2034, and tax credit will no longer be available for installations completed after December 31, 2034.

State Incentives and Utility Company Rebates. In addition to federal income tax credit, utility companies in California and other states offer various incentives and rebate programs. Capital cost rebates provide funds to customers based on the cost and size of a customer’s solar energy system. The value of the rebate is subtracted from the total purchase price, resulting in a net adjusted cost for the purpose of determining the value of the federal tax credit. Performance-based rebates provide funding to customers based on the energy produced by their systems. Under a feed-in tariff subsidy, the government sets prices that regulated utility companies are required to pay for renewable electricity generated by end-users. Under that subsidy program, prices are set above market rates and may be differentiated based on system size or application.

The building standard approved by the California Energy Commission in May 2018 mandates the installation of solar arrays on new single-family residences and on multi-family buildings of up to three stories starting in 2020. The Building Standards Commission has adopted these recommendations without change, and we cannot assure you that the Building Standards Commission will not change this standard or that the standard will survive any legal challenges which may be brought in opposition to the standard.

The California Public Utilities Commission may consider a proposal to significantly reduce the incentives homeowners receive for installing rooftop solar systems. If such a change or any significant change in the benefits provided to homeowners for installing rooftop solar systems, our U.S. business will be materially impaired. We cannot assure you that the present benefits provided to homeowners for installing solar systems will not be adopted.

Depreciation. Certain qualified clean energy facilities, property and technology placed in service after 2024 may be classified as 5-year property under the modified accelerated cost recovery system (MACRS) under Inflation Reduction Act of 2022. Under Internal Revenue Code Section 168(e)(3)(B), qualified facilities, qualified property and energy storage technology are considered 5-year property. These types of property are recoverable under the MACRS. A business with a solar PV system placed in service between January 1, 2018 and December 31, 2022 can elect to claim a 100% bonus depreciation. Starting in 2023, the percentage of capital equipment that can be expensed immediately drops 20% per year (e.g., 80% in 2023 and 60% in 2024) until the provision drops to 0% in 2027.

Tariffs and Trade Policies. The solar energy industry has recently experienced decreasing prices in solar panels, a principal component in any solar energy system. Most solar panels are imported and the price of the solar panels is impacted by trade policies, such as tariffs and quotas. The U.S. government has imposed tariffs on solar cells, solar panels and aluminum that is used in solar panels manufactured overseas. Based on determinations by the U.S. government under the 2012 solar trade case, the anti-dumping and countervailing tariff rates range from approximately 33%-255%. Such anti-dumping and countervailing tariffs are subject to annual review and may be increased or decreased. These tariffs have increased the price of solar panels containing China-manufactured solar cells. We do not purchase panels from China or Taiwan for our United States operations. The purchase price of solar panels containing solar cells manufactured in China reflects these tariff penalties. While solar panels containing solar cells manufactured outside of China are not subject to these tariffs, the prices of these solar panels are, and may continue to be, more expensive than panels produced using Chinese solar cells, before giving effect to the tariff penalties.

On January 23, 2018, the United States placed tariffs on imported solar cells and modules for a period of four years with an effective date of February 7, 2018. The tariff level was set at 30%, with a 5% declining rate per year for the four- year term of the tariff. The tariff includes a 2.5 GW exemption for cells per year, which does not include any sub quotas for individual countries. Additionally, the only countries excluded from the tariff are those that the U.S. government deems as developing nations, with the exception of the Philippines and Thailand that are eligible for the U.S. Generalized System of Preferences program.

While the state and federal incentives benefit the industry by making solar energy systems more affordable and attractive to consumers, they also expose the industry to the risk of negative consequences should these incentives be discontinued or reduced. The market for solar energy products is, and will continue to be, heavily dependent on public policies that support growth of solar energy. There can be no assurances that such policies will continue. Decreases in the level of rebates, incentives or other governmental support for solar energy would materially and adversely affect the demand for solar energy products, including our business.

Net Metering. Net metering is a billing mechanism that credits solar energy system owners for the electricity that they add to the electricity grid. If the owner of a solar system generates more electricity than it consumes, the excess electricity is sold back to the grid.

The California Public Utilities Commission (CPUC) introduced "Net Metering 3.0” (NEM 3.0) as the latest iteration of net metering policies. Under NEM 3.0, customers continue to receive credit for the electricity they produce; however, the calculation of this credit is based on avoided cost rates. These rates align more closely with wholesale rates for electricity, reflecting what utilities themselves pay for electricity rather than the conventional rates paid by customers.

Under NEM 3.0 the economic viability of combining solar panel systems with battery storage is enhanced. As a result, the payback period for the combined installations has accelerated, surpassing that of solar-only installations. We may need to revise our pricing metrics to reflect this change in order for the purchase of a solar system to be economically attractive to the customer, which may result in lower prices and reduced margins.

To the extent that utility companies are not required to purchase excess electricity from owners of solar systems or are permitted to lower the amounts paid, the market for solar systems may be impaired. Because net metering can enable the solar system owner to further reduce the cost of electricity by selling excess electricity to the utility company, any elimination or reduction of this benefit would reduce the cost savings from solar energy. The recent changes in California’s net metering payments may have reduced the market for residential solar installations to the extent that the installation of the homeowner’s decision to install a solar system is based on the benefits of the net metering structure, which has been modified to reduce the benefits to the homeowner. We cannot assure you that net metering will not be eliminated or the benefits significantly reduced for future solar systems, which may dampen the market for solar energy.

California Consumer Privacy Act

In June 2018, California passed the CCPA, which became effective in 2020. As a practical matter, companies needed to have their data tracking systems in place by the start of 2019, since the law gives consumers the right to request all the data a company has collected on them over the previous 12 months. This law covers all companies that serve California residents and have at least $25 million in annual revenue. Under the law, any California consumer has a right to demand to see all the information a company has saved on the consumer, as well as a full list of all the third parties that data is shared with. The consumer also has the right to request that the company delete the information it has on the resident. The CCPA broadly defined broadly defines "protected data.” The CCPA also has specific requirements for companies subject to the law. For example, the law specifies that companies must have a clear and conspicuous link on their websites to a page from which consumers may exercise their right to opt out of data sharing. The CCPA provides for a private right of action for unauthorized access, theft or disclosure of personal information in certain situations, with possible damage awards of $100 to $750 per consumer per incident, or actual damages, whichever is greater. The CCPA also permits class action lawsuits. Because the law was recently adopted, we have not been able to determine the extent to which the law applies to us, our website and our privacy policies.

Employment Regulations

California labor law is more pro-employee than the laws of other states, and the damages and penalties an employee can recover are higher under California labor law than under federal labor law. California has numerous laws and regulations relating to the relationship between an employer and our employees, including wage and hour laws, laws relating to anti-discrimination, and laws mandating expanded training to employees to prevent sexual harassment. In 2004, California passed a law requiring employers with 50 or more employees to provide two hours of sexual-harassment-prevention training to supervisors every two years. A recently passed law requires that by January 1, 2020, employers with five or more employees provide at least two hours of sexual-harassment-prevention training to supervisory employees and one hour of training to nonsupervisory employees. The law also requires that, beginning January 1, 2020, seasonal, temporary and other employees hired to work for less than six months need to be trained within the earlier of 30 calendar days of hire or within 100 hours worked. Our professional employer organization has implemented our sexual harassment prevention program.

Intellectual Property

We do not have any intellectual property that is material to our business.

Artificial Intelligence

Our business does not use and is not dependent upon artificial intelligence.

Historical Operations in China

In 2015, we commenced operations in the PRC with this acquisition of two companies, and we engaged in business in China through 2021. During the period from 2015 through 2021, most of our revenue from our China operations was generated from EPC contracts for large solar farms. Our business in China initially consisted primarily of identifying and procuring solar farm system projects for resale to third party developers and related services in China, identifying potential buyers of solar farms, and providing EPC services. Approximately 95% of our China revenue in 2019 was generated from AMD. We have not generated any revenue from AMD since 2019. Substantially all of our China revenues for 2021 and 2020 were generated from projects for SPIC. Subsequent to December 31, 2021 through the date of this annual report, we did not generate revenues from China, and we are not engaged in any negotiations with SPIC or any other potential customer, and we are not engaged in any marketing activities. In the event that we do not seek to recommence operations in China, we may discontinue our China operations. Conducting business in China is subject to extensive government regulations, and, if we re-commence business in China, we would be subject to all of these laws and regulations as well as any new laws, regulations or interpretations which may be adopted in the future.

We have three subsidiaries organized under the laws of the PRC. Although we are not presently engaged in business in the PRC, our PRC subsidiaries have funds and accounts receivable in China, including the account receivable from SPIC, which was approximately $1.0 million at December 31, 2025 and approximately $1.0 million at March 15, 2026, and $5,000,000 of our cash in uninsured bank accounts of our China subsidiaries. Any repatriation of funds from our PRC subsidiaries to us are subject to applicable PRC laws. Pursuant to the PRC Enterprise Income Tax Law and the Implementation Rules, dividends generated after January 1, 2008 and payable by a foreign-invested enterprise in China to its foreign investors are subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement.

Foreign currency exchange regulation in the PRC is primarily governed by the Regulations on the Administration of Foreign Exchange, most recently revised by the State Council on August 5, 2008, Notice on Further Simplifying and Improving Policies of Foreign Exchange Administration Regarding Direct Investment issued by SAFE on February 13, 2015, and the Provisions on the Administration of Settlement, Sale and Payment of Foreign Exchange promulgated by People’s Bank of China on June 20, 1996. Currently, RMB is convertible for current account items, including the distribution of dividends, interest payments, trade and service related foreign exchange transactions. Conversion of RMB for most capital account items, such as direct investment, security investment and repatriation of investment, however, is still subject to registration with the SAFE. Foreign-invested enterprises may buy, sell and remit foreign currencies at financial institutions engaged in foreign currency settlement and sale after providing valid commercial documents and, in the case of most capital account item transactions, obtaining approval from the SAFE. Capital investments by foreign enterprises are also subject to limitations, which include approvals by the NDRC, the Ministry of Construction, and registration with the SAFE.

On December 24, 2021, the China Securities Regulatory Commission, or the CSRC, issued Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) (the "Administration Provisions”), and the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies. On February 17, 2023, the CSRC released the "Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies” (the "Trial Measures”) and five supporting guidelines. The new regulations require PRC companies that are listed or in the process of being listed on foreign exchanges ("PRC Companies”) to make certain filings with the CSRC. The new regulations authorize the CSRC to review such fillings, penalize relevant PRC Companies or people in charge, or report to overseas securities regulatory institutions in case of violation of the Trial Measures, so that PRC companies are in compliance with PRC regulations and policies. The new regulations became effective on March 31, 2023. Failure to file as required could subject us or our controlling stockholders to fines and penalties, which may be significant. As of the date of this annual report, the CSRC has not published any additional supplemental regulations or guidelines as to PRC Companies. Based on our audited financial statements for 2023, which show that all of our income for 2023 was derived from our United States operations and a majority of our assets were located in the United States and the fact that our management is located in the United States, we believe that we were not an issuer that was required to make a filing with the CSRC, and, accordingly, we did not make such a filing in connection with our initial public offering in February 2024. In the event that the CSRC disagrees with this opinion, we and our controlling stockholders may be subject to fines and penalties, which may be significant. Although we have assets in China and two of our directors are residents of China, for the years ended December 31, 2025 and 2024, all of our revenue was derived from our United States operations and a substantial majority of our assets are located in the United States, we do not believe that we come within the definition of a Chinese domestic company and therefore not subject to these regulations.

Employees

On March 15, 2026, we had 72 employees in the United States, of which five were executives, 24 were in sales and marketing, 31 were in operations and installation and 13 were in accounting and administrative, and we had seven employees in China, of which one was an executive, and six were in accounting and administrative. None of our employees are represented by a labor union. We consider our employee relations to be good. We have agreements with a professional employer organization, Insperity PEO Services, L.P., under which the professional employer organization administers our human resources, payroll and employee benefits functions for our United States employees, who are co-employed by us or one of our subsidiaries and Insperity. We have a 401(k) plan through Insperity PEO Services, L.P.

Item 1A. Risk Factors

An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this annual report, including "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes before making a decision to invest in our common stock. Our business, operating results, financial condition, or prospects could be materially and adversely affected by any of these risks and uncertainties. If any of these risks actually occurs, the trading price of our common stock could decline and you might lose all or part of your investment. Our business, operating results, financial performance, or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.

Risks Related to Our Business

We sustained losses since our organization, our financial statements have a going concern footnote and we cannot assure you that we can or will operate profitably.

We sustained a net loss of approximately $6.3 million for the year ended December 31, 2025, and our financial statements for the year ended December 31, 2025 have a going concern footnote. The loss in the year ended December 31, 2024 of approximately $35.0 million reflects a (i) a one-time non-cash stock compensation expense of $18.5 million (ii) a non-cash $7.5 million goodwill impairment representing an impairment charge of the entire balance of our goodwill associated with our China operations, and (iii) a $1.7 million non-cash income tax expense arising from an increase in the valuation allowance against deferred tax assets. The stock-compensation expense resulted from the treatment of compensation of equity-based incentives which became non-forfeitable upon the completion of our public offering. See Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations – Elimination of Forfeiture Provisions of Options upon Initial Public Offering. We cannot assure you that we can or will operate profitably. We did not generate any revenue from our China operations subsequent to 2021 through the date of this annual report, and we cannot assure you that we will conduct operations in China or generate any revenue from our China operations in the future or that we will not discontinue our China operations. Our failure to generate positive cash flows from operations and operate profitably may impair our ability to continue in business.

We have a working capital deficit of $20.4 million at December 31, 2025 and require substantial funding for our operations.

At December 31, 2025, we had a working capital deficiency of $20.4 million, cash and cash equivalents of $8.0 million and accounts receivable of $12.9 million. We will require additional funds for our operations. During the year ended December 31, 2025, we commenced our BESS operations, and we generated revenues of $60.2 million, or 66.1% of our revenue for the year from our first contract. At December 31, 2025, approximately $56.6 million of our accounts payable related to this contract. In addition, at December 31, 2025, we had current obligations of $14.3 million with respect to our convertible notes that are in default and are described in the following risk factors as well as secured obligations of $5.5 million to a related party and $2.5 million due to our chief executive officer. Because of our losses and the price of our common stock, which is below $1.00 per share as a result of which we received a notice from Nasdaq that we are in violation of the continued listing requirement that our closing bid price be at least $1.00, we may have difficulty raising funds for our operations on acceptable terms, if at all. Further, our financial condition, particularly our current debt obligation and our defaults, may affect our ability to market our BESS systems and we anticipate that we may require additional funds to financing these operations if we generate the business. The terms of any financing may result in significant dilution to our stockholders. Further, at December 31, 2025, we had an outstanding receivable from SPIC of approximately $1.0 million which relates to projects completed prior to 2022. Although we believe the receivable will be collected, and we anticipated collection during 2025, we can give no assurance as to when or whether we will collect the full amount in 2026. We cannot assure you that we will be able to raise the necessary funds and any such failure may affect our ability to continue in business.

We are in default on $14.3 million principal amount of our convertible notes, which may result in the acceleration of the notes, and we will require funds to pay the notes.

From April 2023 through December 31, 2025, we did not pay annual principal installment payments and related quarterly interest payments when due which resulted in an event of default on some convertible notes. At December 31, 2025, the aggregate principal amount of $14.3 million is in default. During 2025 and 2024 we paid principal and interest on convertible debt for which the noteholders demanded payment. The default provisions of the notes provide that if an event of default occurs the outstanding principal amount of this note, plus accrued but unpaid interest and other amounts owing in respect thereof through the date of acceleration, shall become, at the holder's election, immediately due and payable in cash, and commencing five days after occurrence of any Event of Default that results in the eventual acceleration of the note, the interest rate on the note shall accrue at an interest rate of 12% per annum. Further, if an event of default occurs, the noteholders, together, have rights to foreclose on the collateral securing the notes. The collateral is the accounts receivable and inventory of the subsidiary that is party to the note, which are SREP and LED. With respect to notes in default for which SREP is a party in the principal amount of $11.8 million, at December 31, 2025, the collateral includes the accounts receivable and inventory on the BESS projects.  Since, at December 31, 2025, there is an event of default on $14.3 million principal amount, the holders of all of these notes have the current right to accelerate payment on the full principal amount of their notes, in which event all of these notes with interest at 12% per annum may become due. Further, although we accrued interest at the stated interest rate of 4% since the noteholders did not demand acceleration, if they exercise their right of acceleration interest will be payable at 12%, commencing five days after the event of default, which will be an interest expense when the payment of the notes is accelerated. We cannot assure you that we will be able to pay the notes plus interest if the notes are accelerated. In addition, we cannot assure you that we will not incur any liability because of our failure to disclose the defaults in our financial statements for the years ended December 31, 2023 and 2024 and our quarterly financial statements for quarters within the years ended December 31, 2025, 2024 and 2023 and our treatment as long term liabilities the schedule payment due more than one year from the balance sheet date notwithstanding the right of the noteholders to accelerate payment.  At December 31, 2025, the full amount of the principal and accrued interest at the stated interest rate is treated as current liabilities.

We cannot assure you that we will be able to operate our BESS systems business profitably.

During the year ended December 31, 2025, we entered into four contracts to perform EPC services for the construction of BESS systems. As of the date of this annual report we have not completed the construction of our first BESS systems and we have not commenced work for the three projects for which we signed contracts on December 31, 2025. These contracts are fixed price contracts, and we may not be able to recoup any increase in prices which we may incur. Further, we cannot assure you that we will generate a gross profit on these contracts and if we do not generate a significant gross profit on these contracts, we may not be able to operate profitably. Further, until we have demonstrated that we are able to construct a BESS system on time and on budget, we may have difficulty in securing contracts for these systems. We cannot assure you that we will be able to develop this business or operate this business profitable. Further, our need for capital, our working capital deficit, our default on convertible notes, the low price of our common stock, and the possibility that we may be delisted by Nasdaq may make it more difficult for us to obtain profitable contracts. In addition, inflation, including increased inflation resulting from the war against Iran and steps taken by Iran, may affect our ability to generate a profit from our BESS systems work.

We have relied on loans through the United States government’s EB-5 program, which loans need to be refinanced when they become due, either at maturity or upon accelerate of defaulted notes, and we cannot assure you that the limited partners will accept our proposed terms of the refinancing or, if we cannot refinance these loans that we will have the funds to pay the loans or be able to raise such funds on reasonable, if any, terms.

Two of our subsidiaries, SREP and LED, borrowed a total of $55.5 million from Clean Energy Funding (“CEF”) and Clean Energy Funding II (“CEF II”), respectively, who are related parties. CEF and CEF II are limited partnerships of which the general partner is a limited liability company owned by two of our directors, one of whom is the chief executive officer, and the other is a former executive officer/director, and which is managed by our chief executive officer and the former executive officer who was a 5% stockholder. The funding was made pursuant to the United States government’s EB-5 program, and the lenders made loans from the proceeds of capital contributions of the limited partners who made their investment as part of the EB-5 program. Under this program, which is administered by the United States Customs and Immigration Service, entrepreneurs (and their spouses and unmarried children under 21) are eligible to apply for a green card (permanent residence) if they make the necessary investment in a commercial enterprise in the United States and plan to create or preserve ten permanent full-time jobs for qualified United States workers. We are a commercial enterprise that creates permanent full-time jobs in the United States. The loans are secured and are payable 48 months from the date of the advance and are extended by the lender as may be necessary to meet applicable USCIS immigrant investor visa requirements, which is the date when the final step of the EB-5 visa process is completed and the immigrant investors, who are the limited partners of the lender, can become lawful permanent residents of the United States. The initial four-year term of all of the loans has expired and the loans are on extension until the limited partners have met the USCIS requirements. As the loans matured, we offered the limited partners, in lieu of the payment by the limited partnership of their capital contributions, a convertible note in the principal amount equal to their capital contributions to the partnerships, with a term of five years, with 20% of the principal amount being due on each of the first, second, third, fourth and fifth anniversaries of the date of issuance. The notes are secured by the same assets that secured the notes issued to the lenders. As of December 31, 2025 and March 15, 2026, notes to CEF and CEF II in the aggregate principal amount of $10.0 million and $9.0 million, respectively, were outstanding, and convertible notes in the principal amount of $43.5 million had been issued to former limited partners of CEF, of which principal payments of $23.9 million and $25.0 million, respectively, had been made on the anniversary of the respective dates of issuance, convertible notes in the principal amount of $3.0 million and $3.0 million, respectively, had been early redeemed for $2.1 million and $2.1 million, respectively, and the outstanding principal amount of $15.6 million was outstanding. During 2025, we paid the principal and interest on convertible notes in the principal of $200,000 following the exercise by the holder of her right to accelerate. The convertible notes that were issued prior to our initial public offering have a conversion price of $3.20, which is 80% of the public offering price. Convertible notes issued after our initial public offering are issued with a conversion price equal to 80% of the market price at the time the notes are issued. This conversion price ranges from $0.65 to $9.07, with an average conversion price of $1.58. With respect to the outstanding notes to CEF and CEF II, limited partners who made investments of $1.0 million can currently demand repayment from the lender of their investment in the partnership which made the loans to us, which can trigger a payment obligation on our subsidiary’s part. Because the date on which the remaining limited partners can demand repayment of their capital account is dependent upon the approval of their petition for permanent residency, we cannot predict when or whether such petition will be approved. We cannot assure you that we will have or be able to obtain the funds to pay the EB-5 loans when they mature, and our inability to pay or refinance these loans or pay the principal and interest at the default rate of 12% per annum on the notes on which there is a default if the holders exercise their right to accelerate could have a material adverse effect upon our business. To the extent that we are unable to refinance these obligations or pay the principal and interest on the note in default, we will use our available funds for such purpose or it may be necessary to modify the terms of the convertible notes. If the limited partners who have the right to demand repayment of their capital accounts exercise their right, which can trigger the maturing of loans in the total principal amount of $2.0 million, as of December 31, 2025, we may not have sufficient funds to make these payments, and we can give no assurance that we will be able to obtain funding from other sources or reasonable terms, if at all. As noted above, we are in default on the payment of convertible notes in the principal amount of  $14.3 million at December 31, 2025.

We require significant funds to pay our other debt obligations, including obligations to management.

Our debt obligations at December 31, 2025, in addition to the obligations described in the previous risk factor, accrued compensation of $2.4 million to our chief executive officer for the cancellation of restricted stock issued to him ($675,000) and for his deferred salary from 2019 through 2013 and deferred bonus from 2017 and 2018 ($1.7 million). Payment of these amounts has been deferred and they are currently being paid in twelve monthly installments commencing December 31, 2025. Our inability to obtain any financing we require could affect our ability to continue in business.

We did not generate any revenue for our Chinese segment since 2021 and we cannot assure you that we will not have to discontinue our Chinese operations.

We did not generate any revenue from our China operations during subsequent to 2021 and we do not have any agreements with respect to any project in China and we are not engaged in any negotiations and we are not engaged in any marketing activities in China. If we decide to recommence operations in China, we will require substantial funds to develop this business with no assurance of success, either with SPIC or other potential customers, and our operations will be subject to significant regulation relating to conducting business in China. If we are unable to generate profitable business in China, it may be necessary for us to discontinue our China operations. In the event that we discontinue our China operations, our historical financial statements will reflect the operations of our China operations as a discontinued operation.

Our failure to control our costs could impair our financial results.

Our cost of revenues and our operating expenses may increase significantly both in dollars and as a percentage of revenues. Unless we are able to reduce both our cost of revenues and our operating costs, we will not be able to operate profitably. There are many factors beyond our control that may affect our costs, such as the price of components, cost of labor and the availability of warehouse and office space at reasonable rents as well as the effect of competition, and recently, inflation. Further, as a public company we have additional expenses that we did not incur as a private company. Unless we are able to control our costs, we will not be able to operate profitably. We cannot assure you that we can or will operate profitably.

Changes in utility regulations and pricing could impair the market for our products.

The market for alternative energy products is affected by utility regulation and pricing policies. Changes in regulations or pricing could result in a significant reduction in the demand for solar products. 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 utility companies’ peak hour pricing policies affect the competitive nature of our systems. To the extent that we have to lower prices, the profitability of our systems could be impaired. In addition, any changes to government or internal utility regulations and policies that favor electric utilities rather than renewal energy such as solar could reduce our competitiveness and cause a significant reduction in demand for our products and services.

Our business may be affected by increases in the price of solar energy products, including price increases resulting from the United States’ trade and tariff policies and the war against Iran.

The declining cost of solar panels has been a key factor in the pricing of our solar energy systems, which, in turn affects the potential customer’s decision to use solar energy. With any stabilization or increase of solar panel and other component prices, our ability to market our solar energy systems could be impaired, which would affect our revenues and gross profit. The cost of solar panels and raw materials could increase in the future due to tariff penalties or other factors. The U.S. government has imposed tariffs on solar cells, solar panels and aluminum used in solar panels manufactured overseas. These tariffs have increased the price of solar panels containing foreign manufactured solar cells. At present, we purchase solar panels containing solar cells and panels manufactured overseas for our United States installations. While solar panels containing solar cells manufactured inside the United States are not subject to these tariffs, the prices of these solar panels are, and may continue to be, more expensive than panels produced using overseas solar cells, before giving effect to the tariff penalties and the tariff policies may result in an increase in prices of domestic products and, to the extent that domestic products use foreign components or metal, the price of such products is likely to increase. If additional tariffs are imposed or other negotiated outcomes occur, as well as increased inflation resulting from the war against Iran and Iran’s response to attacks by the United States and Israel, our ability to purchase these products on competitive terms from those countries could be limited. Any of those events could impair our financial results if we incur the cost of trade penalties or purchase solar panels or other system components from alternative, higher-priced sources.

Changes in net metering regulations in California is likely to result has resulted in a reduced level of benefits, which is impairing the market for residential solar products.

Net metering is a billing mechanism that credits solar energy system owners for the electricity that they add to the electricity grid. If the owner of a solar system generates more electricity than it consumes, the excess electricity is sold back to the grid. California’s first net metering policy set a "cap” for the three investor-owned utility companies in the state: Pacific Gas & Electric (PG&E), San Diego Gas & Electric (SDG&E), and Southern California Edison (SCE). All three have reached their cap where total solar installations in each utility’s territory were capped at five percent of total peak electricity demand. The California Public Utilities Commission (CPUC) created the current program known as "Net Metering 2.0” (NEM 2.0) that extends California net metering. NEM 2.0 is slightly different from the first net metering policy. Under NEM 2.0, customers will still receive the retail credit for electricity produced but will be required to pay more in Non-Bypassable Charges. NEM 2.0 also requires new solar customers to pay a one-time Interconnection Application Fee, the amount of which is dependent upon the utility company. For systems under 1MW this fee is $132 for San Diego Gas & Electric, $145 for Pacific Gas & Electric, and $75 for Southern California Edison. NEM 2.0 customers are also required to use Time of Use (ToU) rates. The California Public Utilities Commission (CPUC) has adopted NEM 3.0 which establishes the successor to NEM 2.0 in California. NEM 3.0 features a 75% reduction in export rates (the value of excess electricity pushed onto the grid by solar systems), thereby reducing the overall savings and increasing the payback period of home solar installations. The changes under NEM 3.0 result in reduced benefits for most residential solar users and could alter the return on investment for solar customers.

To the extent that utility companies are not required to purchase excess electricity from owners of solar systems or are permitted to lower the amounts paid, the market for solar systems may be impaired. Because net metering can enable the solar system owner to further reduce the cost of electricity by selling excess electricity to the utility company, any elimination or reduction of this benefit would reduce the cost savings from solar energy. The recent changes in California’s net metering payments are reducing the market for residential solar installations to the extent that the installation of the homeowner’s decision to install a solar system is based on the benefits of the net metering structure, which has been modified to reduce the benefits to the home owner. In January 2024, we laid off a portion of our employees associated with the design and installation of residential solar systems in response to a slowdown in demand after NEM 3.0 took effect in April 2023. The layoff represented approximately 25% of our residential solar system design and installation team. Approximately half of the employees who were laid off had been hired in late 2022 to help install our growing backlog of residential solar systems under contract in anticipation of NEM 3.0, and the contracts representing that backlog were completed during 2023. We may need to revise our pricing metrics to reflect the change resulting from NEM 3.0 in order for the purchase of a solar system to be economically attractive to the customer, which may result in lower prices and reduced margins. Although our business plan contemplates that the near-term impact of NEM 3.0 on residential solar contracts will be offset by commercial solar contracts for which we use third-party subcontractors to complete the installations, we cannot assure you that our overall business will not be impacted by the effects of NEM 3.0 or that we will be able to develop our commercial solar business. Our significant decrease in both revenue and gross margin in the nine months ended September 30, 2024 from the comparable period of 2023 reflect both a surge in revenue in 2023 in anticipation of the effectiveness of NEM 3.0 in April 2023 and a sharp decline in revenue resulting from the effectiveness of NEM 3.0. We cannot assure you that net metering will not be eliminated or the benefits significantly reduced for future solar systems, which may dampen the market for solar energy or that our sales, particularly for residential units, will not be impaired.

We may be subject to cybersecurity risks.

We face significant and persistent cybersecurity risks due to the need to protect both our business generally and any transaction which we are considering or with respect to which we are in negotiation, as well as the need to protect the confidentiality of information concerning our personnel and others with whom we conduct business. We face threats from bad actors who seek to disrupt our business as well as others who are engaging in malicious activities for profit, to make a political point or for no particular reason other than creating disruption. Disclosure of certain information as a result of a cybersecurity breach may result is a breach of privacy laws. The substantial level of harm that could occur to us and those with whom we conduct business were we to suffer impacts of a material cybersecurity incident requires us to maintain robust governance and oversight of these risks and to implement mechanisms, controls, technologies, and processes designed to help us assess, identify, and manage these risks.

While we have not, as of the date of this annual report, experienced a cybersecurity threat or incident, we cannot assure you that we will not experience such an incident in the future. Any cybersecurity incidents, whether or not successful, could result in our incurring additional costs related to, for example, rebuilding our internal systems, implementing additional threat protection measures, responding to regulatory inquiries or actions, paying damages or making payments to obtain access to our computer systems, or taking other remedial steps with respect to third parties. We cannot assure you that the steps we are taking will not be successful in preventing a cybersecurity breach, that we will not suffer cybersecurity breaches or that we will not incur significant expenses in seeking to deal with the consequences of any attempted or successful cybersecurity breaches or that, if we suffer a material cybersecurity breach that we will be able to continue in business following such breach.

We may be subject to liability if private information that we receive is not secure or if we violate privacy laws and regulations.

We are or may become subject to a variety of laws and regulations in the United States and abroad regarding privacy, data security, cybersecurity and data protection. These laws and regulations are continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly with respect to foreign laws. In particular, there are numerous United States federal, state, and local laws and regulations and foreign laws and regulations regarding privacy and the collection, sharing, use, processing, disclosure, and protection of personal information and other user data. Such laws and regulations often vary in scope, may be subject to differing interpretations, and may be inconsistent among different jurisdictions.

In June 2018, California adopted the California Consumer Privacy Act ("CCPA”), which became effective in 2020. Under the law, any California consumer has a right to demand to see all the information a company has saved on the consumer, as well as a full list of all the third parties that data is shared with. The consumer also has the right to request that a company delete the information it has on the consumer. The CCPA broadly defines "protected data.” The CCPA also has specific requirements for companies subject to the law. The CCPA provides for a private right of action for unauthorized access, theft or disclosure of personal information in certain situations, with possible damage awards of $100 to $750 per consumer per incident, or actual damages, whichever is greater. The CCPA also permits class action lawsuits.

In November 2016, the Standing Committee of China’s National People’s Congress passed China’s first Cybersecurity Law ("CSL”), which became effective in June 2017. The CSL is the first Chinese law that systematically lays out the regulatory requirements on cybersecurity and data protection, subjecting many previously under-regulated or unregulated activities in cyberspace to government scrutiny. The legal consequences of violation of the CSL include penalties of warning, confiscation of illegal income, suspension of related business, winding up for rectification, shutting down the websites, and revocation of business license or relevant permits. The costs of compliance with, and other burdens imposed by, CSL may limit the use and adoption of our products and services and could have an adverse impact on our business.

The European Union Parliament approved a new data protection regulation, known as the General Data Protection Regulation ("GDPR”), which came into effect in May 2018. The GDPR includes operational requirements for companies that receive or process personal data of residents of the European Economic Area. The GDPR imposes significant penalties for non-compliance. Although we do not conduct any business in the European Economic Area, in the event that residents of the European Economic Area access our website and input protected information, we may become subject to provisions of the GDPR.

We are also subject to laws restricting disclosure of information relating to our employees. We strive to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy, data security, cybersecurity and data protection. However, given that the scope, interpretation, and application of these laws and regulations are often uncertain and may be conflicting, it is possible that these obligations 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. Any failure or perceived failure by us or our third-party service-providers to comply with our privacy or security policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other user data, may result in governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on our business and operating results. Although we maintain cybersecurity insurance, we cannot assure you that this insurance will cover or satisfy any claim made against us or adequately cover any defense costs we may incur.

In addition, we are required to report security breaches and describe steps we are taking to address potential cybersecurity threats.

Pandemics and epidemics, natural disasters, war, terrorist activities, political unrest, the relationship between China and the United States and other outbreaks could disrupt our delivery and operations, which could materially and adversely affect our business, financial condition, and results of operations.

Global pandemics, epidemics in China or elsewhere in the world, or fear of spread of contagious diseases, such as Ebola virus disease (EVD), coronavirus disease 2019 (COVID-19), Middle East respiratory syndrome (MERS), severe acute respiratory syndrome (SARS), H1N1 flu, H7N9 flu, avian flu and monkeypox, as well as hurricanes, earthquakes, tsunamis, or other natural disasters and political unrest and the relationship between the United States and China could disrupt our business operations, reduce or restrict our operations and services, incur significant costs to protect our employees and facilities, or result in regional or global economic distress, which may materially and adversely affect our business, financial condition, and results of operations. Actual or threatened war, terrorist activities, political unrest, civil strife, including the war against Iran and the actions taken by Iran, and the conflicts between Israel and Lebanon and Hamas or any other hostilities in the Middle East and other geopolitical uncertainty could have a similar adverse effect on our business, financial condition, and results of operations. Any one or more of these events may impede our operation and delivery efforts and adversely affect our sales results, or even for a prolonged period of time, which could materially and adversely affect our business, financial condition, and results of operations.

Our business would be impaired if we lose our licenses, if more stringent government regulations are enacted or if we fail to comply with the growing number of regulations pertaining to solar energy and consumer financing industries.

Our business is subject to numerous federal and state laws and regulations. The installation of solar energy systems performed by us is subject to oversight and regulation under local ordinances, building, zoning and fire codes, environmental protection regulation, utility interconnection requirements, and other rules and regulations.

Non-compliance with certain consumer disclosure requirements related to home solicitation sales and home improvement contract sales affords residential customers with a right to rescind such contracts in some jurisdictions, including California. The number of laws affecting both aspects of our business continues to grow.

We can give no assurances that we will properly and timely comply with all laws and regulations that may affect us. If we fail to comply with these laws and regulations, we may be subject to civil and criminal penalties.

A material decrease in the retail price of electricity from the local utility company or from other sources would affect our ability to generate revenues.

We believe that a customer’s decision to buy a solar energy system from it is primarily driven by a desire to pay less for electricity. Decreases in the retail prices of electricity from utility companies or other renewable energy sources, which is not likely in the foreseeable future as a result of climbing energy prices, would impair our ability to offer competitive pricing which would, in turn, affect our ability both to generate revenue and to maintain gross margins. The price of electricity from utility companies could decrease as a result of such factors as a reduction in the price of oil or natural gas as a result of new drilling techniques or a relaxation of associated regulatory standards; the development of energy conservation technologies and public initiatives to reduce electricity consumption; the construction of a significant number of new power generation plants, including nuclear, natural gas or renewable energy technologies.

Often large commercial customers pay less for energy from utility companies than residential customers. To the extent that utility companies offer commercial customers a lower rate for electricity, they may be less willing to switch to solar energy. Under such conditions, we may be unable to offer solar energy systems in commercial markets that produce electricity at rates that are competitive with the price of retail electricity they are able to obtain from the local utility company. In such event, we would be at a competitive disadvantage compared to the local utility company and may be unable to attract commercial customers, which would impact our revenues.

Changes in regulations relating to fossil fuel can impact the market for renewable energy, including solar.

The market for renewable energy in general and solar energy in particular is affected by regulations relating to the use of fossil fuel and the encouragement of renewable energy. To the extent that changes in regulations have the effect of reducing the cost of gas, oil and coal or encouraging the use of such fuels, the market for solar systems may be impaired.

Solar energy and other forms of renewable energy compete with other forms of energy and the attractiveness of solar energy reflects the cost of electricity from the local grid.

Solar energy competes with other all other forms of energy, including, particularly local utility companies, whose pricing structure effectively determines the market for solar energy. If consumers, whether residential or commercial, believe that they are paying and will continue to pay too much for electricity from a local utility company, they may consider other alternatives, including alternative providers of electricity from local utility companies as well as forms of renewable energy. If they are in a location where, because of the climate and geography, solar energy is a possibility, they may consider solar energy as an alternative, provided they are satisfied that they will receive a net savings in their cost of electricity and their system will provide them with a constant source of energy. Further, although some customers may purchase a solar energy system because of environmental considerations, we believe that the cost of electricity is the crucial factor that influences the decision of a user, particularly a commercial user, to elect to use solar energy.

Within the solar energy market, we face intense and increasing competition in the market of solar energy system providers, which exposes us to the risk of reduction of our market penetration and of our gross margin.

The solar energy system installation market is highly and increasingly competitive. The number of new solar energy installation businesses that have entered the industry in California has almost doubled since 2008 when we commenced business. We compete with major companies in the solar business, particularly in California, as well as a large number of small companies. The solar energy industry may continue to expand and possibly consolidate. We may continue to encounter increasing competition from larger companies that have greater resources than we and which would enjoy more economies of scale and greater name recognition than we have. Further, increasing competition may also lead to an excessive supply of solar energy installation services on the market which could continue to affect both our ability to generate revenue as well as our gross margin. To the extent that our ability to provide financing to our customers is an important element in selling our systems, we will compete with both other solar companies that provide financing and with banks, leasing companies and other businesses that seek to offer financing alternatives to purchasers of solar systems. Since early 2020, because we did not have the capital to support such operations, we suspended making loans to our solar customers.

The results of our operations may vary significantly from quarter to quarter.

In our experience in the United States, consumers generally, and residential customers in particular, express interest in a solar energy system during March and April, when they are preparing their tax returns, and in July and August, when they experience high electricity charges from the local utility company. Since the selling cycle for residential systems is typically three to four months, we generally install systems two to three months after the contract date, and we recognize revenue using a cost-based input method that recognizes revenue as work is performed. If we cannot complete a sale to a customer when the customer expresses interest in a solar system, that potential customer may seek alternative sources. Factors which may cause our quarterly results to fluctuate include:

If we commence operations in China, the results of our China operations may also vary significantly from quarter to quarter since revenue from our China operations would be dependent upon both the timing of contracts and the timing of our work and the completion of our obligations on projects for which we have contracts and our ability to price our work to generate a profit on the project. Changes in revenue and the results of any operations in China from quarter to quarter may have a negative effect on our net income and the market for and price of our common stock and may also affect our cash requirements to the extent that there is a delay in receipt of payment following the completion of the work for which payment is required. The last year in which we generated revenue from our China operations was 2021, and all of our revenue in that year was generated in the second quarter. We had no revenue from the China operations for subsequent to 2021 through the date of this annual report, and we have no contracts in place for us to perform any services in China, are not engaged in negotiations and have no marketing effort in China.

Because we are dependent on our chief executive officer, the loss of his services and our failure to hire additional qualified key personnel could harm our business.

Our business is largely dependent upon the continued efforts of one of our founders and our chief executive officer, David Hsu. Although we have an employment agreement with Mr. Hsu, this agreement does not guarantee that Mr. Hsu will continue to work for us. The loss of Mr. Hsu could affect our ability to operate profitably in both the United States and China. If we recommence operations in China, we will need to engage experience executive and operational personnel, and we would be competing with other companies, including Chinese companies, for such personnel. If we are unable to engaged qualified personnel in a timely manner we may not be able to conduct business in China. Further, because our senior management is based in the United States, if we recommence operations in China, our failure to develop senior management personnel in China may strain our management resources and make it difficult for our corporate management to monitor both the China operations and United States operations efficiently. Our failure to have qualified executive personnel in China who can operate in accordance with and implement our business plan and who understand and can comply with applicable United States and Chinese laws and regulations may impair our ability to generate revenue and operating income from the China operations, which could impair our overall operations and financial condition and could prevent our ability to conduct business in China.

In order to develop our business, we need to identify, hire and retain qualified sales, installation and other personnel.

To develop our business, we need to hire, train, deploy, manage and retain a substantial number of skilled employees, including sales, installation and other employees and marketing and, if we engage in financing activities, lending personnel for these activities. Identifying, recruiting and training qualified personnel requires significant time, expense and attention. If we are unable to hire, develop and retain qualified personnel or if our personnel are unable to achieve the desired level of productivity for a reasonable period of time, we may have difficulty in developing our business. Competition for qualified personnel in the solar industry is increasing, particularly for skilled installers and other personnel involved in the installation of solar energy systems. We also compete with the homebuilding and construction industries for skilled labor. As these industries recover and seek to hire additional workers, our cost of labor may increase. The unionization of our United States labor force could also increase our labor costs. Shortages of skilled labor could significantly delay a project or otherwise increase costs. 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 margins or cover our costs for that project. In addition, we compete for a limited pool of technical and engineering resources in the United States and, if we seek to conduct business in China, in China that requires us to pay wages that are competitive with relatively high regional standards for employees in these fields. We not only compete for highly qualified personnel, but we also face other companies seeking to hire our personnel, particularly our highly skilled personnel. If we cannot meet our hiring, retention and efficiency goals, we may be unable to complete the customers’ projects on time, in an acceptable manner, if at all. Any significant failures in this regard would materially impair our growth, reputation, business and financial results. If we are required to pay higher compensation than we anticipate, the increased cost may adversely impact our financial results and our ability to develop our business.

Although our employees in the United States are co-employed by a professional employer organization, we may be liable for the failure of the organization to comply with our obligations under applicable law.

We contract with a professional employer organization, or PEO, that administers our human resources, payroll and employee benefits functions for our United States employees. Although we recruit and select our personnel, our United States employees are co-employed by the PEO and us. Pursuant to the agreement with the PEO, our United States personnel are compensated through the PEO, receive their W-2s from the PEO and are governed by the personnel policies of the PEO. This relationship permits management to focus on our operations rather than human resource administration, but this relationship also exposes us to some risks. Among other risks, if the PEO fails to adequately withhold or pay employer taxes or to comply with other laws, such as the Fair Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act or state and federal anti-discrimination laws, health and safety laws, sexual harassment laws and laws protecting the security of employee information, all of which are outside of our control, we would be liable for such violations, and the indemnification provisions of our agreement with the PEO, if applicable, may not be sufficient to insulate us from those liabilities. Court and administrative proceedings related to these matters could distract management from our business and cause us to incur significant expense. If we were held liable for violations by the PEO of applicable laws, such liability may adversely affect our business and the results of our operations and our cash flow.

Since we act as a general contractor in the United States, we face typical risks of a construction company.

We act as the licensed contractor for our United States 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. For our residential projects, it is the general contractor, construction manager and installer. For our commercial projects, we are the general contractor and construction manager, and we typically rely on licensed subcontractors to support some of our solar panel installations. In either case we are responsible for the completion of the project and must take steps to make sure that we and our subcontractors comply with all applicable laws and regulations. We may be liable to customers for any damage we cause to their home or facility, or belongings or property during the installation of our systems. In addition, shortages of skilled labor for our commercial projects could significantly delay a project or otherwise increase costs. Because our profit on a particular installation is based in part on assumptions we make as to the cost of such project, cost overruns, delays or other execution issues may impair our ability to generate the gross margins that we are seeking. In addition, the installation of solar energy systems and the evaluation and modification of buildings as part of our energy efficiency business is subject to oversight and regulation in accordance with national, state and local laws and ordinances relating to building codes, safety, environmental protection, utility interconnection and metering, and related matters. It is difficult and costly to track the requirements of every individual authority with jurisdiction over our installations and to design solar energy systems to comply with these varying standards. Any new government regulations or utility policies pertaining to our systems may result in significant additional expenses to us and our customers and, as a result, could cause a significant reduction in demand for our systems.

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 employees to work at heights with complicated and potentially dangerous electrical systems. The evaluation and modification of buildings as part of our energy efficiency business requires our employees to work in locations that may contain potentially dangerous levels of asbestos, lead or mold. 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, or OSHA, and equivalent state laws. Changes to federal or state OSHA requirements, or stricter interpretation or enforcement of existing laws or regulations, could result in increased costs. 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. 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.

The availability and price of silicon raw materials may affect our gross margins and profitability.

Polysilicon is an essential raw material in the production of solar power products. The costs of silicon wafers and other silicon-based raw materials have accounted for a large portion of the costs associated with solar panels. Although the price of silicon had declined in recent years, recent increases in the price of polysilicon in the past have resulted in increases in the price of wafers, leading to increases solar panel costs. Due to the volatile market prices, we cannot assure you that the price of polysilicon will remain at its current levels particularly in view of inflationary pressures, especially if the global solar power market gains its growth momentum. Moreover, in the event of an industry-wide shortage of polysilicon, we may experience late or non-delivery from suppliers and it may be necessary for us to purchase silicon raw materials of lower quality that may result in lower efficiencies and reduce our average selling prices and revenues.

Our business is subject to the effects of inflation and has been subject to supply chain issues.

Our business is subject to the inflationary pressures that are affecting many domestic and foreign companies.

The effects of inflation and supply side issues with respect to polysilicon are described in the preceding risk factor.

The effects of inflation may also affect the marketability of our solar systems to residential users. Our cost of revenue per watt of solar systems, which made up approximately 22% of our cost of revenues, increased approximately 20% in 2025 compared to the same period a year ago. Although we have been able to increase the selling price, our ability to increase is limited by competition, which resulted in our increase in 2025 of only 13%, a lower increase than the increase in our unit cost of revenue which resulted in a lower margin. We will continue to source panels at the best available prices, there is no assurance we can continue to source panels at more favorable prices. We have increased the price of solar system installations to offset this increase in cost. Our cost, even of domestic products, may also be affected by tariffs imposed by the United States and counter-tariffs imposed by other countries. The increase in prices due to inflation may also affect the marketability of our solar systems. To the extent that homeowners are incurring high expenses generally, they may have less available cash to invest in a solar system. Although we do not have any data as to the effect of higher utility costs on purchases of solar systems, it has been our experience that, as inflationary pressures are increasing the cost of electricity generally, our domestic business has grown as homeowners are seeking alternatives to what they see as high utility bills. As a result, we have been able to increase our prices which has reduced the effect of increased prices of raw materials. In 2024, our unit cost of revenue increased by 20%, which was partially offset by an increase in unit price of 14%. However, competitive factors limit the amount we can increase our prices, and our price increases have reduced what would otherwise have been a greater decline in gross margin. We are seeking to reduce the effect of increased prices in raw materials by purchasing in greater quantities. However, to the extent inflation continues or increases, we may not be able to raise prices sufficiently to prevent a significant decline in our gross margins and the results of our operations, and if our prices are too high, the residential customer may not see the value of installing our solar system.

Because we derive most of our residential solar system revenue from sales of our solar energy systems in California, we depend on the economic and regulatory climate and weather and other conditions in California.

We currently derive most of our residential solar system revenue from solar energy projects from California. This geographic concentration exposes us more to government regulations, economic conditions, weather conditions, earthquakes, mudslides, fire, including wildfires, power outages, and other natural disasters and effects of climate change, and changes affecting California than if we operated in more states. We cannot predict the effect of the recent forest fires, heavy rains and flooding in California will have on both the market for solar systems in California and on our business in particular and on our ability to solar systems in a timely manner. Any inability to install solar systems in a timely manner, whether because of wildfires, heavy rain or flooding or other causes will also affect the timing of our revenue flow. Furthermore, these conditions may impact our systems’ ability to meet the production guarantee, which would result in payment obligations if our systems fail to meet production guarantees.

Because we provide a production guarantee for some solar systems in California, we may incur additional costs if the output of our systems does not meet the required minimums.

Commencing in 2015, our standard contract for residential systems provides for a production guarantee, which means that we guarantee that the system would generate a specified minimum amount of solar energy during a year. The agreements generally have a term specified in the contract, which is generally ten years. In our standard contract, we specify a minimum annual production and provide that if the power generated by the system is less than 95% of the estimate, we will reimburse the owner for the cost of the shortfall. Because our obligations are not contingent upon external factors, such as sunlight, changes in weather patterns or increases in air pollution, unusual rain, flooding and wildfires and other factors could affect the amount of solar power that is generated and could increase our exposure under the production guarantee. Although our obligations under these agreements have not been significant through December 31, 2024, we cannot assure you that in the future any obligations we have under these agreements will not have a material adverse effect upon our revenue and the results of our operations. Although we believe that the conditions relating to those installations were unique and that we have taken corrective action, we cannot assure you that we will not have unanticipated liability in the future for the failure of systems to comply with applicable production guarantees regardless of the cause of such failure.

Our warranty costs may exceed our warranty reserve.

We provide warranties to the clients of our EPC services for one year in China and for up to 25 years to the purchasers of our solar systems in the United States. Although we generally pass the warranties from our equipment suppliers to the purchasers of the systems, we provide the warranty with respect to our installation and related services. We maintain a warranty reserve on our financial statements, and our warranty claims may exceed the warranty reserve. Any significant warranty expenses could adversely affect our financial condition and results of operations. Our warranty expenses relating to systems with a production guarantee may be affected by significant changes in weather conditions which substantially reduce sun exposure. Significant warranty problems could impair our reputation which could result in lower revenue and a lower gross margin. Although we believe that the problems associated with the systems installed for the leasing company do not apply to our present solar systems, we cannot assure you that we will not incur unanticipated warranty costs in the future.

Because of the rapid development of solar panels and other components for solar systems, we may be subject to inventory obsolescence.

The solar industry has seen rapid technological development. We have an inventory of raw materials that include silicon wafers and other consumables and construction materials used in solar system installations. We evaluate our inventory on a quarterly basis for excess and obsolete inventory, based on assumptions as to market demand, market conditions and technological developments. We cannot assure you that we will not incur significant inventory write-offs resulting from obsolete inventory.

If we seek to expand our business through acquisition, we may not be successful in identifying acquisition targets or integrating their businesses with our existing business.

In 2013 and 2015, we acquired three companies, LED in the United States in 2013 and two companies in China. In 2015, we incurred impairment losses in connection with the LED acquisition, resulting in impairment write-offs relating to the goodwill associated with the acquisition, and in 2024, we recognized impairment charge for the entire balance of the goodwill associated with our China operations of $7.5 million, which related to our 2015 acquisition of the two companies in China. There are significant risks associated with any acquisition program, including, but not limited to, the following:

Our business is largely dependent upon government subsidies and incentives.

The solar energy industry depends on the continued effectiveness of various government subsidies and tax incentive programs existing at the federal and state level to encourage the adoption of solar power. Government policies, in the form of both regulation and incentives, have accelerated the adoption of solar technologies by businesses and consumers. We and our customers benefit from these regulations in the form of federal tax incentives, state utility rebates and depreciation. Because of the high cost of installing solar energy systems, the existence of tax incentives as well as regulations requiring utility companies to purchase excess power from solar energy systems connected to the grid are important incentives to the installation of a solar energy system. California’s adoption of NEM 3.0 has had a negative impact on the purchase of solar energy systems in California, as reflected in our decline in revenue from 2023 to 2024. Should any of the incentives be discontinued or materially reduced, our business and the results of our operations may be impaired. United States government policies that favor gas and oil over renewable energy including solar and wind may adversely affect our ability to sell our solar systems.

United States trade policy affects our ability to purchase domestic solar panel and pricing generally.

One of the effects of the United States tariffs on imported solar panels, including solar panel from China, is an increased demand for products manufactured in the United States which may affect both our ability to purchase solar panels and the price and other terms at which solar panels are available to us. Our inability to obtain domestically produced solar panels at a reasonable cost can impair our ability to generate revenue and maintain reasonable gross margins. Furthermore, to the extent that the United States imposes tariffs on goods generally and other countries impose counter-tariffs, our business could be impaired as a result of higher prices resulting from the tariffs which we may not be able to pass along our customer.

Two of our directors are located outside of the United States; therefore, investors may not be able to enforce federal securities laws or their other legal rights against those directors located outside the United States.

All of our executive officers and directors are located in the United States except that two directors are located in China. As a result, it may be difficult, or in some cases not possible, for investors in the United States to enforce their legal rights, to effect service of process upon those directors located outside the United States, to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties on them under United States securities laws. In particular, the PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States and many other countries and regions. Therefore, recognition and enforcement in the PRC of judgments of United States courts in relation to any matter not subject to a binding arbitration provision may be difficult or impossible. There is uncertainty as to whether the courts of the PRC would enforce judgments of United States courts obtained against these persons predicated upon the civil liability provisions of the United States federal and state securities laws. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States. Under the PRC Civil Procedures Law, foreign shareholders may originate actions based on PRC law against a company in China for disputes if they can establish sufficient nexus to the PRC for a PRC court to have jurisdiction, and meet other procedural requirements, including, among others, the plaintiff must have a direct interest in the case, and there must be a concrete claim, a factual basis and a cause for the suit. It will be, however, difficult for U.S. shareholders to originate actions in the PRC against us or our directors who are located in the PRC in accordance with PRC laws because we are incorporated under the laws of the State of Nevada and it will be difficult for U.S. shareholders, by virtue only of holding our common stock, to establish a connection to the PRC for a PRC court to have jurisdiction as required under the PRC Civil Procedures Law. In addition, it also takes the costs and time for U.S. shareholders to take such court procedures in order to enforce liabilities and judgments in China. As a result of the foregoing, it would be very expensive and time-consuming for a stockholder to either seek to enforce a U.S. judgment in China or to commence an action in a Chinese court, with a strong likelihood that the stockholder will not be successful.

Risks Related to our Common Stock

We had a significant deficiency in our internal controls over financial statements presentation and disclosure which was remediated as of December 31, 2025. Although such significant deficiency does not constitute a material weakness in our internal controls, it may have an adverse impact on the market price of, and the market for, our common stock. 

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls, internal control over financial reporting, and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. If we are not able to protect our computer system, including our financial records and client and personnel information, against cybersecurity attacks, including ransomware attacks, we may not be able to maintain effective disclosure controls or internal controls over financial reporting.

From April 2023 through December 31, 2025, we did not make the required payments of principal and interest on some of our convertible notes, which resulted in an event of default under the terms of the notes.  As a result, the holders of the notes had the right to accelerate payment on the principal amount of notes which would require payment of interest at the annual rate of 12% per annum, rather than the 4% stated interest rate.  We did not disclose these defaults in our financial statements for the years ended December 31, 2024 and 2023 or in our quarterly financial statements in the years ended December 31, 2025, 2024 and 2023.  At December 31, 2025, the aggregate principal amount of these notes was $14.3 million, all of which $10.7 million is treated as short-term liabilities.  Since April 2023, one holder has demanded payment of principal in the amount of $200,000 and we paid the full principal amount with interest.  We assessed these disclosure failures and concluded  that our failure to record such defaults in our financial statements and the classification of the long-term portion of the convertible notes where the holder has the right to accelerate as long-term debt notwithstanding the right of the holders to accelerate payment is a significant deficiency in our internal controls over financial statements presentation and disclosure which was remediated as of December 31, 2025. Although the failure to report such defaults constitutes a significant deficiency in our internal controls, we do not believe such significant deficiency constitutes a material weakness in our internal controls over financial reporting based on our consideration of our current financial position and results of our operations.

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our internal controls may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could adversely affect our operating results, or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal controls could also adversely affect the results of operations. Ineffective disclosure controls and procedures and internal control over financial reporting as well as our failure to disclose the events of default on our convertible notes, even if they do not rise to a material weakness, could cause investors to lose confidence in our reported financial and other information which could adversely impact the market for and the price of our common stock.

In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended and are continuing to expend significant resources, including accounting-related costs, and provide significant management oversight. Any failure to maintain the adequacy of our internal controls, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and materially and adversely affect our ability to operate our business. In the event that our internal controls are perceived as inadequate or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results, and the stock price of our ordinary shares could decline. In addition, if we are unable to continue to meet these requirements, we may not be able to maintain listings on Nasdaq.

Our independent registered public accounting firm is not required to attest to the effectiveness of our internal controls over financial reporting and will not be required to attest to such effectiveness as long as we continue to be an emerging growth company.  At such time as our independent registered public accounting firm is required to attest to the effectiveness of our internal controls, such firm may issue a report that our internal controls are not effective if it is not satisfied with the level at which our controls are documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating results.

An active, liquid and orderly trading market for our common stock may not be maintained, and our stock price is volatile.

We cannot predict the nature of the market for our common stock, and we cannot assure you that an active, liquid or orderly trading market for our common stock will be maintained. Since we completed our initial public offering, the market price for our common stock has been volatile, with a high of $15.82 per share and a low of $0.60 per share. If there is no active, liquid or orderly market for our common stock, the reported bid and asked price at the time you seek to purchase or sell shares may not reflect the price at which you could either buy or sell shares of our common stock.

Because the price of our common stock on Nasdaq is less than $1.00 per share, we have received a notice from Nasdaq that we do not meet the continued listing requirement that our stock price maintain a minimum bid price of $1.00.

On March 3, 2026, we received a notice from The Nasdaq Stock Market that we do not meet Nasdaq’s continued listing requirement of Rule 5550(a)(2) that we maintain a minimum bid price of $1.00 per share. The Nasdaq rules provide that we have a compliance period of 180 calendar days to regain compliance. This period expires on August 31. 2026. To become compliant, the closing bid price of our common stock must be at least $1.00 for a minimum of ten consecutive business days. In the event we do not regain compliance within such 180 day period, we may be eligible for additional time. To qualify, we will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and we will need to provide written notice of our intention to cure the deficiency during the second 180-day compliance period, by effecting a reverse stock split, if necessary. However, if it appears to Nasdaq staff that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq will provide notice that our securities will be subject to delisting. If we choose to implement a reverse stock split to increase the bid price of our common stock, which we may consider, we must complete the split no later than ten business days prior to the expiration of the applicable compliance period. In the event we do does not regain compliance with the rule prior to the expiration of the applicable compliance period, we will receive written notification that our securities are subject to delisting. The Nasdaq rules also provide that if during any compliance period a company’s security has a closing bid price of $0.10 or less for ten consecutive trading days, the Listing Qualifications Department shall issue a Staff Delisting Determination under Rule 5810 with respect to that security. We cannot assure you that we will be able to meet the requirement for a continued listing of our common stock on Nasdaq. Further, if we effect a reverse split, which requires stockholder approval, we can give no assurance that the market price per share of our common stock, post reverse split, will not suffer a significant decline.

The price of our common stock may be affected by a number of factors.

Factors that may affect our common stock include the following:

In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of listed companies. Broad market and industry factors may significantly affect the market price of our common stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our common stock shortly following our initial public offering.

In addition, in the past, following periods of volatility in the overall market and in the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

Our amended and restated articles of incorporation and amended and restated bylaws and our employment agreement with our chief executive officer, as well as Nevada law, contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our common stock.

Our amended and restated articles of incorporation authorize our board of directors to issue preferred stock without stockholder approval. If our board of directors issues preferred stock, such issuance could make it more difficult for a third party to acquire us. Our employment agreements with our David Hsu, chief executive officer, provides that, in the event of a termination of his employment following a change of control, we are to pay Mr. Hsu, upon termination, a lump sum payment equal to two times the highest annual compensation for the three years preceding the date of termination, multiplied by the number of years he has been employed by us. Mr. Hsu’s employment commenced in February 2008. In addition, some provisions of our amended and restated articles of incorporation and bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our stockholders, including:

Provisions of our bylaws and Nevada law could deter a change of our management, which could discourage or delay offers to acquire us.

Certain provisions of Nevada law and of our bylaws could discourage or make it more difficult to accomplish a proxy contest or other change in our management or the acquisition of control by a holder of a substantial amount of our voting stock. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interests or in our best interests. These provisions include:

A portion of the compensation to our senior executive officers may not be deductible, which may increase our taxes

Section 162(m) of the Internal Revenue Code limits the deduction that public companies may take for annual compensation paid to its chief executive officer, chief financial officer and the three other most highly compensated officers, who are referred to as "covered employees.” All compensation in excess of $1.0 million paid to a covered employee, including post termination compensation and death benefits, may be nondeductible for federal income tax purposes, with certain exceptions pursuant to certain contracts that were in effect on November 2, 2017. In the event that the compensation we pay to any covered employee exceeds $1.0 million, such excess may not be deductible which, if our operations are profitable, could increase our income taxes and reduce our net income, which could negatively affect the price of our stock.

Because our bylaws limit the court in which you may bring an action against us, you may have difficulty enforcing any rights which you may claim.

Our bylaws provide that any person who acquires equity in us shall be deemed to have notice and consented to the forum selection provision of our bylaws, which require actions to be brought only in the state courts in Clark County, Nevada, which may inhibit or deter stockholders’ actions (i) on behalf of us, (ii) asserting claims of breach of fiduciary duty by officers or directors of us, or (iii) arising out of the Nevada Revised Statutes. Further, this exclusive forum provision may limit our stockholders’ ability to obtain what they believe to be a favorable judicial forum for disputes with us and our officers and directors. This provision does not apply to claims brought under the Securities Act of 1933 or the Securities Exchange Act of 1934.

Because we do not intend to pay dividends on our common stock for the foreseeable future, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.

We do not plan to declare dividends on shares of our common stock in the foreseeable future. As a result, your only opportunity to achieve a return on your investment will be if you sell your common stock at a price greater than you paid for it. The price of our common stock has fluctuated significantly since our initial public offering and we cannot assure you that the price of our common stock that will prevail in the market will ever equal or exceed the price that you pay for our stock.

Future sales of our common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us.

All of our outstanding shares of common stock, except for 561,798 shares issued in March 2025, are eligible for sale pursuant to Rule 144, subject to limitations provided by Rule 144 with respect to affiliates. In addition, the holders of our convertible notes in the principal amount of $15.6 million at March 15, 2026, have conversion rights at an average conversion price of $2.02 per share. The conversion price is $3.20, which is 80% of our initial public offering price of $4.00 with respect to convertible notes in the principal amount of $9.5 million which were issued prior to our initial public offering, and 80% of the market price on the date of the convertible note with respect to notes issued subsequent to our initial public offering. We require additional capital and, to the extent that we raise funds through the sale of equity securities or equity-based securities and to the extent that that the remaining limited partners of the partnerships that have outstanding loans to us in the principal amount of $9.0 million receive convertible notes in respect of their investment in the limited partnership that made loans to us, the holders will have the right to sell such shares six months after issuance or earlier if the shares are registered for sale pursuant to the Securities Act of 1933. Both the sale and the market’s reaction to the possible sale of such shares could have a material adverse impact on the market price of and the market for our common stock.

We intend to file a registration statement with the SEC on Form S-8 providing for the registration of shares of our common stock issued or reserved for issuance under our equity incentive plan or pursuant to stock options. Subject to the satisfaction of vesting conditions shares registered under the registration statement on Form S-8 will be available for resale immediately in the public market without restriction other than those restrictions imposed on sales by affiliates pursuant to Rule 144.

We cannot predict the size of future issuances of our common stock or securities convertible into common stock or the effect, if any, that future issuances and sales of shares of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock (including shares issued in connection with any acquisition we may make), or the perception that such sales, including sales by our existing stockholders pursuant to Rule 144, could occur, may adversely affect prevailing market prices of our common stock.

We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.

Our amended and restated articles of incorporation authorize us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations and relative rights, including preferences over our common stock respecting dividends and distributions, as our board of directors may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. For example, we might grant holders of preferred stock the right to elect one or more directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might grant to holders of preferred stock could affect the residual value of the common stock.

For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.

We are classified as an "emerging growth company” under the JOBS Act. For as long as we are an emerging growth company, which may be up to five full fiscal years, we will not be required to, among other things, (i) provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, (ii) comply with any new requirements adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, (iii) provide certain disclosure regarding executive compensation, or (iv) hold nonbinding advisory votes on executive compensation. We will remain an emerging growth company for up to five years from our initial public offering, although we will lose that status sooner if we have more than $1.235 billion of revenues in a fiscal year, have more than $700 million in market value of our common stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period.

To the extent that we rely on any of the exemptions available to emerging growth companies, you will receive less information about our executive compensation and internal control over financial reporting than issuers that are not emerging growth companies. If some investors find our common stock to be less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Because our directors and executive officers own or have the right to vote approximately 20.9% of our outstanding common stock, they may be able to elect all directors, approve all matters requiring stockholder approval and block any action which may be beneficial to stockholders.

Our directors and executive officers beneficially own approximately 20.9% of our outstanding common stock, based on the stock they presently own, excluding shares issuable upon exercise of options. Our bylaws provide that one-third of the outstanding common stock constitutes a quorum for a meeting of stockholders. As a result, they may have the ability to elect all of our directors and to approve actions requiring stockholder approval as well as to prevent any action from being taken which they oppose even if such action would benefit our stockholders.

Item 1B. Unresolved Staff Comments

Not applicable

Item 1C. Cybersecurity

Network Protection

We use a security package with regularly updated antivirus software to block and prevent malicious processes and files. Firewalls are configured to block potentially harmful activity, and the network is segmented to protect confidential data with access permissions based on the principle of least privilege. We maintain backup data in key locations to facilitate recovery in the event of data loss or disaster.

Detect Issues

Our system employs active scanners to constantly monitor for potential threats, suspicious behavior, and harmful activity. It utilizes user behavioral analysis and learning to stop potential threats in real time. Both our vendors maintain teams to review alerts, confirming true or false positives in the network.

Threat Response

Our vendors provide SOC teams that automatically investigate and address potential attacks. They collaborate to provide immediate responses, utilizing playbooks and auto-remediation methods such as password resets, IP blocking, software removal, and risk mitigation.

Item 2. Properties

We lease our offices and do not own any real estate. The following table set forth information as to the real property leased by us:

We believe our current facilities are adequate for the foreseeable future. If we require additional or substitute space, we believe that we will be able to obtain such space on acceptable, commercially reasonable terms.

Item 3. Legal Proceedings

In the ordinary course of our business, we and our subsidiaries are involved in various legal proceedings involving contractual relationships, product liability claims, and a variety of other matters. We do not believe there are any such pending legal proceedings that will have a material impact on our financial position or results of operations.

We previously initiated arbitration proceedings against SPIC, the state-owned company related to the receivable balances of several photovoltaic EPC projects that we completed in 2020 and 2021. In April 2025, the arbitration tribunal issued awards in favor of us and subsequently we were able to collect approximately RMB 42.5 million ($6.0 million) of the receivable balance. At December 31, 2025, the unpaid receivable balance was RMB 7.0 million ($1.0 million) and we received no payments since December 31, 2025. We initiated another enforcement proceeding to collect the balance of the arbitration awards. In connection with the enforcement actions, the court has frozen certain bank accounts and real estate assets of the related SPIC subsidiaries and has issued enforcement notices requiring the Xingyi Power Supply Bureau to withhold electricity sales proceeds generated by the photovoltaic power plants. As of December 31, 2025, no cash recoveries had been received. Based on discussions with legal counsel and the enforcement court, we expect that collections will occur through the withholding of electricity revenues generated by the projects. While we believe recovery is probable, the timing and amount of collections remain subject to enforcement procedures and operating performance of the power plants. We continue to monitor the status of the enforcement proceedings and will update our assessment of collectability as additional information becomes available.

Item 4. Mine Safety Disclosures

Not applicable.

Part II

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

Market Information

Our common stock is traded on the Nasdaq Stock Market under the symbol SMXT.

Stockholders

As of March 15, 2026, we had 88 stockholders of record. Based on information provided to us we believe that we have more than 2,950 beneficial owners of our common stock.

Transfer Agent

Continental Stock Transfer & Trust Company, One State Street, 30th floor, New York, New York 10004-1561 is the transfer agent for our common stock.

Dividends

We have never paid or declared any cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the near future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table gives information concerning common stock that may be issued by us with respect to compensation plans, including individual compensation arrangements) as of December 31, 2025:

Use of Proceeds from Our Initial Public Offering

The net proceeds from our initial public offering were approximately $18.6 million. As of March 15, 2026, we used approximately $0.8 million to make compensation payments due to our former executive vice president and $0.1 million to a former employee pursuant to our agreements with them. Our initial public offering was commenced on February 28, 2024 pursuant to a registration statement on Form S-1, File. No. 333-26606, which was declared effective by the SEC on February 12, 2024.

We invested $7.0 million from the proceeds of our initial public offering in an 8% promissory note issued by Webao Limited, a Hong Kong based social media company (“Webao”). This note has been paid as of the date of this annual report and the proceeds are used for working capital. We also invested RMB 5,000,000, or approximately $688,000, in a 5% note due June 25, 2024 issued by Qingdao. The initial maturity was June 25, 2024 and it was extended twice at the request of the maker to December 31, 2025. The principal amount of RMB 3,655,525, or approximately $522,599, of this note is outstanding on the date of this annual report. The note is shown on our balance sheet as held to maturity debt investments. The note was fully paid in February 2026. The proceeds of this note have been and will be used for working capital.

The balance of the proceeds was used for working capital, which included $5.5 million principal payments on convertible notes and $276,000 payment on legal settlement with former EB-5 noteholders.

Recent Sales of Common Stock

In December 2025 and January 2026, we issued a total of 2,603,622 shares of common stock to two accredited investors for a total of $1,518,535. The shares were issued at prices per share ranging from $0.548 and $0.70 which represented a 25% discount from the market price of the common stock. No brokers were involved in the sales.  The issuance of the shares was exempt from registration pursuant to Section 4(a)(2) of the Securities Act as a transaction not involving a public offering. The proceeds from the sale are being used for working capital.

Item 6. [ Reserved ]

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 financial statements and the related notes appearing elsewhere in this annual report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Cautionary Note Concerning Forward-Looking Statements.” Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in “Risk Factors.". All amounts in this report are in U.S. dollars, unless otherwise noted.

Commencement of BESS Systems Business

Since the third quarter of 2025, our primary business has been negotiating contracts and performing EPC services for solar-based BESS commercial systems. As of December 31, 2025, we had commenced EPC services on a 430 MWh battery storage project in Texas pursuant to an agreement dated July 31, 2025 with Longfellow. During the year ended December 31, 2025, we generated revenue of $60.2 million, representing 66.1% of our revenue, from our EPC services pursuant to this contract. All of this revenue was generated during the second half of 2025. On December 31, 2025, we entered into three EPC agreements for large scale BESS systems, two in Puerto Rico and one in Corpus Christi, Texas. We cannot assure you that any of these projects or any other projects will be completed, that we will generate a gross profit from any commercial projects or that we will be successful in developing our commercial business as planned. As of the date of this annual report we have not completed the construction of our first BESS systems and we have not commenced work for the three projects for which we signed contracts on December 31, 2025. These contracts are fixed price contracts, and we may not be able to recoup any increase in prices which we may incur. Further, we cannot assure you that we will generate a gross profit on these contracts and if we do not generate a significant gross profit on these contracts, we may not be able to operate profitably. Further, until we have demonstrated that we are able to construct a BESS system on time and on budget, we may have difficulty in securing contracts for these systems.

Impact of Tariffs and Trade Policy

Recent changes in U.S. trade policy have resulted in the implementation or threatened implementation of tariffs on certain imported goods, particularly those manufactured in China and other countries. These tariffs have increased the cost of certain raw materials and components used in our products. While we have taken steps to mitigate the impact, including working with suppliers and adjusting our pricing strategy, the tariffs are expected to result in higher input costs for our operations for the remainder of 2025. For the year ended December 31, 2025, the tariffs did not have material effects on our cost of revenue.

To the extent that the United States government imposes tariffs on products imported from China or any other foreign country and we are not able to obtain comparable products at a lower cost from domestic suppliers, our costs of these products may increase, and, depending on the tariff, such increase may be substantial. Such increases may impact both our ability to sell our systems and the price we are able to charge for systems which we sell, which could impair our margins.

We continue to monitor developments in international trade policy and may further seek to adjust our supply chain and sourcing strategies in response to evolving conditions.

Regulatory Changes, Inflation and Supply Chain Issues

The federal residential solar tax credit, officially known as the Residential Clean Energy Credit, expired on December 31, 2025. This means that homeowners who had solar energy systems installed and placed into service by this date will qualify for a 30% federal tax credit on the cost of the system. After December 31, 2025, there will be no federal tax credit available for new residential solar installations. This represents a significant change from the previous plan laid out in the Inflation Reduction Act, which would have seen the credit gradually phase out until it expired in 2034. This change in the tax law may significantly reduce the incentive of residential users to install solar systems.

With the recent inflationary pressures combined with the world-wide supply chain issues, which have been impacted from the recent tariffs, our business is subject to the inflationary pressure and we were subject to supply chain issues that are affecting many domestic and foreign companies, and we expect that the inflationary pressures will continue to affect our ability to sell our products, the price at which can sell products and our gross margin. To the extent that we are not able to raise our prices or to the extent that we cannot accurately project our costs when we set our prices, our gross margin and the results of our operations will be impacted.

Polysilicon is an essential raw material in the production of solar power products, principally solar panels. The costs of silicon wafers and other silicon-based raw materials have accounted for a large portion of the costs associated with solar panels. Although the price of silicon had declined in recent years, increases in the price of polysilicon have resulted in increases in the price of wafers, leading to increases in our costs. Due to the volatile market prices, we cannot assure you that the price of polysilicon will remain at its current levels particularly in view of inflationary pressures, especially if the global solar power market gains its growth momentum. Moreover, in the event of an industry-wide shortage of polysilicon, we may experience late or non-delivery from suppliers, and it may be necessary for us to purchase silicon raw materials of lower quality that may result in lower efficiencies and reduce its average selling prices and revenues. We currently are able to obtain the raw material we request, although the prices pay are increasing as a result of the inflationary pressures.

The inflationary pressures, including the inflationary pressures resulting from the tariff policy of the United States and the effect of the war on Iran, which commencing on February 28, 2026, including Iran’s response to the actions  taken against it by the United States and Israel, that are affecting us are not unique to our industry, and relate to the cost of raw materials, labor costs generally and the price at which we can sell our products. Because solar energy can be seen as a way to provide a homeowner with relief from the increasing utility prices for electricity, the market for solar systems generally, and our business specifically, has enabled us to sell solar systems. Thus, the effects of inflation may also affect the marketability of our solar systems to residential users which are also impacted by the effects of NEM 3.0 and the elimination of the federal residential tax credit at December 31, 2025.

Compensation costs per employee, excluding stock-based compensation, for operations, sales, marketing and administrative personnel decreased approximately 6.9% for the year ended December 31, 2025 compared to the same period in 2024. The decrease in 2025 reflected the lay-off of a portion of our employees resulting from a slowdown in our residential solar business after we had completed installation of the increased 2023 backlog resulting orders placed in 2023 in advance of NEM 3.0 becoming effective in April 2023, as discussed below under “Effects of NEM 3.0.” We experienced an increase in residential solar sales in 2023 and our income for 2023 reflected the increased cost of retaining and attracting talent, and such costs may continue to increase as labor costs in California continue to increase as a result of the inflationary pressures. In addition, to the extent that inflationary pressure affects our cost of revenue and general overhead, we may face the choice of raising prices to try and maintain our margins or reduce or maintain our price structure to meet competition which would result in a lower gross margin and a drop in operating income. Supply chain issues have caused us to periodically stock up on components such as solar panels and battery systems to provide an adequate supply to meet expected demand, putting pressure on our cash flow. We do not believe that the supply chain issues that affected our operations in prior periods are currently affecting us. We cannot assure you that such delays and increased costs will not affect our business in the future.

We are seeking to address the inflationary pressures by seeking to cut overhead expenses where possible and raising prices to levels that we believe are both competitive and attractive to customers in view of the increases in utility prices in California and maintaining an inventory of raw materials to enable us to better price our products and by marketing effort directed at commercial sales. We believe that our available cash and cash equivalents and short-term investments will enable us in dealing with the effects of inflation on our business.

Effects of NEM 3.0

Net metering is a billing mechanism that credits solar energy system owners for the electricity that they add to the electricity grid. If the owner of a solar system generates more electricity than it consumes, the excess electricity is sold back to the grid. The California Public Utilities Commission has adopted the current net metering regulations, known as NEM 3.0, which became effective in April 2023. NEM 3.0 features a 75% reduction in export rates (the value of excess electricity pushed onto the grid by solar systems) from the rate set forth in the previous net metering regulations, NEM 2.0, thereby reducing the overall savings and increasing the payback period of home solar installations. The changes under NEM 3.0, which are likely to result in reduced benefits for most residential solar users, could alter the return on investment for solar customers.

In January 2024, we laid off a portion of our employees associated with the design and installation of residential solar systems in response to a slowdown in demand after NEM 3.0 took effect in April 2023. The layoff represented approximately 25% of our residential solar system design and installation team. Approximately half of the employees who were laid off had been hired in late 2022 to help install our growing backlog of residential solar systems under contract in anticipation of NEM 3.0, and the contracts representing that backlog were completed during 2023. We may need to revise our pricing metrics to reflect the change resulting from NEM 3.0 in order for the purchase of a solar system to be economically attractive to the customer, which may result in lower prices and reduced margins. Although we anticipate the near-term impact of NEM 3.0 on residential solar contracts will be offset by commercial solar contracts for which we use third-party subcontractors to complete the installations, we cannot assure you that our overall business will not be impacted by the effects of NEM 3.0. Our decrease in revenue for solar sales in the year ended December 31, 2024 from the year ended December 31, 2023 reflects both a surge in 2023 revenue in anticipation of the effectiveness of NEM 3.0 in April 2023 and a sharp decline in 2024 revenue resulting from the effectiveness of NEM 3.0.

Elimination of Forfeiture Provisions of Options and Stock Grants

During the years 2015 to 2019, we granted restricted stock and stock options to employees and consultants, of which 264,650 shares of restricted stock and stock options to purchase 5,898,137 shares were outstanding at the date of our initial public offering. Under the terms of the restricted stock grant and stock options, the restricted stock and options became vested and non-forfeitable upon the completion of our initial public offering, which occurred on February 12, 2024, the effective date of the registration statement relating to our initial public offering. Under GAAP, upon the completion of the initial public offering, the value of the restricted stock and the incentive stock options is treated as compensation expense in the period in which the restricted stock and stock options become non-forfeitable and are deemed to have met the performance-based indicator (i.e., the completion of the initial public offering). Using the Black Scholes valuation method, the fair value of the incentive stock options at the time of the Company’s initial public offering was approximately $18.5 million, which is stock-based compensation that does not reflect a cash expense, of which approximately $1.3 million is included in cost of revenues and $15.9 million is included in general and administrative expense in the year ended December 31, 2024.

Defaults on Convertible Notes

From April 2023 through December 31, 2025, we did not pay annual principal installment payments and related quarterly interest payments when due which resulted in an event of default on convertible notes. The aggregate principal balance at December 31, 2025 of the notes in default was $14.3 million. The default provisions of the notes provide that if an event of default occurs the outstanding principal amount of this note, plus accrued but unpaid interest and other amounts owing in respect thereof through the date of acceleration, shall become, at the holder’s election, immediately due and payable in cash, and commencing five days after occurrence of any Event of Default that results in the eventual acceleration of the note, the interest rate on the note shall accrue at an interest rate of 12% per annum. Further, if an event of default occurs, the noteholders, together, have rights to foreclose on the collateral securing the notes. Since there is an event of default, the holders of all of these notes have the current right to accelerate payment on the full principal amount of the notes, in which event all of these notes with interest at 12% per annum may become due. We cannot assure you that we will be able to pay the notes plus interest if the notes are accelerated.

Overview

We are an integrated solar and renewable energy company. A solar energy system retains the direct current (DC) electricity from the sun and converts it to alternating current (AC) electricity that can be used to power residential homes and commercial businesses. The solar business is based on the ability of the users of solar energy systems to save on energy costs and reduce their carbon imprint as compared with power purchased from the local electricity utility company. We were founded in 2008 to engage in the solar business in the United States, where our business is primarily conducted. Our primary business consists of the sale and installation of photovoltaic and battery backup systems for residential and commercial customers and sales of LED systems and services to government and commercial users.

Since the third quarter of 2025, our principal business was EPC services in connection with the construction of BESS systems. On July 31, 2025, we entered into an EPC agreement with Longfellow, to develop a BESS facility. Based on the contract terms, the contract is expected to generate revenues of approximately $120.1 million and interest income of $7.2 million from a financing component related to milestone payments that extend beyond the project completion date. Longfellow will own and operate the facility, which will be located in Pecos County, Texas and is expected to have a storage capacity of 430 megawatt-hours. Completion of the BESS facility is targeted for June 2026, although we cannot assure you that this completion date will be met. To the extent that our costs for the project increase as a result of tariffs, the war with Iran, supply chain issues or other factors, any change in the price of the project would be subject to the approval of Longfellow. To the extent that we cannot adjust our prices to reflect such additional costs, our gross margin on the project will be impacted. We have committed to make a $5.0 million capital contribution to Longfellow, in which we have an 8% equity interest. Our capital contribution in the amount of $5.0 million was due no later than December 31, 2025, but has not been paid to date. As of the date of the annual report, we have only provided EPC services.

On December 31, 2025, we entered into three EPC agreements for large scale BESS systems, two in Puerto Rico and one in Corpus Christi, Texas. Pursuant to an EPC agreement with Naguabo BESS LLC, a Texas limited liability company (“Naguabo”), we will develop a BESS facility in Ceiba Municipality, Puerto Rico. The contract is expected to generate revenues of approximately $122.3 million. Naguabo will own and operate the facility, which is expected to have a storage capacity of 320 megawatt-hours. We will have a 9% membership interest in Naguabo. Pursuant to an EPC agreement with Yabucoa BESS LLC, a Texas limited liability company (“Yabucoa”), we will develop a BESS facility in Humacao Municipality, Puerto Rico. The contract is expected to generate revenues of approximately $35.9 million. Yabucoa will own and operate the facility, which is expected to have a storage capacity of 80 megawatt-hours. We will have a 9% membership interest in Yabucoa. Pursuant to an EPC agreement with Navboot Holdco, LLC, a Delaware limited liability company (“Navboot”), we will develop a BESS facility in Corpus Christi, Texas. The contract is expected to generate revenues of approximately $258.1 million. Navboot will own and operate the facility, which is expected to have a storage capacity of 600 megawatt-hours.

In February 2025, we entered into a contract with a California homebuilder pursuant to which we have the right to design and install solar energy systems in a new home project consisting of a proposed 146 new residential homes at a fixed price. Any installations will be made pursuant to contracts with the home owners, and we will pay the homebuilder a commission on the transaction.

In the fourth quarter of 2023, we began to work with several independent dealers which form our dealer network. Our dealer network is comprised of independent licensed sales companies that sell our products pursuant to non-exclusive agreement. The dealers sell our products as well as products sold by our competitors. The dealer handles the sales process, and once the sales agreement with the customer is signed, we install the solar system pursuant to an installation agreement with customer. The dealers earn a commission which is included in cost of revenue.

Although we had nominal sales through the dealer network prior to 2024, during the years ended December 31, 2025 and 2024, approximately 47% and 21%, respectively, of our revenues from residential solar and battery contracts, and 11% and 22% of our total revenues were generated through the dealer network program. We believe that our participation in the dealer network enhances our ability to attract residential customers.

Results of Operations

The following tables set forth information relating to our operating results for the years ended December 31, 2025 and 2024 (dollars in thousands) and as a percentage of revenue:

Years Ended December 31, 2025 and 2024

The following table set forth information relating to our revenue and gross profit results for the years ended December 31, 2025 and 2024 (dollars in thousands):

Revenues

Revenues for the year ended December 31, 2025 were $91.0 million, an increase of $68.0 million or 295.8% from $23.0 million in the year ended December 31, 2024. The increase resulted from revenue of $60.2 million from the Longfellow Contract to develop a BESS facility in Pecos County, Texas, a $5.4 million increase in residential solar energy and battery sales, and a $2.5 million increase in LED sales, offset with a $58,000 decrease in financing revenue. We did not have any revenue from large-scale EPC contracts prior to the third quarter of 2025. Our revenue from residential and commercial solar energy and battery sales increased from $17.9 million for the year ended December 31, 2024 to $23.3 million for the year ended December 31, 2025, a 30.3% increase. Our revenues for the year ended December 31, 2024 were negatively impacted by unusually frequent and heavy rains in California in the early part of 2024, which affected our ability to complete the installation of solar systems, which we did not experience in 2025, and coupled with our ability to increase solar revenue from our dealer network program which resulted in the increase in sales of both the residential and commercial solar energy systems and batteries. The increase in the solar energy and battery sales in the year ended December 31, 2025 reflects a 9.4% increase in the number of systems completed and a 13.6% increase in the wattages deployed. The number of completed systems and the wattages deployed in the year ended December 31, 2024 reflects incremental business resulting from customers signing solar contracts for solar systems prior to the April 2023 effectiveness of NEM 3.0 deadline in California. During the years ended December 31, 2025 and 2024, our battery only sales were $1.8 million and $1.1 million, respectively. Battery sales refer to the sale of batteries sold other than as a part of a solar system and are included in solar energy residential sales.

As a result of the continued relatively high interest rate environment and the expiration of the federal residential solar tax credit on December 31, 2025, we expect the revenue from our residential sales to grow modestly in 2026 through our continued expansion of the dealer network program.

Based on the terms of the Longfellow Contract, the contract is expected to generate revenues and financing income of approximately $127.3 million for us, and we expect to complete the work during 2026. During the year ended December 31, 2025, we recognized $60.2 million in revenues related to this project. On December 31, 2025, we entered into three EPC agreements for large scale BESS systems, two in Puerto Rico and one in Corpus Christi, Texas. Based on the terms of  the agreements, these three EPC agreements are expected to generate revenue of $122.3 million, $35.9 million, and $258.1 million, respectively. As of the date of this annual report, we had not completed the Longfellow project, and we had not commenced the EPC services for the other three BESS projects.

Our LED revenue increased by $2.5 million, or 51.8%, to $7.2 million for the year ended December 31, 2025 from $4.7 million for the year ended December 31, 2024, primarily resulting from the increase in the number of LED projects. LED revenues include LED product sales and LED consulting revenues and are expected to continue to fluctuate based on the number of LED projects awarded which is based on the bidding process and specific customer purchase requirements and timing. The revenue trend from our LED business therefore tends to fluctuate period to period.

We have not originated any loans to our solar customers since early 2022, and our loans in 2021 were modest. As a result, our finance revenue for the years ended December 31, 2025 and 2024 was $282,000 and $340,000, respectively, from our portfolio of solar loans. Finance revenue will decrease as loans in our portfolio are paid and not replaced by new loans.

Cost of revenue and gross profit

Our cost of revenue for the year ended December 31, 2025 was $86.8 million, an increase of $66.1 million or 319.7% from $20.7 million for the year ended December 31, 2024. The increase in cost of revenue was primarily driven by the Longfellow contract. During the year ended December 31, 2024, we recognized a one-time non-cash stock-based compensation expense of approximately $1.3 million in cost of revenue as a result of performance options vesting upon our initial public offering in the first quarter of 2024. Excluding this one-time stock-based compensation expense cost of revenue increased 346.6% from $19.4 million in the year ended December 31, 2024 to $86.7 million in the year ended December 31, 2025, primarily driven by the corresponding increase in sale revenue related to the new EPC contract entered into in July 2025 with Longfellow.

The overall gross margin decreased to 4.6% for the year ended December 31, 2025 from 10.1% in the year ended December 31, 2024. Excluding the effect of one-time stock-based compensation expense of $78,000 in the third quarter of 2025 and $1.3 million in the first quarter of 2024, our overall gross margin for the year ended December 31, 2025 would be 4.7% compared to 15.6% in the year ended December 31, 2024. The reduction in gross margin in 2025 was largely due to the costs recognized related to the new EPC contract with Longfellow, in addition to higher unit costs in our solar business. Our revenue recognition for Longfellow contract requires us to recognize revenue, but not profit, on uninstalled materials. The revenue on uninstalled materials was recognized by us when the control was transferred equal to the cost of the uninstalled materials. This decrease in gross margin was partially offset by an increase in the gross margin for our LED operation due to higher volume of higher margin LED products. We have no cost of revenue with respect to interest income on customer loans. Our China operations had no revenue and no cost of revenue for the years ended December 31, 2025 and 2024.

Operating expenses

Sales and marketing expenses for the year ended December 31, 2025 decreased to $367,000, a decrease of $150,000, or 29.1%, from $517,000 in the comparable period of 2024. Sales and marketing expenses were 0.4% of revenue for the year ended December 31, 2025 compared to 2.2% for the year ended December 31, 2024. Our sales and marketing expenses may fluctuate from time to time based on the types of marketing and promotion initiatives we deploy. We expect to continue to be selective in our sales and marketing spends for 2026. Our China operations did not incur sales and marketing expenses for the years ended December 31, 2025 and 2024.

General and administration expenses for the year ended December 31, 2025 decreased $16.6 million or 63.8%, to $9.5 million compared to $26.1 million for the year ended December 31, 2024, representing 10.4% of revenue for the year ended December 31, 2025 compared to 113.4% of revenue for the year ended December 31, 2024. The decrease in the year ended December 31, 2025 is principally attributed to the $17.3 million stock compensation expense recognized in the year ended December 31, 2024 as a result of performance options vesting upon our initial public offering in the first quarter of 2024. Our general increase, excluding the stock compensation expense, in general and administrative expenses in 2025 reflects the cost of compliance and other regulatory costs associated with being a public reporting company which is expected to continue in 2026. The decrease in the percentage of both sales and marketing and general and administrative expenses as a percentage of revenue in 2025 reflects revenue of approximately $60.2 million from the Longfellow Contract, on which revenue commenced in the third quarter 2025.

General and administrative expenses relating to our China operations were $594,000 in the year ended December 31, 2025, as compared with $1,365,000 in the year ended December 31, 2024. During the year ended December 31, 2024, we had a $1.1 million recovery of previously reserved receivable on one of our projects for SPIC as a result of an arbitration ruling in our favor. Excluding the effect of the $1.1 million recovery in 2024, the increase in general and administrative expenses in the China operations in 2025 is due to the legal and travel related costs incurred in connection with the SPIC lawsuits and related arbitration.

Impairment of China Goodwill

During the year ended December 31, 2024 we performed a goodwill impairment assessment with respect to our China operations considering various factors and based primarily on the continued economic downturn in China that directly impacts our ability to generate new businesses in the foreseeable future and the absence of any agreements or negotiations for agreements at December 31, 2024. We recognized an impairment charge for the entire balance of the goodwill of $7.5 million for the year ended December 31, 2024. We do not have any contracts to perform services in China and we are not engaged in discussions with respect to any new contracts and we are not engaged in any marketing activities in China. We are not generating any revenue and we have no prospects for revenue from China. However, we continue to incur expenses, primarily relating to our back office expenses which results in general and administrative expenses for our China operations. We can give no assurance as to our ability to generate revenue from our China operations.

Income (loss) from operations

As a result of the factors described above, our loss from operations was $5.7 million for the year ended December 31, 2025, compared to loss from operations of $24.3 million in the year ended December 31, 2024, reflecting the one-time stock compensation expense of $18.5 million associated with the vesting of stock options and restricted stock upon our initial public offering completed in February 2024. Our loss from operations for the China operations was $594,000 for the year ended December 31, 2025, compared to a loss from operations of $8.8 million in the year ended December 31, 2024, principally as a result of the recognition of impairment loss associated with goodwill of $7.5 million.

The consolidated loss from operations was $6.3 million for the year ended December 31, 2025 compared to a consolidated loss from operations of $33.1 million for the year ended December 31, 2024.

Equity in income (loss) from unconsolidated entities

Equity in income from unconsolidated entities comprises the equity in income from three unconsolidated project companies in which we have a non-controlling 30% interest. The equity in income reported for the year ended December 31, 2025 was $254,000 compared to $635,000 in the year ended December 31, 2024, a decrease of $381,000 or 60.1%. The decline in revenue and income from these Chinese unconsolidated entities in 2025 resulted from insufficient sunlight, cloudy skies and frequent rain in the Guizhou region leading to a decline in the power production relative to the prior period.

Loss on debt extinguishment

Loss on debt extinguishment for the year ended December 31, 2025 was $977,000, of which $990,000 resulted from the issuance of common stock at a 25% discount from market in satisfaction of our promissory notes in the principal amount of $2.9 million, offset by a $13,000 gain on debt extinguishment for the exchange of a $500,000 secured EB-5 note payable to a related party for a 4% convertible note in the same principal amount. During the year ended December 31, 2024, we issued 4% secured convertible notes in the principal amount of $6.0 million in exchange for $6.0 million of secured 3% EB-5 notes payable to related parties, resulting in gain on debt extinguishment of $147,000, and we settled $500,000 principal amount of 4% convertible note for a gain of approximately $142,000. When the secured EB-5 notes are exchanged, the limited partners of the related party are not related parties.

Interest expense, net

Interest expense, net, for the year ended December 31, 2025 was $827,000, an increase of $238,000, or 22.4%, from the year ended December 31, 2024. Our interest expense in the year ended December 31, 2025 primarily includes interest at 3% on two loans from related parties in the United States with a total principal balance of $10.5 million at December 31, 2025 and interest at 4% on convertible notes issued to former limited partners of CEF in transactions in which the former limited partners of CEF accepted a 4% convertible note issued by SolarMax and the subsidiary that borrowed the funds from CEF with an aggregate principal balance of $15.2 million at December 31, 2025. The convertible notes issued to the former limited partners of CEF were issued as payment of the former limited partner’s capital account in CEF and replace debt of an equal amount that had been due to CEF. The notes are secured by the same collateral as the notes to CEF. At December 31, 2025, we are in default on $14.3 million of the principal amount of convertible notes, and the holders of these notes have the right to accelerate payment, which would result in an increase in the interest expense to 12% per annum. Our interest expense reflects interest at the stated interest rate of 4%. In the event that any or all of the noteholders on which we have defaulted exercise their acceleration option to call the notes and trigger the default rate, we would be required to pay interest at 12% for almost all of the time the notes were in default. Such additional interest will be reflected as interest expense in the quarter in which payment of the notes is accelerated.

Our interest income for the years ended December 31, 2025 and 2024 includes interest earned on a 8% promissory note due December 31, 2025 which was issued by Webao, and a 5% promissory note due December 31, 2025 which was issued by Qingdao. For the years ended December 31, 2025 and 2024, interest income on the Webao note was $385,000 and $464,000, respectively. The Webao note was paid in full in December 2025. For the years ended December 31, 2025 and 2024, interest income on the Qingdao note was $41,000 and $30,000, respectively. The Qingdao note is reflected as held maturity debt investments on the Consolidated Financial Statements. The unpaid principal and accrued interest on this note were repaid in full on February 19, 2026.

Other income (expense), net

During the year ended December 31, 2025, other income, net was $386,000 consisting primarily of a $198,000 of foreign currency transaction gains for intercompany receivable denominated in RMB, a loss on disposal of property in the amount of $65,000 and an elimination gain related to foreign currency of $249,000. During the year ended December 31, 2024, other expense was $145,000, consisting primarily of a $332,000 of foreign currency transaction losses for intercompany receivable denominated in RMB, a $30,000 loss associated with the write-off of legal settlement receivable as a result of the debtor's bankruptcy, offset be cash distributions declared of $198,000 from zero basis equity investments in unconsolidated joint venture entities in the United States, and a gain on disposal of property in the amount of $21,000.

Income tax benefit (provision)

For the years ended December 31, 2025 and 2024, we reported an income tax expense of $68,000 and $6,000, respectively, attributable to the Texas franchise tax and other state minimum tax liabilities.

For our China operations, income tax benefit of approximately $1.1 million and income tax expense of approximately $1.7 million were reported for the years ended December 31, 2025 and 2024, respectively, arising from an increase in the valuation allowance against deferred tax assets as of December 31, 2025 and current tax expense for the year ended December 31, 2024.

Net income (loss)

As a result of the foregoing, we had consolidated net loss of $6.3 million, or $(0.13) per share (basic and diluted), for the year ended December 31, 2025, compared with a consolidated net loss of $35.0 million, or $(0.79) per share (basic and diluted), for the year ended December 31, 2024.

Currency translation adjustment

Although our functional currency is the U.S. dollar, the functional currency of our China subsidiaries is the Renminbi (“RMB”). The financial statements of our subsidiaries are translated to U.S. dollars using period end exchange rates for assets and liabilities, and average exchange rates for the period for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations and reflects changes in the exchange rates between U.S. dollars and RMB.

As a result of foreign currency translations, which are non-cash adjustments, we reported net foreign currency translation losses of $31,000 and $167,000 for the years ended December 31, 2025 and 2024, respectively.

Liquidity and Capital Resources

The following tables show consolidated cash flow information for the years ended December 31, 2025 and 2024 (dollars in thousands):

Operating Activities

Net cash provided by operating activities for the year ended December 31, 2025 was $498,000, compared to net cash used in operating activities for the year ended December 31, 2024 of $9.1 million. The cash provided by operations for the year ended December 31, 2025, resulting from a decrease in our net loss of $28.6 million,  decreases in non-cash expense of $27.0 million primarily from decreases of $7.5 million in China goodwill impairment loss and $18.0 million from stock-based compensation, and an increase of $8.0 million in cash used for our operating assets and liabilities. 

Net cash used in operations for the year ended December 31, 2024 of $9.1 million. The cash used in operations for the year ended December 31, 2024, resulting from our net loss of $35.0 million, increases in non-cash expense from $18.5 million in stock-based compensation expenses and $7.5 million in China goodwill impairment loss, and an increase of $5.8 million in cash used for our operating assets and liabilities.

Non-cash adjustments changes from 2024 to 2025 :

Changes in operating assets and liabilities: