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What changed in SolarMax Technology, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of SolarMax Technology, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+433 added−1001 removedSource: 10-K (2026-04-06) vs 10-K (2025-03-31)

Top changes in SolarMax Technology, Inc.'s 2025 10-K

433 paragraphs added · 1001 removed · 244 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

58 edited+47 added−246 removed96 unchanged
Biggest changeEmployees On March 15, 2025, we had 76 employees in the United States, of which five were executives, 21 were in sales and marketing, 39 were in operations and installation and eleven were in accounting and administrative, and we had six employees in China, of which one was an executive, and five were in accounting and administrative.
Biggest changeAlthough 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. 17 Table of Contents 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.
Foreign Currency Exchange 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.
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.
Approximately 95% of our China revenue in 2019 was generated from Changzhou Almaden Co., Ltd., which is 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.
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.
These leases are operating leases and we own the systems, which we lease 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.
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.
We have relationships with a number of LED system manufacturers that provide us with access to a variety of high-performance products and ultimately enables us to meet customers’ energy needs and budgets.
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.
Under that subsidy program, prices are set above market rates and may be differentiated based on system size or application. 13 Table of Contents 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.
Under that subsidy program, prices are set above market rates and may be differentiated based on system size or application. 14 Table of Contents 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.
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.
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.
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.
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. 18 Table of Contents
The net proceeds of $18.6 million from our public offering were used as follows: · approximately $800,000 to make payments due to our former executive vice president and $100,000 million to a former employee pursuant to our agreements with them; · $7.0 million invested in an 8% promissory note issued by a Hong Kong based social media company; and RMB 5,000,000, or approximately $688,000, in a 5% note issued by a PRC-based company; · and the balance 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.
The net proceeds of $18.6 million from our initial public offering were used as follows: · approximately $800,000 to make payments due to our former executive vice president and $100,000 to a former employee pursuant to our agreements with them; · $7.0 million invested in an 8% promissory note issued by a Hong Kong based social media company and RMB 5,000,000, or approximately $688,000, in a 5% note issued by a PRC-based company, which have been paid in full and the proceeds were used for working capital; and · the balance 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.
We estimate that approximately 30% of our sales are generated through referrals by our customers. 11 Table of Contents 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.
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.
Based on our audited financial statements for 2023, which show that a majority of our income is derived from our United States operations and a majority of our assets are located in the United States and the fact that our management is located in the United States, we believe that we are not an issuer that is 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.
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.
Our only production guarantees are pursuant to agreements with our customers. 9 Table of Contents 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.
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.
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, in order to ensure PRC Companies are in compliance with PRC regulations and policies. The new regulations became effective on March 31, 2023.
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.
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.
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.
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. 14 Table of Contents California Consumer Privacy Act In June 2018, California passed the CCPA, which became effective in 2020.
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.
However, our increased revenues in 2023 and significant reduction in revenues in 2024 was affected by the introduction of NEM 3.0 rather than seasonality. We have historically experienced a slight increase for small commercial projects during the summer season.
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.
Marketing We have an in-house sales and marketing staff of 21, of whom 16 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.
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.
United States Operations Solar Energy Systems 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.
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.
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.
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.
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.
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.
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.
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.
The following table sets forth customer loan receivables at December 31, 2024 and December 31, 2023: December 31, 2024 December 31, 2023 Customer loans receivable, gross $ 4,644 $ 6,795 Less: unamortized loan discounts - (2 ) Allowance for loan losses (280 ) (257 ) Customer loans receivable, net 4,364 6,536 Less: Current portion 1,287 2,213 Non-current portion $ 3,076 $ 4,323 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.
The following table sets forth customer loan receivables at December 31, 2025 and 2024: December 31, 2025 2024 Customer loans receivable, gross $ 3,337 $ 4,644 Allowance for loan losses (206 ) (280 ) Customer loans receivable, net 3,131 4,364 Less: Current portion 875 1,287 Non-current portion $ 2,256 $ 3,076 11 Table of Contents 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.
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.
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.
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.
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.
Since early 2020, because we did not have the capital to support such operations, we suspended making loans to our solar customers, and we have no present plans to re-commence financing operations. Our finance revenue reflects revenue earned on our current portfolio, with no new loans having been added since early 2020.
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.
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.
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.
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 if at all. Prior to 2022, ZHTH was engaged in project development.
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.
We therefore believe that the timing of the execution of large commercial deals depends largely on the progress of contract negotiations. 10 Table of Contents 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.
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.
Sale and Installation Process Our system sale and installation process 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.
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 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.
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.
Two suppliers accounted for 10% or more of our purchases for the years ended December 31, 2024 and 2023. Consolidated Electrical Distributors accounted for purchases of approximately $4.0 million, or 12% of our purchases, for the year ended December 31, 2024, and $4.9 million, or 12% of our purchases, for the year ended December 31, 2023.
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.
At this stage, the customer has not made any commitment to purchase a system from us. 8 Table of Contents 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.
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.
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.
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 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.
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.
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.
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.
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. Prior to 2015, we entered into power purchase agreements that have a term of up to 20 years.
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.
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.
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.
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, customers continue to receive credit for the electricity they produce; however, the calculation of this credit is based on avoided cost rates.
Power Purchase Agreements We entered into solar power purchase agreements in our United States segment with some commercial customers, and many of these agreements remain in effect.
We have not leased systems for our account after 2014. 10 Table of Contents Power Purchase Agreements We entered into solar power purchase agreements with some commercial customers, and many of these agreements remain in effect.
Pursuant to Announcement on Policies for Deepening the VAT Reform issued by the PRC Ministry of Finance, PRC State Taxation Administration and the General Administration of Customs on May 20, 2019 and effective on April 1, 2019, the previous rate of 16% or 10% are adjusted to be 13% or 9%, respectively, for taxpayer’s general sale activities or imports. 25 Table of Contents Dividend Withholding Tax 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.
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.
Since early 2020, because we did not have the capital to support such operations, we suspended making loans to our solar customers, and we are not currently financing the purchase of solar systems and we do not anticipate engaging in such activities in the near future, if at all.
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.
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. 5 Table of Contents 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.
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.
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. Consumer Protection Laws In negotiating and entering into contracts with our residential customers, we must comply with state and federal consumer protection laws.
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.
Although we are negotiating for the installation of commercial in other states, as of the date of this annual report we do not have any contracts for these commercial installations and we cannot assure you that we will be successful in marketing commercial installations or that we will be able to price any such installations at a price at which we can generate a profit. ___________________________ 1 https://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 7 Table of Contents We provide and install both grid-tied and off-grid systems.
We currently install these solar systems only in California. ___________________________ 1 https://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 8 Table of Contents We provide and install both grid-tied and off-grid systems.
Warranty Obligations; Production Guarantee All parts of the system provided by us are under manufacturers’ warranties, typically for 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.
The manufacturer’s warranty on the solar energy systems’ components, which is typically passed through to the customers, ranges from one to ten years.
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.
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. 16 Table of Contents 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.
Our primary business consists of 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 also generate revenue from financing the sale of our photovoltaic and battery backup systems.
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.
ZHTH was primarily engaged in the business of identifying and procuring solar system projects for resale to third party developers and related services in China. ZHPV’s core business has been to provide EPC services. We have not generated any revenue from our China segment during 2022, 2023 and 2024.
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.
Our finance revenue reflects revenue earned on our current portfolio, with no new loans having been added since early 2020. In 2015, we commenced operations in the PRC with the acquisition of two subsidiaries –Chengdu Zhonghong Tianhao Technology Co., Ltd. ("Chengdu ZHTH”), which is a subsidiary of SolarMax Technology (Shanghai) Co. Ltd.
Our finance revenue reflects revenue earned on our current portfolio, with nominal new loans having been added since early 2020 and none since 2022. 5 Table of Contents In 2015, we commenced operations in the PRC, and we engaged in business in China through 2021.
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. Our marketing effort includes our ability to offer financing in connection with purchases of our systems through third-party equipment leasing companies.
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.
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.
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.
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.
The federal energy policy which favors gas and oil over renewable energy such as solar and wind affects our ability to market solar systems. 13 Table of Contents 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.
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 We design, install and sell high performance photovoltaic solar energy systems and battery systems, and we have installations at more than 12,000 homes and businesses.
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.
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. 12 Table of Contents Consumer Financing Regulations In the event that we recommence financing operations in California, our finance subsidiary, SolarMax Financial, will have 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, and SolarMax Financial would be required to comply with regulations pertaining to consumer financing.
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.
We provide end-to-end customer service during the lifetime of the product. 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.
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.
As a licensed finance lender, SolarMax Financial will be subject to periodic examination by state regulatory authorities. SolarMax Financial would also be subject to extensive federal regulation, including the Truth in Lending Act, the Equal Credit Opportunity Act, Fair Debt Collection Practices Act and the Fair Credit Reporting Act and other laws.
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.
The chart for the China segment does not include the subsidiaries of ZHPV, which are either project subsidiaries or subsidiaries which are formed to perform services for a specific contract; or subsidiaries of SolarMax Shanghai. 6 Table of Contents Our principal executive offices are located at 3080 12 th Street, Riverside, California 92507. Our telephone number is (951) 300-0788.
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.
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.
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. 15 Table of Contents Under NEM 3.0 the economic viability of combining solar panel systems with battery storage is enhanced.
Removed
(together with its subsidiaries thereunder, "ZHTH”), and Jiangsu Zhonghong Photovoltaic Electric Co., Ltd. ("ZHPV”). We did has not generate any revenue from our China segment subsequent to 2021, and the China segment does not have any projects or agreements as of the date of this report.
Added
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”).
Removed
All of our revenue the year ended December 31, 2022, 2023 and 2024 was generated by our United States segment, and our cost of revenue related to our United States segment.
Added
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.
Removed
We are seeking to offset our decline in residential solar sales in California for the year ended December 31, 2024 as compared with the 2023 by marketing sales of larger systems to commercial users both in California and in other states; however, we cannot assure you that we will be successful in marketing to commercial users.
Added
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.
Removed
As of the date of this annual report, we do not have any contracts for major commercial solar projects.
Added
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.
Removed
Although we have non-binding memoranda of understanding, letter of intent or term sheets with respect to four proposed projects, all of which are subject to the negotiation of definitive agreements, and some of the projects require the identification of a financing source to provide the full financing for the project.
Added
In the event that we do not seek to recommence operations in China, we may discontinue our China operations.
Removed
ZHPV’s core business was to provide engineering, procurement and construction (“EPC”) services. In order to build a solar farm in China it is first necessary to obtain a permit, which covers a specific location. ZHTH and ZHPV establish special subsidiaries to own and acquire a permit for a solar farm. We refer to these subsidiaries as project subsidiaries.
Added
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.
Removed
When a buyer of a project is identified, we sell to the buyer the equity in the project subsidiary that holds the permit for that specific solar farm project, and the buyer of the project engages ZHPV for the EPC work. The purchase price for the project subsidiary is an amount approximating the project subsidiary’s net assets.
Added
Our Corporate Structure We are a Nevada corporation formed in January 2008.
Removed
Accordingly, we do not generate a material gain or loss from the sale of the project subsidiaries and our revenue is primarily generated by our EPC services. The sale of the equity in the project subsidiaries is part of the normal course of our operations in China.
Added
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.
Removed
Because Chinese government regulations prohibit the sale of the permit relating to a solar farm, it is necessary for us to sell the equity in the project subsidiary to effectuate the transfer of the ownership of the solar farm and the permit to the buyer.
Added
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. 6 Table of Contents 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.
Removed
From mid 2019 to 2021, our China segment was dependent upon one customer, SPIC, a state-owned enterprise. We have not generated any revenue from our China segment since mid-2021. At December 31, 2024, we had an outstanding receivable from SPIC of approximately $6.8 million which relates to projects completed prior to 2022.
Added
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.
Removed
Although we believe the receivable will be substantially collected, we can give no assurance as to when or whether we will collect the full amount. At December 31, 2024, we increased our bad debt reserve relating to this receivable as a result of initial arbitration meetings during 2024.
Added
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

88 edited+40 added−441 removed165 unchanged
Biggest changeFactors that may affect the of our common stock include the following: · price and volume fluctuations in the overall stock market from time to time; · volatility in the trading prices and trading volumes of solar or renewable energy stocks; · changes in operating performance and stock market valuations of other energy companies generally, or those in our industry in particular; · sales of shares of our common stock by us or our stockholders; · the perception of our ability to raise funds we may require from time to time and terms on which we issue securities in a private equity transaction; · failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our Company, or our failure to meet these estimates or the expectations of investors, and unfavorable recommendations by securities analysts; · any financial projections we may provide to the public, any changes in those projections, or our failure to meet those projections; · the perception of our ability to enter into, perform and generate profits from contracts for major commercial projects; · announcements by us or our competitors of new products, features, or services; · the public’s reaction to our press releases, other public announcements and filings with the SEC; 66 Table of Contents · rumors and market speculation involving us or other companies in our industry; · actual or anticipated changes in our results of operations or fluctuations in our results of operations; · actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; · if we commence business in China, the perception of our ability to operate profitably and generate positive cash flow in China and our failure to generate significant business from our China segment; · litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; · announced or completed acquisitions of businesses, products, services or technologies by us or our competitors; · new laws or regulations or new interpretations of existing laws or regulations applicable to our business; · changes in accounting standards, policies, guidelines, interpretations or principles; · any significant change in our management or our failure or perceived failure to engage additional executive and other senior level personnel; and · general economic conditions and slow or negative growth of our markets.
Biggest changeFactors that may affect our common stock include the following: · the perception of our ability to meet the Nasdaq continued listing requirements; · the perception of our ability to raise funds we require from time to time, including funds to pay our outstanding debt, including convertible debt with respect to which we are in default, and terms on which we issue securities in private equity transactions; · the perception of our ability to generate a reasonable gross profit from BESS systems; · volatility in the trading prices and trading volumes of solar or renewable energy stocks; · changes in operating performance and stock market valuations of other energy companies generally, or those in our industry in particular; · sales of shares of our common stock by us or our stockholders; · failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our Company, or our failure to meet these estimates or the expectations of investors, and unfavorable recommendations by securities analysts; · any financial projections we may provide to the public, any changes in those projections, or our failure to meet those projections; · announcements by us or our competitors of new products, features, or services; · actual or anticipated changes in our results of operations or fluctuations in our results of operations; · actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; · if we commence business in China, the perception of our ability to operate profitably and generate positive cash flow in China and our failure to generate significant business from any operations we may commence in China; · rumors and market speculation involving us or other companies in our industry; · the public’s reaction to our press releases, other public announcements and filings with the SEC; · litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; · announced or completed acquisitions of businesses, products, services or technologies by us or our competitors; · new laws or regulations or new interpretations of existing laws or regulations applicable to our business; · changes in accounting standards, policies, guidelines, interpretations or principles; · any significant change in our management or our failure or perceived failure to engage additional executive and other senior level personnel; and · general economic conditions and slow or negative growth of our markets.
There are significant risks associated with any acquisition program, including, but not limited to, the following: · We may incur significant expenses and devote significant management time to the acquisition, and we may be unable to consummate the acquisition on acceptable terms. · If we identify an acquisition, we may face competition from other companies in the industry or from financial buyers in seeking to make the acquisition. · The integration of any acquisition with our existing business may be difficult and, if we are not able to integrate the business successfully, we may not only be unable to operate the business profitably, but management may be unable to devote the necessary time to the development of our existing business; · The key employees who operated the acquired business successfully prior to the acquisition may not be happy working for us and may resign, thus leaving the business without the necessary continuity of management. · Even if the business is successful, our two senior executive officers may need to devote significant time to the acquired business, which may distract them from their other management activities. · If the business does not operate as we expect, we may incur an impairment charge based on the value of the assets acquired. · We may have difficulty implementing and maintaining the necessary quality control over the acquired business and our products and services. · To the extent that an acquired company operates at a loss prior to our acquisition, we may not be able to develop profitable operations following the acquisition. · Problems and claims relating to the acquired business that were not disclosed at the time of the acquisition may result in increased costs and may impair our ability to operate the acquired company. 43 Table of Contents · The acquired company may have liabilities or obligations and cybersecurity issues or problems which were not disclosed to us, or the acquired assets may not have the value we anticipated. · Any indemnification obligations of the seller under the purchase agreement may be inadequate to compensate us for any loss, damage or expense which we may sustain, including undisclosed claims or liabilities. · To the extent that the acquired company is dependent upon our management to maintain relationships with existing customers, we may have difficulty in retaining the business of these customers if there is a change in management. · Government agencies may seek damages after we make the acquisition for conduct which occurred prior to the acquisition and may not have adequate recourse against the seller. · We may require significant capital both to acquire and to operate the business, and the capital requirements of the business may be greater than we anticipated.
There are significant risks associated with any acquisition program, including, but not limited to, the following: · We may incur significant expenses and devote significant management time to the acquisition, and we may be unable to consummate the acquisition on acceptable terms. · If we identify an acquisition, we may face competition from other companies in the industry or from financial buyers in seeking to make the acquisition. · The integration of any acquisition with our existing business may be difficult and, if we are not able to integrate the business successfully, we may not only be unable to operate the business profitably, but management may be unable to devote the necessary time to the development of our existing business; · The key employees who operated the acquired business successfully prior to the acquisition may not be happy working for us and may resign, thus leaving the business without the necessary continuity of management. · Even if the business is successful, our two senior executive officers may need to devote significant time to the acquired business, which may distract them from their other management activities. · If the business does not operate as we expect, we may incur an impairment charge based on the value of the assets acquired. · We may have difficulty implementing and maintaining the necessary quality control over the acquired business and our products and services. · To the extent that an acquired company operates at a loss prior to our acquisition, we may not be able to develop profitable operations following the acquisition. · Problems and claims relating to the acquired business that were not disclosed at the time of the acquisition may result in increased costs and may impair our ability to operate the acquired company. · The acquired company may have liabilities or obligations and cybersecurity issues or problems which were not disclosed to us, or the acquired assets may not have the value we anticipated. · Any indemnification obligations of the seller under the purchase agreement may be inadequate to compensate us for any loss, damage or expense which we may sustain, including undisclosed claims or liabilities. · To the extent that the acquired company is dependent upon our management to maintain relationships with existing customers, we may have difficulty in retaining the business of these customers if there is a change in management. · Government agencies may seek damages after we make the acquisition for conduct which occurred prior to the acquisition and may not have adequate recourse against the seller. · We may require significant capital both to acquire and to operate the business, and the capital requirements of the business may be greater than we anticipated.
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 segment, which could impair our overall operations and financial condition and could prevent our ability to conduct business in China.
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.
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 $11.0 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.
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.
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. 39 Table of Contents 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.
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. 27 Table of Contents 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.
Changes in revenue and the results of operations from our China segment 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.
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.
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. 41 Table of Contents 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.
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. 29 Table of Contents 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.
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. 40 Table of Contents The availability and price of silicon raw materials may affect our gross margins and profitability.
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. 28 Table of Contents The availability and price of silicon raw materials may affect our gross margins and profitability.
With respect to the outstanding notes to CEF and CEF II, limited partners who made investments of $2.0 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.
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.
However, to the extent inflation continues or increases, we may not be able to raise prices sufficient 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.
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.
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 segment of $7.5 million, which related to our 2015 acquisition of the 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.
Our directors and executive officers beneficially own approximately 27.9% 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.
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.
Since the selling cycle 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.
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.
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
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. 37 Table of Contents Item 1B. Unresolved Staff Comments Not applicable
We provide warranties to the clients of our EPC services for one year in China and for ten 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 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.
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 34 Table of Contents Changes in net metering regulations in California is likely to result in a reduced level of benefits, which is impairing the market for residential solar products.
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.
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 $12.0 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.
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.
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 or non-accelerated filer.
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.
Two of our subsidiaries borrowed a total of $55.5 million from Clean Energy Funding (“CEF”) and Clean Energy Funding II (“CEF II”), who are related parties.
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 a former executive officer/director, and which is managed by our chief executive officer and a former executive officer who is a major stockholder.
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.
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 in our United States segment to offset this increase in cost.
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.
Because we derive most of our United States 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 United States revenue from solar energy projects in the United States from California.
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.
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: · limitations on the removal of directors; · limitations on the ability of our stockholders to call special meetings; · establishing advance notice provisions for stockholder proposals and nominations for elections to the board of directors to be acted upon at meetings of stockholders; · providing that the board of directors is expressly authorized to adopt, or to alter or repeal our bylaws; and · establishing advance notice and certain information requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings. 67 Table of Contents Provisions of our bylaws and Nevada law could deter a change of our management, which could discourage or delay offers to acquire us.
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: · limitations on the removal of directors; · limitations on the ability of our stockholders to call special meetings; · establishing advance notice provisions for stockholder proposals and nominations for elections to the board of directors to be acted upon at meetings of stockholders; · providing that the board of directors is expressly authorized to adopt, or to alter or repeal our bylaws; and · establishing advance notice and certain information requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
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.
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.
Actual or threatened war, terrorist activities, political unrest, civil strife, including the war between Israel 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.
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.
Although we have been able to increase the selling price, our ability to increase is limited by competition, which resulted in our increase in 2024 of only 14%, a lower increase than the increase in cost of revenue which resulted in lower margin.
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.
The effects of inflation may also affect the marketability of our solar systems to residential users. In our United States segment, our cost of revenue per watt of solar systems, which made up approximately 80% of our cost of revenues, increased approximately 20% in 2024 compared to the same period a year ago.
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.
At December 31, 2024, we had an outstanding receivable from SPIC of approximately $6.8 million which relates to projects completed prior to 2022. Although we believe the receivable will be collected, and we anticipated collection during 2024, we can give no assurance as to when or whether we will collect the full amount.
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.
Factors which may cause our quarterly results to fluctuate include: · local weather and climate conditions and long-term projected climate developments, including the effects of wildfires, unusually heavy rain and floods in California and climate change generally, which may affect both our ability to enter into contracts for the installation of solar systems and our ability to complete the construction and installation in a timely manner and may result in financial obligation to customers pursuant to production guarantees; · expiration, initiation or reduction of tax and other rebates and utility incentives; 38 Table of Contents · our revenue recognition policies, whereby significant work can be performed before we recognize revenue; · our ability to complete installations in a timely manner; · our ability to process applications for third-party financing; · our ability to expand our operations and the timing of any expansion; · changes in competitors’ pricing and financing policies and other changes in the competitive environment in the solar energy industry; · pricing policies of local electricity providers; · gas and oil prices; and · changes in customer demands for solar energy systems.
Factors which may cause our quarterly results to fluctuate include: · local weather and climate conditions and long-term projected climate developments, including the effects of wildfires, unusually heavy rain and floods in California and climate change generally, which may affect both our ability to enter into contracts for the installation of solar systems and our ability to complete the construction and installation in a timely manner and may result in financial obligation to customers pursuant to production guarantees; · expiration, initiation or reduction of tax and other rebates and utility incentives; · our revenue recognition policies, whereby significant work can be performed before we recognize revenue; · our ability to complete installations in a timely manner; · our ability to process applications for third-party financing; · our ability to expand our operations and the timing of any expansion; · changes in competitors’ pricing and financing policies and other changes in the competitive environment in the solar energy industry; · pricing policies of local electricity providers; · gas and oil prices; and · changes in customer demands for solar energy systems. 26 Table of Contents 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.
In order to develop, maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we will need to expend and we are expending significant resources, including accounting-related costs, and provide significant management oversight.
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.
Our failure to obtain capital on reasonable terms may impair the value of the acquisition and may impair our continuing operations. · The acquired company may be impacted by unanticipated events, such as a pandemic such as the COVID-19 or other pandemic, the effect of climate changes, international conflicts or hostilities or social unrest or other factors over which we or the acquired company may have no control.
Our failure to obtain capital on reasonable terms may impair the value of the acquisition and may impair our continuing operations. · The acquired company may be impacted by unanticipated events, such as a pandemic such as the COVID-19 or other pandemic, the effect of climate changes, international conflicts or hostilities or social unrest or other factors over which we or the acquired company may have no control. 31 Table of Contents Our business is largely dependent upon government subsidies and incentives.
In addition to our current debt, at December 31, 2024, we owed 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).
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).
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 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. 22 Table of Contents We may be subject to cybersecurity risks .
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. 37 Table of Contents Often large commercial customers pay less for energy from utility companies than residential customers.
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.
The loss in the year ended December 31, 2024 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 segment, (iii) a $1.7 million non-cash income tax expense arising from an increase in the valuation allowance against deferred tax assets, and (iv) an operating loss in the United States segment of $24.3 million which includes the $18.5 million stock compensation expense.
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.
We sustained a net loss of approximately $35.0 million for the year ended December 31, 2024, and our financial statements for the year ended December 31, 2024 have a going concern footnote.
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.
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 segment during 2022, 2023 and 2024.
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.
To the extent that utility companies offer commercial customers a lower rate for electricity, they may be less willing to switch to solar energy.
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.
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.
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.
To the extent that we are unable to refinance these obligations, we will use our available funds for such purpose or it may be necessary to modify the terms of the convertible notes.
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.
In addition, the holders of our convertible notes in the principal amount of $16.5 million at March 15, 2025, have conversion rights at an average conversion price of $2.78 per share.
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.
As of March 15, 2025, notes to CEF and CEF II in the aggregate principal amount of $11.0 million were outstanding, and convertible notes in the principal amount of $41.5 million had been issued to former limited partners of CEF, of which principal payments of $22.0 million had been made on the anniversary of the respective dates of issuance, convertible notes in the principal amount of $3.0 million had been early redeemed for $2.1 million, and the outstanding principal amount of $16.5 million was outstanding.
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.
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, the funds available from our initial public offering may not be sufficient to provide us with funds to pay such loans, and we can give have no assurance that we will be able to obtain funding from other sources or reasonable terms, if at all.
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.
Three 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 officers and directors (prior to and after the offering) located outside the United States.
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.
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.
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.
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 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. 23 Table of Contents We may be subject to liability if private information that we receive is not secure or if we violate privacy laws and regulations.
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.
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.
Unless we are able to reduce both our cost of revenues and our operating costs, we will not be able to operate profitably.
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.
We did not generate any revenue from our China segment for 2024, 2023 and 2022, and we have not generated any revenue from our China segment during 2025 through the date of this annual report, and we cannot assure you that we will generate any revenue from our China segment in the future or that we will not discontinue our China operations.
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.
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.
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.
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.
This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. 34 Table of Contents 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.
These provisions include: · requiring stockholders who wish to request a special meeting of the stockholders to disclose certain specified information in such request and to deliver such request in a specific way within a certain timeframe, which may inhibit or deter stockholders from requesting special meetings of the stockholders; · requiring that stockholders can only call a special meeting if the request is made by the holders of two-thirds of the entire capital entitled to vote; · requiring that stockholders who wish to act by written consent request a record date from us for such action and such request must include disclosure of certain specified information, which may inhibit or deter stockholders from acting by written consent; · requiring that, if a matter is to be brought before a meeting of stockholders which is not specified in the notice of meeting or brought at the direction of the board of directors, it can only be brought up at the meeting if brought by stockholders of record holding two-thirds of the outstanding stock; · establishing the board of directors as the sole entity to fill vacancies in the board, which lengthens the time needed to elect a new majority of the board; · establishing a two-thirds majority vote of the stockholders to remove a director or all directors, which lengthens the time needed to elect a new majority of the board; · providing that our bylaws may be amended only by either the affirmative vote of two-thirds of the stockholders entitled to vote or by the board of directors, which limits the ability of stockholders to amend our bylaws, including amendments to provisions in the bylaws that are described in this risk factor; and · establishing more detailed disclosure in any stockholder’s advance notice to nominate a new member of the board, including specified information regarding such nominee, which may inhibit or deter such nomination and lengthen the time needed to elect a new majority of the board.
These provisions include: · requiring stockholders who wish to request a special meeting of the stockholders to disclose certain specified information in such request and to deliver such request in a specific way within a certain timeframe, which may inhibit or deter stockholders from requesting special meetings of the stockholders; · requiring that stockholders can only call a special meeting if the request is made by the holders of two-thirds of the entire capital entitled to vote; · requiring that stockholders who wish to act by written consent request a record date from us for such action and such request must include disclosure of certain specified information, which may inhibit or deter stockholders from acting by written consent; · requiring that, if a matter is to be brought before a meeting of stockholders which is not specified in the notice of meeting or brought at the direction of the board of directors, it can only be brought up at the meeting if brought by stockholders of record holding two-thirds of the outstanding stock; · establishing the board of directors as the sole entity to fill vacancies in the board, which lengthens the time needed to elect a new majority of the board; · establishing a two-thirds majority vote of the stockholders to remove a director or all directors, which lengthens the time needed to elect a new majority of the board; · providing that our bylaws may be amended only by either the affirmative vote of two-thirds of the stockholders entitled to vote or by the board of directors, which limits the ability of stockholders to amend our bylaws, including amendments to provisions in the bylaws that are described in this risk factor; and · establishing more detailed disclosure in any stockholder’s advance notice to nominate a new member of the board, including specified information regarding such nominee, which may inhibit or deter such nomination and lengthen the time needed to elect a new majority of the board. 35 Table of Contents 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.
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.
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.
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.
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. 25 Table of Contents 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.
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.
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.
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.
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. 36 Table of Contents 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.
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. 35 Table of Contents 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.
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.
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. If we are unable to generate profitable business in China, it may be necessary for us to discontinue our China operations.
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.
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.
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.
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.
In addition, we are required to report security breaches and describe steps we are taking to address potential cybersecurity threats. 24 Table of Contents 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.
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 could have a material adverse effect upon our business.
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.
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. 69 Table of Contents Because our directors and executive officers own or have the right to vote approximately 27.9% 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.
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.
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.
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. 32 Table of Contents 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.
Payment of these amounts has been deferred and they are currently to be made in twelve monthly installments June 30, 2025. Our inability to obtain any financing we require could materially impair our ability to make these payments and to develop our business and to operate profitably.
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.
If additional tariffs are imposed or other negotiated outcomes occur, our ability to purchase these products on competitive terms from those countries could be limited.
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.
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. 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.
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.
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.
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. 21 Table of Contents 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.
This provision does not apply to claims brought under the Securities Act of 1933 or the Securities Exchange Act of 1934. 68 Table of Contents 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.
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.
The consumer protection laws, among other things: · require us to obtain and maintain licenses and qualifications; · limit certain interest rates, fees and other charges it is allowed to charge; · limit or prescribe certain terms of the loans to our customers; and · require specific disclosures and the use of special contract forms.
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. · require us to obtain and maintain licenses and qualifications; · limit certain interest rates, fees and other charges it is allowed to charge; · limit or prescribe certain terms of the loans to our customers; and · require specific disclosures and the use of special contract forms.
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.
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.
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. 36 Table of Contents In addition, we are required to report security breaches and describe steps we are taking to address potential cybersecurity threats.
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.
The last year in which we generated revenue from our China segment was 2021, and all of our revenue in that year was generated in the second quarter. We had no revenue from the China segment for 2022, 2023 and 2024, and we have no contracts in place for us to perform any services in China.
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.
The terms of any financing may result in significant dilution to our stockholders. 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 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. 19 Table of Contents 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.
In the event that we discontinue our China segment, our historical financial statements will reflect the operations of our China segment as the results of a discontinued operation. Our failure to control our costs could impair our financial results. Our cost of revenues and our operating expenses increased significantly both in dollars and as a percentage of revenues.
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.
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.
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.
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 could also cause investors to lose confidence in our reported financial and other information.
Any failure to implement and maintain effective internal controls could also adversely affect the results of operations.
We have a working capital deficit of $13.7 million at December 31, 2024 and require funding for our operations. At December 31, 2024, we had a working capital deficiency of $13.7 million, cash and cash equivalents of $0.8 million (down from $2.5 million at December 31, 2023), accounts receivable of $4.2 million and short-term investments of $6.3 million.
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.
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 and our ability to raise financing. 42 Table of Contents Our warranty costs may exceed our warranty reserve.
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.
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 ever operate profitably.
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.
Because of our losses and the price of our common stock, we may have difficulty raising funds for our operations on acceptable terms, if at all. Further, our financial condition may affect our ability to market our solar systems to commercial enterprises and we anticipate that we may require additional funds to financing these operations if we generate the business.
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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeItem 1C. Cybersecurity Our company diligently monitors cybersecurity risks, conducting annual reviews at senior management levels and, if necessary, with the Audit Committee for updates to the Board of Directors. Currently, we believe there are no significant cybersecurity threats that pose a material risk to our business strategy, operations, or financial condition.
Biggest changeItem 1C. Cybersecurity Our company diligently monitors cybersecurity risks, conducting annual reviews at senior management levels and, if necessary, with the Audit Committee for updates to the Board of Directors. Currently, we believe there are no significant cybersecurity threats that pose a material business strategy, operations, or financial condition.
Threat Response Our vendors provide SOC teams that automatically investigate and address potential attacks. They collaborate to ensure immediate responses, utilizing playbooks and auto-remediation methods such as password resets, IP blocking, software removal, and risk mitigation. 70 Table of Contents
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. 38 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table set forth information as to the real property leased by us: Location Square Feet Current Annual Rent Expiration Date 3080 12th Street, Riverside, CA (1) 158,693 $ 1,618,418 12/31/26 Room 402, Floor 4, No. 558 Tongxie Rd., Shanghai, China 5,920 104,693 12/31/23 (1) This property is owned by 3080 Landlord pursuant to a net lease dated October 13, 2022.
Biggest changeThe following table set forth information as to the real property leased by us: Location Square Feet Current Annual Rent Expiration Date 3080 12th Street, Riverside, CA (1) 158,693 $ 1,855,566 12/31/33 Unit A905, 9th Floor, Block A, No.1-72, Lane 2855, Huqingping Highway, Zhaoxiang Town, Qingpu District, Shanghai, China 5,920 $ 23,517 10/30/28 (1) This property is owned by 3080 Landlord pursuant to a net lease extension dated January 28, 2026.
Rent for the first lease year is at the annual rate of $1,618,418 and increases 3% per year. 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.
Rent for 2026 is at the annual rate of $1,855,566 and increases 3% per year. 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

Legal Proceedings — active lawsuits and investigations

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Removed
During 2024, we commenced an arbitration procedures with SPIC to collect on the receivables owed by SPIC related to the EPC contracts as well as other advances and reimbursements for a total of RMB 54.2 million (approximately $7.7 million).
Added
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.
Removed
Based on the initial arbitration hearing which concluded in May 2024, we reserved RMB 4.7 million (approximately $659,000) at December 31, 2024 for a potential uncollectible amount. The net balance of the receivable after adjusting for the reserve is RMB 49.5 million ($6.8 million) at December 31, 2024. We expect the final arbitration ruling during 2025.
Added
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.
Added
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.
Added
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.
Added
We continue to monitor the status of the enforcement proceedings and will update our assessment of collectability as additional information becomes available.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny 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. 72 Table of Contents 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, 2024: Equity Compensation Agreements Information Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) Weighted average exercise price of outstanding options, warrants, and rights ($) Number of securities remaining available for future issuance under equity compensation plans (excluding outstanding options and warrants) (#) As of December 31, 2024 Equity compensation plans approved by security holders 6,045,941 $ 5.01 9,074,059 Equity compensation plans not approved by security holders 149,802 $ 3.50 0 Total 6,195,743 9,074,059 Use of Proceeds from Our Initial Public Offering The net proceeds from our initial public offering were approximately $18.6 million.
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans The following table gives information concerning common stock that may be issued by us with respect to compensation plans, including individual compensation arrangements) as of December 31, 2025: Equity Compensation Agreements Information Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) Weighted average exercise price of outstanding options, warrants, and rights ($) Number of securities remaining available for future issuance under equity compensation plans (excluding outstanding options and warrants) (#) As of December 31, 2025 Equity compensation plans approved by security holders 6,045,941 $ 5.01 9,074,059 Equity compensation plans not approved by security holders 149,802 $ 3.50 0 Total 6,195,743 9,074,059 40 Table of Contents Use of Proceeds from Our Initial Public Offering The net proceeds from our initial public offering were approximately $18.6 million.
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.
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”).
As of March 15, 2025, 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.
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.
Based on information provided to us we believe that we have more than 1,500 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.
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.
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, 2025, we had 81 stockholders of record.
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.
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.
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.
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.
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.
The initial maturity was June 25, 2024 and it was extended twice at the request of the maker to June 30, 2025. These notes are shown on our balance sheet as short-term investments. The full principal amount of these notes is outstanding on the date of this annual report.
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.
Recent Sale of Common Stock On March 19, 2025, we issued to an accredited investor 561,798 shares of common stock to at $0.89 per share, reflecting a 25% discount from the market price of the common stock, for a total purchase price of $500,000. No broker was involved in the sale.
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.
Removed
The initial maturity was June 1, 2024 and it was extended twice at the request of the maker to June 30, 2025. Our China segment invested RMB 5,000,000, or approximately $688,000, in a 5% note due June 25, 2024 issued by Qingdao Xiaohuangbei Technology Co., Ltd., a PRC-based company.
Added
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.
Added
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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

85 edited+95 added−67 removed41 unchanged
Biggest changeWe 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. 76 Table of Contents Results of Operations The following tables set forth information relating to our operating results for the years ended December 31, 2024 and 2023 (dollars in thousands) and as a percentage of revenue: Years Ended December 31, 2024 2023 Dollars % Dollars % Revenue: Solar energy sales $ 17,910 77.9 % $ 50,523 93.3 % LED sales 4,737 20.6 % 3,055 5.6 % Financing 340 1.5 % 562 1.1 % Total revenues 22,987 100.0 % 54,140 100.0 % Cost of revenue: Solar energy sales 16,319 71.0 % 40,891 75.6 % LED sales 4,353 18.9 % 2,099 3.9 % Total cost of revenues 20,672 89.9 % 42,990 79.5 % Gross profit 2,315 10.1 % 11,150 20.5 % Operating expenses: Sales and marketing (US) 517 2.2 % 1,158 2.1 % General and administrative (US) 26,074 113.4 % 8,789 16.2 % General and administrative (China) 1,365 5.9 % 719 1.3 % Asset impairment (China) 7,462 32.5 % - 0.0 % Total operating expenses 35,418 154.0 % 10,666 19.6 % Income (loss) from operations (US) (24,276 ) (105.6 )% 1,203 2.2 % Income (loss) from operations (China) (8,827 ) (38.4 )% (719 ) (1.3 )% Equity in income of solar project companies 635 2.8 % 864 1.6 % Gain on debt extinguishment 303 1.3 % 27 0.0 % Gain on early termination of lease 77 0.3 % 4 0.0 % Interest income 501 2.2 % 69 0.1 % Interest (expense) (1,566 ) (6.8 )% (1,577 ) (2.9 )% Other income (loss), net (145 ) (0.7 )% 500 1.0 % Income (loss) before income taxes (33,298 ) (144.9 )% 371 0.7 % Income tax provision (benefit) 1,664 7.2 % (64 ) 0.7 % Net income (loss) (34,962 ) (152.1 )% 435 0.0 % Currency translation adjustment (167 ) (0.6 )% (115 ) (0.2 )% Comprehensive income (loss) $ (35,129 ) (152.7 )% $ 320 (0.2 )% 77 Table of Contents Years Ended December 31, 2024 and 2023 The following table set forth information relating to our revenue and gross profit results for the years ended December 31, 2024 and 2023 (dollars in thousands), all of which related to our United States segment: Years Ended December 31, 2024 2023 Change % Change Revenue: Solar energy sales $ 17,910 $ 50,523 $ (32,613 ) (64.6 )% LED sales 4,737 3,055 1,682 55.1 % Financing 340 562 (222 ) (39.5 )% Total revenues 22,987 54,140 (31,153 ) (57.5 )% Cost of revenue: Solar energy sales 16,319 40,891 (24,572 ) (60.1 )% LED sales 4,353 2,099 2,254 107.4 % Total cost of revenues 20,672 42,990 (22,318 ) (51.9 )% Gross profit $ 2,315 $ 11,150 $ (8,835 ) (79.2 )% Revenues Revenues for the year ended December 31, 2024 were $23.0 million, a decrease of $31.2 million or 57.5% from $54.1 million in the year ended December 31, 2023, all of which was generated by the United States segment.
Biggest changeResults 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 2024 Dollars % Dollars % Revenue: Large-scale EPC contracts $ 60,172 66.1 % $ - 0.0 % Solar energy sales 23,335 25.6 % 17,910 78.0 % LED sales 7,193 7.9 % 4,737 20.6 % Financing 282 0.4 % 340 1.4 % Total revenues 90,982 100.0 % 22,987 100.0 % Cost of revenue: Large-scale EPC contracts 59,853 65.9 % - 0.0 % Solar energy sales 20,772 22.9 % 16,319 71.1 % LED sales 6,127 6.7 % 4,353 18.9 % Total cost of revenues 86,752 95.5 % 20,672 90.0 % Gross profit 4,230 4.6 % 2,315 10.1 % Operating expenses: Sales and marketing (US) 367 0.4 % 517 2.2 % General and administrative (US) 9,565 10.5 % 26,074 113.4 % General and administrative (China) 594 0.6 % 1,365 5.9 % Asset impairment (China) - 0.0 % 7,462 32.5 % Total operating expenses 10,526 11.5 % 35,418 154.0 % Income (loss) from operations (US) (5,702 ) (6.3 )% (24,277 ) (105.6 )% Income (loss) from operations (China) (594 ) (0.7 )% (8,827 ) (38.4 )% Equity in income of solar project companies 254 0.3 % 635 2.8 % Gain on debt extinguishment (976 ) (1.1 )% 303 1.3 % Gain on early termination of lease - 0.0 % 77 0.3 % Interest income 539 0.6 % 501 2.2 % Interest expense (1,366 ) (1.5 )% (1,566 ) (6.8 )% Other income (loss), net 386 0.5 % (145 ) (0.5 )% Income (loss) before income taxes (7,459 ) (8.2 )% (33,299 ) (144.7 )% Income tax provision (benefit) (1,135 ) (1.2 )% 1,664 7.2 % Net income (loss) (6,324 ) (7.0 )% (34,963 ) (151.9 )% Currency translation adjustment 31 0.0 % (167 ) (0.7 )% Comprehensive income (loss) $ (6,293 ) (7.0 )% $ (35,130 ) (152.6 )% 45 Table of Contents 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): Years Ended December 31, 2025 2024 Change % Change Revenue: Large-scale EPC contracts $ 60,172 $ - $ 60,172 - % Solar energy residential sales 23,335 17,910 5,425 30.3 % LED sales 7,193 4,737 2,456 51.8 % Financing 282 340 (58 ) (17.1 )% Total revenues 90,982 22,987 67,995 295.8 % Cost of revenue: Large-scale EPC contracts 59,853 - 59,853 - % Solar energy sales 20,772 16,319 4,453 27.3 % LED sales 6,127 4,353 1,774 40.8 % Total cost of revenues 86,752 20,672 66,080 319.7 % Gross profit $ 4,230 $ 2,315 $ 1,915 82.7 % 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.
However, these tax positions are subject to interpretation by the Internal Revenue Service, state tax authorities and the courts. We determine uncertain tax positions in accordance with the authoritative guidance.
However, these tax positions are subject to interpretation by the Internal Revenue Service, state tax authorities, foreign tax authorities and the courts. We determine uncertain tax positions in accordance with the authoritative guidance.
With respect to our China segment, we review China’s current and future economic conditions along with its political landscape, and how these factors may affect our receivable from SPIC, a state-owned entity. We regularly monitor collection status of these financial assets through account reconciliation, payment tracking, customer’s financial condition and macroeconomics conditions.
With respect to our China operations, we review China’s current and future economic conditions along with its political landscape, and how these factors may affect our receivable from SPIC, a state-owned entity. We regularly monitor collection status of these financial assets through account reconciliation, payment tracking, customer’s financial condition and macroeconomics conditions.
Effect if Different Assumptions Used We believe that assumptions not based on the use of historical collection experience, current and forecasted economic, political (China segment) and business conditions, and a review of the status of each customer’s financial asset account would be contra to the requirements of ASU 2016-13 and a departure from GAAP.
Effect if Different Assumptions Used We believe that assumptions not based on the use of historical collection experience, current and forecasted economic, political (China operations) and business conditions, and a review of the status of each customer’s financial asset account would be contra to the requirements of ASU 2016-13 and a departure from GAAP.
Supply chain issues have caused us to periodically stock up on components such as solar panels and battery systems to ensure 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.
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.
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 resulting in a lower gross margin and a drop in operating income.
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.
Hsu $675,000 as the cash payment in connection with his exchange of 1,348,213 restricted shares of common stock for options to purchase 1,428,432 shares of common stock at $5.01 per share and a cash payment of $675,000, which was initially payable by December 15, 2019 and has been extended and is now due commencing on June 30, 2025 in twelve equal monthly installments.
Hsu $675,000 as the cash payment in connection with his exchange of 1,348,213 restricted shares of common stock for options to purchase 1,428,432 shares of common stock at $5.01 per share and a cash payment of $675,000, which was initially payable by December 15, 2019 and has been extended and is now due commencing on December 31, 2025 in twelve equal monthly installments.
The number of completed systems and the wattages deployed in the year ended December 31, 2023 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, 2024 and 2023, our battery only sales were $1.1 million and $1.2 million, respectively.
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.
Maintaining any significant portion of our cash in non-financial institutions, particularly companies in Hong Kong and China, which do not have any of the protections provided United States banks, is subject to adverse conditions in the financial or credit markets, which could impact access to our invested cash and could adversely impact our operating liquidity and financial performance.
Maintaining any significant portion of our cash in non-financial institutions, particularly companies in Hong Kong and China, which do not have any of the protections provided by United States banks, is subject to adverse conditions in the Chinese financial and credit markets, which could impact access to our invested cash and could adversely impact our operating liquidity and financial performance.
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.
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. 42 Table of Contents Polysilicon is an essential raw material in the production of solar power products, principally solar panels.
We cannot assure you that any of these projects or any other projects will be completed, that we will generate a gross profit or positive cash flow from any commercial projects or that we will be successful in developing our commercial business as planned.
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 March 15, 2025, limited partners whose capital contributions funded loans of $41.5 million had received their green card approval and their extensions expired and one limited partner whose capital contribution funded $500,000 had withdrawn from CEF II and the limited partner’s capital contribution was returned.
As of March 15, 2026, limited partners whose capital contributions funded loans of $43.5 million had received their green card approval and their extensions expired and one limited partner whose capital contribution funded $500,000 had withdrawn from CEF II and the limited partner’s capital contribution was returned.
The petitions of limited partners of CEF and CEF II whose capital contribution funded loans of $9.0 million are pending.
The petitions of limited partners of CEF and CEF II whose capital contribution funded loans of $8.0 million are pending.
We have no cost of revenue with respect to interest income on customer loans. Our China segment had no revenue and no cost of revenue for the years ended December 31, 2024 and 2023.
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.
Our loss from operations for the China segment was $8.8 million for the year ended December 31, 2024, compared to a loss from operations of $718,000 in the year ended December 31, 2023, principally as a result of the recognition of impairment loss associated with goodwill of $7.5 million.
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.
During the year ended December 31, 2024, we exchanged $6.0 million of secured EB-5 notes payable to related party to 4% convertible notes in the same principal amount, resulting in gain on debt extinguishment of $147,000, and settled $500,000 principal amount of 4% convertible note for a gain of approximately $142,000.
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.
The loans from CEF and CEF II bear interest at 3% per annum. The loans are secured by a security interest in the accounts and inventory of the borrowing subsidiary. CEF and CEF II are limited partnerships, the general partner of which is Inland Empire Renewable Energy Regional Center, a related party.
The loans are secured by a security interest in the accounts and inventory of the borrowing subsidiary. CEF and CEF II are limited partnerships, the general partner of which is Inland Empire Renewable Energy Regional Center, a related party.
The willingness of the limited partners of CEF and CEF II to accept convertible notes rather than a cash payment of their investment in the limited partnership may be affected by their perception of our performance and the performance of our common stock as well as their perception that they could get a more favorable result with litigation.
The willingness of the limited partners of CEF and CEF II to accept convertible notes rather than a cash payment of their investment in the limited partnership may be affected by their perception of our performance and the performance of our common stock, including our low stock price and the possibility of our being delisted from Nasdaq, as well as their perception that they could get a more favorable result with litigation.
Hsu described above, approximately $2.5 million of which will be paid in twelve equal monthly installments with the first payment becoming due on June 30, 2025. We cannot assure you that we will be able to negotiate extensions to our loans or refinancing of our EB-5 debt.
We also have obligations to Mr. Hsu described above, approximately $2.5 million of which will be paid in twelve equal monthly installments with the first payment becoming due on December 31, 2025. We cannot assure you that we will be able to negotiate extensions to our loans or refinancing of our EB-5 debt.
As of March 15, 2025, we had issued convertible notes in the principal amount of $41.5 million to former limited partners of CEF, of which principal payments of $22.0 million had been made on the anniversary of the respective dates of issuance, and convertible notes in the principal amount of $3.0 million had been purchased by us for $2.1 million, leaving convertible notes in the principal amount of $16.5 million outstanding.
As of March 15, 2026, we had issued convertible notes in the principal amount of $43.5 million to former limited partners of CEF and CEF II, of which principal payments of $25.0 million had been made on the anniversary of the respective dates of issuance, and convertible notes in the principal amount of $3.0 million had been purchased by us for $2.1 million, leaving convertible notes in the principal amount of $15.6 million outstanding.
Under the terms of the options, the options became non-forfeitable upon our completion of an initial public offering, which occurred on February 12, 2024, the effective date of the registration statement relating to 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.
Investing Activities Net cash used by investing activities for the year ended December 31, 2024 was approximately $6.3 million, consisting of $7.7 million of short-term investment in three promissory notes (of which $638,000 relates to the China segment), offset by $1.3 million repayments received on the promissory notes, and $21,000 of cash proceeds received from disposal of property and equipment.
Net cash used by investing activities for the year ended December 31, 2024 was $6.3 million, consisting of $7.7 million of short-term investment in promissory notes, offset by $1.3 million repayments received on the promissory notes, and $21,000 of cash proceeds related to the disposal of property and equipment.
Net income (loss) As a result of the foregoing, we had consolidated net loss of $35.0 million, or $(0.79) per share (basic and diluted), for the year ended December 31, 2024, compared with a consolidated net income of $0.4 million, or $0.01 per share (basic and diluted), for the year ended December 31, 2023.
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.
For the China segment, income tax expense of approximately $1.7 million and $70,000 were reported for the years ended December 31, 2024 and 2023, respectively, arising from an increase in the valuation allowance against deferred tax assets as of December 31, 2024 and current tax expense for the year ended December 31, 2023.
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.
With the recent inflationary pressures combined with the world-wide supply chain issues, our business is subject to the inflationary pressure and we were subject to supply chain issues that were 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 in both the United States and China and our gross margin in both the United States and China.
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.
Using the Black Scholes valuation method, the fair value of the options at the time of our initial public offering was approximately $17.2 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.
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.
Equity in income (loss) from unconsolidated entities Equity in income from unconsolidated entities relates to our China segment and comprises the equity in income from three unconsolidated project companies in which we have a non-controlling 30% interest.
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.
We have not originated any loans to our solar customers since early 2020. As a result, our finance revenue for the years ended December 31, 2024 and 2023 was $340,000 and $562,000, respectively, from our portfolio of solar loans.
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.
Hsu’s annual salary for 2023 was $716,431, and his salary for 2024 is at the annual rate of $737,924. We also owe Mr.
Hsu’s annual salary for 2024 was at the annual rate of $737,924, and his annual salary for 2025 is at the annual rate of $760,065. We also owe Mr.
Our LED revenue increased by $1.7 million, or 55.1%, to $4.7 million for the year ended December 31, 2024 from $3.1 million for the year ended December 31, 2023, primarily resulting from the increase in the number of LED 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.
The consolidated loss from operations was $33.1 million for the year ended December 31, 2024 compared to a consolidated income from operations of $484,000 for the year ended December 31, 2023.
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.
Battery sales refer to the sale of batteries sold other than as a part of a solar system.
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.
Compensation costs per employee, excluding stock-based compensation, for sales, marketing and administrative personnel in our United States segment decreased approximately 27% for the year ended December 31, 2024 compared to the same period in 2023.
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 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 increases of $18.5 million in stock-based compensation expenses and an increase of $7.5 million in China goodwill impairment loss, and an increase of $5.8 million in cash used for our operating assets and liabilities.
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.
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.
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.
Effect if Different Assumptions Used Should a change in facts or circumstances, including a change in enacted tax legislation, lead to a change in judgment about the ultimate realizability of a deferred tax asset, we would record or adjust the related valuation allowance in the period that the change in facts and circumstances occurs, along with a corresponding increase or decrease in the provision for income taxes.
We evaluate uncertain tax positions at the end of each reporting period and make adjustments when warranted based on changes in fact or law. 56 Table of Contents Effect if Different Assumptions Used Should a change in facts or circumstances, including a change in enacted tax legislation, lead to a change in judgment about the ultimate realizability of a deferred tax asset, we would record or adjust the related valuation allowance in the period that the change in facts and circumstances occurs, along with a corresponding increase or decrease in the provision for income taxes.
During the year ended December 31, 2023, we had a $1.1 million recovery of previously reserved receivable on one of our projects for SPIC as a result of the settlement of a legal proceeding.
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.
Hsu on not less than 90 days’ notice prior to the expiration of the initial term or any one-year extension. The agreements provide for an annual salary with an increase of not less than 3% and an annual bonus in restricted stock and cash equal to a specified percentage of consolidated revenues for each year. Mr.
The agreements provide for an annual salary with an increase of not less than 3% and an annual bonus in restricted stock and cash equal to a specified percentage of consolidated revenues for each year. Mr.
Income (loss) from operations As a result of the factors described above, our loss from operations for the United States segment was $24.3 million for the year ended December 31, 2024, compared to income from operations of $1.2 million in the year ended December 31, 2023, 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.
We can give no assurance as to our ability to generate revenue from our China operations. 47 Table of Contents 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.
In addition, at December 31, 2024, we owed Mr. Hsu $1,833,378, representing deferred salary from 2019, 2020, 2021, 2022, 2023, and 2024 and cash bonuses deferred from 2017 and 2018. Mr.
In addition, at December 31, 2025, we owed Mr. Hsu $1,818,282, representing deferred salary from 2019 through 2024 and cash bonuses deferred from 2017 and 2018. Mr.
Our interest expense in the year ended December 31, 2024 primarily includes interest at 3% on two loans from related parties in the United States with a total principal balance of $11.0 million at December 31, 2024, 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 $16.6 million at December 31, 2024, interest at 8% on promissory notes issued to SMX Property (a related party) due in October 2025 with a principal balance of $1.4 million at December 31, 2024, interest at 8% on a promissory note issued to an unrelated individual due on June 30, 2025 with a principal balance of $2.0 million at December 31, 2024, and interest at 12% on a promissory note issued to an unrelated investment company due on June 30, 2025 with a principal balance of $900,000 at 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 equity in income reported for the year ended December 31, 2024 was $635,000 compared to $864,000 in the year ended December 31, 2023, a decrease of $229,000 or 26.5%.
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%.
Other income (expenses), net During the year ended December 31, 2024, other expense, net was $145,000 consisting primarily of a $332,000 of foreign currency transaction losses for our United States segment intercompany receivable denominated in the Chinese currency, a $30,000 loss associated with the write-off of legal settlement receivable as a result of the debtor's bankruptcy, offset by cash distributions declared of $198,000 from our zero basis equity investments in Alliance joint venture entities in the United States segment and a gain on disposal of property in the amount of $21,000.
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. 48 Table of Contents 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 a discussion of current and deferred taxes, net operating losses and tax credit carryforwards, accounting for uncertainty in income taxes, unrecognized tax benefits, and tax disputes, see Note 20 of “Notes to Consolidated Financial Statements.” 86 Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable Item 8.
For a discussion of current and deferred taxes, net operating losses and tax credit carryforwards, accounting for uncertainty in income taxes, unrecognized tax benefits, and tax disputes, see Note 22 of “Notes to Consolidated Financial Statements.”
EB-5 Loans On January 3, 2012, CEF entered into a loan agreement with SREP, one of our United States subsidiaries, pursuant to which CEF advanced $45.0 million. On August 26, 2014, CEF II entered into a loan agreement with LED, another United States subsidiary, for up to $13.0 million. CEF II advanced $10.5 million pursuant to the agreement.
On August 26, 2014, CEF II entered into a loan agreement with LED, another United States subsidiary, for up to $13.0 million. CEF II advanced $10.5 million pursuant to the agreement. The loans from CEF and CEF II bear interest at 3% per annum.
Hsu waived his bonus for 2019, 2020, 2021, 2022, and 2023 as part of the suspension of incentive programs for key employees, and he agreed that the $1,833,378 deferred salary and bonus be paid in twelve equal monthly installments with the first payment becoming due on June 30, 2025.
Hsu waived his bonus for 2019 through 2025 as part of the suspension of incentive programs for key employees, and he agreed that the $1,818,282 deferred salary and $675,000 bonus be paid in twelve equal monthly installments with the first payment having become due on December 31, 2025. As of March 15, 2026, Mr.
Excluding the one-time stock-based compensation expense, our overall gross margin for the year ended December 31, 2024 would be 15.6% compared to 20.6% in the year ended December 31, 2023.
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 notes are secured by the same assets that secured the notes issued to CEF and CEF II.
The notes are secured by the same assets that secured the notes issued to CEF and CEF II. The convertible notes are issued by the Company and the applicable subsidiary – SREP for loans from CEF and LED from loans from CEF II.
Changes in operating assets and liabilities: · $4.1 million decrease in net cash from contract assets related to projects for which the performance obligations have not been satisfied under the revenue recognition standard which became effective January 1, 2019. · $4.0 million increase in net cash from contract liabilities related to projects for which the performance obligations have not been satisfied under the revenue recognition standard which became effective January 1, 2019. · $2.0 million decrease in net cash inflow from inventories. 81 Table of Contents · $1.8 million decrease in net cash inflow from customer loans receivable. · $1.9 million decrease in cash inflows from accounts payable. · $771,000 million decrease in cash from accrued expenses and other payables and other liabilities. · $786,000 increase in net cash inflow from accounts receivable, other receivables and current assets · $75,000 decrease in net cash from operating lease liabilities.
Changes in operating assets and liabilities: · $45.7 million decrease in cash from a net increase contract assets related to projects for which the performance obligations have not been satisfied under our revenue recognition policies. · $57.6 million increase in cash from an increase accounts payable. · $8.5 million decrease in cash from a net increase in accounts receivable, SPIC receivable, and other receivables and current assets. · $6.2 million increase in cash from a net increase in accrued expenses and other payables and other liabilities. · $826,000 decrease in cash from an increase in inventories. · $720,000 increase in cash from a decrease in customer loans receivable. · $124,000 decrease in cash from a decrease operating lease liabilities.
The decrease in the solar energy and battery sales in the United States segment in the year ended December 31, 2024 reflects a 60.2% decrease in the number of systems completed and a 70.2% decrease in the wattages deployed.
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.
Allowance for credit and loan losses Nature of Estimates Required In adopting ASU 2016-13, we are required to estimate credit and loan losses based on a forward-looking methodology and, if needed, record a reserve for each of the following assets: accounts receivable, customer loans receivable and certain contract assets. 85 Table of Contents Key Assumptions and Approach Used In determining the expected loss, we make assumptions based on historical collection experience, current and forecasted economic and business conditions, and a review of the status of each customer’s financial asset account.
Basis of Presentation and Summary of Significant Accounting Policies.” 55 Table of Contents Allowance for credit and loan losses Nature of Estimates Required In adopting ASU 2016-13, we are required to estimate credit and loan losses based on a forward-looking methodology and, if needed, record a reserve for each of the following assets: accounts receivable, customer loans receivable and certain contract assets.
Operating expenses Sales and marketing expenses for the year ended December 31, 2024 decreased for our United States segment to $517,000, a decrease of $641,000, or 55.3%, from $1.2 million in the comparable period of 2023, as a result of decreased sales in 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.
Net cash used by financing activities for the year ended December 31, 2023 was $5.3 million, consisting of $4.8 million principal payments on convertible notes in the United States segment, $276,000 payment on legal settlement with former EB-5 noteholders in the United States segment, $49,000 payments on other borrowings and equipment leases in the United States segment, and $6.8 million payment to Uonone, offset by $6.6 million of proceeds from Uonone, related to legal settlement received by SolarMax on Uonone’s behalf in the China segment.
Financing Activities Net cash provided by financing activities for the year ended December 31, 2025 was $1.1 million, consisting of $4.8 million of proceeds from sale of common stock, offset by $3.3 million principal payments on convertible notes, and $346,000 payment on legal settlement with former EB-5 noteholders.
As a result of foreign currency translations, which are non-cash adjustments, we reported net foreign currency translation losses of $167,000 and $115,000 for the years ended December 31, 2024 and 2023, respectively. 80 Table of Contents Liquidity and Capital Resources The following tables show consolidated cash flows information for the years ended December 31, 2024 and 2023 (dollars in thousands): Years Ended December 31, $ Increase (Decrease) 2024 2023 Consolidated cash flows data: Net cash provided by (used in) operating activities $ (9,130 ) $ 4,091 $ (13,221 ) Net cash provided by (used in) investing activities (6,316 ) (7 ) (6,309 ) Net cash provided by (used in) financing activities 13,309 (5,322 ) 18,631 Net increase (decrease) in cash and cash equivalents and restricted cash (1,831 ) (1,275 ) (556 ) Net increase (decrease) in cash and cash equivalents and restricted cash excluding foreign exchange effect $ (2,137 ) $ (1,237 ) $ (900 ) Operating Activities Net cash used in operating activities for the year ended December 31, 2024 was $9.1 million, compared to net cash provided by operating activities for the year ended December 31, 2023 of $4.1 million.
Liquidity and Capital Resources The following tables show consolidated cash flow information for the years ended December 31, 2025 and 2024 (dollars in thousands): Years Ended December 31, $ Increase 2025 2024 (Decrease) Consolidated cash flow data: Net cash provided by (used in) operating activities $ 498 $ (9,130 ) $ 9,628 Net cash provided by (used in) investing activities 5,839 (6,316 ) 12,155 Net cash provided by (used in) financing activities 1,148 13,309 (12,161 ) Net increase (decrease) in cash and cash equivalents and restricted cash 7,184 (1,831 ) 9,015 Net increase (decrease) in cash and cash equivalents and restricted cash excluding foreign exchange effect $ 7,485 $ (2,137 ) $ 9,622 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.
Our primary business consists of 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 in California. We also generate revenue from financing the sale of its photovoltaic and battery backup systems.
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.
Non-cash adjustments changes: · $18.5 million increase in stock-based compensation expense · $7.5 million increase in goodwill impairment loss · $1.9 million increase in deferred income taxes. · $473,000 decrease in expenses associated with loss provisions for bad debts, loan losses, inventories, warranty, customer care and production guaranty. · $276,000 net decrease from the reduction in gain on debt extinguishment. · $229,000 net increase resulting from equity in income from our equity investments. · $73,000 decrease from the gain on early termination of leases · $2,000 net increase in depreciation and amortization expense which includes loan and debt discounts amortization.
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. 49 Table of Contents Non-cash adjustments changes from 2024 to 2025 : · $18.0 million decrease in stock-based compensation expense · $7.5 million decrease in goodwill impairment loss · $3.2 million decrease in deferred income taxes. · $990,000 increase from the loss on debt extinguishment relate to promissory note payables exchanged for common stock · $381,000 net increase resulting from equity in income from our equity investments. · $289,000 net increase from the reduction in gain on debt extinguishment related to the exchange of convertible notes · $37,000 net decrease in depreciation and amortization expense which includes loan and debt discounts amortization. · $29,000 decrease in expenses associated with loss provisions for bad debts, loan losses, inventories, warranty, customer care and production guaranty.
The $17.2 million stock-based compensation expense, which is not deductible for federal and state income tax purposes and is a non-cash expense, represents the major portion of our $35.0 million loss for the year ended December 31, 2024. 74 Table of Contents Impairment of China Segment Goodwill During the quarter ended September 30, 2024, we performed a goodwill impairment assessment with respect to our China segment 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 September 30, 2024, We recognized an impairment charge for the entire balance of the goodwill of $7.5 million.
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.
Cash Requirements We require substantial funds for our business, and we believe that the cash and cash equivalents and short-term investment, together with cash generated by our operations should enable us to meet our cash requirements for at least the twelve months from the date of this report.
Hsu has been paid $415,547 under this agreement. 54 Table of Contents Cash Requirements We require substantial funds for our business, and we believe that the cash and cash equivalents and short-term investment, together with cash generated by our operations should enable us to meet our cash requirements for at least the twelve months from the date of this report although such funds may not be adequate if the holders of the $14.3 million convertible notes on which we are in default demand acceleration.
Borrowings Contemporaneously with the execution of our lease with 3080 Landlord and the termination of our former lease with SMXP, a related party, in 2022, we issued two two-year 8% notes to SMXP.
Contemporaneously with the execution of our lease with 3080 Landlord and the termination of our former lease with SMXP, a related party, we issued two two-year 8% notes to SMXP in the aggregate principal amount of $1,358,658. These notes provide for quarterly payments of interest during the term with the principal being initially due at maturity.
Sales and marketing expenses in the United States were 2.2% of revenue for the year ended December 31, 2024 compared to 2.1% for the year ended December 31, 2023. Our sales and marketing expenses in the United States may fluctuate from time to time based on the types of marketing and promotion initiatives we deploy.
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.
We do not believe that this restriction will impair our operations since we do not anticipate that we will use the cash generated from our PRC operations in those operations and we do not plan to repatriate such funds to the United States. 82 Table of Contents We invested $7,000,000 from the proceeds of our initial public offering in an 8% promissory note issued by Webao Limited, a Hong Kong based social media company.
We do not believe that this restriction will impair our operations since we do not anticipate that we will use the cash generated from our PRC operations in those operations and we do not plan to repatriate such funds to the United States.
Excluding the one-time stock-compensation expense in 2024, general and administrative expenses were 38.3% of revenue in 2024. We expect a modest increase in general and administrative expenses in 2025 as a result of the cost of compliance and other regulatory costs associated with being a public reporting company for the entire year.
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.
To the extent that we are not able to obtain the proceeds of these loans in a timely manner, our operations may be impaired. 84 Table of Contents Critical Accounting Estimates and Policies The accounting policies described below are considered critical to obtaining an understanding of our consolidated financial statements because their application requires the use of significant estimates and judgments by management in preparing the consolidated financial statements.
Our financial statements for the year ended December 31, 2025 and 2024 have a going concern paragraph. Critical Accounting Estimates and Policies The accounting policies described below are considered critical to obtaining an understanding of our consolidated financial statements because their application requires the use of significant estimates and judgments by management in preparing the consolidated financial statements.
We have extended our loan obligation to an unrelated third party for $2.0 million to June 30, 2025 and, with respect to the loans made under the EB-5 program, as described above, we are seeking to refinance the loans through the issuance of secured subordinated convertible notes to the limited partners of the lenders. We also have obligations to Mr.
We have significant debt obligations which mature or may mature during the next year. With respect to the loans made by CEF and CEF II under the EB-5 program, as described above, we are seeking to refinance the loans through the issuance of secured subordinated convertible notes to the limited partners of the lenders.
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 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.
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 gain on debt extinguishment for the year ended December 31, 2023 was $27,000, representing the gain on exchange of $500,000 principal amount of EB-5 notes for a convertible note in the same principal note.
During the year ended December 31, 2025, we issued convertible notes in the aggregate principal amount of $500,000 pursuant to exchange agreements which resulted in a reduction of EB-5 notes in the principal amount of $500,000 and recognized a gain on debt extinguishment of $13,000.
In March 2025, we received $500,000 from the sale of 561,798 shares of common stock, which we are using for working capital. However, we cannot assure you that we will not require additional funds to meet our commitments or that funds will be available on reasonable terms, if at all.
Under the Nasdaq regulations, we may not be able to raise any significant funding from the sale of common stock at a discount from market in the near future without stockholder approval. However, we cannot assure you that we will not require additional funds to meet our commitments or that funds will be available on reasonable terms, if at all.
We cannot assure you that such financing will be available on acceptable, if any terms, which would impair our ability to develop our business. Our financial statements for the year ended December 31, 2024 have a going concern paragraph. Further, we have short-term investments of approximately $7.7 million which are past due.
We cannot assure you that such financing will be available on acceptable, if any terms, which would impair our ability to develop our business.
Elimination of Forfeiture Provisions of Options upon Initial Public Offering During the years 2015 to 2019, we granted stock options to employees and consultants, of which options to purchase 5,898,137 shares were outstanding at the date of our initial public offering.
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. 43 Table of Contents 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.
Financing Activities Net cash provided by financing activities for the year ended December 31, 2024 was $13.3 million, consisting of $18.6 million of net cash proceeds from the initial public offering completed in March 2024, $900,000 loan proceeds from a new short-term borrowing, offset by $5.5 million principal payments on convertible notes in the United States segment, and $276,000 payment on legal settlement with former EB-5 noteholders in the United States segment.
Net cash provided by financing activities for the year ended December 31, 2024 was $13.3 million, consisting of $18.6 million of net cash proceeds from the initial public offering completed in March 2024, $900,000 loan proceeds from a new short-term borrowing, offset by $5.5 million principal payments on convertible, and $276,000 payment on legal settlement with former EB-5 noteholders. 50 Table of Contents Cash and Cash Equivalents and Restricted Cash The following table sets forth, our cash and cash equivalents and restricted cash held by our United States and China operations at December 31, 2025 and 2024 (dollars in thousands): December 31, 2025 2024 United States Insured cash $ 909 $ 523 Uninsured cash 1,899 497 2,808 1,020 China Insured cash 309 43 Uninsured cash 5,130 - 5,439 43 Total cash and cash equivalents and restricted cash 8,247 1,063 Less: Cash and cash equivalents 7,967 786 Restricted cash $ 280 $ 277 We currently do not plan to repatriate any cash or earnings from any of our non-United States operations because we intend to utilize such funds to purchase inventory in China for delivery to the United States.
Contractual Obligations Borrowings Principal maturities for the financing arrangements as of December 31, 2024 are as follows (dollars in thousands): For the year ending December 31, Bank and Other Unsecured Loans EB-5 Loans - Related Party Notes Payable - Related Party Convertible Notes Total 2025 $ 2,900 $ 4,000 $ 1,359 $ 9,770 $ 18,029 2026 - 2,000 - 3,090 5,090 2027 - 3,000 - 1,690 4,690 2028 - 2,000 - 1,200 3,200 2029 - - - 800 800 Total $ 2,900 $ 11,000 $ 1,359 $ 16,550 $ 31,809 Operating Leases Future minimum lease commitments for office facilities and equipment for each of the next five years as of December 31, 2024, are as follows (dollars in thousands): For the year ending December 31, Total 2025 $ 1,760 2026 1,768 Total $ 3,528 Employment Agreements On October 7, 2016, we entered into an employment agreement with our chief executive officer, David Hsu, for a five-year term commencing January 1, 2017 and continuing on a year-to-year basis unless terminated by us or Mr.
Contractual Obligations Borrowings Principal maturities for the financing arrangements as of December 31, 2025 are as follows (dollars in thousands): For the year ending December 31, EB-5 Loans - Related Party Convertible Notes Total 2026 $ 5,500 $ 14,650 $ 20,150 2027 3,500 200 3,700 2028 1,500 200 1,700 2029 - 100 100 Total $ 10,500 $ 15,150 $ 25,650 Operating Leases Future minimum lease commitments for office facilities and equipment for each of the next five years as of December 31, 2025, are as follows (dollars in thousands): For the year ending December 31, Total 2026 $ 1,785 2027 16 2028 10 Total $ 1,811 On January 28, 2026, we entered into an amendment to the lease for our facilities at 3080 12th Street, Riverside, California.
The initial maturity was June 1, 2024 and it was extended at the request of the maker to December 31, 2024 and subsequently extended to June 30, 2025. Our China segment invested RMB 5,000,000, or approximately $688,000, in a 5% note due June 25, 2024 issued by Qingdao Xiaohuangbei Technology Co., Ltd., a PRC-based company.
We invested $7.0 million from the proceeds of our initial public offering in an 8% promissory note issued by Webao, and RMB 5,000,000, or approximately $688,000, in a 5% note due June 25, 2024 issued by Qingdao, a PRC-based company. As of December 31, 2025, Webao had repaid the $7.0 million.
The initial maturity was June 25, 2024 and it was extended at the request of the maker initially to December 25, 2024 and subsequently extended to June 30, 2025. These notes are shown on our balance sheet as short-term investments.
The initial June 30, 2024 maturity date of the Qingdao note was extended at the request of Qingdao initially to December 25, 2024 and further subsequently extended to June 30, 2025. All of the extensions were at the request of the respective makers of the notes.
Under GAAP, upon the termination of the forfeiture provisions, the value of the options is treated as a compensation expense in the period in which the options become non-forfeitable.
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).
General and administrative expenses relating to the China segment were $1,365,000 in the year ended December 31, 2024, as compared with $718,000 in the year ended December 31, 2023, an increase of $647,000 primarily as a result of the increase in the bad debt reserve related to the SPIC receivable based on the result of the initial arbitration meetings during 2024.
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.
As of March 15, 2025, notes to CEF and CEF II in the aggregate principal amount of $11.0 million were outstanding. 83 Table of Contents Other Debt Obligations We have a loan for $2.0 million from an unrelated party bearing interest rate at 6% per annum which becomes due at June 30, 2025.
Other Debt Obligations We had an unsecured loan for $2.0 million from an unrelated party bearing interest rate at 6% per annum which became due at June 30, 2025. This loan had been extended periodically since the original maturity date of April 30, 2021.
During the year ended December 31, 2024, our United States operations recognized a one-time stock-based compensation expense of approximately $18.5 million in general and administrative expense as a result of performance options vesting of 5,898,137 option shares and 264,650 restricted shares granted to two former consultants, upon our initial public offering in February 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.
We can give no assurance as to our ability to generate revenue from our China operations, and, if we are not able to generate revenue from our China segment, we may discontinue this segment. 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.
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.
The increase in 2023 and the decrease in 2024 reflected resulted from increased staffing in response to an increased demand for solar energy projects in anticipation of the implementation of California’s NEM 3.0 and the decrease reflected the lay-off of a portion of our employees resulting from a slowdown after we had completed installation of the increased 2023 backlog resulting from NEM 3.
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.
Gross margin decreased to 10.1% for the year ended December 31, 2024 from 20.6% in the year ended December 31, 2023, primarily as result of the decreased sales in the current period while some labor components of the cost remain fixed which adversely impacted the gross margin.
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.

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