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What changed in SUNation Energy, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SUNation Energy, Inc.'s 2022 and 2023 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 2023 report.

+144 added−112 removedSource: 10-K (2024-04-01) vs 10-K (2023-04-14)

Top changes in SUNation Energy, Inc.'s 2023 10-K

144 paragraphs added · 112 removed · 90 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

14 edited+0 added−1 removed59 unchanged
Biggest changeWe have proprietary technology in this area, strong relationships with regulators and utilities, and are participating in ongoing requests for proposals around this opportunity. Residential Customers Agreements The majority of Pineapple revenue (92% of 2022 consolidated revenue) comes from photovoltaic solar energy systems and batteries for residential homeowners. The size of our residential installations vary by location.
Biggest changeResidential Customers Agreements The majority of Pineapple revenue (81% of 2023 consolidated revenue) comes from photovoltaic solar energy systems and batteries for residential homeowners. The size of our residential installations vary by location. In 2023, the average system size was 6.2 kilowatts for HEC customers in Hawaii and 11.5 kilowatts for SUNation customers in Long Island, New York.
ITEM 1. BUSINESS OVERVIEW Pineapple Energy Inc.’s (herein collectively referred to as “Pineapple,” “PEGY,” “our,” “we” or the “Company”) vision is to power the energy transition through grass-roots growth of solar electricity paired with battery storage. The Company is a growing domestic operator and consolidator of residential and commercial solar, battery storage, and grid services solutions.
ITEM 1. BUSINESS OVERVIEW Pineapple Energy Inc.’s (herein referred to as “Pineapple,” “PEGY,” “our,” “we” or the “Company”) vision is to power the energy transition through grass-roots growth of solar electricity paired with battery storage. The Company is a growing domestic operator and consolidator of residential and commercial solar, battery storage, and grid services solutions.
Our strategy is focused on acquiring, integrating, and growing leading local and regional solar, storage, and energy services companies nationwide. Pineapple today is primarily engaged in the sale, design, and installation of photovoltaic solar energy systems and battery storage systems through its Hawaii-based Hawaii Energy Connection (“HEC”) and New York-based SUNation Solar Systems (“SUNation”) entities.
Our strategy is focused on acquiring, integrating, and growing leading local and regional solar, storage, and energy services companies nationwide. Pineapple is primarily engaged in the sale, design, and installation of photovoltaic solar energy systems and battery storage systems through its Hawaii-based Hawaii Energy Connection (“HEC”) and New York-based SUNation Solar Systems (“SUNation”) entities.
Pineapple installers complete offerings in-house as full-service installers to have total control of the customer experience. Pineapple offers transparent, clear sales agreements and has invested in digital tools to support customers along the installation journey. Pineapple installers are active in their local communities to build a trusted brand.
Our installers complete offerings in-house as full-service installers to have total control of the customer experience. Pineapple offers transparent, clear sales agreements and has invested in digital tools to support customers along the installation journey. Our installers are active in their local communities to build a trusted brand.
We believe there is a tremendous opportunity for a consolidator to rapidly scale its business and become one of the most recognized brands in the industry through acquiring, integrating, and growing leading local and regional solar sales and installation companies. 3 Leverage and continue to lower our customer acquisition costs through referral programs.
We believe there is a tremendous opportunity for a consolidator to rapidly scale its business and become one of the most recognized brands in the industry through acquiring, integrating, and growing leading local and regional solar sales and installation companies. 6 Leverage and continue to lower our customer acquisition costs through referral programs.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available 6 free of charge on our website as soon as reasonably practicable after these documents are filed electronically with the Securities and Exchange Commission (“SEC”).
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available 9 free of charge on our website as soon as reasonably practicable after these documents are filed electronically with the Securities and Exchange Commission (“SEC”).
We already have what we believe are premier referral rates, with over 50% of installed jobs in 2022 coming from referrals or repeat customers.
We already have what we believe are premier referral rates, with over 50% of installed jobs in 2022 and 2023 coming from referrals or repeat customers.
Human Capital As of March 31, 2023, the Company employed 255 people. We consider our relations with our employees to be good. None of our employees are currently represented by a labor union. The Company aims to attract and retain qualified personnel and provides wages and benefits that are competitive locally to reward employees for performance.
Human Capital As of March 15, 2024, the Company employed 201 people. We consider our relations with our employees to be good. None of our employees are currently represented by a labor union. The Company aims to attract and retain qualified personnel and provides wages and benefits that are competitive locally to reward employees for performance.
See Note 7 of the Notes to the Consolidated Financial Statements, “Discontinued Operations.” As a result, unless otherwise noted, all information in this Form 10-K related to the JDL and Ecessa businesses will be discussed and presented as discontinued operations and the Company will report its remaining business operations as continuing operations.
See Note 7 of the Notes to the Consolidated Financial Statements, “Discontinued Operations.” As a result, unless otherwise noted, all information in this Form 10-K related to the JDL and Ecessa businesses is discussed and presented as discontinued operations and the Company’s remaining business operations are reported as continuing operations.
While these patents are an important part of our intellectual property, we are not overly dependent on any of these patents. 5 Government Regulation We are not regulated as a public utility in the U.S. under applicable national, state, or other local regulatory regimes where we conduct business.
While these patents are an important part of our intellectual property, we do not consider any to be material to our business. 8 Government Regulation We are not regulated as a public utility in the U.S. under applicable national, state, or other local regulatory regimes where we conduct business.
This is an emerging part of the business, but soon we believe we will be able to help homeowners generate ongoing revenue streams by 4 aggregating their batteries into a fleet, thus creating a “virtual power plant” and selling grid services to the utility.
This is an emerging part of the business, but soon we believe we will be able to help homeowners generate ongoing revenue streams by 7 aggregating their batteries into a fleet, thus creating a “virtual power plant” and selling grid services to the utility. We have proprietary technology in this area, strong relationships with regulators and utilities.
On November 9, 2022, the Company purchased the equity of New York-based SUNation Solar Systems, Inc. and five of its affiliated entities (collectively “SUNation”). Pursuant to the merger agreement, the Company is working to divest its legacy operations and operating assets. The Company is actively pursuing the sale of its JDL Technologies, Inc.
On November 9, 2022, the Company purchased the equity of New York-based SUNation Solar Systems, Inc. and five of its affiliated entities (collectively “SUNation”). Pursuant to the merger agreement, the Company sold substantially all of its JDL Technologies, Inc. (“JDL”) and Ecessa Corporation (“Ecessa”) businesses on June 30, 2023.
In 2022, the average system size was 6.8 kilowatts for HEC customers in Hawaii and 11.6 kilowatts for SUNation customers in Long Island, New York. Historically, most residential homeowners have chosen to own their home system rather than pursue a third-party ownership model.
Historically, most residential homeowners have chosen to own their home system rather than pursue a third-party ownership model. Pineapple believes that it has historically been best for customers to own their own systems, but recognizes that some customers do not want to own their systems.
(“JDL”) and Ecessa Corporation (“Ecessa”) businesses and has met the criteria to report the operations of these businesses as discontinued operations.
Because the Company was working to divest such assets pursuant to the merger agreement, it previously met the criteria to report the operations of these businesses as discontinued operations.
Removed
Pineapple believes that it has historically been best for customers to own their own systems, but recognizes that some customers do not want to own their systems. We will continue exploring whether adding lease or purchase power agreement (“PPA”) options would be beneficial to homeowners going forward.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

41 edited+35 added−14 removed168 unchanged
Biggest changeThe United States has often considered tariffs on industry-related goods imported from other countries. For example, on February 8, 2022, Auxin Solar, a U.S.-based solar panel manufacturer, submitted a petition to the U.S.
Biggest changeIncreases in the cost of the Company’s solar energy systems due to tariffs and other trade restrictions imposed by the U.S. government could have a material adverse effect on its business, financial condition and results of operations. The United States has often considered tariffs on industry-related goods imported from other countries.
The consummation and timing of any future acquisitions will depend upon, among other things, whether the Company is able to: identify attractive acquisition candidates; negotiate economically acceptable purchase agreements; obtain any required governmental or third-party consents; obtain financing for these acquisitions on economically acceptable terms; which may be more difficult at times when the capital markets are less accessible; and outbid any competing bidders. ‎ Additionally, any acquisition involves potential risks, including, among other things: mistaken assumptions about assets, revenues and expenses of the acquired company, including synergies and potential growth; an inability to successfully integrate the assets or businesses the Company acquires; coordinating geographically disparate organizations, systems and facilities; the assumption of unknown liabilities for which the Company is not indemnified or for which its indemnity is inadequate; mistaken assumptions about the acquired company’s suppliers or other vendors; the diversion of management’s and employees’ attention from other business concerns; unforeseen difficulties operating in new geographic areas and business lines; customer or key employee losses at the acquired business; and poor quality assets or installation. ‎ If the Company consummates future acquisitions, its capitalization, results of operations and future growth may change significantly and its shareholders may not have the opportunity to evaluate the economic, financial and other relevant information considered in deciding to engage in these future acquisitions.
The consummation and timing of any future acquisitions will depend upon, among other things, whether the Company is able to: identify attractive acquisition candidates; negotiate economically acceptable purchase agreements; obtain any required governmental or third-party consents; obtain financing for these acquisitions on economically acceptable terms; which may be more difficult at times when the capital markets are less accessible; and outbid any competing bidders. ‎ Additionally, any acquisition involves potential risks, including, among other things: mistaken assumptions about assets, revenues and expenses of the acquired company, including synergies and potential growth; an inability to successfully integrate the assets or businesses the Company acquires; coordinating geographically disparate organizations, systems and facilities; 16 the assumption of unknown liabilities for which the Company is not indemnified or for which its indemnity is inadequate; mistaken assumptions about the acquired company’s suppliers or other vendors; the diversion of management’s and employees’ attention from other business concerns; unforeseen difficulties operating in new geographic areas and business lines; customer or key employee losses at the acquired business; and poor quality assets or installation. ‎ If the Company consummates future acquisitions, its capitalization, results of operations and future growth may change significantly and its shareholders may not have the opportunity to evaluate the economic, financial and other relevant information considered in deciding to engage in these future acquisitions.
The price of electricity from utilities could decrease for any one or more reasons, including but not limited to: the construction of a significant number of new power generation plants, whether generated by natural gas, nuclear power, coal or renewable energy; the construction of additional electric transmission and distribution lines; a reduction in the price of natural gas or other natural resources as a result of increased supply due to new drilling techniques or other technological developments; a relaxation of associated regulatory standards or broader economic or policy developments; 14 less demand for electricity due to energy conservation technologies and public initiatives to reduce electricity consumption or to recessionary economic conditions; and development of competing energy technologies that provide less expensive energy. ‎ A reduction in electric utilities’ rates or changes to peak hour pricing policies or rate design (such as the adoption of a fixed or flat rate or adding fees to homeowners that have residential solar systems) could also make the Company’s offerings less competitive with the price of electricity from the electrical grid.
The price of electricity from utilities could decrease for any one or more reasons, including but not limited to: the construction of a significant number of new power generation plants, whether generated by natural gas, nuclear power, coal or renewable energy; the construction of additional electric transmission and distribution lines; a reduction in the price of natural gas or other natural resources as a result of increased supply due to new drilling techniques or other technological developments; a relaxation of associated regulatory standards or broader economic or policy developments; less demand for electricity due to energy conservation technologies and public initiatives to reduce electricity consumption or to recessionary economic conditions; and development of competing energy technologies that provide less expensive energy. ‎ A reduction in electric utilities’ rates or changes to peak hour pricing policies or rate design (such as the adoption of a fixed or flat rate or adding fees to homeowners that have residential solar systems) could also make the Company’s offerings less competitive with the price of electricity from the electrical grid.
The existence of unissued and unreserved common stock and preferred stock may enable the board of directors to issue shares to persons friendly to current management or to issue preferred stock with terms that could render more difficult or discourage a third-party attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or otherwise, thereby protecting the continuity of its management. Shares of the Company’s common stock do not have cumulative voting rights in the election of directors, so our shareholders holding a majority of the shares of common stock outstanding are able to elect all of the Company’s directors. Special meetings of the shareholders may be called only by the board of directors, the chairman of the board of directors or the chief executive officer. The board of directors may adopt, alter, amend or repeal some provisions of the bylaws of the Company without shareholder approval. 19 Unless otherwise provided by law, any newly created directorship or any vacancy occurring on the board of directors for any cause may be filled by the affirmative vote of a majority of the remaining members of the board of directors even if such majority is less than a quorum, and any director so elected shall hold office until the expiration of the term of office of the director whom he or she has replaced or until his or her successor is elected and qualified. The affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of the Company’s capital stock entitled to vote generally in the election of directors, voting together as a single class, is required to amend or repeal certain provisions of our articles and bylaws relating to advance notice of nominations for election and advance notice of shareholder proposals . Shareholders must follow advance notice procedures to submit nominations of candidates for election to the Board of Directors at an annual or special meeting of our shareholders and must follow advance notice procedures to submit other proposals for business to be brought before an annual meeting of our shareholders.
The existence of unissued and unreserved common stock and preferred stock may enable the board of directors to issue shares to persons friendly to current management or to issue preferred stock with terms that could render more difficult or discourage a third-party attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or otherwise, thereby protecting the continuity of its management. Shares of the Company’s common stock do not have cumulative voting rights in the election of directors, so our shareholders holding a majority of the shares of common stock outstanding are able to elect all of the Company’s directors. 12 Special meetings of the shareholders may be called only by the board of directors, the chairman of the board of directors or the chief executive officer. The board of directors may adopt, alter, amend or repeal some provisions of the bylaws of the Company without shareholder approval. Unless otherwise provided by law, any newly created directorship or any vacancy occurring on the board of directors for any cause may be filled by the affirmative vote of a majority of the remaining members of the board of directors even if such majority is less than a quorum, and any director so elected shall hold office until the expiration of the term of office of the director whom he or she has replaced or until his or her successor is elected and qualified. The affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of the Company’s capital stock entitled to vote generally in the election of directors, voting together as a single class, is required to amend or repeal certain provisions of our articles and bylaws relating to advance notice of nominations for election and advance notice of shareholder proposals . Shareholders must follow advance notice procedures to submit nominations of candidates for election to the Board of Directors at an annual or special meeting of our shareholders and must follow advance notice procedures to submit other proposals for business to be brought before an annual meeting of our shareholders.
Factors that may have a significant impact on the market price and marketability of the Company’s common stock include, among others: public reaction to the Company’s press releases, announcements and filings with the SEC; the Company’s operating and financial performance; fluctuations in broader securities market prices and volumes, particularly among securities of technology and solar companies; changes in market valuations of similar companies; departures of key personnel; commencement of or involvement in litigation; variations in the Company’s quarterly results of operations or those of other technology and solar companies; changes in general economic conditions, financial markets or the technology and solar industries; announcements by the Company or its competitors of significant acquisitions or other transactions; changes in accounting standards, policies, guidance, interpretations or principles; speculation in the press or investment community; actions by the Company’s shareholders, particularly relating to the Company’s common stock; 18 the failure of securities analysts to cover the Company’s common stock or changes in their recommendations and estimates of its financial performance; future sales of the Company’s common stock; the delisting of the Company’s common stock or halting or suspension of trading in its common stock by the Nasdaq Stock Market; economic and other external factors, such as the COVID-19 pandemic; and general market conditions.
Factors that may have a significant impact on the market price and marketability of the Company’s common stock include, among others: public reaction to the Company’s press releases, announcements and filings with the SEC; the Company’s operating and financial performance; fluctuations in broader securities market prices and volumes, particularly among securities of technology and solar companies; changes in market valuations of similar companies; departures of key personnel; commencement of or involvement in litigation; variations in the Company’s quarterly results of operations or those of other technology and solar companies; 11 changes in general economic conditions, financial markets or the technology and solar industries; announcements by the Company or its competitors of significant acquisitions or other transactions; changes in accounting standards, policies, guidance, interpretations or principles; speculation in the press or investment community; actions by the Company’s shareholders, particularly relating to the Company’s common stock; the failure of securities analysts to cover the Company’s common stock or changes in their recommendations and estimates of its financial performance; future sales of the Company’s common stock; the delisting of the Company’s common stock or halting or suspension of trading in its common stock by the Nasdaq Stock Market; economic and other external factors, such as the COVID-19 pandemic; and general market conditions.
Competition for these roles is increasing. Shortages of skilled labor could significantly delay a project or otherwise increase our costs. 12 Our business is concentrated in certain markets, putting us at risk of region-specific disruptions. The Company currently operates primarily in Hawaii and the New York (Long Island) region, and most of the Company’s revenue comes from these regions.
Competition for these roles is increasing. Shortages of skilled labor could significantly delay a project or otherwise increase our costs. Our business is concentrated in certain markets, putting us at risk of region-specific disruptions. The Company currently operates primarily in Hawaii and the New York (Long Island) region, and most of the Company’s revenue comes from these regions.
Delays in interconnections could also harm the Company’s growth rate and customer satisfaction scores. As adoption of solar distributed generation rises, along with the increased operation of utility-scale solar generation (such as in key markets including California), the amount of solar energy being contributed to the electrical grid may surpass the capacity anticipated to be needed to meet aggregate demand.
Delays in interconnections could also harm the Company’s growth rate and customer satisfaction scores. 23 As adoption of solar distributed generation rises, along with the increased operation of utility-scale solar generation (such as in key markets including California), the amount of solar energy being contributed to the electrical grid may surpass the capacity anticipated to be needed to meet aggregate demand.
Significant developments in technology, such as advances in distributed solar power generation, energy storage solutions such as batteries, energy storage management systems, the widespread use or adoption of fuel cells for residential or commercial properties or improvements in other forms of distributed or centralized power production may materially and adversely affect demand for the Company’s offerings and otherwise affect its business.
Significant developments in technology, such as advances in distributed solar power generation, energy storage solutions such as batteries, energy storage management systems, the widespread use or adoption of fuel cells for residential or commercial properties or 20 improvements in other forms of distributed or centralized power production may materially and adversely affect demand for the Company’s offerings and otherwise affect its business.
These jurisdictions, by statute, regulation, administrative order or a combination thereof, have recently adopted or are considering new restrictions and additional changes to net metering programs either on a state-wide basis or within specific utility territories. Many of these measures were introduced and supported by centralized electric utilities.
These jurisdictions, by statute, regulation, administrative order or a combination thereof, have recently adopted or are considering new restrictions and 22 additional changes to net metering programs either on a state-wide basis or within specific utility territories. Many of these measures were introduced and supported by centralized electric utilities.
This growth may place a strain on the Company’s management, operational and financial infrastructure. The Company’s growth requires management to devote a significant amount of time and effort to maintain and expand its relationships with customers and third parties, attract new customers, arrange financing for its growth and manage its expansion into additional markets.
This growth may place a strain on the Company’s management, operational and financial infrastructure. The Company’s growth requires management to devote a significant amount of time and effort to maintain and expand 13 its relationships with customers and third parties, attract new customers, arrange financing for its growth and manage its expansion into additional markets.
The successful assertion of product liability claims against the Company could result in potentially significant monetary damages, potential increases in 10 insurance expenses, penalties or fines, subject it to adverse publicity, damage its reputation and competitive position and adversely affect sales of solar energy systems.
The successful assertion of product liability claims against the Company could result in potentially significant monetary damages, potential increases in insurance expenses, penalties or fines, subject it to adverse publicity, damage its reputation and competitive position and adversely affect sales of solar energy systems.
These types of risks could harm the Company’s business, financial condition and results of operations. Risks Related to Regulations Increases in the cost of the Company’s solar energy systems due to tariffs imposed by the U.S. government could have a material adverse effect on its business, financial condition and results of operations.
These types of risks could harm the Company’s business, financial condition and results of operations. 21 Risks Related to Regulations Increases in the cost of the Company’s solar energy systems due to tariffs imposed by the U.S. government could have a material adverse effect on its business, financial condition and results of operations.
The Company currently is not regulated as an electric public utility in the U.S. under applicable national, state or other local regulatory regimes where it conducts business, and is not currently subject to the various federal, state and local standards, restrictions and 15 regulatory requirements applicable to centralized public utilities.
The Company currently is not regulated as an electric public utility in the U.S. under applicable national, state or other local regulatory regimes where it conducts business, and is not currently subject to the various federal, state and local standards, restrictions and regulatory requirements applicable to centralized public utilities.
The Company depends on its experienced management team and the loss of one or more key executives could have a negative impact on its business. The Company may be unable to replace key members of its management team and key employees if it loses their services.
The Company depends on its experienced management team and the loss of one or more key executives could have a negative impact on its business. The Company may be unable to replace key members of its management team and key employees if it loses their 17 services.
These incentives come in various forms, including rebates, tax credits and other financial incentives such as payments for renewable energy credits associated 16 with renewable energy generation, exclusion of solar energy systems from property tax assessments or other taxes and system performance payments.
These incentives come in various forms, including rebates, tax credits and other financial incentives such as payments for renewable energy credits associated with renewable energy generation, exclusion of solar energy systems from property tax assessments or other taxes and system performance payments.
Given that the Company receives, stores and uses personal information of its customers, including names, addresses, e-mail addresses, credit information, credit card and financial account information and other housing and energy use information, this risk is amplified.
Given that the Company receives, stores and 18 uses personal information of its customers, including names, addresses, e-mail addresses, credit information, credit card and financial account information and other housing and energy use information, this risk is amplified.
Any need to transition to a new supplier may result in additional costs and delays in originating solar installation agreements and deploying its related solar energy systems, which in turn may result in additional costs and delays in its acquisition of such solar installation agreements and related solar energy systems.
Any need to transition to a new supplier may result in additional costs and delays in 14 originating solar installation agreements and deploying its related solar energy systems, which in turn may result in additional costs and delays in its acquisition of such solar installation agreements and related solar energy systems.
Solar energy system component and raw material prices may not continue to decline at the same rate as they have over the past several years or at all.
Solar energy system 19 component and raw material prices may not continue to decline at the same rate as they have over the past several years or at all.
These parties may claim the Company has misappropriated, misused, violated or 11 infringed third-party intellectual property rights.
These parties may claim the Company has misappropriated, misused, violated or infringed third-party intellectual property rights.
In addition to the other risks described in this section, the following factors could cause the Company’s operating results to fluctuate: expiration or initiation of any governmental rebates or incentives; significant fluctuations in customer demand for the Company’s solar energy systems; our ability to continue to expand the Company’s operations and the amount and timing of expenditures related to this expansion; announcements by the Company or its competitors of significant acquisitions; strategic partnerships, joint ventures or capital-raising activities or commitments; price of materials and supplies; availability and cost of labor; changes in the Company’s pricing policies or terms or those of its competitors, including centralized electric utilities; actual or anticipated developments in the Company’s competitors’ businesses; technology or the competitive landscape; and natural disasters or other weather or meteorological conditions. ‎ For these or other reasons, past performance of Pineapple, HEC, E-Gear, or SUNation should not be relied upon as indications of the Company’s future performance.
In addition to the other risks described in this section, the following factors could cause the Company’s operating results to fluctuate: expiration or initiation of any governmental rebates or incentives; significant fluctuations in customer demand for the Company’s solar energy systems; our ability to continue to expand the Company’s operations and the amount and timing of expenditures related to this expansion; announcements by the Company or its competitors of significant acquisitions; strategic partnerships, joint ventures or capital-raising activities or commitments; price of materials and supplies; availability and cost of labor; changes in the Company’s pricing policies or terms or those of its competitors, including centralized electric utilities; actual or anticipated developments in the Company’s competitors’ businesses; technology or the competitive landscape; and 15 natural disasters or other weather or meteorological conditions. ‎ For these or other reasons, past performance should not be relied upon as indications of the Company’s future performance.
At our stock price as of March 31, 2023, if we were to trigger these anti-dilution provisions, including through the sale of securities for purposes of a capital raising transaction, a substantial number of additional shares of our common stock may become issuable, which would further materially dilute the ownership interests of our shareholders.
At our stock price as of March 15, 2024, if we were to trigger these anti-dilution provisions, including through the sale of securities for purposes of a capital raising transaction, a substantial number of additional shares of our common stock may become issuable, which would further materially dilute the ownership interests of our shareholders.
If the Company is unable to establish or maintain appropriate internal financial controls and procedures, it could cause the Company to fail to meet its reporting obligations on a timely basis, result in material misstatements in its consolidated financial statements, and harm its operating results.
If the Company continues to have material weaknesses in our internal controls or is unable to establish or maintain appropriate internal financial controls and procedures, it could cause the Company to fail to meet its reporting obligations on a timely basis, result in material misstatements in its consolidated financial statements, and harm its operating results.
The Company board of directors is authorized to issue and designate shares of preferred stock without shareholder approval.
The Company’s board of directors is authorized to issue and designate shares of preferred stock without shareholder approval.
The Company’s supply chain and operations could be subject to natural disasters and other events beyond its control, such as earthquakes, wildfires, flooding, hurricanes, tsunamis, typhoons, volcanic eruptions, droughts, tornadoes, power outages or other natural disasters, the effects of climate change and related extreme weather, public health issues and pandemics, war, terrorism, government restrictions or limitations on trade, and geo-political unrest and uncertainties. 8 Increases in the cost of the Company’s solar energy systems due to tariffs and other trade restrictions imposed by the U.S. government could have a material adverse effect on its business, financial condition and results of operations.
The Company’s supply chain and operations could be subject to natural disasters and other events beyond its control, such as earthquakes, wildfires, flooding, hurricanes, tsunamis, typhoons, volcanic eruptions, droughts, tornadoes, power outages or other natural disasters, the effects of climate change and related extreme weather, public health issues and pandemics, war, terrorism, government restrictions or limitations on trade, and geo-political unrest and uncertainties.
Developments in technology or improvements in distributed solar energy generation and related technologies or components may materially adversely affect demand for the Company’s offerings.
Developments in technology or improvements in distributed solar energy generation and related technologies or components may have a material adverse effect on demand for the Company’s offerings.
Department of Commerce to request country-wide circumvention inquiries pursuant to Section 781(b) of the Tariff Act of 1930 concerning crystalline silicon photovoltaic cells and modules assembled in Malaysia, Thailand, Vietnam and Cambodia using Chinese inputs.
For example, on February 8, 2022, Auxin Solar, a U.S.-based solar panel manufacturer, submitted a petition to the U.S. Department of Commerce to request country-wide circumvention inquiries pursuant to Section 781(b) of the Tariff Act of 1930 concerning crystalline silicon photovoltaic cells and modules assembled in Malaysia, Thailand, Vietnam and Cambodia using Chinese inputs.
The powers, preferences and rights of these series of preferred stock may be senior to or on parity with our common stock, which may reduce its value.
The powers, preferences and rights of these series of preferred stock may be senior to or on parity with our common stock, which may reduce its value. Risks Relating to the Company’s Business The Company’s growth strategy depends on the continued origination of solar installation agreements. The Company’s growth strategy depends on the continued origination of solar installation agreements.
Based on the Company’s current financial position, including the approximately $4.5 million of cash, restricted cash, cash equivalents and investments that are restricted under the Company’s contingent value rights (“CVR”) agreement and cannot be used by the Company for its own working capital needs and $1.3 million of cash that can only be used to support SUNation’s operations, the Company’s forecasted future cash flows for twelve months beyond the date of issuance of the financial statements in this report indicate that the Company will not have sufficient cash to repay the $5.0 million secured short-term note that is due on August 9, 2023 (the “Short-Term Note”) .
Based on the Company’s current financial position, including the approximately $1.8 million of cash, restricted cash, cash equivalents and investments that are restricted under the Company’s contingent value rights (“CVR”) agreement and cannot be used by the Company for its own working capital needs , the Company’s forecasted future cash flows for twelve months beyond the date of issuance of the financial statements in this report indicate that the Company will not have sufficient cash to make the first earnout payment in the second quarter of 2024 under the SUNation Transaction Agreement or the first principal payment of the long-term note that is due on November 9, 2024 .
For illustrative purposes only, if we were to sell shares of common stock that reset the conversion price of the Convertible Preferred Stock to $1.59, the closing price of our common stock on the Nasdaq Stock Market as of March 31, 2023, the Convertible Preferred Stock would be convertible into an additional 10,610,063 shares of common stock and the exercise price of the PIPE Warrants would reduce to $1.59 and the PIPE Warrants would become exercisable for an additional 14,949,316 shares of common stock.
For illustrative purposes only, if we were to sell shares of common stock that reset the conversion price of the Convertible Preferred Stock to $0.07, the closing price of our common stock on the Nasdaq Stock Market as of March 15, 2024, the Convertible Preferred Stock would be convertible into an additional 147,122,401 shares of common stock and the exercise price of the PIPE Warrants would reduce to $0.07 and the PIPE Warrants would become exercisable for an additional 221,603,161 shares of common stock.
Any failure to effectively manage the Company’s operations and growth could adversely impact its reputation, business, financial condition, cash flows and results of operations. 7 The Company needs to raise additional capital to fund its operations and repay its obligations, which funding may not be available on favorable terms or at all and may lead to substantial dilution to the Company’s existing shareholders.
The Company needs to raise additional capital to fund its operations and repay its obligations, which funding may not be available on favorable terms or at all and may lead to substantial dilution to the Company’s existing shareholders.
The Company may issue additional common stock resulting in stock ownership dilution. As of March 31, 2023, we had 9,948,836 shares of common stock outstanding.
The Company may issue additional common stock resulting in stock ownership dilution. As of March 15, 2024, we had 64,927,119 shares of common stock outstanding.
Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors, including those factors discussed below. Risks Relating to the Company’s Business The Company’s growth strategy depends on the continued origination of solar installation agreements. The Company’s growth strategy depends on the continued origination of solar installation agreements.
Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors, including those factors discussed below.
During 2022, the sale price of common stock following the merger transaction ranged from $0.76 to $7.60 per share, and our daily trading volume ranged from 2,400 to approximately 135.5 million shares. This volatility may, in part, be the result of broad market and industry factors.
During 2024 through March 15, 2024, the sale price of common stock ranged from $0.05 to $0.63 per share, and our daily trading volume ranged from 8,000 to approximately 49.5 million shares. This volatility may, in part, be the result of broad market and industry factors.
The Company’s inability to comply with the continued listing requirements of the Nasdaq Stock Market could result in its common stock being delisted, which could affect its market price and liquidity and reduce the Company’s ability to raise capital.
Risks Related to the Company’s Common Stock Our failure to maintain compliance with the Nasdaq Stock Market’s continued listing requirements could result in the delisting of our common stock , which could negatively affect the market price of our common stock, our liquidity and our ability to raise capital .
If the Company fails to put in place appropriate and effective internal control over financial reporting, it may suffer harm to its reputation and investor confidence levels. The process of designing and implementing and maintaining effective internal controls for newly acquired businesses has required and is expected to continue to require significant resources of the Company.
The process of designing and implementing and maintaining effective internal controls for newly acquired businesses has required and is expected to continue to require significant resources of the Company.
Individuals hired by or on behalf of the Company may have workplace accidents and receive citations from OSHA regulators for alleged safety violations, resulting in fines.
Individuals hired by or on behalf of the Company may have workplace accidents and receive citations from OSHA regulators for alleged safety violations, resulting in fines. Any such accidents, citations, violations, injuries or failure to comply with industry best practices may subject the Company to adverse publicity, damage its reputation and competitive position and adversely affect its business.
As a result, these competitors may be able to devote more resources to the promotion and sale of their products or services or respond more quickly to evolving industry standards and changes in market conditions than the Company can. 13 The Company also competes with retail electric providers and independent power producers that are not regulated like centralized electric utilities but that have access to the centralized utilities’ electricity transmission and distribution infrastructure pursuant to state, territorial and local pro-competition and consumer choice policies.
The Company also competes with retail electric providers and independent power producers that are not regulated like centralized electric utilities but that have access to the centralized utilities’ electricity transmission and distribution infrastructure pursuant to state, territorial and local pro-competition and consumer choice policies.
After the November 9, 2022 PIPE reset and subsequent conversions through March 31, 2023 , the number of remaining preferred shares with a stated amount of $4.00 were convertible into 7,000,000 shares of common stock at a conversion price of $4.00, and there were outstanding warrants to purchase 1,176,371 shares of common stock with a $13.60 per share exercise price and warrants to purchase 4,000,000 shares of common stock with a $4.00 exercise price.
After the November 9, 2022 and February 5, 2024 PIPE resets and subsequent conversions through March 15, 2024 , the 20,597.14 of remaining preferred shares with a stated amount of $0.14 were convertible into 147,122,398 shares of common stock at a conversion price of $0.14, and there were outstanding warrants to purchase 235,539,698 shares of common stock with a weighted average of $0.14 per share exercise price.
Additionally, there are an additional 1,250,000 shares reserved for our 2022 Equity Incentive Plan and an additional 200,000 shares for our 2022 Employee Stock Purchase Plan. Accordingly, our shareholders may experience future dilution, which may be substantial .
There are an additional 911,404 shares reserved for issuance upon the settlement of outstanding restricted stock units, 271,090 shares available for grant under the 2022 Equity Incentive Plan, and 415,005 shares available for issuance under the 2022 Employee Stock Purchase Plan. Accordingly, our shareholders may experience future dilution, which may be substantial .
This could also result in declines in quality or customer satisfaction, increased costs, difficulties in introducing new offerings or other operational difficulties.
This could also result in declines in quality or customer satisfaction, increased costs, difficulties in introducing new offerings or other operational difficulties. Any failure to effectively manage the Company’s operations and growth could adversely impact its reputation, business, financial condition, cash flows and results of operations.
The Company is required to meet certain qualitative and quantitative requirements to maintain the listing of its common stock on the Nasdaq Stock Market.
Our common stock is currently listed on The Nasdaq Capital Market. In order to maintain this listing, we must satisfy minimum financial and other requirements.
Removed
The Company may have difficulty integrating the businesses from the SUNation transaction with its existing operations or otherwise obtaining the strategic benefits of the acquisition, and it may be adversely impacted by negative covenants under the Short-Term Note. The impact of the SUNation acquisition on the Company’s business, operating results and financial condition is uncertain.
Added
On October 27, 2023, we received a notice from the Listing Qualifications Department of the Nasdaq Stock Market informing us that because the closing bid price for our common stock listed on Nasdaq was below $1.00 per share for the last 31 consecutive business days, we did not comply with the minimum closing bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(a)(2) (the "Minimum Bid Rule").
Removed
The Company may have difficulty assimilating the businesses and their products, services, technologies and personnel into the Company’s existing operations. These difficulties could disrupt the Company’s ongoing business, distract its management and workforce, increase the Company’s expenses and materially adversely affect the Company’s operating results and financial condition.
Added
In accordance with Nasdaq’s Listing Rules, we have a period of 180 calendar days, or until April 24, 2024, to regain compliance with the Minimum Bid Rule.
Removed
The acquisition involves other potential risks, including:  the failure to successfully integrate personnel, departments and systems, including IT and accounting systems, technologies, books and records, and procedures; 9  the need for additional investments post-acquisition that could be greater than anticipated;  the assumption of liabilities of SUNation that could be greater than anticipated;  incorrect estimates made in the accounting for acquisitions, incurrence of non-recurring charges, and write-off of significant amounts of goodwill or other assets that could adversely affect the Company’s operating results;  unforeseen difficulties related to entering geographic regions or industries in which it does not have prior experience; and  the potential loss of key employees or existing customers or adverse effects on existing business relationships with suppliers and customers.
Added
Additionally, on February 27, 2024, the Staff issued another notice (the “February Notice”) notifying us that our common stock had a closing bid price of $0.10 or less for 10 consecutive trading days (February 12, 2024 to February 26, 2024). Accordingly, the Company is subject to the provisions contemplated under Nasdaq Listing Rule 5810(c)(3)(A)(iii) (the “Low Priced Stock Rule”).
Removed
Additionally, the Company cannot ensure that the expected benefits of SUNation acquisition will be realized or will be realized within the time frames it expects. Unforeseen issues could arise which adversely affect the anticipated returns or which are otherwise not recoverable through indemnification or as an adjustment to the purchase price.
Added
As a result, the Staff had determined to delist the Company’s securities from Nasdaq effective as of the opening of business on March 7, 2024, unless the Company requested an appeal before the Nasdaq Hearings Panel (the “Panel”) of the Staff’s determination by March 5, 2024.
Removed
The price the Company paid for SUNation may exceed the value it realizes, the Company cannot provide assurance that it will obtain the expected revenues, anticipated synergies and strategic benefits of the SUNation acquisition within the time it expects or at all.
Added
The Company requested a hearing before the Panel to appeal the February Notice, and Nasdaq has scheduled the hearing for April 30, 2024. Accordingly, the delisting action has been stayed, pending a final written decision by the Panel.
Removed
In connection with the SUNation acquisition, the Company incurred additional indebtedness with the issuance of the Short-Term N ote and the Long-Term Note.
Added
There can be no assurances that the Company will be able to regain compliance with the Minimum Bid Rule at all or by the deadline, or that any related extension request will be granted.
Removed
While the Short-Term Note remains outstanding, the Company is subject to certain negative covenants with respect to the operation of SUNation, including limits on distributions, the incurrence of indebtedness, imposition of liens, and sales of assets outside the ordinary course of business.
Added
Further, there can be no assurances that the hearing related to the Low Priced Stock Rule will occur, that a favorable decision will be obtained if the hearing is held, that the Panel will grant any request for an extension period within which to regain compliance, or that the Company will be able meet the continued listing requirements during any compliance period or in the future.
Removed
Further, although the Company looks to expand further through the acquisition of regional residential solar companies and energy technology solution providers, there can be no assurance that the Company will be able to find appropriate candidates for acquisitions, reach agreement to acquire them, have sufficient capital or funding to acquire them, or obtain any required shareholder or regulatory approvals needed, despite the effort and management attention invested.
Added
If the Company is unable to regain or maintain compliance with these Nasdaq requirements, its common stock will be delisted from Nasdaq.
Removed
Any such accidents, citations, violations, injuries or failure to comply with industry best practices may subject the Company to adverse publicity, damage its reputation and competitive position and adversely affect its business. 17 Risks Related to the Company’s Common Stock Future sales of Company shares could cause the Company’s stock price to decline.
Added
While on January 3, 2024 the Company’s shareholders approved a reverse stock split of the outstanding shares of the Company’s common stock at a ratio within a range of 1-for-2 to 1-for-15, as determined by our board of directors, the board has not implemented a reverse stock split pursuant to that approval, and has determined that, based on recent stock prices of the Company’s common stock, the maximum ratio under that approved range of 1-for-15 would not be sufficient to cause the stock price to increase or be maintained at a level that would satisfy the Minimum Bid Rule.
Removed
In connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, the Company may identify deficiencies and may encounter problems or delays in completing the remediation of any deficiencies.
Added
As a result, the board has called a special meeting of shareholders to request, among other matters, that its shareholders approve a reverse stock split of the outstanding shares of the Company’s common stock at a ratio within a range of 1-for-25 and 1-for-200, as determined by the board.
Removed
The existence of deficiencies in internal control over financial reporting may require management to devote significant time and incur significant expense to remediate any such deficiencies.
Added
However, there can be no assurance that shareholders will approve that reverse stock split or that any reverse stock split that is effected will increase, or maintain, the bid price per share of our common stock sufficiently to satisfy the Minimum Bid Rule or the Low Priced Stock Rule.
Removed
Pursuant to the merger agreement, we may be obligated to issue up to an additional 2,500,000 shares as earnout consideration and additional shares in connection with the Convertible Note Financing (as defined in the merger agreement).
Added
The perception among investors that we are at a heightened risk of delisting could negatively affect the market price and trading volume of our common stock.
Removed
If the Company does not maintain compliance with the continued listing requirements for the Nasdaq Stock Market within specified periods and subject to permitted extensions, its common stock may be recommended for delisting (subject to any appeal the Company may file). No assurance can be provided that the Company will continue to comply with these continued listing requirements.
Added
If our common stock is delisted from Nasdaq, the delisting could: substantially decrease trading in our common stock; adversely affect the market liquidity of our common stock as a result of the loss of market efficiencies associated with Nasdaq and the loss of federal preemption of state securities laws; adversely affect our ability to issue additional securities or obtain additional financing in the future on acceptable terms, if at all; result in the potential loss of confidence by investors, suppliers, partners and employees and fewer business development opportunities; and result in limited analyst interest.
Removed
If the Company’s common stock were delisted, it could be more difficult to buy or sell its common stock and to obtain accurate quotations, and the price of its stock could suffer a material decline. Delisting would also impair the Company’s ability to raise capital. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Added
Additionally, the market price of our common stock may decline further, and shareholders may lose some or all of their investment. 10 Future sales of Company shares could cause the Company’s stock price to decline.
Added
Our management concluded that our disclosure controls and procedures and our internal control over financial reporting were not effective as of December 31, 2023 due to material weaknesses in internal control over financial reporting.
Added
If we are unable to remediate these material weaknesses and maintain an effective system of disclosure controls and procedures and internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and financial results.
Added
We have concluded that we have material weaknesses in our internal controls due to our limited accounting and finance resources which resulted in inappropriate preparation, review and maintenance of documentation critical to the design and consistent execution of internal controls. Due to limited staffing,it can be challenging to properly prepare, review and maintain appropriate documentation critical to the process.
Added
The process of designing and implementing and maintaining effective internal controls for newly acquired businesses has required and is expected to continue to require significant resources of the Company.
Added
We have concluded that we have material weaknesses in our internal controls due to our limited accounting and finance resources which resulted in inappropriate preparation, review and maintenance of documentation critical to the design and consistent execution of internal controls. Due to limited staffing, it can be challenging to properly prepare, review and maintain appropriate documentation critical to the process.
Added
On February 5, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Purchasers”) for the sale by the Company of 2,702,703 shares of the Company’s common stock in a registered direct offering (the “Offering”).
Added
The Purchasers in this offering agreed to purchase, and the Company has agreed to sell, the Shares at a purchase price per share of $0.37 per share. The aggregate gross proceeds for the sale of the Shares were approximately $1.0 million, before deducting the placement agent fees and related offering expenses.
Added
Following the Offering, the share price of the Company’s stock price fell due to the dilutive effects of the newly issued shares. If the Company was to undertake another similar offering, its share price could be reduced further.
Added
We may not realize the anticipated benefits of past or future investments, strategic transactions, or acquisitions, and integration of these acquisitions may disrupt our business and our management. We have in the past and may in the future, acquire companies, projects, products, or technologies or enter into joint ventures or other strategic transactions.
Added
We may not realize the anticipated benefits of past or future investments, strategic transactions, or acquisitions, and these transactions involve numerous risks that are not within our control.
Added
These risks include the following, among others: ‎  Failure to satisfy the required conditions and otherwise complete a planned acquisition, joint venture or other strategic transaction on a timely basis or at all;  Legal or regulatory proceedings, if any, relating to a planned acquisition, joint venture or other strategic transaction and the outcome of such legal proceedings;  Difficulty in assimilating the operations, systems, and personnel of the acquired company;  Difficulty in effectively integrating the acquired technologies or products with our current products and technologies;  Difficulty in maintaining controls, procedures and policies during the transition and integration;  Disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges due to integration issues;  Difficulty integrating the acquired company’s accounting, management information and other administrative systems;  Inability to retain key technical and managerial personnel of the acquired business;  Inability to retain key customers, vendors and other business partners of the acquired business;  Inability to achieve the financial and strategic goals for the acquired and combined businesses;  Incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our results of operations;  Significant post-acquisition investments which may lower the actual benefits realized through the acquisition;  Potential failure of the due diligence processes to identify significant issues with product quality, legal, and financial liabilities, among other things;  Moderating and anticipating the impacts of inherent or emerging seasonality in acquired customer agreements;  Potential inability to assert that internal controls over financial reporting are effective; and  Potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which could delay or prevent such acquisitions. ‎ Our failure to address these risks, or other problems encountered in connection with our past or future investments, strategic transactions, or acquisitions, could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities, and harm our business generally.

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Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed2 unchanged
Biggest changeJDL Technologies and Ecessa use this facility for some administrative operations. The Company leases 10,000 square feet of office and warehouse space in Aiea, Hawaii. SUNation leases 59,000 square feet of office and warehouse space in Ronkonkoma, New York. JDL Technologies leases 3,700 square feet of office space in Fort Lauderdale, Florida.
Biggest changeJDL Technologies and Ecessa use this facility for some administrative operations. The Company leases 10,000 square feet of office and warehouse space in Aiea, Hawaii. SUNation leases 59,000 square feet of office and warehouse space in Ronkonkoma, New York and 3,000 square feet of office and warehouse space in Tampa, FL.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeManagement believes that the resolution or settlement of any pending litigation will not have a material adverse effect on the results of operations or liquidity of the Company. 20 ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Biggest changeManagement believes that the resolution or settlement of any pending litigation will not have a material adverse effect on the results of operations or liquidity of the Company. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed3 unchanged
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans The following table presents information about the Company’s equity compensation plans, under which equity securities of the Company are authorized for issuance, as of December 31, 2022: Equity Compensation Plan Information Number of securities Number of securities to be issued upon remaining available exercise of Weighted-average for future issuance under outstanding exercise price of equity compensation options, warrants outstanding options plans (excluding shares Plan Category and rights (1) warrants and rights (2) in first column) Equity compensation plans approved by security holders: (3) 2022 Employee Stock Purchase Plan — $ — 200,000 2022 Equity Incentive Plan 470,888 $ — 779,112 Equity compensation plans not approved by security holders: CFO Inducement Grant 82,278 $ — — SUNation Inducement Grants 134,546 $ — — TOTAL 687,712 $ — 979,112 (1) Includes outstanding awards under the 2022 Equity Incentive Plan, as well as restricted stock units outstanding under inducement grants made to the Company’s newly-hired Chief Financial Officer and newly-hired employees in connection with the SUNation acquisition in accordance with Nasdaq Listing Rule 5635(c)(4).
Biggest changeHolders At March 15, 2024, there were approximately 272 registered holders of record of Pineapple Energy Inc. common stock. 25 Securities Authorized for Issuance Under Equity Compensation Plans The following table presents information about the Company’s equity compensation plans, under which equity securities of the Company are authorized for issuance, as of December 31, 2023: Equity Compensation Plan Information Number of securities Number of securities to be issued upon remaining available exercise of Weighted-average for future issuance under outstanding exercise price of equity compensation options, warrants outstanding options plans (excluding shares Plan Category and rights (1) warrants and rights (2) in first column) Equity compensation plans approved by security holders: (3) 2022 Employee Stock Purchase Plan — $ — 415,005 2022 Equity Incentive Plan 640,854 $ — 397,089 Equity compensation plans not approved by security holders: CFO Inducement Grant 54,852 $ — — SUNation Inducement Grants 89,698 $ — — TOTAL 785,404 $ — 812,094 (1) Includes outstanding awards under the 2022 Equity Incentive Plan, as well as restricted stock units outstanding under inducement grants made to the Company’s newly-hired Chief Financial Officer in October 2022 and to newly-hired employees in connection with the SUNation acquisition in November 2022, in each case in accordance with Nasdaq Listing Rule 5635(c)(4).
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The Company’s common stock trades on the Nasdaq Capital Market under the trading symbol PEGY. Holders At March 31, 2023, there were approximately 272 registered holders of record of Pineapple Energy Inc. common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The Company’s common stock trades on the Nasdaq Capital Market under the trading symbol PEGY.
The ESPP was approved by shareholders on December 7, 2022, and provides for the purchase by eligible employees of shares of the Company’s common stock at a discount to the market price. A total of 200,000 shares are available for purchase under the ESPP. ITEM 6. [RESERVED] 21
The ESPP was approved by shareholders on December 7, 2022, and provides for the purchase by eligible employees of shares of the Company’s common stock at a discount to the market price. The number of shares authorized for issuance under the ESPP was initially 200,000 and was increased to 500,000 by shareholder approval on December 14, 2023.

Item 7. Management's Discussion & Analysis

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

29 edited+19 added−7 removed31 unchanged
Biggest changeConsolidated other income was $7,182,860 in 2022 as compared to $1,373,261 in consolidated other expense in 2021. 2022 included a $4,684,000 gain on the fair value remeasurement of the Company’s earnout consideration from the merger, a $1,229,883 gain on sale of assets, and a $2,125,949 gain on the fair value remeasurement of the contingent value rights (“CVRs”), as discussed further in Note 16, Fair Value Measurements, partially offset by interest expense of $976,606.
Biggest changeThe decrease was related to a $4,684,000 gain on the fair value remeasurement of the merger earnout consideration in 2022, a $792,767 decrease in the gain on sale of assets in 2023 compared to the same period of 2022 and a $1,680,911 increase in interest and accretion expense, partially offset by a $549,017 increase in fair value remeasurement gain on the CVRs.
Pineapple today is primarily engaged in the sale, design, and installation of photovoltaic solar energy systems and battery storage systems through its Hawaii-based HEC and New York-based SUNation entities. We install systems that provide clean, reliable solar energy typically at savings relative to traditional utility offerings. Our primary customers are residential homeowners.
Pineapple is primarily engaged in the sale, design, and installation of photovoltaic solar energy systems and battery storage systems through its Hawaii-based HEC and New York-based SUNation entities. We install systems that provide clean, reliable solar energy typically at savings relative to traditional utility offerings. Our primary customers are residential homeowners.
(“CSI”) and Pineapple Holdings, Inc.) (herein collectively referred to as “Pineapple,” “PEGY,” “our,” “we” or the “Company”) was originally organized as a Minnesota corporation in 1969.
(“CSI”) and Pineapple Holdings, Inc.) (herein referred to as “Pineapple,” “PEGY,” “our,” “we” or the “Company”) was originally organized as a Minnesota corporation in 1969.
It carries an annual interest rate of 4% until the first anniversary of issuance, then 8% thereafter until the Long-Term Note is paid in full. The Company will be required to make a principal payment of $2.5 million on the second anniversary of the Long- Term Note.
It carries an annual interest rate of 4% until the first anniversary of issuance, then 8% thereafter until the Long-Term Note is paid in full. The Company will be required to make a principal payment of $2.74 million on the second anniversary of the Long- Term Note.
Results of Operations 2022 Compared to 2021 The consolidated results herein reflect the historical operating results of Pineapple Energy prior to the merger and the consolidated results of CSI (excluding the discontinued operations of JDL & Ecessa), Pineapple Energy, HEC and E-Gear following the Closing on March 28, 2022 and the results of SUNation following the closing on its acquisition on November 9, 2022.
Results of Operations 2023 Compared to 2022 The consolidated results herein reflect the historical operating results of Pineapple Energy prior to the merger and the consolidated results of CSI (excluding the discontinued operations of JDL & Ecessa), Pineapple Energy, HEC and E-Gear following the Closing on March 28, 2022 and the results of SUNation following the closing on its acquisition on November 9, 2022.
Of this amount, $978,462 was invested in short-term money market funds that are not considered to be bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or other government agency.
Of this amount, $1,799,357 was invested in short-term money market funds that are not considered to be bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or other government agency.
Net cash used in 2022 was primarily related to $10,991,128 in net cash paid for the HEC Asset Acquisition, the merger and the SUNation acquisition, partially offset by $6,297,865 in proceeds from the sale of assets previously classified as held for sale and $1,500,000 in earnout consideration payments related to legacy CSI’s sale of its Electronics and Software segment in 2021. 24 Net cash provided by financing activities was $15,912,117 in 2022 compared to $350,000 in 2021.
Net cash used in 2022 was primarily related to $10,991,128 in net cash paid for the HEC Asset Acquisition, the merger, and the SUNation acquisition partially offset by $6,297,865 in proceeds from the sale of assets previously classified as held for sale and $1,500,000 in earnout consideration payments related to legacy CSI’s sale of its Electronics and Software segment in 2021.
The Company also paid $4,500,000 in principal against the Hercules term loan in the first quarter of 2022, as discussed further in Note 11, Commitments and Contingencies. During the third quarter of 2022, the Company paid $8,745,628 in CVR distributions.
The Company also paid $8,745,628 in CVR distributions and $4,500,000 in principal against the Hercules term loan in 2022, as discussed further in Note 11, Commitments and Contingencies.
The Company also had $2,666,766 in investments consisting of corporate notes and bonds that are traded on the open market and are classified as available-for-sale at December 31, 2022.
The Company also had $0 in investments consisting of corporate notes and bonds that are traded on the open market and are classified as available-for-sale at December 31, 2023.
In connection with the SUNation acquisition, on November 9, 2022, the Company issued a $5.0 million Short-Term Limited Recourse Secured Promissory Note (the “Short-Term Note”) and a $5,486,000 Long-Term Promissory Note (the “Long-Term Note”). The Short-Term Note is secured as described below and matures on August 9, 2023.
In connection with the SUNation Acquisition, on November 9, 2022, the Company issued a $5,000,000 Short-Term Limited Recourse Secured Promissory Note (the “Short-Term Note”) and a $5,486,000 Long-Term Promissory Note (the “Long-Term Note”). The Short-Term Note was secured as described below and was scheduled to mature on August 9, 2023.
It carries an annual interest rate of 4% until the three-month anniversary of issuance, 8% thereafter until the six-month anniversary of issuance, then 12% thereafter until the Short-Term Note is paid in full. The Long-Term Note is unsecured and matures on November 9, 2025.
It carried an annual interest rate of 4% until the three-month anniversary of issuance, 8% thereafter until the six-month anniversary of issuance, then 12% thereafter until the Short-Term Note is paid in full. The Short-Term Note was paid in full in conjunction 30 with the Decathlon loan. The Long-Term Note is unsecured and matures on November 9, 2025.
For a detailed discussion of a number of these risk factors, please see Item 1A above. 22 Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).
For a detailed discussion of a number of these risk factors, please see Item 1A, “Risk Factors,” of this Annual Report on Form 10-K. 27 Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).
As discussed above and in Note 3, Business Combinations and Note 11, Commitments and Contingencies, on November 9, 2022, the Company, in connection with the SUNation acquisition, paid $2.39 million in cash and entered into the Short-Term Note and the Long-Term Note.
The Long-Term Note may be prepaid at our option at any time without penalty. As discussed above and in Note 3, Business Combinations and Note 11, Commitments and Contingencies, on November 9, 2022, the Company, in connection with the SUNation acquisition, paid $2.39 million in cash and entered into the Short-Term Note and the Long-Term Note.
The CVR liability as of December 31, 2022 was estimated at $7,402,714 and represented the estimated fair value as of that date of the legacy CSI assets to be distributed to CVR holders as of that date.
The CVR liability as of December 31, 2023 was estimated at $1,691,072 and represented the estimated fair value as of that date of the legacy CSI assets to be distributed to CVR holders as of that date.
Of the amounts of cash, restricted cash, cash equivalents and investments on the balance sheet at December 31, 2022, $4,463,089 consist of funds that can only be used to support the legacy CSI business, will be distributed to CVR holders and cannot be used to support the working capital needs of the Pineapple Energy business and $1,272,615 consists of funds that can only be used to support SUNation’s operations.
Of the amounts of cash, restricted cash, and restricted cash equivalents on the balance sheet at December 31, 2023, $1,821,060 consist of funds that can only be used to support the legacy CSI business, will be distributed to CVR holders and cannot be used to support the working capital needs of the Pineapple Energy business.
Based on the Company’s current financial position, the Company’s forecasted future cash flows for twelve months beyond the date of issuance of the financial statements in this report indicate that the Company will not have sufficient cash to repay the Short-Term Note obligation, a factor which raises substantial doubt about the Company’s ability to continue as a going concern.
Based on the Company’s current financial position, the Company’s forecasted future cash flows for twelve months beyond the date of issuance of the financial statements in this report indicate that the Company will not have sufficient cash to make the first SUNation earnout payment in the second quarter of 2024 or the first principal payment of the Long-Term Note due on November 9, 2024, factors which raise substantial doubt about the Company’s ability to continue as a going concern.
This amount is recorded as a long-term liability that includes the remaining restricted cash and cash equivalents, investments, along with the other tangible and intangible assets related to the legacy CSI business.
This amount is recorded as a long-term liability that includes the remaining restricted cash and cash equivalents, investments, along with the other tangible and intangible assets related to the legacy CSI business. The proceeds from CSI’s pre-merger business working capital and related long term-assets and liabilities are not available to fund the working capital needs of the post-merger company.
The CVR entitles the holder to a portion of the cash, cash equivalents, investments and net proceeds of any divestiture, assignment, or other disposition of all legacy assets of CSI and/or its legacy subsidiaries, JDL and Ecessa, that are related to CSI’s pre-merger business, assets, and properties that occur during the 24-month period following the closing of the merger.
The CVR entitles the holder to a portion of the cash, cash equivalents, investments and net proceeds of any divestiture, assignment, or other disposition of all legacy assets of CSI and/or its legacy subsidiaries, JDL and Ecessa, that are related to CSI’s pre-merger business, assets, and properties that occur during the period following the closing of the merger and ending initially on March 28, 2024, but was extended through December 31, 2024 by the First Amendment to the Contingent Value Rights Agreement entered into on March 27, 2024.
Consolidated sales were $27,522,099 in 2022 and $38,162 in 2021. As Pineapple Energy had limited revenue in the prior year, the increase in sales was due to the merger and acquisitions during 2022.
Consolidated sales were $79,632,709 in 2023 and $27,522,099 in 2022. As Pineapple Energy had limited revenue in the first quarter of the prior year, the increase in sales was due to the merger, the HEC Asset Acquisition and the acquisition of SUNation during 2022.
For additional details, see Note 3, Business Combinations and Note 10, Goodwill and Intangible Assets. Convertible Preferred Stock and Warrants: In March 2022, the Company issued shares of Series A convertible preferred stock (the “Convertible Preferred Stock”) and warrants (the “PIPE Warrants”) to investors as part of a $32.0 million private investment in public equity (“PIPE”) transaction.
No goodwill impairment was recorded during the years ended December 31, 2023 and 2022. Convertible Preferred Stock and Warrants: In March 2022, the Company issued shares of Series A convertible preferred stock (the “Convertible Preferred Stock”) and warrants (the “PIPE Warrants”) to investors as part of a $32.0 million private investment in public equity (“PIPE”) transaction.
The Company had working capital of $27,366, consisting of current assets of approximately $25,961,524 and current liabilities of $25,934,158 at December 31, 2022 compared to working capital of $(2,872,233), consisting of current assets of $18,966 and current liabilities of $2,891,199 at the end of 2021.
The Company had working capital of $(6,594,834), consisting of current assets of approximately $15,778,648 and current liabilities of $22,373,482 at December 31, 2023 compared to working capital of $27,366, consisting of current assets of $25,961,524 and current liabilities of $25,934,158 at the end of 2022.
Consolidated operating loss from continuing operation s before income taxes in 2022 was $3,265,819, compared to an operating loss from continuing operations before income taxes of $6,235,550 in 2021. Net loss from continuing operations in 2022 was $3,278,056.
Consolidated operating loss from continuing operation s before income taxes in 2023 was $6,820,716, compared to a consolidated operating loss from continuing operations before income taxes of $3,265,819 in 2022. Net loss from continuing operations in 2023 was $6,939,892, or ($0.69) per diluted share.
Consolidated operating expenses, which include selling, general and administrative expenses, amortization expense and transaction costs increased 263.8% to $17,826,124 in 2022 as compared to $4,900,451 in 2021.
Consolidated operating expenses, which include selling, general and administrative expenses, amortization expense, transaction costs and a fair value remeasurement loss on SUNation earnout consideration increased 97.3% to $35,163,055 in 2023 as compared to $17,826,124 in 2022.
Net loss attributable to common shareholders (after taking into effect $16,863,892 in deemed dividends) was $27,216,132 or $(2.99) per diluted share from continuing operations, compared to net loss from continuing operations of $6,235,550, or $(2.03) per diluted share, in 2021.
Net loss attributable to common shareholders in 2022 (after taking into effect $16,863,892 in deemed dividends) was $27,216,132, or ($2.99) per diluted share from continuing operations. Liquidity and Capital Resources As of December 31, 2023, the Company had approximately $5,396,343 in cash, restricted cash and cash equivalents, and liquid investments, compared to $7,923,244 at December 31, 2022.
Sales in 2022 and 2021 by type were as follows: 23 Revenue by Type 2022 2021 Residential $ 25,375,067 $ — Commercial 1,673,403 — Service 412,388 — Commission 61,241 38,162 $ 27,522,099 $ 38,162 Consolidated gross profit was $7,377,445 in 2022 as compared to $38,162 in 2021.
Sales in 2023 and 2022 by type were as follows: Revenue by Type 2023 2022 Residential contracts $ 64,855,898 $ 25,375,067 Commercial contracts 11,283,903 1,673,403 Service revenue 3,133,865 412,388 Software revenue 347,550 — Other 11,493 61,241 $ 79,632,709 $ 27,522,099 Consolidated gross profit increased to $27,696,190 in 2023 as compared to gross profit of $7,377,445 in 2022 due to the increase in revenue through acquisitions.
In the first quarter of 2022, the Company received $32,000,000 in proceeds from the issuance of shares of Convertible Preferred Stock and PIPE Warrants to investors in our March 28, 2022 PIPE offering and paid $2,699,370 in related issuance costs.
(“Hercules”) term loan, as discussed further in Note 11, Commitments and Contingencies, partially offset by $7,500,000 in borrowings from Decathlon Specialty Finance, LLC (“Decathlon”). In 2022, the Company received $32,000,000 in proceeds from the issuance of convertible preferred stock and warrants to PIPE Investors and paid $2,699,370 in related issuance costs.
The proceeds from CSI’s pre-merger business working capital and related long term-assets and liabilities are not available to fund the working capital needs of the post-merger company. 25 New Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements included elsewhere in this report for a discussion of new accounting standards.
New Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements included elsewhere in this report for a discussion of new accounting standards. Off Balance Sheet Arrangements None.
Consolidated selling, general and administrative expenses increased to $12,211,135 in 2022 from $1,060,522 in 2021, due primarily to $7,160,670 in selling, general and administrative costs of the acquired businesses and $4,469,080 in corporate overhead costs in 2022.
Consolidated selling, general and administrative expenses increased to $29,072,558 in 2023 from $12,211,135 in 2022, due primarily to a $16,038,900 increase in selling, general and administrative costs associated with acquired businesses. Amortization expense increased by $1,605,017 to $4,738,477 in 2023 due to additional intangible assets acquired through acquired businesses.
Amortization expense increased by $1,704,165 to $3,133,460 in 2022 due to intangible assets acquired through the merger, the HEC Asset Acquisition and the SUNation acquisition. Transaction costs decreased by $179,105 to $2,231,529 in 2022, due to the consummation of the merger and the HEC Asset Acquisition in the first quarter of 2022.
Transaction costs decreased by $2,229,509 to $2,020 in 2023, due to the consummation 29 of the merger and the HEC Asset Acquisition in the first quarter of 2022 and limited activity in 2023. There was also a $1,350,000 fair value remeasurement loss related to the SUNation acquisition earnout consideration in 2023.
Removed
Liquidity and Capital Resources As of December 31, 2022, the Company had approximately $7,923,244 in cash, restricted cash and cash equivalents, and liquid investments, compared to $18,966 at December 31, 2021.
Added
For additional details, see Note 3, Business Combinations and Note 10, Goodwill and Intangible Assets. Goodwill: Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the assets acquired and liabilities assumed from acquisitions.
Removed
Per the SUNation transaction agreement, only excess cash over $1,500,000 can be used to support the remaining operations of Pineapple Energy until the Short-Term Note is paid off.
Added
We test goodwill for impairment annually on October 1 or more frequently if events and circumstances warrant. Such events and circumstances may be a significant change in our business climate, economic and industry trends, legal factors, negative operating performance indicators, significant competition or changes in strategy.
Removed
Cash flow used in operating activities was approximately $7,577,199 in 2022 compared to $811,017 used in 2021. Significant working capital changes from 2021 to 2022 included an increase in customer deposits of $2,148,599 and a decrease in accounts payable of $1,076,350. Cash used by investing activities was $3,097,406 in 2022 compared to $479,983 provided in 2021.
Added
We perform our goodwill impairment test at the reporting unit level, which is the same as our operating segments. An impairment charge for goodwill is recognized only when the estimated fair value of a reporting unit, including goodwill, is less than its carrying amount.
Removed
Both the Short-Term Note and Long-Term Note may be prepaid at our option at any time without penalty. The Short-Term Note is secured by a pledge by the Company of the equity of the acquired SUNation companies.
Added
In applying the goodwill impairment assessment, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. Qualitative factors may include, but are not limited to, economic, market and industry conditions, cost factors and overall financial performance of the reporting unit.
Removed
While the Short-Term Note remains outstanding, the Company also agreed to certain negative covenants with respect to the operation of the acquired companies, including limits on distributions, the incurrence of indebtedness, imposition of liens, and sales of assets outside the ordinary course of business. The pledge will automatically terminate upon the payment of all amounts due under the Short-Term Note.
Added
If after assessing these qualitative factors, the Company determines it is "more-likely-than not" that the fair value is less than the carrying value, a quantitative assessment of goodwill is required.
Removed
Also as discussed above, o f the amounts of cash, restricted cash, cash equivalents and investments on the balance sheet at December 31, 2022, $4,463,089 consist of funds that can only be used to support the legacy CSI business, are restricted under the CVR agreement and cannot be used to support the working capital needs of the Pineapple Energy business and $1,272,615 consists of funds that can only be used to support SUNation’s operations.
Added
The quantitative impairment test requires judgment, including the identification of reporting units, the assignment of assets, liabilities and goodwill to reporting units, and the determination of fair value of each reporting unit. The impairment test requires the comparison of the fair value of each reporting unit with its carrying amount, including goodwill.
Removed
Per the SUNation transaction agreement, only excess cash over $1,500,000 can be used to support the remaining operations of Pineapple Energy until the Short-Term Note is paid off.
Added
We estimate the reporting units’ fair value using a combination of the income approach based upon projected discounted cash flows of the reporting unit and the market approach based upon the market multiple of comparable publicly traded companies.
Added
If the estimated fair value of the reporting entity exceeds the carrying value, the goodwill is not impaired, and no further review is required.
Added
However, if the carrying value exceeds the estimated fair value of the reporting unit, an impairment expense should be recognized for the excess of the carrying value over the fair value. 28 Under the income approach, the estimated discounted cash flows are based on the best information available to us at the time, including supportable assumptions and projections we believe are reasonable.
Added
Our discounted cash flow estimates use discount rates that correspond to a weighted-average cost of capital consistent with a market-participant view. Certain other key assumptions utilized, including revenue and cash flow projections, are based on estimates consistent with those utilized in our annual budgeting and planning process that we believe are reasonable.
Added
However, if we do not achieve the results reflected in the assumptions and estimates, our goodwill impairment evaluations could be adversely affected, and we may impair a portion or all of our goodwill, which would adversely affect our operating results in the period of impairment. The market approach identifies the revenue multiples of comparable publicly traded companies.
Added
The reporting unit’s revenue projections are multiplied by the market multiple to estimate its current estimated fair value. If the market multiples or revenue value assumptions are incorrect, our goodwill impairment evaluation could also be adversely affected, and we may impair a portion or all of our goodwill, which would adversely affect our operating results in the period of impairment.
Added
Gross margin increased to 34.8% in 2023 compared to 26.8% in 2022 due to the SUNation acquisition, normalization of the supply chain and an overall decrease in product costs.
Added
Consolidated other income decreased $6,536,711 to $646,149 in 2023 as compared to $7,182,860 in 2022.
Added
Cash flow used in operating activities was approximately $667,177 in 2023 compared to $7,577,199 used in 2022.
Added
Significant working capital changes from 2022 to 2023 included a decrease in other accrued liabilities of $4,494,247, a decrease in other assets of $3,333,146, a decrease in inventory of $2,475,825, and a decrease in customer deposits of $2,172,766. $1,584,541 of the decrease in other assets and $2,181,761 of the decrease in other accrued liabilities was related to the receipt and payment out of the employee retention credit receivable and other related party payables.
Added
Other accrued liabilities also decreased by approximately $2.3 million due to a decrease in billings in excess of costs and estimated earnings as commercial projects were completed during the year. Cash provided by investing activities was $3,567,278 in 2023 compared to $3,097,406 provided in 2022.
Added
Net cash provided in 2023 was the result of proceeds from the sale of investments and proceeds from the sale of the JDL and Ecessa assets included within discontinued operations, partially offset by capital expenditures.
Added
Net cash used in financing activities was $2,760,236 in 2023 compared to $15,912,117 in 2022. Net cash used in financing activities in 2023 was due to $3,036,676 in CVR distributions and $5,000,000 in payments against the SUNation Short-Term Note and $1,500,000 in payments against the Hercules Capital, Inc.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed1 unchanged
Biggest changeThe Company’s investments are money market, certificates of deposit, commercial paper, and corporate notes and bonds types of investments that earn interest at prevailing market rates and as such do not have material risk exposure. Based on the Company’s operations, in the opinion of management, the Company is not exposed to material future losses due to market risk. ‎ 26
Biggest changeThe Company’s investments are in money markets that earn interest at prevailing market rates and as such do not have material risk exposure. Based on the Company’s operations, in the opinion of management, the Company is not exposed to material future losses due to market risk. ‎ 31

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