What changed in this filing

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Item 9A. Controls and Procedures

2026-04-06 compared with 2025-03-31 · 632 added, 502 removed, 1406 unchanged (45% of the section changed)

5 unchanged sentences

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report.

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are designed to provide that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework.

Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report at the reasonable assurance level.

Management's Annual Report on Internal Control over Financial Reporting

In our 10-Q for the period ended as of September 30, 2024, we identified a material weakness in our internal control over financial reporting related to the lack of adequate controls enabling us to identify the change in the status of the permit-to-operate field in the system, which affects recognition of revenue, coupled with lack of any monitoring and review controls to identify changes to the permit-to-operate field, all of which, resulted in a material audit adjustment to revenue during the quarter ended September 30, 2024.

During the quarter ended December 31, 2024, we completed the implementation and testing of the remediation measures designed to address this material weakness.

These measures included (i) generating system reports that identify all changes to the permit-to-operate field, (ii) reviewing the impact of changes to the permit-to-operate field, which includes a detailed review of all billed projects and accrued projects, and (iii) quantifying the impact of the changes and assessing the materiality of proposed adjustments.

We have performed testing to evaluate the operating effectiveness of these remediation measures.

Based on the results of our testing, we have concluded that the material weakness related to the lack of monitoring and review controls to identify changes in the permit-to-operate field has been remediated as of December 31, 2024.

As of December 31, 2025, we believe that our internal controls over financial reporting are effective in providing reasonable assurance regarding the reliability of our financial reporting.

Changes in Internal Control over Financial Reporting

Other than the additional controls added to the revenue process, there was no change in our internal control over financial reporting that occurred during the fourth quarter of December 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

3 unchanged sentences

Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

This annual report on Form 10-K does not include an attestation report of our registered public accounting firm.

As an “emerging growth company,” we may take advantage of certain temporary exemptions from various reporting requirements, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act (and the SEC rules and regulations thereunder).

Accordingly, this Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm.

Other Information

10 unchanged sentences

Wei Yuan Chen

Wen-Ching (Stephen) Yang, Ph.D.

Lei Zhang, Ph.D.

30 unchanged sentences

Chen’s experience in project management and familiarity with the Chinese market qualify him to serve as a director.

Jinxi Lin has served as a director since 2014.

Lin serves as the chairman of AMD, a publicly traded solar panel manufacturer in Asia and the Middle East and one of our major stockholders.

Lin founded AMD in 2006 and has served as its chairman since its formation.

Lin received his undergraduate degree in business administration from Northwest Polytechnic University.

Lin’s knowledge of the solar industry and the Chinese market qualify him to serve as a director.

Wen-Ching (Stephen) Yang has been a director since December 2020.

Yang is the founder of Grand Trust International Law Offices and has been the partner-in-charge since 2008.

He has also been the chief executive officer of Taoyuan Enterprise Chamber since 2016.

Yang received his bachelor’s and master’s degrees from National Taiwan University and his PhD in economics in law from the law school at Peking University.

Yang was also a research fellow at the John F.

Kennedy School of Government at Harvard University.

Yang’s background in economics qualify him as a director.

Lei Zhang has been a director since November 2020.

5 unchanged sentences

Zhang’s knowledge of the energy industry qualifies her to serve as a director.

All of our executive officers and directors are located in the United States except that two directors (Wei Yuan Chen and Jinxi Lin) are located in China and one director (Wen-Ching (Stephen) Yang) is located in Taiwan.

Steve Chen has been a director since November 2025.

Chen is a private investor and business operator since 1998.

He actively manages a portfolio of commercial and hospitality real estate assets in the United States.

His professional experience includes founder and chief executive officer of ALPS European Whole Grain in Shanghai, China, the first microbrewery in China, from 1994 to 2000, and founder and chief executive officer from 2009 to 2016 of Speedy Sails, a regional distribution business for U.S.

manufactured catamarans aimed at China’s emerging marine leisure market.

Chen received his degree from World College of Journalism in Taipei, Taiwan.

We believe his business experience qualifies him to serve as a director.

All of our executive officers and directors are located in the United States except that two directors (Wei Yuan Chen and Stephen Chen, who are not related) are located in China.

As a result, it may be difficult, or in some cases not possible, for investors in the United States to enforce their legal rights, to effect service of process upon those directors located outside the United States, to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties on our directors under United States securities laws.

14 unchanged sentences

Audit Committee.

Our audit committee consists of Dr.

Wen-Ching Yang as chair, Wei Yuan Chen and Simon Yuan.

We have determined that Dr.

Yuan satisfy the "independence” requirements of the Nasdaq Listing Rules and meet the independence standards under Rule 10A-3 under the Exchange Act.

We have determined that each of Dr.

Yuan qualify as an "audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of our financial statements.

Our audit committee consists of Simon Yuan, as chair, Wei Yuan Chen and Lei Zhang, Ph.D.

We have determined that each of the audit committee members satisfies the "independence” requirements of the Nasdaq Listing Rules and meet the independence standards under Rule 10A-3 under the Exchange Act.

We have determined that each of Mr.

Yuan qualifies as an "audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of our financial statements.

The audit committee is responsible for, among other things:

13 unchanged sentences

Compensation Committee .

Our compensation committee consists of Wei Yuan Chen, as chair, Lei Zhang, Ph.D.

and Jinxi Lin.

We have determined that Mr.

Zhang, and Mr.

Lin satisfy the "independence” requirements of the Nasdaq Listing Rules.

Our compensation committee consists of Wei Yuan Chen, as chair, Simon Yuan and Lei Zhang, Ph.D.

We have determined that each of the committee members satisfies the "independence” requirements of the Nasdaq Listing Rules.

The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation relating to our directors and executive officers.

7 unchanged sentences

Nominating and Corporate Governance Committee .

Our nominating and corporate governance committee consists of Dr.

Wen-Ching Yang, as chair, and Wei Yuan Chen.

We have determined that Dr.

Chen satisfy the "independence” requirements of the Nasdaq Listing Rules.

Our nominating and corporate governance committee consists of Lei Zhang, Ph.D., Wei Yuan Chen and Steve Chen.

We have determined that each of the committee members satisfies the "independence” requirements of the Nasdaq Listing Rules.

The nominating and corporate governance committee assists the board in selecting individuals qualified to become our directors and in determining the composition of the board and its committees.

7 unchanged sentences

Section 16(a) of the Exchange Act requires our directors, executive officers and 10% stockholders to file initial reports of ownership and reports of changes in ownership of our common stock with SEC and to furnish us with copies of all Section 16(a) forms that they file.

Yuan filed a late Form 3.

Zhang are delinquent in their Form 3 filings.

Chen Wei Yuan and Zhang Lei, Ph.D.

were late in their filings, and Steve Chen is delinquent in his Form 3 filings.

Executive Compensation

11 unchanged sentences

Hsu is eligible for an annual bonus in which 70% is payable in stock and 30% is payable in cash.

Hsu waived his bonus for 2023 and 2022 in connection with the suspension of incentive programs for our key employees.

All other compensation represents the value of paid time off accrued.

18 unchanged sentences

More than $300 million

70% of the bonus payable for any calendar year shall be paid in restricted stock and 30% shall be paid in cash and shall be paid no later than the earlier of (i) 30 days following the issuance of our audited financial statements for the calendar year in which the bonus is earned or (ii) the last business day of December of such next following calendar year.

70% of the bonus payable for any calendar year is to be paid in restricted stock and 30% is to be paid in cash and shall be paid no later than the earlier of (i) 30 days following the issuance of our audited financial statements for the calendar year in which the bonus is earned or (ii) the last business day of December of such next following calendar year.

Our audited financial statements shall be deemed to be issued on the date we file our annual report on Form 10-K.

2 unchanged sentences

The restricted stock will vest immediately on issuance.

Hsu waived his bonus for 2023 and 2022 in connection with the suspension of incentive programs for our key employees.

Hsu waived his bonus for 2025 in connection with the suspension of incentive programs for our key employees since 2019.

Hsu is eligible for restricted stock grants or stock options, which shall not exceed 1.5% of our outstanding common stock prior to the grant.

15 unchanged sentences

Hsu $1,712,770, representing deferred salary from 2019, 2020, 2021, 2022 and 2023 and cash bonuses deferred from 2017 and 2018.

Hsu agreed that this deferred salary and bonus be paid in twelve equal monthly installments, the first payment becoming due on the February 27, 2025 which has been extended to June 30, 2025.

Hsu agreed that this deferred salary and bonus be paid in twelve equal monthly installments, the first payment becoming due on the February 27, 2025 which date was extended to December 31, 2025.

As of March 15, 2026, Mr.

Hsu has been paid $415,547 under this agreement, and $2,077,735 remains due to Mr.

Hsu and is being paid under this agreement.

We have an employment agreement dated March 23, 2017 with Stephen Brown pursuant to which we pay Mr.

9 unchanged sentences

The incentive-based compensation subject to recovery is the incentive-based compensation received during the three completed fiscal years immediately preceding the date that we are required to prepare an accounting restatement as described above, provided that the person served as an executive officer at any time during the performance period applicable to the incentive-based compensation in question provided that the clawback policy shall only apply if the incentive-based compensation is received while we have a class of securities listed on Nasdaq and on or after October 2, 2023.

David Hsu, our chief executive officer, has an employment which provides for incentive-based compensation during the year ended December 31.

David Hsu, our chief executive officer, has an employment agreement which provides for incentive-based compensation during the year ended December 31, 2025;

Hsu waived his bonus for 2025 in connection with the suspension of incentive programs for our key employees.

9 unchanged sentences

The shares were subject to forfeiture if we did not complete our initial public offering by April 30, 2024.

The options became exercisable as to 50% of the shares in August 2024 and become exercisable as to the remaining 50% in August 2025.

The options became exercisable as to 50% of the shares in August 2024 and became exercisable as to the remaining 50% in August 2025.

Outstanding Equity Awards

5 unchanged sentences

Stephen Brown

These options held by Mr.

Hsu are exercisable as to 50% and will become exercisable as to the remaining 50% on August 12, 2025.

Director Compensation

1 unchanged sentence

Wei Yuan Chen

Wen-Ching (Stephen) Yang

Lei Zhang, Ph.D.

12 unchanged sentences

Wei Yuan Chen

Wen-Ching (Stephen) Yang 6

Lei Zhang, Ph.D.

Stephen Brown 6

All officers and directors as a group 2,3 , 5,6 (seven individuals beneficially owning stock)

All officers and directors as a group 2,3,5,6 (five individuals beneficially owning stock)

The percentages are based on 56,906,572 shares of common stock outstanding.

12 unchanged sentences

Yuan and 634,859 shares issuable upon exercise of options held by Mr.

Includes 349,537 shares of common stock owned by Dr.

Yang’s wife, as to which he disclaims beneficial interest.

Shares beneficially owned by Mr.

3 unchanged sentences

Related Party Transactions

On January 3, 2012, CEF entered into a loan agreement with SREP, one of our United States subsidiaries, pursuant to which CEF agreed to make loans to the subsidiary in an amount not to exceed $45 million.

On January 3, 2012, CEF entered into a loan agreement with SREP, pursuant to which CEF agreed to make loans to the subsidiary in an amount not to exceed $45 million.

CEF advanced $45 million pursuant to the agreement.

On August 26, 2014, CEF II entered into a loan agreement with LED, another United States subsidiary, for up to $13,000,000.

CEF II advanced $10.5 million pursuant to the agreement.

On August 26, 2014, CEF II entered into a loan agreement with LED, for up to $13.0 million CEF II advanced $10.5 million pursuant to the agreement.

The proceeds of the loans were used by our subsidiaries for their operations.

28 unchanged sentences

The proceeds of the loans were used to pay the security deposit and lease obligations for one month owed to the new owner of our headquarters building under the new lease agreement and for rent on our headquarters building from June 1, 2022 to October 12, 2022.

David Hsu, our chief executive officer and a director, and Ching Liu, formerly our executive vice president and a director and currently a 5% stockholder are the principal management group of SMXP.

David Hsu, our chief executive officer and a director, and Ching Liu, formerly our executive vice president, a director and 5% stockholder are the principal management group of SMXP.

Simon Yuan, a director, has a non-controlling interest in SMXP and is not part of its management.

The loan for $414,581 was paid in full in July 2025, and the loan for $944,077 was paid in full in September 2025.

Related Party Leases

6 unchanged sentences

Effective March 31, 2024, we terminated the lease with Fallow Field.

For the years ended December 31, 2024 and 2023, total related party rental expense included in general and administrative expenses was approximately $36,000 and $100,000, respectively.

We did not incur any rental expense for related party leases in 2025 since all related party leases were terminated in 2024.

Total related party rental expense included in general and administrative expenses was approximately $36,000 for the year ended December 31, 2024.

Equity Transactions with Officers and Directors

In October 2016, the board of directors granted 3,810,949 shares, of which 3,045,963 shares were granted to officers and directors.

The following table set forth information relating to the restricted stock grants to officers and directors.

The following table sets forth information relating to the restricted stock grants to officers and directors.

Chung Jen Tsai 2

6 unchanged sentences

Liu and one other employee, who held 1,348,213, 998,676 and 199,736 restricted shares, respectively, the right (a) to exchange 50% of their restricted shares for a ten-year option to purchase 2.119 shares of common stock at $5.01 per share for each share exchanged and (b) transfer to us 50% of their restricted shares for $1,275,000, or $1.01 per share.

These payments were initially due in December 2019 and the payment date was extended and we made these payments from the proceeds of our initial public offering.

These payments, which are treated as compensation, were initially due in December 2019 and the payment date was extended and we made these payments from the proceeds of our initial public offering.

Pursuant to their exchange agreements with us, we granted Mr.

8 unchanged sentences

The payment to Mr.

Hsu is to be paid in twelve monthly installments, commencing June 30, 2025.

Hsu is to be paid in twelve monthly installments, commencing December 31, 2025.

Director Independence

We believe that five of our directors, Mr.

Yuan are independent directors using the Nasdaq definition of independence.

We believe that four of our directors, Mr.

Steve Chen, Mr.

Wei Yuan Chen, Mr.

Yuan, and Dr.

Zhang are independent directors using the Nasdaq definition of independence.

Principal Accounting Fees and Services

The following table sets forth the fees billed Marcum LLP, by our registered independent public accounting firm, for 2024 and 2023 for the categories of services indicated.

The following table sets forth the fees billed by CBIZ CPAs P.C.

and by Marcum LLP, our registered independent public accounting firms, for 2025 and 2024, respectively, for the categories of services indicated.

Years Ended December 31,

Audit – related fees

Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements and our registration statement on Form S-1 relating to our initial public offering.

Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements.

Audit-related fees consist of fees related to the annual audit of the standalone financial statements of a subsidiary.

35 unchanged sentences

Letter agreement dated March 27, 2025 between the Company and David Hsu deferring payment of deferred compensation 3 .

Form of stock purchase used in March 2025 stock placement 3 .

Form of stock purchase used in stock placements in 2025 and 2026 3 .

Engineering, Procurement and Construction Agreement, by and between Longfellow Bess I LLC and SolarMax Renewable Energy Provider, Inc., dated July 31, 2025 6

Engineering, Procurement and Construction Agreement, by and between Naguabo BESS LLC and SolarMax Renewable Energy Provider, Inc., dated December 31, 2025 7

Engineering, Procurement and Construction Agreement, by and between Yububo BESS LLC and SolarMax Renewable Energy Provider, Inc., dated December 31, 2025 7

Engineering, Procurement and Construction Agreement, by and between Navboot BESS LLC and SolarMax Renewable Energy Provider, Inc., dated December 31, 2025 7

JC International Group, Inc.

Agreement Dated February 20, 2025 4

Code of Ethics 2

15 unchanged sentences

Filed as an exhibit to the Company’s Form 10-K for the year ended December 31, 2023 which was filed with the SEC on April 14, 2024 and incorporated herein by reference.

Filed herewith

Filed as an exhibit to the Company’s Form 10-K for the year ended December 31, 2024 which was filed with the SEC on March 31, 2025 and incorporated herein by reference.

Furnished herewith

Filed herewith

Filed as an exhibit to the Company’s Form 8-K, which was filed with the SEC on August 6, 2025 and incorporated herein by reference.

Filed as an exhibit to the Company’s Form 8-K, which was filed with the SEC on January 6, 2026 and incorporated herein by reference.

Compensatory plan or arrangement.

2 unchanged sentences

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

March 31, 2025

April 6, 2026

SOLARMAX TECHNOLOGY, INC.

5 unchanged sentences

Chief executive officer and director (principal executive officer)

March 31, 2025

April 6, 2026

/s/ Stephen Brown

Chief financial officer (principal financial officer)

March 31, 2025

April 6, 2026

Stephen Brown

/s/ Simon Yuan

March 31, 2025

/s/ Jinxi Lin

March 31, 2025

April 6, 2026

/s/ Steve Chen

April 6, 2026

/s/ Wei Yuan Chen

March 31, 2025

April 6, 2026

Wei Yuan Chen

/s/ Wen-Chang (Stephen) Yang

March 31, 2025

Wen-Chang (Stephen) Yang

/s/ Lei Zhang

March 31, 2025

April 6, 2026

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Accounting Firm (PCAOB ID 199)

Consolidated Balance Sheets as of December 31, 2024 and December 31, 2023

Report of Independent Registered Accounting Firm (PCAOB ID 688 )

Consolidated Balance Sheets as of December 31, 2025 and 2024

Consolidated Statements of Operations for the years ended December 31, 2025 and 2024

8 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of SolarMax Technology Inc.

(the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion,the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheet of SolarMax Technology Inc.

(the “Company”) as of December 31, 2025, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity (deficit) and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations.

1 unchanged sentence

Management's plans in regard to these matters are also described in Note 2.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ CBIZ CPAs P.C.

CBIZ CPAs P.C.

We have served as the Company’s auditor since 2015 (such date takes into account the acquisition of the attest business of Marcum llp by CBIZ CPAs P.C.

effective November 1, 2024).

Costa Mesa, CA

April 6, 2026

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of

SolarMax Technology Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of SolarMax Technology, Inc.

(the “Company”) as of December 31, 2024, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity (deficit) and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

These conditions raise substantial doubt about the Company's ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

Accordingly, we express no such opinion.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/S/ Marcum LLP

We have served as the Company’s auditor since 2015 .

Costa Mesa, California

March 31, 2025

We have served as the Company’s auditor from 2015 to 2025.

Costa Mesa, CA

April 6, 2026

Financial Statements

2 unchanged sentences

Consolidated Balance Sheets

As of December 31, 2024 and December 31, 2023

As of December 31, 2025 and 2024

Current assets:

2 unchanged sentences

Receivable from SPIC, net

Short-term investments

Held to maturity debt investments

Contract assets, net

6 unchanged sentences

Operating lease right-of-use assets

Investments in unconsolidated solar project companies

Investments in unconsolidated companies

Customer loans receivable, noncurrent, net

Deferred tax assets

Restricted cash, noncurrent

See accompanying notes to consolidated financial statements.

SolarMax Technology, Inc.

and Subsidiaries

Consolidated Balance Sheets

As of December 31, 2024 and December 31, 2023 (Continued)

Liabilities and stockholders' deficit

16 unchanged sentences

Preferred stock, par value $ 0.001 per share;

15,000,000 shares authorized, none issued and outstanding as of December 31, 2024 and December 31, 2023

15,000,000 shares authorized, none issued and outstanding as of December 31, 2025 and 2024

Common stock, par value $ 0.001 per share;

297,225,000 shares authorized, 46,532,355 and 40,983,881 shares issued as of December 31, 2024 and December 31, 2023, respectively, and 45,270,860 and 39,735,536 shares outstanding as of December 31, 2024 and December 31, 2023, respectively

297,225,000 shares authorized, 56,168,067 and 46,532,355 shares issued as of December 31, 2025 and 2024, respectively, and 54,906,572 and 45,270,860 shares outstanding as of December 31, 2025 and 2024, respectively

Additional paid-in capital

Treasury stock, at cost, 1,261,495 and 1,248,345 shares at December 31, 2024 and December 31, 2023, respectively

Treasury stock, at cost, 1,261,495 and 1,261,495 shares at December 31, 2025 and 2024, respectively

( 1,979,294 )

24 unchanged sentences

( 6,296,273 )

( 33,103,548 )

Other income (expense):

3 unchanged sentences

( 1,565,732 )

Equity in income of solar project companies

Gain on debt extinguishment

Gain on early termination of lease

Equity in income of unconsolidated companies

Gain (loss) on debt extinguishment

Gain (loss) on early termination of lease

Other income (expense), net

Total other income (expense)

Total other income (expense), net

( 1,163,670 )

Income (loss) before income taxes

( 7,459,943 )

( 33,298,506 )

Income tax provision (benefit)

( 1,134,575 )

Net income (loss)

$ ( 6,325,368 )

$ ( 34,962,336 )

Net income (loss) per share

8 unchanged sentences

$ ( 6,325,368 )

$ ( 34,962,336 )

Other comprehensive income (loss)

2 unchanged sentences

$ ( 6,294,041 )

$ ( 35,128,940 )

See accompanying notes to consolidated financial statements.

4 unchanged sentences

Preferred Stock

Additional Paid-

Additional Paid- In

Treasury Stock

6 unchanged sentences

$ ( 15,078,942 )

Vesting of restricted stock

Stock-based compensation

Shares issued on warrant exercise

Shares issued on option exercise

Shares returned for tax withholding on option exercise

Shares issued in initial public offering

Public offering costs previously capitalized

( 1,004,991 )

Shares issued in public offering

Net income (loss)

8 unchanged sentences

$ ( 1,417,865 )

$ ( 12,210,098 )

Preferred Stock

Additional Paid-

Additional Paid- In

Treasury Stock

6 unchanged sentences

$ ( 15,887,828 )

Vesting of restricted stock

Stock-based compensation

Shares issued on warrant exercise

Shares issued on option exercise

Shares returned for tax withholding on option exercise

Shares issued in initial public offering

Public offering costs previously capitalized

( 1,004,991 )

Net income (loss)

( 34,962,336 )

Currency translation adjustments

14 unchanged sentences

$ ( 6,325,368 )

$ ( 34,962,336 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

4 unchanged sentences

Provision for (recovery of) credit losses and loan losses

Provision for other receivables from SPIC

Provision for receivables from SPIC

Provision for excess and obsolete inventories

Provision for warranty and production guaranty

Equity in income of investment in solar project company excess of $0 distribution received

Equity in income of investment in solar project companies in excess of $0 distribution received

Deferred income tax provision

Gain on disposal of property and equipment

Gain on debt extinguishment

( 1,400,381 )

Loss (gain) on disposal of property and equipment

Gain on debt extinguishment related to convertible notes

Loss on debt extinguishment related to promissory notes

Gain on early termination of lease

3 unchanged sentences

Accounts Receivable

( 8,695,297 )

Contract Assets

( 45,633,504 )

Receivable from SPIC

Customer loans receivable

Other receivables and current assets

( 1,404,001 )

Accounts payable

2 unchanged sentences

( 1,447,263 )

Contract liabilities

( 4,036,348 )

Accrued expenses and other payables

( 3,716,300 )

( 2,664,360 )

Other liabilities

( 1,097,948 )

( 1,379,324 )

Net cash provided by (used in) operating activities

( 9,130,110 )

See accompanying notes to consolidated financial statements.

SolarMax Technology, Inc.

and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2024 and 2023 (Continued)

Years Ended December 31,

Investing activities

1 unchanged sentence

( 7,685,171 )

Proceeds from short-term investments

Purchase of property and equipment

Principal repayment on debt investments

Proceeds from disposal of property and equipment

2 unchanged sentences

Financing activities

Accrued settlement

$ ( 276,269 )

Proceeds from initial public offering, net of underwriting fees

Share issuance costs relating to the initial public offering

Accrued legal settlement

Proceeds from private placement sale of common stock

Gross proceeds from initial public offering, net of underwriting fees

Share issuance costs

IPO offering costs paid

Proceeds from note payable

Proceeds from note issuances

Principal payments on convertible notes

1 unchanged sentence

( 5,545,007 )

Principal payment on borrowings

Repayment on equipment capital lease

Payments related to Uonone acquisition contingency (Note 15)

( 6,841,501 )

Proceeds from Uonone acquisition contingency (Note 15)

Net cash provided by (used in) financing activities

( 5,321,892 )

Effect of exchange rate

1 unchanged sentence

( 1,830,739 )

( 1,275,135 )

Cash, cash equivalents, and restricted cash, beginning of year

1 unchanged sentence

Supplemental disclosures of cash flow information:

Interest paid (received) in cash

Income taxes paid (received) in cash

Interest paid in cash

Income taxes paid in cash

Non-cash activities for investing and financing activities:

Issuance of common stock in exchange of note payable

Shares returned for tax withholding on options exercised

Reversal of previously capitalized offering cost upon IPO

Right-of-use assets acquired through operating leases, related party

Convertible notes issued to non-related parties in connection with cancellation of EB-5 loans

21 unchanged sentences

The solar business is based on the ability of the users of solar energy systems to save on energy costs and reduce their carbon imprint as compared with power purchased from the local electricity utility company.

The Company was founded in 2008 to engage in the solar business in the United States of America.

The Company’s primary business consists of the sale and installation of photovoltaic and battery backup systems for residential and commercial customers sales of LED systems and services to government and commercial users in the United States.

In 2015, the Company commenced operations in the People’s Republic of China (the “PRC”) with the acquisition of two subsidiaries, Chengdu Zhonghong Tianhao Technology Co., Ltd.

("Chengdu ZHTH”), which is a subsidiary of SolarMax Technology (Shanghai) Co.

(together with its subsidiaries thereunder, "ZHTH”), and Jiangsu Zhonghong Photovoltaic Electric Co., Ltd.

The Company did not generate any revenue from its China segment subsequent to 2021, and the China segment does not have any projects or agreements as of the date of the issuance of these financial statements.

All of the Company’s revenue for the years ended December 31, 2024 and 2023 was generated by the United States segment, and the cost of revenue related to the United States segment.

The Company’s operations primarily consist of (i) the sale and installation of photovoltaic and battery backup systems for residential and commercial customers, and (ii) sales of LED systems and services to government and commercial users.

In the U.S., the Company has four wholly-owned subsidiaries at December 31, 2024 as follows:

SolarMax Renewable Energy Provider, Inc., a California corporation ("SREP”)

SolarMax LED, Inc., a California corporation ("LED”)

SolarMax Financial, Inc., a California corporation ("SolarMax Financial”)

SMX Capital, Inc., a New Jersey corporation ("SMX Capital”)

The Company’s wholly-owned subsidiaries outside the U.S.

are as follows:

Accumulate Investment Co.

Ltd ("Accumulate”), a British Virgin Islands corporation.

The Company acquired Accumulate as part of its acquisition of Jiangsu Zhonghong Photovoltaic Electric Co., Ltd.

("ZHPV”) in April 2015.

SolarMax Technology Holdings (Hong Kong) Limited ("SolarMax Hong Kong”), which was established under the laws of Hong Kong on October 27, 2014.

Golden SolarMax Finance Co., Ltd., ("Golden SolarMax”), which was organized under the laws of the PRC on June 1, 2015.

The entity was liquidated in Q2 2024.

Solarmax Technology Holdings (Cayman) Limited ("Solarmax Cayman”), a Cayman Islands limited company formed on May 8, 2017.

Accumulate has one wholly-owned subsidiary, Accumulate Investment Co., Limited (HK), an entity organized under the laws of Hong Kong ("Accumulate Hong Kong”).

Accumulate Hong Kong has one wholly-owned subsidiary, ZHPV.

SolarMax Hong Kong has one wholly-owned subsidiary, SolarMax Technology (Shanghai) Co., Ltd.

("SolarMax Shanghai”), organized under the laws of the PRC and formed on February 3, 2015.

SolarMax Shanghai is a wholly foreign-owned entity, referred to as a WFOE.

SolarMax Shanghai currently has subsidiaries that are not significant.

SolarMax Shanghai and its subsidiaries are collectively referred to as ZHTH.

On May 8, 2017, Solarmax Technology Holdings (Cayman) Limited ("Solarmax Cayman”) a Cayman Islands limited company, was formed.

Solarmax Cayman is a 100% owned direct subsidiary of the Company and was created to potentially serve as an intermediate holding company for the Company’s PRC operations for possible future transactions.

Solarmax Cayman does not currently have any operations.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

At December 31, 2024 and 2023, the Company’s major subsidiaries and the related core business consist of the following:

SREP was established on July 19, 2011 and is engaged in the business of developing, selling and installing integrated photovoltaic systems and energy storage systems for residential and commercial customers in the U.S.

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

SolarMax Financial was established on September 9, 2009 and was engaged in the business of providing secured installment financing to purchasers of residential and commercial photovoltaic systems, and servicing installment sales for SREP and LED customers in the U.S.

The Company was founded in 2008 to engage in the solar business in the United States.

Since the third quarter of 2025, the Company’s primary business has been negotiating contracts and performing engineering, procurement and construction (“EPC”) services for solar-based battery energy storage systems (“BESS”) commercial systems.

As of December 31, 2025, the Company had commenced EPC services on a 430 MWh battery storage project in Texas pursuant to an agreement dated July 31, 2025 with Longfellow BESS I, LLC, Texas limited liability company (“Longfellow”).

During the year ended December 31, 2025, the Company generated revenue of $ 60.2 million, representing 66.1 % of the Company's revenue, from EPC services pursuant to this contract.

All of this revenue was generated during the second half of 2025.

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

Prior to the third quarter of 2025, the Company's primary business was the sale and installation of photovoltaic and battery backup systems for residential and commercial customers, sales of LED systems and services to government and commercial users.

The Company is continuing to develop this business but, because of changes in California law, this part of the Company's business is developing more slowly.

The Company also generates revenue from financing the sale of photovoltaic and battery backup systems.

Since early 2020, because the Company did not have the capital to support such operations, the Company ceased making loans to solar customers, and the Company does not anticipate engaging in such activities.

The Company’s finance revenue reflects revenue earned on its current portfolio, with no new loans having been added since 2022.

In 2015, the Company commenced operations in China, and the Company engaged in business in China through 2021.

Substantially all of the Company’s China revenues for 2021 and 2020 were generated from four projects for State Power Investment Corporation Guizhou Jinyuan Weining Energy Co., Ltd (“SPIC”), which is a large state-owned enterprise under the administration of the Chinese government.

Subsequent to December 31, 2021 through the date of this annual report, the Company did not generate revenues from China, and the Company is not engaged in any negotiations with SPIC or any other potential customer, and it is not engaged in any marketing activities.

In the event that the Company does not seek to recommence operations in China, it may discontinue its China operations.

In the United States, the Company has four wholly-owned subsidiaries at December 31, 2025 as follows:

SolarMax Renewable Energy Provider, Inc., a California corporation ("SREP”) was established on July 19, 2011 and is engaged in the business of developing, selling and installing integrated photovoltaic systems and energy storage systems for residential and commercial customers in the U.S., including EPC services for BESS contracts.

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

SolarMax Financial, Inc., a California corporation ("SolarMax Financial”) was established on September 9, 2009 and was engaged in the business of providing secured installment financing to purchasers of residential and commercial photovoltaic systems, and servicing installment sales for SREP and LED customers in the U.S.

The Company has not provided financing to purchasers since 2022, and all revenues from SolarMax Financial reflects revenue earned on its current portfolio, with no new loans having been added since early 2022.

SMX Capital was acquired by the Company in June 2011.

SMX Capital, Inc., a New Jersey corporation ("SMX Capital”) was acquired by the Company in June 2011.

SMX Capital is engaged in the business of owning and funding renewable energy projects in the U.S.

2 unchanged sentences

SMX Capital has not been engaged in leasing new systems since 2014 and its primary business is the ownership and maintenance of systems under existing leases.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2025 and 2024

The Company has three wholly-owned subsidiaries outside the U.S., through which the Company conducted its China operations and which are not actively engaged in any business activities since the Company is not actively involved in any business activities in China.

Initial Public Offering

3 unchanged sentences

The aggregate gross proceeds from the offering were approximately $ 20.0 million, prior to deducting the underwriting discounts, commissions and offering expenses payable by the Company.

Net proceeds from the Company’s initial public offering of approximately $18.6 million reflects the gross proceeds net of underwriting discounts, the non-accountable expense allowance, accountable expenses of the underwriters that were paid by the Company and other expenses that were deducted from gross proceeds at the closing.

Net proceeds from the Company’s initial public offering of approximately $ 18.6 million reflect the gross proceeds net of underwriting discounts, the non-accountable expense allowance, accountable expenses of the underwriters that were paid by the Company and other expenses that were deducted from gross proceeds at the closing.

Pursuant to the Underwriting Agreement, the Company issued to the Representative warrants (the “Representative’s Warrants”) to purchase 403,196 shares of common stock at an exercise price of $ 4.80 per share.

7 unchanged sentences

dollars, unless stated otherwise.

The functional currency of the Company’s foreign subsidiaries is the Chinese renminbi ("RMB”).

The functional currency of the Company’s Chinese subsidiaries is the Chinese renminbi ("RMB”).

These transactions are translated from the local currency into U.S.

11 unchanged sentences

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant accounting estimates reflected in the Company’s consolidated financial statements include the cost-based inputs to estimate revenues on long-term construction contracts, the collectability of accounts receivable, the receivable from SPIC and loans receivable, the value of investments in unconsolidated solar project companies, the value of short-term investments which have been extended and which were not paid on the maturity date, the useful lives and impairment of property and equipment, the fair value of stock options granted and stock-based compensation expense, warranty and customer care reserve, the valuation of deferred tax assets, inventories and provisions for income taxes.

Significant accounting estimates reflected in the Company’s consolidated financial statements include the cost-based inputs to estimate revenues on long-term construction contracts, the collectability of accounts receivable, the receivable from SPIC and loans receivable, the value of investments in unconsolidated solar project companies, the value of held to maturity debt investments, the useful lives and impairment of property and equipment, the fair value of stock options granted and stock-based compensation expense, warranty and customer care reserve, the valuation of deferred tax assets, inventories and provisions for income taxes.

Actual results could differ materially from those estimates.

2 unchanged sentences

GAAP, which contemplate continuation of the Company as a going concern.

The Company’s history of net losses and negative cash flow from operating activities, including its net loss and negative cash flow for the year ended December 31, 2024, along with its increased accumulated deficit and stockholders’ deficit raise substantial doubt about the Company's ability to continue as a going concern.

The Company’s history of net losses and negative cash flow from operating activities, including its net loss for the year ended December 31, 2025, along with its increased accumulated deficit and stockholders’ deficit, its default on principal and interest since 2023 on convertible notes in the principal amount of $ 14.7 million, as of December 31, 2025, the low price of the Company’s common stock, which is below the Nasdaq continued listing requirement of a closing bid price of $ 1.00 per share and the possibility that the Company may effect a reverse split of its common stock in order to regain compliance with the Nasdaq minimum closing bid price requirement raise substantial doubt about the Company's ability to continue as a going concern.

At December 31, 2025, the Company reported a working capital deficit of approximately $ 20.4 million.

1 unchanged sentence

In connection with these consolidated financial statements, management evaluated whether there were conditions and events, that, considered in the aggregate, raise substantial doubt about the Company’s ability to meet its obligations as they become due within one year from the date of issuance of these financial statements.

Management assessed that there were such conditions and events, including a history of recurring operating losses, a history of negative cash flows from operating activities, and significant current debt.

As of December 31, 2024, the Company’s principal sources of liquidity consisted of approximately $ 786,000 , of cash and cash equivalents, a significant decline from $ 2.5 million at December 31, 2023 even though the Company completed its initial public offering in March 2024, and estimated cash from operations.

The Company believes its current cash balances coupled with anticipated cash generated from operating activities are sufficient to meet the Company’s working capital requirements for at least one year from the date of the issuance of the accompanying consolidated financial statements, excluding approximately $ 18.0 million of debt that is due in the next twelve months which the Company is seeking to have exchanged for five-year convertible notes.

Management is focused on expanding the Company’s existing business, as well as its customer base to expand its marketing to commercial solar installations, including its continuing efforts to generate revenue for its China operations, although the Company has not generated revenue from its China operations since 2021 and as of the date of issuance of these financial statements, the Company was not engaged in negotiations with respect to any contracts for its China segment.

The Company’s China segment has a receivable of RMB 49.5 million ($ 6.8 million) from SPIC, which has been outstanding since 2021, and reflects a reserve taken as of December 31, 2024 of RMB 4.7 million ($ 659,000 ) based on the initial arbitration results which disallow certain items claimed by the Company.

Although the Company expects to collect substantially all of this amount, it can give no assurance that it will recover such funds in 2025 if at all, and its ability to collect may be subject to China’s decline in tax revenue and funds from other sources.

As of December 31, 2025, the Company’s principal sources of liquidity consisted of approximately $ 8.0 million of cash and cash equivalents, proceeds from the sale of common stock and cash generated by the Company’s operations.

The Company believes its current cash balances coupled with anticipated cash generated from operating activities are sufficient to meet the Company’s working capital requirements for at least one year from the date of the issuance of the accompanying consolidated financial statements, excluding approximately $ 20.2 million of debt that is due in the next twelve months which the Company is seeking to have exchanged for five-year convertible notes and debt which the holders have the right to accelerate payment and seek interest at the default interest rate of 12 % per annum.

Management is focused on expanding the Company’s existing business, primarily its commercial EPC business, and to expand its marketing to commercial solar installations in the United States.

The Company is looking to continue to negotiate an exchange of a large portion of the approximately $ 5.5 million of the current portion of long-term related party loans for convertible notes that mature in periods beyond one year.

The Company cannot predict whether it will be successful in these efforts.

The Company cannot predict whether it will be successful in these efforts or whether it will be necessary to change the proposed terms of any such exchanges.

However, the low price of the Company’s common stock and the Company’s defaults on outstanding convertible debt make it unlikely that the beneficial owners of the EB-5 debt may be reluctant either to accept convertible notes on the present, if any, terms or to convert outstanding convertible notes.

During the year ended December 31, 2025, the Company raised a total of approximately $ 7.7 million from the sale of common stock at a 25% discount from market.

Under the Nasdaq regulations, the Company may not be able to raise any significant funding from the sale of common stock at a discount from market, as defined by Nasdaq, in the near future without stockholder approval.

As a result of the above, there is substantial doubt regarding the Company’s ability to continue as a going concern within one year from the date of issuance of these financial statements.

The Company cannot give assurance that it can increase its cash balances or limit its cash consumption, or obtain the exchange of any of its current debt for secured convertible debt and thus maintain sufficient cash balances for its planned operations.

The Company cannot give assurance that it will be able to pay or refinance its current debt, including convertible notes in the principal amount of $ 14.3 million on which the Company is in default, can increase its cash balances or limit its cash consumption or obtain the exchange of any of its current debt for secured convertible debt and thus maintain sufficient cash balances for its planned operations.

Future business demands may lead to cash utilization at levels greater than recently experienced.

Revenue and cash flow from the Company’s China segment is uncertain since as of December 31, 2024, the Company did not have any agreements for its China segment and was not engaged in any negotiations for such a contract.

The Company may need to raise additional capital in the future.

However, the Company cannot assure that it will be able to raise additional capital on acceptable terms, if at all.

Further, the Company cannot assure that it will not discontinue its China operations if it is not able to generate revenues from this segment.

If the Company cannot refinance or pay its current debt obligations, including convertible notes in the principal amount of $14.3 million on which the Company is in default and with respect to which the holders have the right to accelerate payment of principal and interest, or it cannot raise the funding it requires for its business, it may not be able to continue in business.

If the Company generates business for its China operations, and no assurance can be given that it will be successful in such efforts, any revenue and cash flow from the Company’s China operations would be irregular because of the timing of solar projects and the significant funding requirements for its China operations, particularly during periods when there is little or no revenue or cash flow from projects.

As of December 31, 2025, the Company did not have any agreements for its China operations and was not in negotiation with respect to any agreement.

In the event that the Company is not able to develop business in China, the Company may terminate its China operations.

During the year ended December 31, 2025, the Company (i) raised approximately $ 4.8 million in cash from the private placement of common stock and (ii) issued common stock as payment of $ 2.9 million of promissory notes.

The Company is likely to require additional capital in the future.

Because of NASDAQ regulation, the Company is limited in its ability to continue to raise funds by the private placement of common stock at a discount from market, as defined by Nasdaq.

In view of the foregoing and the low price of the Company’s common stock and the possibility that the common stock may be delisted from Nasdaq or effect a reverse split in order to raise the price of the Company’s common stock, the Company cannot assure that it will be able to raise additional capital on acceptable terms, if at all.

Cash and Cash Equivalents

Cash and cash equivalents consist of deposit accounts and highly liquid investments purchased with an original maturity of six months or less.

Cash and cash equivalents consist of deposit accounts and highly liquid investments purchased with an original maturity of three months or less.

The standard insurance coverage for non-interest bearing transaction accounts in the U.S.

1 unchanged sentence

The standard insurance coverage for non-interest bearing transaction accounts in the PRC is RMB 500,000 (approximately $ 73,000 ) per depositor per bank under the applicable Chinese general deposit insurance rules.

Short-term Investments

Short-term investments consist of short-term note receivables with original maturities of 12 months or less.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

Held to Maturity Debt Investments

Held to maturity debt investments consist of short-term note receivables with original maturities of 12 months or less and are accounted for at amortized cost.

Restricted Cash

Restricted cash includes cash held to collateralize ACH transactions and outstanding credit card borrowing facilities.

Restricted cash at December 31, 2024 and December 31, 2023 consisted of:

Deposit held by a US financial institution as collateral for ACH transactions and business credit cards – US Segment

Restricted cash at December 31, 2025 and 2024 consisted of:

Deposit held by a US financial institution as collateral for ACH transactions and business credit cards

current portion

2 unchanged sentences

Accounts receivable are reported at the outstanding principal balance due from customers.

In the U.S., accounts receivable substantially include customer billings for the sales of LED products and services.

In the U.S., accounts receivable substantially include customer billings for large-scale EPC projects and for the sales of LED products and services.

In the PRC segment, accounts receivable represents the amounts billed under the contracts but uncollected on completed construction contracts.

Accounts receivable are recorded at net realizable value.

The Company maintains allowances for the applicable portion of receivables, including accounts receivable, government rebate receivables and other receivables, represents the Company’s estimate of the current expected loss inherent in accounts receivable as of the balance sheet date.

The Company maintains allowances for the applicable portion of receivables, including accounts receivable, government rebate receivables and other receivables, that represent the Company’s estimate of the current expected loss inherent in accounts receivable as of the balance sheet date.

The adequacy of the allowance for credit losses is assessed quarterly and the assumptions and models used in establishing the allowance are evaluated regularly.

2 unchanged sentences

The expense related to rebates receivable is recorded as a reduction to revenues.

Contract Assets

Contract Balances

The contract assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date, primarily for the solar energy system sales in the U.S.

The contract assets are transferred to accounts receivable when the rights become unconditional (i.e., when the permission to operate is issued).

The contract assets are transferred to receivables when the rights become unconditional (i.e., when the permission to operate is issued).

For industrial construction contracts, contract assets represent costs and estimated earnings in excess of billings on uncompleted contracts.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2025 and 2024

The contract liabilities primarily relate to the advance consideration received from customers related to the solar energy system sales in the U.S., for which the transfer of ownership has not occurred.

For industrial construction contracts, contract liabilities represent billings in excess of costs and estimated earnings on uncompleted contracts.

Applying the practical expedient in ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), paragraph 340‑40-25-4, the Company recognizes the incremental costs of obtaining contracts (i.e., commission fees) in cost of revenue when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less.

These costs are included in cost of revenues.

Deferred Project Costs

Deferred project costs relate to costs incurred by the Company on projects which the corresponding revenue is not yet recognized.

Deferred project costs are presented as a current asset on the balance sheet, and is recognized as cost of revenue when revenue is recognized on the corresponding project.

Customer Loans Receivable

10 unchanged sentences

All of the inventories are in the United States segment;

the China segment has no inventory.

the China operations has no inventory.

The estimate for excess and obsolete inventories is based on historical sales and usage experience together with a review of the current status of existing inventories.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

Property and Equipment

9 unchanged sentences

Lease term, 10 - 20 years

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2025 and 2024

Goodwill represents the excess of the purchase price in a business combination over the fair value of assets acquired and liabilities assumed.

The Company’s goodwill was derived from the acquisitions of businesses in China in April 2015.During the quarter ended September 30, 2024, the Company performed its annual goodwill impairment assessment considering various factors and based primarily on the continued economic downturn in China that directly impacts the Company's ability to generate new businesses in the foreseeable future, the Company recognized impairment loss for the entire balance of the goodwill of $ 7.5 million for the year ended December 31, 2024.

No impairment loss was recognized for the year ended December 31, 2023.

The Company reviews goodwill for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount may be impaired.

The Company generally performs its annual impairment test of goodwill in the fourth quarter each year or whenever events or circumstances change or occur that would indicate that goodwill might be impaired.

When assessing goodwill for impairment, the Company follows ASC Topic 350, Intangibles-Goodwill and Other.

In determining the reporting unit’s fair value, the Company considers the underlying enterprise value and if necessary, the reporting unit’s discounted cash flow, which involves assumptions and estimates, including the reporting unit’s future financial performance, weighted-average cost of capital and interpretation of currently enacted tax laws.

Circumstances that could indicate impairment and require the Company to perform a quantitative impairment test include a significant decline in the reporting unit’s financial results, a significant decline in the reporting unit’s enterprise value relative to its net book value, an unanticipated change in competition or market share and a significant change in the reporting unit’s strategic plans.

For the Company’s goodwill annual testing, management determined that its reporting units are the same as its operating segments.

Accordingly, the reporting unit for the goodwill annual testing is the PRC segment.

The Company had no goodwill at December 31, 2025 and 2024.

The Company’s goodwill had been derived from the acquisition of businesses in China in April 2015, and the Company recognized impairment loss for the entire balance of the goodwill of $ 7.5 million for the year ended December 31, 2024.

Impairment of Long-Lived Assets

2 unchanged sentences

If the aggregate undiscounted future net cash flows expected to result from the use and the eventual disposition of a long-lived asset is less than its carrying value, then the Company would recognize an impairment loss based on the excess of the carrying value over the fair value.

There was no impairment loss on such systems for the years ended December 31, 2024 and 2023.

Investments in Unconsolidated Joint Ventures and Solar Project Companies

The Company’s unconsolidated investments in the U.S.

are held directly by the Company as well as through its subsidiary, SMX Capital, and consist of investments in U.S.-based solar limited liability companies:

There was no impairment loss on the Company’s property and equipment for the years ended December 31, 2025 and 2024.

Investments in Unconsolidated Companies

The Company’s unconsolidated investments are held directly by the Company as well as through its subsidiary, SMX Capital, and consist of investments in U.S.-based solar limited liability companies:

Alliance Solar Capital 1, LLC (“A#1”), Alliance Solar Capital 2, LLC (“A#2”), and Alliance Solar Capital 3, LLC (“A#3”).

The Company’s U.S.

segment also has an investment in a PRC-based panel manufacturer, Changzhou Hongyi New Energy Technology Co., Ltd (“Changzhou”).

At December 31, 2024 and December 31, 2023, the Company has unconsolidated investments in the PRC related to its 30 % non-controlling interests in three project companies for which it transferred a 70% interest in 2021 to SPIC, which operates the project companies.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

The Company also has an investment in a PRC-based panel manufacturer, Changzhou Hongyi New Energy Technology Co., Ltd (“Changzhou”).

As a result of recurring historical losses, all the unconsolidated investments in the U.S.

have zero cost basis at December 31, 2025 and 2024.

At December 31, 2025 and 2024, the Company has unconsolidated investments in the PRC reflecting its 30 % non-controlling interests in three project companies for which it transferred a 70% interest in 2021 to SPIC, which operates these companies.

For these investments, the Company does not have the controlling interests but it has the contractual ability to exercise significant influence over the operations and the financial decisions of the investees under the respective operating agreements although these investees are controlled by SPIC, which, as the 70% owner and the operator of the entities, has the ability to make all decisions concerning the investees.

In each of the investments, the investee also maintains a separate capital account for each of its investors and accordingly, the Company has a separate capital account at each of the investees.

Since the Company has the contractual ability to exercise significant influence over the investees, the Company accounts for each of these investments using the equity method of accounting, under which the Company records its proportionate share of the investee’s profit or loss based on the specified profit and loss percentage.

Since the Company has the contractual right to exercise significant influence over the investees, the Company accounts for each of these investments using the equity method of accounting, under which the Company records its proportionate share of the investee’s profit or loss based on the specified profit and loss percentage.

Distributions received from equity method investees are accounted for as returns on investment and classified as cash inflows from operating activities, unless the Company’s cumulative distributions received less distributions received in prior periods that were determined to be returns of investment exceed cumulative equity in earnings recognized by the Company.

When such an excess occurs, the current year distribution up to this excess would be considered a return of investment and classified as cash inflows from investing activities.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2025 and 2024

Because the Company’s investments include privately-held companies where quoted market prices are not available and as a result, the cost method, combined with other intrinsic information, is used to assess the fair value of the investment.

10 unchanged sentences

The Company determined that its 25-year workmanship warranty for solar energy systems constitutes an assurance-type warranty and should continue to be accounted for under ASC Topic 460, Guarantees, instead of a service-type warranty which would be accounted for under Topic 606 as a cost of revenues.

Quality Warranty for EPC Services

For the PRC segment, the Company provided construction quality warranty on Engineering, Procurement and Construction (“EPC”) services generally for one year after completion.

Warranty for EPC Services

For the PRC operations, the Company provided construction quality warranty on EPC services generally for one year after completion.

The customer typically retains 3-5% of the contract price which will not be paid to the Company until the expiration of the warranty period which is accounted by the Company as retainage receivable.

The Company currently provides a reserve for such potential liabilities based on a nominal percentage of project revenues for the PRC segment in the approximate amount of $ 241,000 and $ 249,000 as of December 31, 2024 and December 31, 2023, respectively, which is included in accrued expenses and other liabilities.

The Company currently provides a reserve for such potential liabilities based on a nominal percentage of project revenues for the PRC segment in the approximate amount of $ 251,000 and $ 247,000 as of December 31, 2025 and 2024, respectively, which is included in accrued expenses and other liabilities.

To date the Company has not incurred significant claims on the quality warranty.

The liability is reversed when the warranty period expires.

For the US segment.

the Company provides a three year workmanship warranty after the project is completed.

The equipment is covered by the manufacturer warranty for ten years.

The Company currently provides a reserve for warranty based on a nominal percentage of project revenues recognized for the period and is included in other liabilities.

Production Guaranty

For solar systems sold in the U.S., the Company warrants that modules installed in accordance with agreed-upon specifications will produce at least 98 % of their labeled power output rating during the first year, with the warranty coverage reducing by 0.5 % every year thereafter throughout the approximate 10 -year production guaranty period.

In resolving claims under the production guaranty, the Company typically makes cash payments to customers who claim for the production shortfall in power output on an annual basis.

In resolving claims under the production guaranty, the Company typically makes cash payments on an annual basis to customers who claim for the production shortfall in power output.

The Company currently provides a reserve for the production guaranty at 0.2% of the total solar revenue .

6 unchanged sentences

For the Years Ended December 31, 2025 and 2024

Other Warranties

In 2016, as a result of the bankruptcy of a Chinese panel supplier from whom the Company purchased solar modules, the Company reclassified the liability related to unpaid retentions to warranty liability in the amount of $ 651,000 .

As of September 30, 2023, the Company had not received any claims against the liability and accordingly, the Company reversed the liability against cost of revenue during the third quarter of 2023.

See Note 14 - Accrued Expenses and Other Payables.

Fair Value Measurements

12 unchanged sentences

Customer loans receivable

Short-term investments

Held to maturity debt investments

Bank and other loans

1 unchanged sentence

Secured convertible debt

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

The following table presents the fair value and carrying value of the Company’s cash equivalents, loans receivable and borrowings as of December 31, 2024:

1 unchanged sentence

Customer loans receivable

Held to maturity debt investments

Bank and other loans

5 unchanged sentences

The overall credit risk of the portfolio also has not significantly fluctuated as evidenced by the minimal historical write-offs, and lastly the market interest rates have remained relatively consistent since the origination of the loans.

Short-term investments – Short-term investments consist of short-term note receivables with original maturities of 12 months or less.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2025 and 2024

Held to maturity debt investments – Held to maturity debt investments consist of short-term note receivables with initial maturities of 12 months or less.

Accordingly, their carrying values approximate their fair value.

14 unchanged sentences

For such sale arrangements, the Company recognizes revenue using cost-based input methods, which recognize revenue and gross profit as work is performed based on the relationship between actual costs incurred compared to the total estimated costs of the contract after consideration of the customer’s commitment to perform its obligations under the contract, which is typically measured through the receipt of cash deposits or other forms of financial security issued by creditworthy financial institutions or parent entities.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

Payment for EPC services is made by the customer pursuant to the billing schedule stipulated in the EPC contract which is generally based on the progress of the construction.

1 unchanged sentence

The retainage amount is withheld by the customer and is paid at the conclusion of the 12-month warranty period .

In applying cost-based input methods of revenue recognition, the Company uses the actual costs incurred relative to the total estimated costs (including solar module costs) to determine the progress towards contract completion and to calculate the corresponding amount of revenue and gross profit to recognize.

In applying cost-based input methods of revenue recognition, the Company uses the actual costs incurred relative to the total estimated costs to determine the progress towards contract completion and to calculate the corresponding amount of revenue and gross profit to recognize.

Cost based input methods of revenue recognition are considered a faithful depiction of the Company’s efforts to satisfy long-term construction contracts and therefore reflect the transfer of goods to a customer under such contracts.

Costs incurred that do not contribute to satisfying the Company’s performance obligations (“inefficient costs”) are excluded from the Company’s input methods of revenue recognition as the amounts are not reflective of the Company’s transferring control of the solar energy system to the customer.

Costs incurred towards contract completion may include costs associated with solar modules, direct materials, labor, subcontractors, and other indirect costs related to contract performance.

The Company recognizes solar module and direct material costs as incurred when such items have been installed in a system.

Costs incurred towards contract completion may include costs associated with solar modules and batteries, direct materials, labor, subcontractors, and other indirect costs related to contract performance.

The Company recognizes the cost of solar modules, batteries, and direct material costs as incurred when such items have been installed in a system.

For industrial projects, the Company uses the actual installation costs incurred relative to the total estimated installation costs to determine the progress towards contract completion and to calculate the corresponding amount of revenue and gross profit to recognize.

The Company recognizes revenue, but not profit, on uninstalled materials on industrial projects.

The revenue on uninstalled materials is recognized when the control is transferred.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2025 and 2024

Cost-based input methods of revenue recognition require the Company to make estimates of net contract revenues and costs to complete its projects.

16 unchanged sentences

All costs to obtain and fulfil contracts associated with system sales and other product sales are expensed to cost of revenue when the corresponding revenue is recognized.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

For solar energy and battery storage system sales, the Company recognizes revenue using a cost-based input method that recognizes revenue and gross profit as work is performed based on the relationship between actual costs incurred compared to the total estimated cost of the contract.

2 unchanged sentences

Costs incurred towards contract completion may include costs associated with solar modules, battery components, direct materials, labor, subcontractors, and other indirect costs related to contract performance.

In the U.S., the Company sells solar energy and battery storage systems to residential and commercial customers and recognizes revenue net of sales taxes.

Cash sales include direct payments from the customer (including financing obtained directly by the customer), third-party financing arranged by the Company for the customer, and leasing arranged by the Company for the customer through a third party leasing company.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2025 and 2024

The Company sells solar energy and battery storage systems to residential and commercial customers in California and recognizes revenue net of sales taxes.

Cash sales include direct payments from the customer (including financing obtained directly by the customer), third-party financing arranged by the Company for the customer, and third-party leasing agreements arranged by the Company for the customer.

Direct payments are made by the customer as stipulated in the underlying home improvement or commercial contract which generally includes an upfront down payment at contract signing, payments at delivery of materials and installation ranging from 70% to 85% of the contract price , and the payment of the final balance at the time of the city signoff or when the permission to operate the solar system is granted by a utility company.

For third-party financing arranged by the Company for the customer, direct payments are made by the financing company to the Company based on an agreement between the financing company and the Company, with the majority of the payments made by the time of completion of installation but not later than the date on which the permission to operate the solar system is granted by the utility company.

For a lease through the third party leasing partner, direct payments are made by the leasing partner to the Company based on an agreement between the leasing partner and the Company, which is generally 80% upon the completion of installation and 20% upon the permission to operate is granted.

For a lease through the third party leasing company, direct payments are made by the leasing company to the Company based on an agreement between the leasing company and the Company, which is generally 80% upon the completion of installation and 20% when permission to operate is granted.

LED Product Sales and Service Sales

24 unchanged sentences

For the Years Ended December 31, 2025 and 2024

Operating Leases and Power Purchase Agreements (PPAs) in U.S.

The Company sells energy generated by PV solar power systems under PPAs.

For energy sold under PPAs, which may qualify as a lease, the Company recognizes revenue each period based on the volume of energy delivered to the customer and the price stated in the PPA.

For leases, the Company was considered the lessor of solar energy systems under ASC Topic 840, Leases (“ASC 840”);

however, upon the Company’s adoption of ASC Topic 842, Leases (“ASC 842”), the Company is no longer considered the lessor because the Company owns the solar renewable energy certificates related to these solar energy systems, and the counterparty does not receive substantially all of the economic benefits for the use of these energy solar systems.

Therefore, these arrangements are not considered leases in accordance with ASC 842.

Solar Leases and Solar Power Purchase Agreements (PPAs) in the U.S.

The Company has entered into long-term solar leases as well as contracts for the sale of energy generated by PV solar power systems under PPAs that do not meet the criteria for recognition under ASC 842, either because the agreements are not deemed to contain a lease, or the agreements qualify for the short-term lease exemption.

These systems were installed on the customers’ properties but are owned by the Company.

Loan Interest Income

In the U.S., in the past, the Company provided installment financing to qualified customers to purchase residential or commercial photovoltaic systems, energy storage systems, as well as LED products and services, and some of these loans remain outstanding.

The Company has not entered into new loans since early 2020, and its revenues are from financing relates to its existing loan portfolio.

Prior to 2023, the Company provided installment financing to qualified U.S.

customers to purchase residential or commercial photovoltaic systems, energy storage systems, as well as LED products and services, and some of these loans remain outstanding.

The Company has not entered into new loans since early 2020, and its finance revenues are from its existing loan portfolio.

Customer loans receivable are classified as held-for-investment based on management’s intent and ability to hold the loans for the foreseeable future or to maturity.

5 unchanged sentences

Loans are transferred from held-for-investment to held-for-sale when management’s intent is not to hold the loans for the foreseeable future.

Loans held-for-sale are recorded at the lower of cost or fair value.

There were no loans held-for-sale at December 31, 2024 and December 31, 2023.

The following table summarizes the Company’s revenue by business line for the years ended December 31, 2024 and 2023:

Years Ended December 31,

Solar energy and battery storage systems

Sales on non-installment basis

Third-party leasing arrangements

Operating lease revenues

Power purchase agreement revenues

Total solar energy and battery storage systems

Financing related

Total revenues

Advertising Costs

The Company charges advertising and marketing costs related to radio, internet and print advertising to operations as incurred.

Advertising and marketing costs for the years ended December 31, 2024 and 2023 were approximately $ 517,000 and $ 1.2 million, respectively.

Advertising and marketing costs for the years ended December 31, 2025 and 2024 were approximately $ 367,000 and $ 517,000 , respectively.

The Company accounts for income taxes pursuant to the FASB ASC Topic 740, Income Taxes (“ASC 740”).

3 unchanged sentences

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized.

12 unchanged sentences

income taxes on the undistributed earnings of its foreign subsidiaries based upon the Company’s intention to permanently reinvest undistributed earnings to ensure sufficient working capital and further expansion of existing operations outside the U.S.

As of December 31, 2024 and December 31, 2023, the Company’s foreign subsidiaries operated at a cumulative deficit for U.S.

As of December 31, 2025 and 2024, the Company’s foreign subsidiaries operated at a cumulative deficit for U.S.

earnings and profit purposes.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2025 and 2024

Comprehensive Income (Loss)

1 unchanged sentence

Under ASC 220, the Company is required to report comprehensive income (loss), which includes net income (loss) as well as other comprehensive income (loss).

The only significant component of accumulated other comprehensive income (loss) as of December 31, 2024 and December 31, 2023 is the currency translation adjustment.

The only significant component of accumulated other comprehensive income (loss) as of December 31, 2025 and 2024 is the currency translation adjustment.

Net Income (Loss) Per Share

1 unchanged sentence

Diluted weighted average shares is computed using basic weighted average shares plus any potentially dilutive securities outstanding during the period using the treasury-stock-type method and the if-converted method, except when their effect is anti-dilutive.

Potentially dilutive securities are excluded from the computation of diluted earnings per share for the year ended December 31, 2024 because the effect would be antidilutive.

Potentially dilutive securities are excluded from the computation of diluted earnings per share for the years ended December 31, 2025 and 2024 because the effect would be antidilutive.

Stock-Based Compensation

9 unchanged sentences

Adjustments resulting from the translation from RMB into U.S.

dollar are recorded in stockholders’ equity as part of accumulated other comprehensive income.

dollar are recorded in stockholders’ equity (deficit) as part of accumulated other comprehensive income (loss).

Further, foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency.

Losses on those foreign currency transactions of approximately $ 31,000 and $ 167,000 for the years ended December 31, 2025 and 2024, respectively, are included in other income (expense), net for the period in which exchange rates change.

Segment Information

Operating segments are defined as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.

The Company’s chief operating decision maker is the chief executive officer.

Based on the financial information presented to and reviewed by the chief operating decision maker in deciding how to allocate the resources and in assessing the performance of the Company, the Company has determined that it has one operating segment, and one reporting segment which is the operation in the United States for the year ended December 31, 2025.

Prior to January 1, 2024, the Company considered its operation in China an operating segment and a reporting segment.

However, because the operation in China has had no revenues and no operations in China since 2022, its principal activity having been seeking to collect its receivable from SPIC, and the Company has no agreement and is not engaged in any negotiations or marketing activities in China, the Company no longer considers its operation in China an operating segment or a reporting segment.

SolarMax Technology, Inc.

2 unchanged sentences

For the Years Ended December 31, 2025 and 2024

Segment Information

The Company’s chief operating decision maker is the chief executive officer.

Based on the financial information presented to and reviewed by the chief operating decision maker in deciding how to allocate the resources and in assessing the performance of the Company, the Company has determined that it has two operating segments, the United States and China;

however, the Company has one reporting segment which is the operation in the United States for the year ended December 31, 2024.

Prior to January 1, 2024, the Company considered its operation in China a reporting segment.

However, because the operation in China has had no significant revenues since 2022, the Company no longer considers its operation in China a reporting segment.

Recently Issued Accounting Pronouncements

As an emerging growth company, the Company has elected to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Securities and Exchange Act of 1934.

In November 2023, the FASB issued ASU 2023-07 that would enhance disclosures for significant segment expenses for all public entities required to report segment information in accordance with ASC 280.

ASC 280 requires a public entity to report for each reportable segment a measure of segment profit or loss that its chief operating decision maker (CODM) uses to assess segment performance and to make decisions about resource allocations.

The amendments in ASU 2023-07 improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more useful financial analyses.

Currently, Topic 280 requires that a public entity disclose certain information about its reportable segments.

The amendments in ASU 2023-07 do not change or remove those disclosure requirements.

The amendments in ASU 2023-07 also do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments.

The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

A public entity should apply the amendments in ASU 2023-07 retrospectively to all prior periods presented in the financial statements.

The adoption effective on January 1, 2024 has no significant impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740).

1 unchanged sentence

The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024, though early adoption is permitted.

The Company does not expect that adoption of this standard will have a material impact on the Company’s income tax disclosures.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024.

The Company adopted this standard prospectively for the year ended December 31, 2025.

The adoption impacted the Company’s income tax disclosures, but did not impact the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

This update requires that at each interim and annual reporting period public entities disclose (1) the amounts of purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions;

(2) certain amounts that are already required to be disclosed under current GAAP in the same disclosure as the other disaggregation requirements;

(3) a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively;

and (4) the total amount of selling expenses and, in annual reporting periods, the definition of selling expenses.

In January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Clarifying the Effective Date.

This update clarifies that ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

Early adoption is permitted.

The Company is currently evaluating the impact on its financial statements of adopting this guidance.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments- Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets.

ASU 2025-05 is intended to improve the estimation of expected credit losses for contracts arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers.

The amendments in this ASU will be applied prospectively and are effective for fiscal years beginning after December 15, 2025, with early adoption permitted.

The Company is currently evaluating the impact of implementing this guidance on its financial statements.

The Company has reviewed all other recently issued accounting pronouncements and concluded they were either not applicable or not expected to have a material impact on the Company’s consolidated financial statements.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

Disaggregation of Revenue

The following table summarizes the Company’s revenue by business line for the years ended December 31, 2025 and 2024:

Years Ended December 31,

Solar energy and battery storage systems

Large-scale EPC contracts

Sales on non-installment basis

Third-party leasing arrangements

Operating lease revenues

Power purchase agreement revenues

Total solar energy and battery storage systems

Financing related

Total revenues

Cash, Cash Equivalents and Restricted Cash

As of December 31, 2024 and December 31, 2023, insured and uninsured cash including the balance classified as restricted cash were as follows:

As of December 31, 2025 and 2024, insured and uninsured cash including the balance classified as restricted cash were as follows:

US Operations

Uninsured cash

China Segment

China Operations

Uninsured cash

2 unchanged sentences

Restricted cash

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2025 and 2024

Accounts Receivable, Net

2 unchanged sentences

Balance – beginning of period

Provision for bad debts

( 1,266,474 )

Effect of exchange rate

Provision for credit losses

Receivables charged off

Balance – end of period

Short-term investments

In March 2024, the Company's United States segment made short-term investments of $ 7.0 million in 8% promissory notes due June 1, 2024 issued by Webao Limited, an unrelated party, based in Hong Kong.

The maturity date of the notes has been extended to June 30, 2025 .

The total amortized cost, the fair value and the carrying value of the investments is $ 5.7 million at December 31, 2024.

There was no unrecognized holding gains or losses and other-than-temporary impairment recognized on this investment at December 31, 2024.

In March 2024, the Company's China segment made short-term investments of RMB 5.0 million in a 5% promissory note due June 25, 2024 issued by Qingdao Xiaohuangbei Technology Co., Ltd.

Held to Maturity Debt Investments

In March 2024, the Company made short-term investments of $ 7.0 million in 8% promissory notes, originally due June 1, 2024 issued by Webao Limited, an unrelated party, based in Hong Kong.

The notes were extended multiple times and the note was paid in December 2025.

In March 2024, the Company made short-term investments of RMB 5.0 million, approximately $ 693,000 , in a 5% promissory note due June 25, 2024 issued by Qingdao Xiaohuangbei Technology Co., Ltd.

, an unrelated party based in PRC.

The maturity date of the note has been extended to June 30, 2025 .

At December 31, 2024, the unpaid balance of the promissory note was RMB 4.7 million (approximately $ 638,000 ).

In January 2025, an additional principal payment of RMB 679,288 (approximately $ 95,000 ) was made along with the accrued interest.

The maturity date of the note was extended to December 31, 2025 .

At December 31, 2025, the unpaid balance of the promissory note was RMB 3.7 million (approximately $ 523,000 ) and on February 19, 2026, the unpaid principal and accrued interest were fully paid.

Receivable from SPIC, Net

The Company’s receivables due from SPIC relate to four EPC projects the Company’s China segment completed in 2020 and 2021.

The gross balance of the receivables of RMB 54.2 million ($ 7.4 million) was unchanged through December 31, 2023 consisting of accounts receivable of RMB 27.9 million ($ 3.8 million) and other receivables related to project advances and reimbursements of RMB 26.4 million ($ 3.6 million).

As a result of the COVID-19 pandemic, the settlement discussions were halted and did not resume until 2023 at which time the new management of SPIC raised additional questions regarding certain provisions of the contracts which resulted in arbitration meetings being held during 2024.

The final arbitration rulings are expected in the first half of 2025.

However, based on the initial opinion of the Company’s representative counsel at the arbitration, the receivables that were deemed supportable and realizable at the arbitration meetings are approximately RMB 49.5 million ($ 6.8 million).

Accordingly, a reserve for uncollectible amount of RMB 4.7 million ($ 659,000 ) was recorded by the Company at December 31, 2024.

The receivable balance due from SPIC, net of the reserve is RMB 49.5 million ($ 6.8 million) at December 31, 2024.

The Company had previously initiated arbitration proceedings against SPIC, the state-owned company related to the receivable balances of several photovoltaic EPC projects that the Company completed in 2020 and 2021.

In April 2025, the arbitration tribunal issued awards in favor of the Company and subsequently the Company collected approximately RMB 42.5 million ($ 6.0 million) of the receivable balance.

At December 31, 2025, the unpaid receivable balance was RMB 7.0 million ($ 1.0 million) and no additional payments were received since.

Accordingly, the Company initiated another enforcement proceeding to collect the balance of the arbitration awards.

In connection with the enforcement actions, the court has frozen certain bank accounts and real estate assets of the related SPIC subsidiaries and has issued enforcement notices requiring a power supply bureau that owned money to SPIC to withhold electricity sales proceeds generated by the photovoltaic power plants.

As of December 31, 2025, no cash recoveries had been received.

Based on discussions with legal counsel and the enforcement court, management expects that collections will occur through the withholding of electricity revenues generated by the projects.

While management believes recovery is probable, the timing and amount of collections remain subject to enforcement procedures and operating performance of the power plants.

The Company continues to monitor the status of the enforcement proceedings and will update its assessment of collectability as additional information becomes available.

Large-scale EPC Contracts

On July 31, 2025, SREP, entered into an EPC agreement (the “Longfellow Contract”) with Longfellow, for an industrial project to develop a BESS facility.

Based on the terms of the contract, the contract is expected to generate revenues of approximately $ 120.1 million and financing income of $ 7.2 million related to milestone payments that extend beyond the project completion date.

Longfellow will own and operate the facility, which will be located in Pecos County, Texas and is expected to have a storage capacity of 430 megawatt-hours.

The BESS facility is expected to be completed during 2026.

One of Longfellow's members is a stockholder of the Company with 2.3 % interest at December 31, 2025.

The Company has committed to make a $ 5.0 million contribution to capital in Longfellow for an 8 % equity interest.

This capital contribution was due by December 31, 2025.

At December 31, 2025, and on the date of these financial statements, the Company has not made such contribution and has not recorded the investment at December 31, 2025.

The Company’s chief executive officer, who is representing the Company, is one of the five members of Longfellow’s board of managers, which has collectively managed the affairs of Longfellow since June 2025.

The EPC contract with Longfellow is a fixed-price contract consisting of batteries of $ 75.3 million and services of $ 52.0 million, of which $ 7.2 million is financing income.

As of December 31, 2025, batteries of $ 58.8 million were procured and delivered to the customer’s premise but have not yet been installed, resulting in revenues related to batteries being reported at the Company’s cost.

Additionally, the Company completed engineering and pre-construction services under the contract totaling $1.0 million, representing 2.9% progress of completion, which is included in cost of revenue for the year ended December 31, 2025.

Accordingly, the Company recorded revenues of $ 60.2 million and cost of revenues of $ 59.8 million at December 31, 2025.

As of December 31, 2025, accounts receivable from Longfellow were $ 9.4 million, and the contract asset, representing unbilled revenue was $ 45.8 million.

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

Pursuant to an EPC agreement with Naguabo BESS, LLC, a Texas limited liability company (“Naguabo”), the Company will develop a BESS facility in Ceiba Municipality, Puerto Rico.

The contract is expected to generate revenues of approximately $ 122.3 million.

Naguabo will own and operate the facility, which is expected to have a storage capacity of 320 megawatt-hours.

The Company will have a 9 % membership interest in Naguabo.

Pursuant to an EPC agreement with Yabucoa BESS, LLC, a Texas limited liability company (“Yabucoa”), the Company will develop a BESS facility in Humacao Municipality, Puerto Rico.

The contract is expected to generate revenues of approximately $ 35.9 million.

Yabucoa will own and operate the facility, which is expected to have a storage capacity of 80 megawatt-hours.

The Company will have a 9 % membership interest in Yabucoa.

Pursuant to an EPC agreement with Navboot Holdco, LLC, a Delaware limited liability company (“Navboot”), the Company will develop a BESS facility in Corpus Christi, Texas.

The contract is expected to generate revenues of approximately $ 258.1 million.

Navboot will own and operate the facility, which is expected to have a storage capacity of 600 megawatt-hours.

As of December 31, 2025, work had not commenced on these three projects.

SolarMax Technology, Inc.

3 unchanged sentences

Customer Loans Receivable

In past years, the Company provided financing to qualified customers to purchase residential or commercial photovoltaic systems, as well as other products the Company offered in the U.S.

Prior to 2023, the Company provided financing to qualified customers to purchase residential or commercial photovoltaic systems, as well as other products the Company offered in the U.S.

Depending on the credit rating of customers, the interest rate generally ranges from 0.00 % to 10.99 % per annum with financing terms ranging from one to fifteen years.

At December 31, 2024 and December 31, 2023, the percentage of the Company’s loan portfolio with a 0 % interest rate is .4% and 2.7 %, respectively.

The customer gives the Company a security interest in the photovoltaic systems and other products financed.

At December 31, 2025 and 2024, the percentage of the Company’s loan portfolio with a 0 % interest rate is 0.4% and 2.7 %, respectively.

The customer gave the Company a security interest in the photovoltaic systems and other products financed.

The following tables summarize the Company’s customer loan receivables by credit rating, determined at origination, for each vintage of the customer loan receivable portfolio at December 31, 2025:

14 unchanged sentences

Total Customer Loan Receivables, gross

Customer loans receivable consist of the following as of December 31, 2024 and December 31, 2023:

Customer loans receivable consist of the following as of December 31, 2025 and 2024:

Customer loans receivable, gross

unamortized loan discounts

Allowance for loan losses

24 unchanged sentences

Balance – end of period

Inventories consisted of the following as of December 31, 2024 and December 31, 2023:

Inventories consisted of the following as of December 31, 2025 and 2024:

Solar panels, inverters, battery storage and components

2 unchanged sentences

Total inventories, net

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

Other Receivables and Current Assets, Net

Other receivables and current assets, net consisted of the following at December 31, 2024 and December 31, 2023:

Other receivables and current assets, net consisted of the following at December 31, 2025 and 2024:

Receivable from seller (Uonone Group - Note 18)

1 unchanged sentence

Advances to suppliers

Accrued interest on held to maturity debt investment

Accrued interest on customer loans receivable

Capitalized offering costs

Total other receivables and current assets

Deferred project costs consist of work in process and subcontractor costs incurred on the solar energy systems and LED projects that are not fully completed at December 31, 2024 and December 31, 2023.

Prepaid expenses and other current assets include unpaid accrued rent from Sunspark Technology, Inc.

("Sunspark"), one of the Company's sub-lessees at its office in Riverside, California.

Sunspark is also one of the Company's panel suppliers.

On June 12, 2024, the Company entered into an offset agreement with Sunspark whereby Sunspark's unpaid rents, utilities and security allocations through June 30, 2024 of $ 638,000 was offset against the Company's accrued payables for the panels and other expenses of $ 601,000 .

Following the offset agreement, the remaining balance owed by Sunspark is approximately $ 197,000 at December 31, 2024.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2025 and 2024

On June 12, 2024, the Company entered into an offset agreement with Sunspark Technology, Inc.

("Sunspark") whereby Sunspark's unpaid rents, utilities and security allocations through June 30, 2024 of $ 638,000 was offset against the Company's accrued payables for the panels and other expenses of $ 601,000 .

Following the offset agreement, the remaining balance owed by Sunspark is approximately $ 197,000 and is included in prepaid expenses and other current assets at December 31, 2024.

Sunspark is a subtenant of the Company and is one of the Company's panel suppliers.

In July 2025, the Company entered into an asset transfer and debt assignment with Sunspark and Sun Pioneer USA Inc.

("Sun Pioneer") to resolve certain outstanding rents and other amounts due from Sunspark under the sublease agreement with Sunspark dated October 11, 2022.

Pursuant to the July 2025 agreement, Sun Pioneer agreed to assume the debt balance owed by Sunspark.

In connection therewith, Sun Pioneer issued its short-term $460,000 promissory note to repay the debt to the Company that it assumed from Sunspark, at 0% interest rate, with payments of $150,000 due upon signing of the agreement, $100,000 payable on July 15, 2025, $42,000 per month from August 1, 2025 to December 1, 2025 .

At December 31, 2025, Sun Pioneer had not paid the amounts owed for September through December 2025 totaling $ 168,000 and is included in prepaid expenses and other current assets.

The $ 168,000 balance was paid in January 2026.

Property and Equipment

15 unchanged sentences

Balance – end of period

During the years ended December 31, 2024, as a result of the continued headwinds facing China's economy after the pandemic and the economic indicators seem to indicate further future contraction, all of which will have a direct impact on the Company's ability to generate new businesses in its China segment in the foreseeable future, accordingly the Company recognized a $ 7.5 million impairment loss related to goodwill that originated in its 2015 acquisitions ZHTH and ZHPB.

During the year ended December 31, 2024, as a result of the continued headwinds facing China's economy after the pandemic and the economic indicators seem to indicate further future contraction, all of which have a direct impact on the Company's ability to generate new businesses in its China operations in the foreseeable future, accordingly the Company recognized a $ 7.5 million goodwill impairment.

SolarMax Technology, Inc.

2 unchanged sentences

For the Years Ended December 31, 2025 and 2024

Investments in Unconsolidated Solar Project Companies

The Company has a 30 % non-controlling interest in three PRC companies that were project subsidiaries that performed EPC services.

Upon completion of the project, a 70 % equity interest in the project subsidiary was transferred to the customer, with the customer having a first right of refusal to purchase the 30% interest in the project subsidiary during a specified period.

Upon the transfer of the 70 % interest in these entities, the entities, which are referred to by the projects for which the Company’s China segment performed services, were de-consolidated and the Company’s 30 % non-controlling interest is treated as an equity investment.

Activity in the Company’s 30 % non-controlling investments in these entities’ solar project companies in the China segment for the years ended December 31, 2024 and December 31, 2023 is reflected in the following tables:

Investments in Unconsolidated Companies

At December 31, 2025 and 2024, the Company has a 30 % non-controlling interest in three PRC companies.

These PRC companies were project subsidiaries previously owned by the Company that previously performed EPC services for three projects pursuant to agreement with SPIC.

The project subsidiaries are the entities that hold the ownership and operate the solar farms.

When the projects were completed in 2020, the customer, SPIC, purchased a 70 % equity interest in these project subsidiaries.

Since 2020, the Company has been accounting for its 30 % equity interest using the equity method.

Activity in the Company’s 30 % non-controlling investments in these entities for the years ended December 31, 2025 and 2024 is reflected in the following tables:

Investment Balance at

Share of Investee’s

Effect of Exchange

December 31, 2024

Share of Investee’s Net

Effect of Exchange Rate

Investment Balance at

$ ( 135,524 )

$ ( 312,223 )

December 31, 2025

Investment Balance at

Share of Investee’s

Net Income (Loss)

Effect of Exchange

December 31, 2023

Share of Investee’s Net

Income (Loss)

Effect of Exchange Rate

Investment Balance at

December 31, 2024

$ ( 135,524 )

The following tables present the summary of the combined financial statements of the three solar project companies in which the Company has a 30 % equity interest as of December 31, 2024 and December 31, 2023, and for the years ended December 31, 2024 and 2023:

$ ( 312,223 )

1 The investee is the name of the project.

The following tables present the summary of the unaudited combined financial statements of the three solar project companies in which the Company has a 30% equity interest as of December 31, 2025 and 2024, and for the years ended December 31, 2025 and 2024:

Current assets

Non-current assets

$ 101,008,831

Current liabilities

2 unchanged sentences

Total liabilities and members’ capital

$ 101,008,831

Years Ended December 31,

Revenue of these project companies is generated from the power purchase agreements with the PRC utility companies as well as government subsidies.

On April 29, 2025, Longfellow was formed as a Texas limited liability company and commenced its business on the same date.

Longfellow is a special purpose company created to own and operate a new battery storage system located in Pecos County, Texas.

Pursuant to the LLC agreement, the Company owns an 8 % interest percentage and shall make a Phase 2 contribution of $ 5.0 million the earlier of December 31, 2025 or when the board of managers determines such contributions are necessary to meet Longfellow's obligations under the EPC agreement dated July 2025 for which the Company is the EPC contractor (see Note 8).

Longfellow's business is managed by the board of managers comprising of five managers, one of whom is David Hsu who is representing SolarMax.

David Hsu is the CEO of SolarMax.

SolarMax' interest in Longfellow is effective in June 2025, even though its capital contribution was not due until December 31, 2025 per the LLC agreement.

At December 31, 2025, SolarMax has not yet paid its $ 5.0 million contribution and accordingly, has not recorded its $ 5.0 million investment.

The Company's management has obtained a waiver from Longfellow waiving the due date of the Company's capital commitment to a later date, such date has not yet been determined.

SolarMax Technology, Inc.

2 unchanged sentences

For the Years Ended December 31, 2025 and 2024

Revenue of these project companies is generated from the power purchase agreements with the PRC utility companies as well as government subsidies.

Financing Arrangements

As of December 31, 2024 and December 31, 2023, the Company had the following borrowings:

As of December 31, 2025 and 2024, the Company had the following borrowings:

Unsecured loan from unrelated party at 8.0% fixed interest due June 30, 2025

9 unchanged sentences

Unsecured Loans

Unsecured loans include a loan of $ 2.0 million from an unrelated PRC individual at an interest rate of 8 %, interest payable quarterly in arrears, a maturity date of June 30, 2025 , and a short-term loan of $ 900,000 from another unrelated party at a fixed interest rate of 12 % with a maturity of June 30, 2025 .

On April 16, 2025, the $ 900,000 unsecured promissory note was assigned by the original creditor to two unrelated individuals, who then exchanged the promissory note for a total of 1,046,512 shares of the Company’s common stock at a purchase price of $ 0.86 per share, representing a discount of 25 % of the market price of the common stock.

In connection with the exchange, the Company recognized a loss from debt extinguishment of $ 313,953 based on the market price of the common stock.

On April 3, 2025, the $ 2,000,000 unsecured promissory note was transferred to another unrelated PRC individual, who subsequently cancelled the promissory note on July 31, 2025 by exchanging the promissory note for 2,702,703 shares of the Company’s common stock at a purchase price of $ 0.74 per share, representing a discount of 25 % of the market price of the common stock.

In connection with this transaction, the Company recognized a loss from debt extinguishment of $ 675,676 in July 2025 based on the market price of the shares.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2025 and 2024

Related party EB-5 financings

The Company’s borrowings under the EB-5 program from related parties consisted of the following as of December 31, 2024 and December 31, 2023:

The Company’s borrowings under the EB-5 program from related parties consisted of the following as of December 31, 2025 and 2024:

Loan from Clean Energy Funding, LP

4 unchanged sentences

Noncurrent portion

On January 3, 2012, Clean Energy Fund, LP (“CEF”) entered into a secured loan agreement with SREP, a wholly owned subsidiary of the Company.

On January 3, 2012, CEF entered into a secured loan agreement with SREP, a wholly owned subsidiary of the Company.

Under the secured loan agreement, CEF agreed to make loans to SREP in an amount not to exceed $ 45.0 million, to be used to finance the installment purchases for customers of the solar energy systems.

5 unchanged sentences

Citizenship and Immigration Services requirements of the EB‑5 program.

As of December 31, 2024 and December 31, 2023, the principal loan balance was $ 3.5 million and $ 7.0 million, respectively.

On August 26, 2014, Clean Energy Funding II, LP (“CEF II”) entered into a secured loan agreement with LED, a wholly-owned subsidiary of the Company, for up to $ 13.0 million.

As of both December 31, 2025 and 2024, the principal loan balance was $ 3.5 million.

On August 26, 2014, CEF II entered into a secured loan agreement with LED, a wholly-owned subsidiary of the Company, for up to $ 13.0 million.

A total of $ 10.5 million was lent.

3 unchanged sentences

Immigration Form I-829 approval date if longer.

As of December 31, 2024 and December 31, 2023, the principal loan balance was $ 7.5 million and $ 10.0 million, respectively.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

As of December 31, 2025 and 2024, the principal loan balance was $ 7.0 million and $ 7.5 million, respectively.

The general partner of CEF and CEF II is Inland Empire Renewable Energy Regional Center (“IERE”).

The principal members and managers of IERE consist of the Company’s chief executive officer and its former executive vice president, who is a 5% stockholder.

A current director resigned from IERE in January 2024 and was not involved in its management.

The principal members and managers of IERE consist of the Company’s chief executive officer and its former executive vice president and director, who was a 5% stockholder.

A current director resigned from IERE in January 2024 and, prior to his resignation from IERE, he had not been involved in its management.

Convertible Notes

3 unchanged sentences

The convertible notes are payable in equal installments on the first, second, third, fourth and fifth anniversaries of the date of issuance.

The convertible notes made prior to, or on or about the date of, the Company’s initial public offering are convertible into common stock at a conversion price equal to 80% of the public stock price of the Company’s common stock as defined in the convertible note, which is $3.20 per share.

The convertible notes made prior to, or on or about the date of, the Company’s initial public offering are convertible into common stock at a conversion price of $3.20 which was 80% of the initial public offering price of $ 4.00 per share.

The convertible notes made after the Company’s initial public offering are convertible into common stock at a conversion price equal to 80% of the average closing price of the Company’s common stock for the ten trading days preceding the date of the exchange agreement with the limited partner which range from $0.65 to $9.07.

The convertible notes may be converted into common stock at the first, second, third, fourth and fifth anniversaries of the date of issuance, but not earlier than six months from the date of the Company’s initial public offering or for convertible notes issued after the initial public offering, six months after the issuance of the notes.

All convertible notes issued prior to the Company’s initial public offering have two separate and distinct embedded features.

(1) optional conversion upon a public stock event as defined in the convertible note;

and (2) redemption put feature upon fundamental transaction.

Commencing six months from the date the Company first receives proceeds from its public stock event for convertible notes made prior to the Company’s initial public offering, and from the date of the convertible note made after the Company’s initial public offering, until the convertible notes are no longer outstanding, the convertible notes and all unpaid accrued interest is convertible into shares of common stock, at the option of the holder, during five trading days commencing on the first, second, third, fourth, and fifth anniversaries of the original issuance date.

The number of shares of common stock to be issued upon such conversion shall be equal to the quotient obtained by dividing (x) the then entire amount of the convertible notes balance outstanding including all unpaid principal and, with the consent of the Company, accrued interest payable by (y) the conversion price.

The Company evaluated the embedded optional conversion feature in accordance with the guidance under ASC Topic No.

815, Derivatives and Hedging (“ASC 815”), and determined it is exempt from derivative accounting as the embedded feature is deemed to be indexed to the Company’s own stock and would be classified in stockholder’s equity if freestanding.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2025 and 2024

All convertible notes issued contained redemption put features that allow the holders of the convertible notes the right to receive, for each conversion share that would have been issuable upon conversion immediately prior to the occurrence of an effective change in control event defined as a fundamental transaction, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration receivable as a result of such fundamental transaction by a holder of the number of shares of common stock for which these convertible notes are convertible immediately prior to such fundamental transaction.

1 unchanged sentence

Accordingly, the redemption put features contained in the convertible notes were not bifurcated and accounted for as freestanding derivative instruments.

During the year ended December 31, 2024, the Company issued convertible notes in the aggregate principal amount of $ 6.0 million pursuant to exchange agreements which resulted in a reduction of EB-5 notes in the principal amount of $ 6.0 million and recognized a gain on debt extinguishment of $ 303,000 .

During the year ended December 31, 2023, the Company issued convertible notes in the aggregate principal amount of $ 500,000 pursuant to exchange agreements which resulted in a reduction of EB-5 note in the principal amount of $ 500,000 and recognized a gain on debt extinguishment of $ 27,000 .

Notes Payable to SMX Property, LLC, a related party

On October 10, 2022, SMXP made unsecured loan to the Company of $ 944,077 and $ 414,581 , for which the Company issued its 8 % promissory notes due October 10, 2025, with interest payable quarterly.

During the year ended December 31, 2025, the Company issued convertible notes in the aggregate principal amount of $500,000 pursuant to exchange agreements which resulted in a reduction of EB-5 notes in the principal amount of $500,000 and recognized a gain on debt extinguishment of $ 13,000 .

During the year ended December 31, 2024, the Company issued convertible notes in the aggregate principal amount of $ 6.0 million pursuant to exchange agreements which resulted in a reduction of EB-5 note in the principal amount of $ 6.0 million and recognized a gain on debt extinguishment of $ 303,000 .

Event of Default on Convertible Notes

From April 2023 through December 31, 2025, the Company did not pay annual principal installment payments and related quarterly interest payments which is an event of default on convertible notes.

As of December 31, 2025, the aggregate principal amount of the notes in default was $ 14.3 million.

The default provisions of the notes provide that if an event of default occurs the outstanding principal amount of this note, plus accrued but unpaid interest and other amounts owing in respect thereof through the date of acceleration, shall become, at the noteholder’s election, immediately due and payable in cash, and commencing five days after occurrence of any event of default that results in the eventual acceleration of the note, the interest rate on the note shall accrue at an interest rate of 12% per annum.

Further, if an event of default occurs, the noteholders, together have rights to foreclose on the collateral securing the notes.

The Company accrued interest at the rate of 4 % per annum since no noteholder has taken action to accelerate payment of principal and interest.

Since the Company has accrued interest at 4% per annum on the outstanding notes, in the aggregate principal amount of $14.3 million, with respect to which there is an event of default but with respect to which the noteholders did not demand acceleration.

Such accrued interest was approximately $297,000 at December 31, 2025.

In the event that the holders of all of these note demand acceleration, the amount of interest on those at 12% would be approximately $1.7 million.

The difference between the interest at 12% and the accrued interest at 4% as of December 31, 2025 , together with any additional interest due subsequent to December 31, 2025 is a contingent liability of the Company.

If any noteholders exercise their right to accelerate, the accrued interest at the default rate of 12% will be reflected as an interest expense in the period the note is accelerated.

SolarMax Technology, Inc.

2 unchanged sentences

For the Years Ended December 31, 2025 and 2024

Notes Payable to SMX Property, LLC, a related party

On October 10, 2022, SMXP made unsecured loans to the Company of $ 944,077 and $ 414,581 , for which the Company issued its 8 % promissory notes due October 10, 2025, with interest payable quarterly.

The $ 944,077 loan was used to pay the security deposit and lease obligations for one month owed to the new owner of the Company’s headquarters building under the new lease agreement.

The $414,581 note was issued in payment of lease obligations owing to SMXP by the Company for rent on the Company’s headquarters from June 1, 2022 to October 12, 2022.

David Hsu, the Company's chief executive officer and a director, and Ching Liu, formerly the Company's executive vice president and a director and currently a 5% stockholder, are the principal management group of SMXP.

Simon Yuan, a director, has a non-controlling interest in SMXP and is not part of its management.

On September 2, 2025, this loan obligation was repaid.

The $ 414,581 loan was used to pay lease obligations owing to SMXP by the Company for rent on the Company’s headquarters from June 1, 2022 to October 12, 2022.

On July 22, 2025, this loan obligation was repaid.

The Company’s chief executive officer and its former executive vice president who was a director and a 5% stockholder are the principal management of SMXP.

One other director has a non-controlling interest in SMXP and is not part of its management.

Interest Expense

1 unchanged sentence

Total interest expense incurred (including interest on long-term related party loans) was approximately $ 1.4 million and $ 1.6 million for the years ended December 31, 2025 and 2024, respectively.

The weighted average interest rate on loans outstanding was 4.0 % and 3.7 % as of December 31, 2024 and December 31, 2023.

The weighted average interest rate on loans outstanding was 4 .0% and 3.7 % as of December 31, 2025 and 2024.

Principal maturities for the financing arrangements as of December 31, 2025 are as follows:

For the year ending December 31,

Bank and Other

Unsecured Loans

Related Party

Notes Payable -

Related Party

Convertible Notes

Accrued Expenses and Other Payables

Accrued expenses and other payables consisted of the following as of December 31, 2024 and December 31, 2023:

Accrued expenses and other payables consisted of the following as of December 31, 2025 and 2024:

Customer deposits

16 unchanged sentences

At December 31, 2025, accrued compensation includes $ 675,000 of compensation to the Company’s chief executive officer in connection with the cancellation in March 2019 of restricted stock grants and $ 1.8 million of accrued but unpaid compensation to the chief executive officer pursuant to his employment agreement.

At December 31, 2023, accrued compensation includes $ 675,000 of compensation to the Company’s chief executive officer in connection with the cancellation in March 2019 of restricted stock grants, $ 1.7 million of accrued but unpaid compensation to the chief executive officer pursuant to his employment agreement, $ 600,000 due to the former executive vice president, who is also a 5% stockholder, and one other employee in connection with the cancellation in March 2019 of restricted stock grants and $ 338,095 of deferred compensation to its former executive vice president, all of which was paid in March 2024.

At December 31, 2024, accrued compensation includes $ 675,000 of compensation to the Company’s chief executive officer in connection with the cancellation in March 2019 of restricted stock grants, $ 1.7 million of accrued but unpaid compensation to the chief executive officer pursuant to his employment agreement, $ 600,000 due to the former executive vice president, who was also a 5% stockholder, and one other employee in connection with the cancellation in March 2019 of restricted stock grants and $ 338,095 of deferred compensation to its former executive vice president, all of which was paid in March 2024.

The remaining balance relates to accrued unpaid commissions and accrued paid time off.

4 unchanged sentences

Accrued Settlement

In November 2022, the Company entered into a settlement agreement with two former limited partners of Clean Energy Funding L.P., pursuant to which the Company agreed to pay each of the limited partners a sum of $533,749.98, payable $50,000 at the time of the agreement execution and the remainder shall be paid in 14 quarterly installments of $34,533.57 .

At December 31, 2024 and December 31, 2023, the balance of the accrued settlement is $ 414,963 and $ 622,164 , respectively, of which $276,000 represents the current portion of such liability at December 31, 2024.

At December 31, 2025 and 2024, the balance of the accrued settlement is $ 69,627 and $ 414,963 , respectively.

The $ 69,627 is included in accounts payable at December 31, 2025.

Accrued Warranty

4 unchanged sentences

Expenditures and adjustments

Reversal of UE Solar accrual

Effect of exchange rate

2 unchanged sentences

Non-current portion (other liabilities)

Preacquisition Liability

As part of the April 2015 acquisition of ZHPV, the Company assumed a liability associated with the former ZHPV project consisting of reimbursement of project expenses to an unrelated third-party including reimbursement of certain land rental expenses and land use taxes estimated at a total of approximately RMB 10.7 million ($ 1.6 million at December 31, 2024).

The Company expects to negotiate to offset the entire liability with the unpaid contract receivables and reimbursements from the third party.

All the receivables and reimbursements were previously fully reserved by the Company.

Concentrations

Major Customers

For the years ended December 31, 2024 and 2023, there were no customers that accounted for 10% or more of the Company’s revenues .

Major Suppliers

During the years ended December 31, 2024 and 2023 , one supplier in the U.S.

segment accounted for purchases of $ 4.0 million, or 11.9 %, and purchases of $ 4.9 million, or 12.0 %, respectively.

During the year ended December 31, 2024, another supplier in the U.S.

segment accounted for purchases of $ 4.0 million, or 11.9%.

No other supplier accounted for 10 % or more of the Company’s purchases in either period.

For the years ended December 31, 2025, one customer, Longfellow, accounted for $ 60.2 million, or 66.1 %, of revenues, $ 9.4 million, or 72.4 %,of accounts receivable, and $ 45.8 million, or 99.0 % of contract assets (see Note 8).

There were no customers that accounted for 10% or more of the Company’s revenues , accounts receivable, and contract assets for the year ended December 31, 2024.

SolarMax Technology, Inc.

2 unchanged sentences

For the Years Ended December 31, 2025 and 2024

Major Suppliers

During the year ended December 31, 2025, one supplier, Renewable Energy Resolution, Inc.

("RER") accounted for purchases of $ 58.8 million, or 76.4 % of total purchases, and accounted for $ 56.4 million, or 94.6 %, of accounts payable at December 31, 2025.

In September 2025, the Company entered into a supply agreement valued at approximately $ 71.2 million with RER to supply certain specialized batteries that are specifically required for the Longfellow Contract.

During the year ended December 31, 2025, another supplier accounted for purchases of $ 8.6 million, or 11.1 % of total purchases, and accounted for $ 1.5 million, or 2.5 %, of accounts payable at December 31, 2025.

During the year ended December 31, 2024, one supplier accounted for purchases of approximately $ 4.0 million, or 11.9 %, and accounted for $ 1.2 million, or 36.7 %, of accounts payable at December 31, 2024.

Another supplier accounted for purchases of approximately $ 4.0 , or 11.9 %, and accounted for $ 15,000 , or 0.05 %, of accounts payable at December 31, 2024.

Acquisition Contingencies and Other Payable to Uonone Group

Effective on May 12, 2016, in conjunction with the execution of the amendment to the April 2015 share exchange agreement to acquire ZHPV, ZHPV entered into a debt settlement agreement (the “Debt Settlement Agreement”) with one of the former owners of ZHPV, Uonone Group Co., Ltd., (“Uonone Group”), pursuant to which ZHPV and Uonone Group agreed to settle a list of pending business transactions from December 31, 2012 to December 31, 2015, pursuant to which Uonone Group agreed and had paid ZHPV a total amount of RMB 8,009,716 .

An additional contingent liability related to estimated costs of a project known as Ningxia project completed by ZHPV prior to the Company’s acquisition of ZHPV of approximately RMB 3.0 million (or approximately $ 437,000 ) was also included as a receivable from Uonone Group (see Note 9 – Other Receivables and Current Assets, Net) with the corresponding liability recognized by the Company on the date of acquisition.

Effective on May 12, 2016, one of the Company’s PRC subsidiaries entered into a debt settlement agreement (the “Debt Settlement Agreement”) with one of the former owners of the subsidiary, Uonone Group Co., Ltd., (“Uonone Group”), pursuant to which the subsidiary and Uonone Group agreed to settle a list of pending business transactions from December 31, 2012 to December 31, 2015, pursuant to which Uonone Group agreed and had paid the subsidiary a total amount of RMB 8,009,716 .

An additional contingent liability related to estimated costs of a project known as Ningxia project completed by the subsidiary prior to the Company’s acquisition of the subsidiary of approximately RMB 3.0 million (or approximately $ 429,000 ) was also included as a receivable from Uonone Group (see Note 11 – Other Receivables and Current Assets, Net) with the corresponding liability recognized by the Company on the date of acquisition.

As of December 31, 2021, Uonone Group had repaid all the amounts agreed to under the debt settlement agreement except for the RMB 3.0 million contingent receivable from Uonone Group discussed above.

Uonone Group’s obligation on the contingent receivable does not arise until and unless the Company becomes obligated to pay the contingent liability.

At December 31, 2023, the Company had no payment obligations with respect to the assumed contingent liability and accordingly, Uonone Group had no obligation to the Company with respect to the contingent receivable.

Under the debt settlement agreement, any legal settlement proceeds, less fees and expenses, received by ZHPV related to the projects completed prior to the April 2015 business combination would be repaid to the Uonone Group.

At December 31, 2025 and 2024, the Company had no payment obligations with respect to the assumed contingent liability and accordingly, Uonone Group had no obligation to the Company with respect to the contingent receivable.

Under the debt settlement agreement, any legal settlement proceeds, less fees and expenses, received by the subsidiary related to the projects completed prior to the April 2015 acquisition of the subsidiary would be repaid to the Uonone Group.

During the year ended December 31, 2025 the Company did not receive any additional legal settlement proceeds, nor did the Company make any payments to Uonone.

At both December 31, 2024 and December 31, 2023, the amount payable to Uonone, was approximately RMB 18.0 million ($ 2.5 million).

At both December 31, 2025 and 2024, the amount payable to Uonone, was approximately RMB 18.0 million ($ 2.6 million) (see Note 16).

Related Party Transactions

5 unchanged sentences

The Company determines if an arrangement is a lease, or contains a lease, at inception and records the leases in the consolidated financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.

Related Party Lease Agreements

Effective March 31, 2024, the Company terminated its lease with Fallow Field, LLC, a related party, for office space in Diamond Bar, California.

In conjunction with the early lease termination, the Company reported a gain on the lease termination of approximately $ 77,000 .

Related party rent expense related to Fallow Field was $ 36,436 for the year ended December 31, 2024.

The Company recognized a gain of approximately $ 4,200 for the early termination and amendment of the leases and derecognized an ROU asset of approximately $ 478,000 and a lease liability of approximately $ 520,000 on the consolidated balance sheet.

Also for the amendment of one of the leases, the Company recognized an additional $ 221,000 for an ROU asset, in relation to the extended lease term, and a corresponding lease liability of approximately $ 254,000 on the consolidated balance sheet.

Future minimum lease commitments as of December 31, 2024, are as follows:

For the year ending December 31,

For the years ended December 31, 2024 and 2023, rent expense for offices, warehouse facilities and equipment, including rental expense for related party leases, was approximately $ 1.8 million and $ 1.5 million, respectively.

Effective March 31, 2024, the Company terminated its lease with Fallow Field, LLC, a related party, for its office space in Diamond Bar, California.

In connection with the early lease termination, the Company recognized a gain on the lease termination of approximately $ 77,000 during the year ended December 31, 2024.

Related party rent expense related to Fallow Field, a related party, was $ 36,436 for the year ended December 31, 2024.

The Company had no related party lease arrangements in the year ended December 31, 2025.

For the years ended December 31, 2025 and 2024, rent expense for offices, warehouse facilities and equipment, including rental expense for related party leases in 2024, was approximately $ 1.7 million and $ 1.8 million, respectively.

These amounts include short-term leases and variable lease costs, which are immaterial.

The Company did not incur any rental expense for related party leases in 2025 since all related party leases were terminated in 2024.

SolarMax Technology, Inc.

2 unchanged sentences

For the Years Ended December 31, 2025 and 2024

Future minimum lease commitments as of December 31, 2025, consisting primarily of the lease on the Company's Riverside headquarters, are as follows:

For the year ending December 31,

As of December 31, 2025, the maturities of the Company’s operating lease liabilities (excluding short-term leases) are as follows:

8 unchanged sentences

Weighted average discount rate

Between September and October 2022, the Company entered into subleases with three unrelated companies for portions of office space through December 31, 2022 and one other unrelated company through March 31, 2024.

For the years ended December 31, 2024 and 2023, the total sublease income recognized totaled approximately $ 982,000 and $ 1.1 million, respectively.

The Company entered into subleases for portions of its office space, generally on a month-to-month basis.

For the years ended December 31, 2025 and 2024, the total sublease income recognized totaled approximately $ 1.1 million and $ 1.0 million, respectively.

The sublease income is recognized as an offset to operating lease costs reported in general and administrative expenses.

10 unchanged sentences

On October 7, 2016, the Company entered into an employment agreement with its chief executive officer for a five-year term commencing on January 1, 2017 and continuing on a year-to-year basis unless terminated by the Company or the executive on not less than 90 days’ notice prior to the expiration of the initial term or any one-year extension .

The agreement provides for an initial annual salary of $ 600,000 and $ 560,000 , respectively, with an increase of not less than 3 % on January 1st of each year, commencing January 1, 2018, and an annual bonus payable in restricted stock and cash, commencing with the year ending December 31, 2017, equal to a specified percentage of consolidated revenues for each year.

The bonus is based on a percentage of consolidated revenue in excess of $30 million, ranging from $250,000 for revenue in excess of $30 million but less than $50 million, to 1.0% of revenue in excess of $300 million .

The agreement provides for severance payments equal to one or two times, depending on the nature of the termination, of the highest annual total compensation of the three years preceding the year of termination, multiplied by the number of whole years the executive has been employed by the Company, which commenced in February 2008.

The Company entered into a consulting agreement dated October 1, 2020 with the Company’s former executive vice president, who is also a major stockholder, pursuant to which the Company engaged her as a consultant for a term ending December 31, 2022, and continuing thereafter on a month-to-month basis for monthly compensation of $ 3,000 .

The options previously granted to the former executive vice president continue in effect according to their terms as long as she remains a consultant.

The agreement provides for an initial annual salary of $ 600,000 , with an increase of not less than 3 % on January 1st of each year, commencing January 1, 2018, and an annual bonus payable in restricted stock and cash, commencing with the year ending December 31, 2017, equal to a specified percentage of consolidated revenues for each year.

The bonus is based on a percentage of consolidated revenue in excess of $30 million, ranging from $250,000 and $200,000, respectively, for revenue in excess of $30 million but less than $50 million, to 1.0% and 0.9%, respectively, of revenue in excess of $300 million .

In connection with the suspension of the Company’s incentive bonuses to key employees that started in 2019, the Company’s chief executive officer has agreed to waive his bonuses since 2019.

The agreement also provides for severance payments equal to one or two times, depending on the nature of the termination, of the highest annual total compensation of the three years preceding the year of termination, multiplied by the number of whole years the executive has been employed by the Company, which commenced in February 2008.

The annual salary for the chief executive officer was $ 760,065 for 2025 and $ 737,924 in 2024.

SolarMax Technology, Inc.

2 unchanged sentences

For the Years Ended December 31, 2025 and 2024

Stockholders’ Equity

Legal Matters

In the ordinary course of the Company’s business, the Company is involved in various legal proceedings involving contractual relationships, product liability claims, and a variety of other matters.

The Company does not believe there are any pending legal proceedings that will have a material impact on the Company’s financial position or results of operations.

During 2024, the Company commenced arbitration procedures in Shanghai with SPIC to collect on the receivables owed by SPIC related to three completed EPC projects as well as other advances and reimbursements totaling approximately RMB 49.5 million ($ 6.8 million) at December 31, 2024.

On April 16, 2025, the Company received the written arbitration award results and subsequently, SPIC entered into a payment agreement with the Company.

As of December 31, 2025, the receivable balance has been reduced to RMB 7.0 million ($ 1.0 million).

As of December 31, 2025, the Company is planning to file a lawsuit against SPIC to recover the remaining receivable balance, as well as other related performance matters on the projects.

Default on Convertible Notes

See Note 15 in connection with contingent liabilities resulting from the Company’s default on outstanding convertible notes.

Stockholders’ Equity (Deficit)

Issuance of Common Stock under Private Placement

During the year ended December 31, 2025, the Company issued a total of 9,635,712 shares for a total consideration of $ 7,652,535 , at prices ranging from $ 0.70 to $ 0.90 , with an average purchase price of $ 0.79 .

The purchase price was 75% of the market price on the date of the respective agreements.

Under the Nasdaq regulations, the Company may not be able to raise any significant funding from the sale of common stock at a discount from market in the near future without stockholder approval.

The consideration for the shares includes cash payments and cancellation of indebtedness of the Company.

2016 Long-Term Incentive Plan

In October 2016, the Company’s board of directors adopted and in November 2016 the stockholders approved the 2016 Long-Term Incentive Plan, pursuant to which a maximum of 6,491,394 shares of common stock may be issued pursuant to restricted stock grants, incentive stock options, non-qualified stock options and other equity-based incentives may be granted.

In March 2019, the Company’s board of directors and stockholders approved an increase in the maximum number of shares of common stock subject to the 2016 long-term incentive plan to 15,120,000 shares .

Elimination of Forfeiture Provisions of Options and Stock Grants

During the years 2015 to 2019, the Company granted shares of restricted stock and incentive stock options to employees and consultants, of which 264,650 shares of restricted stock and incentive stock options to purchase 5,898,137 shares were outstanding at the date of the Company’s initial public offering.

1 unchanged sentence

Under GAAP, upon the completion of the initial public offering, the value of the restricted stock as well as the incentive stock options is treated as compensation expense in the period in which the restricted stock and incentive stock options become non-forfeitable and are deemed to have met the performance-based indicator (i.e., the completion of the initial public offering).

Using the Black Scholes valuation method, the fair value of the incentive stock options at the time of the Company’s initial public offering was approximately $ 18.5 million, which is stock-based compensation that does not reflect a cash expense, of which approximately $ 1.3 million is included in cost of revenues and $ 17.2 million is included in general and administrative expense.

Using the Black Scholes valuation method, the fair value of the incentive stock options at the time of the Company’s initial public offering was approximately $ 18.5 million, which is stock-based compensation that does not reflect a cash expense, of which approximately $ 1.3 million is included in cost of revenues and $ 15.9 million is included in general and administrative expense in the year ended December 31, 2024.

Restricted Stock

As of December 31, 2023, total unrecognized compensation costs for outstanding restricted stock awarded was estimated at $ 1.3 million, based on the estimate of the then most recent price at which shares were sold of $ 5.01 per share.

In the year ended December 31, 2024, upon completion of the Company’s initial public offering, which triggered realization of all unrealized compensation expense and stock options, which became vested upon completion of the Company’s initial public offering, based on the estimate of the then most recent price at which shares were sold of $ 5.01 per share.

SolarMax Technology, Inc.

2 unchanged sentences

For the Years Ended December 31, 2025 and 2024

The following table below summarizes the activity of the restricted stock shares:

Number of Shares

The following table below summarizes the activity of the restricted shares:

Weighted Average Grant

9 unchanged sentences

The vested options are exercisable for six months after the termination date unless (i) termination is due to optionee’s death or disability, in which case the option shall be exercisable for 12 months after the termination date, or (ii) the optionee is terminated for cause, in which case the option will immediately terminate.

All outstanding options are vested at December 31, 2025 and 2024.

A summary of option activity is as follows:

14 unchanged sentences

The aggregate intrinsic values as of December 31, 2024 are based upon the value per share of $ 5.01 , which was the latest sale price of the Company’s common stock in May 2018.

As a result of the Company’s completion of its initial public offering in February 2024, all the stock options which are performance-based awards became vested and compensation cost of $ 17.2 million related to such stock options was recognized in the year ended December 31, 2024 as the performance condition of such awards were met on the public offering date of February 12, 2024.

The compensation cost of $ 17.2 million is determined using the Black Scholes model that includes key assumptions for each grant of options as follows:

volatility ranging from 54.34 % to 67.75 %, the risk-free rate ranging from 1.55 % to 2.34 %, and an expected term ranging from 5 to 6.5 years.

For the year ended December 31, 2024, approximately $ 1.3 million and $ 15.9 million of compensation cost was charged to cost of revenue and general and administrative expenses, respectively, related to stock options.

On August 29, 2025, the Company’s board of directors approved a 3-year extension for all previously granted options that will be expiring over the next three years from August 31, 2025.

These options had an exercise price ranging from $ 3.50 to $ 5.01 .

As a result of this modification, the Company recognized a stock-based compensation expense of $ 520,721 for year ended December 31, 2025, representing the difference between the fair value of the options before and after the modification using the Black Scholes model that includes key assumptions as follows:

volatility of 107.46 %, the risk-free rate of 3.58 %, and an expected term of 2.25 years.

For the year ended December 31, 2025, approximately $ 78,411 and $ 442,310 of compensation cost was charged to cost of revenue and general and administrative expenses, respectively, related to stock option modifications.

SolarMax Technology, Inc.

2 unchanged sentences

For the Years Ended December 31, 2025 and 2024

Non-vested Option Awards

The following table summarizes the Company’s nonvested option awards activity:

Balance at December 31, 2023

( 5,898,137 )

Balance at December 31, 2024

As a result of the Company’s completion of its initial public offering, all the stock options which are performance-based awards are vested and compensation cost of $ 18.5 million related to such stock options was recognized for the year ended December 31, 2024 as the performance condition of such awards, which was the completion of the Company' initial public offering, had been met.

The compensation cost of $ 17.2 million is determined using the Black Scholes model that includes key assumptions for each grant of options as follows:

volatility ranging from 54.34% to 67.75%, the risk-free interest rate ranging from 1.55% to 2.34%, and an expected term ranging from 5 to 6.5 years .

For the year ended December 31, 2024, approximately $ 1.3 million and $ 15.9 million of compensation cost resulting from the termination of the forfeiture provision of the options was charged to cost of revenue and general and administrative expenses, respectively.

During the years ended December 31, 2024 and 2023, no vested options to purchase shares of common stock were cancelled.

No nonvested options to purchase common stock were cancelled during the year ended December 31, 2023.

The components of the pretax income (loss) from operations for the years ended December 31, 2025 and 2024 are as follows:

2 unchanged sentences

$ ( 7,159,752 )

Foreign (PRC Segment)

$ ( 25,131,654 )

Foreign (PRC operations)

( 8,166,852 )

Income (loss) before income taxes

$ ( 7,459,943 )

$ ( 33,298,506 )

The income tax provisions (benefits) for the years ended December 31, 2025 and 2024 are as follows:

1 unchanged sentence

State and local

Foreign (PRC Segment)

Foreign (PRC operations)

Total current income tax expense (benefit)

State and local

Foreign (PRC Segment)

Foreign (PRC operations)

( 1,400,381 )

Total deferred income tax expense (benefit)

( 1,400,381 )

Income tax expense (benefit)

$ ( 1,134,575 )

Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 2, Summary of Significant Accounting Policies, the reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended December 31, 2025 was as follows:

December 31, 2025

Income taxes at statutory rates

$ ( 1,566,588 )

State taxes in Texas and made up the majority (greater than 50%) of the tax effect in this category, net of federal benefit

Foreign rate differential

Valuation allowance

( 1,135,313 )

Effects of cross-border tax laws

Change in valuation allowance

Nontaxable or nondeductible items

Non-deductible interest expense 163(l)- Convertible debt

Debt Extinguishment Loss

Other adjustments

Executives Compensation

Equity investment basis true-up

Other adjustment

Effective income tax rate

$ ( 1,134,575 )

SolarMax Technology, Inc.

2 unchanged sentences

For the Years Ended December 31, 2025 and 2024

Significant components of the deferred tax assets and liabilities for federal income taxes as of December 31, 2024 and 2023:

December 31, 2024

The reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:

December 31, 2024

13 unchanged sentences

Other adjustment

Effective income tax rate

The amount of cash income taxes paid (refunded) by the Company for the year ended December 31, 2025 are as follows:

PRC operations

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2025 and 2024 are as follows:

12 unchanged sentences

Operating lease right-of-use assets

( 1,506,457 )

Contract Accounting

6 unchanged sentences

$ ( 251,806 )

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023

$ ( 1,620,495 )

The Company has established a valuation allowance against its net deferred tax assets due to the uncertainty surrounding the realization of such assets.

1 unchanged sentence

At such time as it is determined that it is more likely than not that deferred assets are realizable, the valuation allowance will be reduced.

The Company has recorded a full valuation allowance of $ 25.1 million as of December 31, 2024 as it does not believe it is more likely than not that certain deferred tax assets will be realized primarily due to the generation of pre-tax book losses in the current year, the lack of feasible tax-planning strategies, the limited existing taxable temporary differences, and the subjective nature of forecasting future taxable income into the future.

The Company increased its valuation allowance by approximately $ 7.5 million during the year ended December 31, 2024.

The Company has recorded a valuation allowance of $ 23.8 million as of December 31, 2025 as it does not believe it is more likely than not that certain deferred tax assets will be realized primarily due to the generation of pre-tax book losses in the current year, the lack of feasible tax-planning strategies, the limited existing taxable temporary differences, and the subjective nature of forecasting future taxable income into the future.

The Company decreased its valuation allowance by approximately $ 1.4 million during the year ended December 31, 2025.

As of December 31, 2025, the Company had federal and state tax net operating loss ("NOL”) carryforwards of $ 62.2 million, and $ 65.6 million, respectively.

1 unchanged sentence

The remaining federal and state NOL carryforwards will begin to expire in 2031, and the state NOL carryforwards will begin to expire in 2032 unless previously utilized .

The Company also had China NOL carryforwards of $ 1.3 million as of December 31, 2024.

The Company also had China NOL carryforwards of approximately $ 400,000 as of December 31, 2025.

The China NOL will begin to expire in 2027 , unless previously utilized.

In addition, as of December 31, 2025 the Company had investment tax credits of $ 1.0 million, for building qualifying energy properties and projects under IRC section 48, which will expire in 2034 .

The above NOL carryforwards and the investment tax credit carryforwards are subject to limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, and similar state provisions that limit the amount NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2025 and 2024

The above NOL carryforwards and the investment tax credit carryforwards are subject to limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, and similar state provisions which limit the amount NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively.

In general, an ownership change, as defined by Sections 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period.

17 unchanged sentences

The Company's PRC subsidiaries' tax filings are subject to the PRC tax bureau’s examination for a period up to five years.

These subsidiaries are not currently being examined by the PRC tax bureau.

These subsidiaries are not currently under examination by the PRC tax bureau.

As of December 31, 2025, the Company’s foreign subsidiaries operated at a cumulative deficit for U.S.

4 unchanged sentences

Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted.

The Company adopted this standard prospectively for the period ending December 31, 2025.

The adoption impacted the Company's income tax disclosures only and did not otherwise impact the Company's financial statements.

SolarMax Technology, Inc.

2 unchanged sentences

For the Years Ended December 31, 2025 and 2024

On July 4, 2025, the reconciliation bill commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States.

The OBBBA includes a broad range of tax reform provisions affecting U.S.

corporate income taxation.

Certain provisions became effective beginning in 2025, including an elective deduction for domestic research and development expenditures, reinstatement of 100% first-year bonus depreciation, and repeal of the fiscal year-end requirement for certain non-U.S.

corporations.

Other provisions of the OBBBA will become effective in 2026 and subsequent years, including a more favorable tax rate applicable to Foreign-Derived Deduction Eligible Income and income from non-U.S.

subsidiaries (Net CFC Tested Income).

Due to the Company’s full valuation allowance on deferred tax assets, the enactment of the OBBBA did not have a material impact on the Company’s financial statements for the year ended December 31, 2025.

Net Income (Loss) Per Share

3 unchanged sentences

$ ( 6,325,368 )

$ ( 34,962,336 )

Weighted average shares used to compute net loss per share, basic

5 unchanged sentences

Segment Reporting

The Company operates under two operating segments, the United States and China.

The chief operating decision maker ("CODM") is the Chief Executive Officer.

As of January 1, 2024, the Company has determined that it has one reporting segment which is the United States.

The Company’s operation in China have not generated significant revenues since 2022 and is no longer considered a reporting segment.

As of January 1, 2024, the Company has determined that it has one reporting segment which is solar energy systems in the United States.

The Company has not generated any revenue from its China operations since 2021, it does not have any contracts for services in China, it does not have any marketing activities in China and its China operations is no longer considered a reporting segment.

The CODM regularly reviews operations and financial performance at the consolidated level and uses net income (loss) to allocate resources (including labor, technology and capital resources) for the single reporting segment to make decisions regarding annual budget, entering new markets, marketing decisions, pursuing new business, and driving the Company's mission.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2025 and 2024

The following table shows the operations of the Company’s reporting segment for the years ended December 31, 2025 and 2024:

1 unchanged sentence

Segment revenue

Large-scale EPC contracts

Solar energy systems

25 unchanged sentences

$ ( 7,459,943 )

$ ( 33,298,506 )

Subsequent Events

On March 19, 2025, the Company issued to an accredited investor 561,798 shares of common stock at $ 0.89 per share, reflecting a 25 % discount from the market price of the common stock, for a total purchase price of $ 500,000 .

No broker was involved in the sale.

Convertible Notes Issued

In January and February 2026, the Company issued two convertible notes in the principal amount of $ 1.0 million to limited partners of CEF I, which resulted in a reduction of $ 1.0 million in the principal amount of the related party notes to CEF I.

In January 2026, the Company issued a convertible note in the principal amount of $ 500,000 to a limited partner of CEF II, which resulted in a reduction of $ 500,000 in the principal amount of the related party notes to CEF II.

Recent Sales of Common Stock

In January 2026, the Company issued a total of 2,000,000 shares of common stock to two accredited investors for a total of $ 1,096,000 .

The shares were issued at a price per share of $ 0.548 which represented a 25 % discount from the market price of the common stock.

No brokers were involved in the sales.

The issuance of the shares was exempt from registration pursuant to Section 4(a)(2) of the Securities Act as a transaction not involving a public offering.

The proceeds from the sale are being used for working capital.

The Company has evaluated subsequent events through the date the December 31, 2024 consolidated financial statements were issued, and no other events require adjustment of, or disclosure in, the consolidated financial statements.

Lease Amendment

On January 28, 2026, the Company entered into an amendment to the lease for its facilities at 3080 12th Street, Riverside, California.

The amendment extends the expiration date of the lease from December 31, 2026 to December 31, 2033.

The annual base rent during the term, as extended is $1,855,566 for 2026 and it increases annually until $2,282,112 for 2033 .

The Company also pays certain operating expenses in the same manner as with the prior lease.

The amendment provides for certain construction expenses, a portion of which are payable by the landlord and a portion of which are payable by the Company.

The extension also provides for mutual releases.

SolarMax Technology, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2025 and 2024

Condensed Financial Information of Parent

42 unchanged sentences

Total Revenues

Cost of revenues (includes stock-based compensation expense of $1,264,690 for the year ended December 31, 2024)

General and administrative (includes stock-based compensation expense of $17,271,494 for the year ended December 31, 2024)

Cost of revenues (includes stock-based compensation expense of $78,411and $1,264,690 for the years ended December 31, 2025 and 2024, respectively)

General and administrative (includes stock-based compensation expense of $442,310 and $17,271,494 for the years ended December 31, 2025 and 2024, respectively)

Interest income

9 unchanged sentences

( 6,260,236 )

( 34,959,536 )

Income tax provision (benefit)

1 unchanged sentence

$ ( 6,325,368 )

$ ( 34,962,336 )

SolarMax Technology, Inc.

8 unchanged sentences

$ ( 7,800,264 )

$ ( 13,179,446 )

Net cash provided by (used in) investing activities

1 unchanged sentence

Net cash provided by (used in) financing activities

( 1,358,658 )

Net increase (decrease) in cash, cash equivalents, and restricted cash

2 unchanged sentences

Supplemental disclosures of cash flow information:

Issuance of common stock in exchange of note payable

Interest paid in cash

Income taxes paid (received) in cash

Income taxes paid in cash

SolarMax Technology, Inc.

11 unchanged sentences

Related Party Transactions

Intercompany Sales

Parent’s revenues include sales of solar panels, LED components, as well as certain battery storage system components to its subsidiaries.

Parent does not have any sales to external customers.

Management Fee Income

2 unchanged sentences

Headquarter Rent Expense Allocation

During the years ended December 31, 2024 and 2023, the total rent expense of the headquarters was $ 1,694,808 and $ 1,694,808 , respectively, of which $ 1,257,786 and $ 847,818 , respectively, was allocated to United States subsidiaries, based on the estimated square feet occupied by employees and other personnel assigned to such subsidiaries.

For both the years ended December 31, 2025 and 2024, the total rent expense of the headquarters was $ 1,694,808 , of which $ 1,257,786 was allocated to United States subsidiaries, based on the estimated square feet occupied by employees and other personnel assigned to such subsidiaries.

Intercompany receivables and payables

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures