SolarMax Technology, Inc. 10-K

Item 1A. Risk Factors An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this annual report, including "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes before making a decision to invest in our common stock. Our business, operating results, financial condition, or prospects could be materially and adversely affected by any of these risks and uncertainties. If any of these risks actually occurs, the trading price of our common stock could decline and you might lose all or part of your investment. Our business, operating results, financial performance, or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. Risks Related to Our Business We sustained losses since our organization, our financial statements have a going concern footnote and we cannot assure you that we can or will operate profitably. We sustained a net loss of approximately $6.3 million for the year ended December 31, 2025, and our financial statements for the year ended December 31, 2025 have a going concern footnote. The loss in the year ended December 31, 2024 of approximately $35.0 million reflects a (i) a one-time non-cash stock compensation expense of $18.5 million (ii) a non-cash $7.5 million goodwill impairment representing an impairment charge of the entire balance of our goodwill associated with our China operations, and (iii) a $1.7 million non-cash income tax expense arising from an increase in the valuation allowance against deferred tax assets. The stock-compensation expense resulted from the treatment of compensation of equity-based incentives which became non-forfeitable upon the completion of our public offering. See Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations – Elimination of Forfeiture Provisions of Options upon Initial Public Offering. We cannot assure you that we can or will operate profitably. We did not generate any revenue from our China operations subsequent to 2021 through the date of this annual report, and we cannot assure you that we will conduct operations in China or generate any revenue from our China operations in the future or that we will not discontinue our China operations. Our failure to generate positive cash flows from operations and operate profitably may impair our ability to continue in business. We have a working capital deficit of $20.4 million at December 31, 2025 and require substantial funding for our operations. At December 31, 2025, we had a working capital deficiency of $20.4 million, cash and cash equivalents of $8.0 million and accounts receivable of $12.9 million. We will require additional funds for our operations. During the year ended December 31, 2025, we commenced our BESS operations, and we generated revenues of $60.2 million, or 66.1% of our revenue for the year from our first contract. At December 31, 2025, approximately $56.6 million of our accounts payable related to this contract. In addition, at December 31, 2025, we had current obligations of $14.3 million with respect to our convertible notes that are in default and are described in the following risk factors as well as secured obligations of $5.5 million to a related party and $2.5 million due to our chief executive officer. Because of our losses and the price of our common stock, which is below $1.00 per share as a result of which we received a notice from Nasdaq that we are in violation of the continued listing requirement that our closing bid price be at least $1.00, we may have difficulty raising funds for our operations on acceptable terms, if at all. Further, our financial condition, particularly our current debt obligation and our defaults, may affect our ability to market our BESS systems and we anticipate that we may require additional funds to financing these operations if we generate the business. The terms of any financing may result in significant dilution to our stockholders. Further, at December 31, 2025, we had an outstanding receivable from SPIC of approximately $1.0 million which relates to projects completed prior to 2022. Although we believe the receivable will be collected, and we anticipated collection during 2025, we can give no assurance as to when or whether we will collect the full amount in 2026. We cannot assure you that we will be able to raise the necessary funds and any such failure may affect our ability to continue in business. 19 Table of Contents We are in default on $14.3 million principal amount of our convertible notes, which may result in the acceleration of the notes, and we will require funds to pay the notes. From April 2023 through December 31, 2025, we did not pay annual principal installment payments and related quarterly interest payments when due which resulted in an event of default on some convertible notes. At December 31, 2025, the aggregate principal amount of $14.3 million is in default. During 2025 and 2024 we paid principal and interest on convertible debt for which the noteholders demanded payment. The default provisions of the notes provide that if an event of default occurs the outstanding principal amount of this note, plus accrued but unpaid interest and other amounts owing in respect thereof through the date of acceleration, shall become, at the holder's election, immediately due and payable in cash, and commencing five days after occurrence of any Event of Default that results in the eventual acceleration of the note, the interest rate on the note shall accrue at an interest rate of 12% per annum. Further, if an event of default occurs, the noteholders, together, have rights to foreclose on the collateral securing the notes. The collateral is the accounts receivable and inventory of the subsidiary that is party to the note, which are SREP and LED. With respect to notes in default for which SREP is a party in the principal amount of $11.8 million, at December 31, 2025, the collateral includes the accounts receivable and inventory on the BESS projects. Since, at December 31, 2025, there is an event of default on $14.3 million principal amount, the holders of all of these notes have the current right to accelerate payment on the full principal amount of their notes, in which event all of these notes with interest at 12% per annum may become due. Further, although we accrued interest at the stated interest rate of 4% since the noteholders did not demand acceleration, if they exercise their right of acceleration interest will be payable at 12%, commencing five days after the event of default, which will be an interest expense when the payment of the notes is accelerated. We cannot assure you that we will be able to pay the notes plus interest if the notes are accelerated. In addition, we cannot assure you that we will not incur any liability because of our failure to disclose the defaults in our financial statements for the years ended December 31, 2023 and 2024 and our quarterly financial statements for quarters within the years ended December 31, 2025, 2024 and 2023 and our treatment as long term liabilities the schedule payment due more than one year from the balance sheet date notwithstanding the right of the noteholders to accelerate payment. At December 31, 2025, the full amount of the principal and accrued interest at the stated interest rate is treated as current liabilities. We cannot assure you that we will be able to operate our BESS systems business profitably. During the year ended December 31, 2025, we entered into four contracts to perform EPC services for the construction of BESS systems. As of the date of this annual report we have not completed the construction of our first BESS systems and we have not commenced work for the three projects for which we signed contracts on December 31, 2025. These contracts are fixed price contracts, and we may not be able to recoup any increase in prices which we may incur. Further, we cannot assure you that we will generate a gross profit on these contracts and if we do not generate a significant gross profit on these contracts, we may not be able to operate profitably. Further, until we have demonstrated that we are able to construct a BESS system on time and on budget, we may have difficulty in securing contracts for these systems. We cannot assure you that we will be able to develop this business or operate this business profitable. Further, our need for capital, our working capital deficit, our default on convertible notes, the low price of our common stock, and the possibility that we may be delisted by Nasdaq may make it more difficult for us to obtain profitable contracts. In addition, inflation, including increased inflation resulting from the war against Iran and steps taken by Iran, may affect our ability to generate a profit from our BESS systems work. We have relied on loans through the United States government’s EB-5 program, which loans need to be refinanced when they become due, either at maturity or upon accelerate of defaulted notes, and we cannot assure you that the limited partners will accept our proposed terms of the refinancing or, if we cannot refinance these loans that we will have the funds to pay the loans or be able to raise such funds on reasonable, if any, terms. Two of our subsidiaries, SREP and LED, borrowed a total of $55.5 million from Clean Energy Funding (“CEF”) and Clean Energy Funding II (“CEF II”), respectively, who are related parties. CEF and CEF II are limited partnerships of which the general partner is a limited liability company owned by two of our directors, one of whom is the chief executive officer, and the other is a former executive officer/director, and which is managed by our chief executive officer and the former executive officer who was a 5% stockholder. The funding was made pursuant to the United States government’s EB-5 program, and the lenders made loans from the proceeds of capital contributions of the limited partners who made their investment as part of the EB-5 program. Under this program, which is administered by the United States Customs and Immigration Service, entrepreneurs (and their spouses and unmarried children under 21) are eligible to apply for a green card (permanent residence) if they make the necessary investment in a commercial enterprise in the United States and plan to create or preserve ten permanent full-time jobs for qualified United States workers. We are a commercial enterprise that creates permanent full-time jobs in the United States. The loans are secured and are payable 48 months from the date of the advance and are extended by the lender as may be necessary to meet applicable USCIS immigrant investor visa requirements, which is the date when the final step of the EB-5 visa process is completed and the immigrant investors, who are the limited partners of the lender, can become lawful permanent residents of the United States. The initial four-year term of all of the loans has expired and the loans are on extension until the limited partners have met the USCIS requirements. As the loans matured, we offered the limited partners, in lieu of the payment by the limited partnership of their capital contributions, a convertible note in the principal amount equal to their capital contributions to the partnerships, with a term of five years, with 20% of the principal amount being due on each of the first, second, third, fourth and fifth anniversaries of the date of issuance. The notes are secured by the same assets that secured the notes issued to the lenders. As of December 31, 2025 and March 15, 2026, notes to CEF and CEF II in the aggregate principal amount of $10.0 million and $9.0 million, respectively, were outstanding, and convertible notes in the principal amount of $43.5 million had been issued to former limited partners of CEF, of which principal payments of $23.9 million and $25.0 million, respectively, had been made on the anniversary of the respective dates of issuance, convertible notes in the principal amount of $3.0 million and $3.0 million, respectively, had been early redeemed for $2.1 million and $2.1 million, respectively, and the outstanding principal amount of $15.6 million was outstanding. During 2025, we paid the principal and interest on convertible notes in the principal of $200,000 following the exercise by the holder of her right to accelerate. The convertible notes that were issued prior to our initial public offering have a conversion price of $3.20, which is 80% of the public offering price. Convertible notes issued after our initial public offering are issued with a conversion price equal to 80% of the market price at the time the notes are issued. This conversion price ranges from $0.65 to $9.07, with an average conversion price of $1.58. With respect to the outstanding notes to CEF and CEF II, limited partners who made investments of $1.0 million can currently demand repayment from the lender of their investment in the partnership which made the loans to us, which can trigger a payment obligation on our subsidiary’s part. Because the date on which the remaining limited partners can demand repayment of their capital account is dependent upon the approval of their petition for permanent residency, we cannot predict when or whether such petition will be approved. We cannot assure you that we will have or be able to obtain the funds to pay the EB-5 loans when they mature, and our inability to pay or refinance these loans or pay the principal and interest at the default rate of 12% per annum on the notes on which there is a default if the holders exercise their right to accelerate could have a material adverse effect upon our business. To the extent that we are unable to refinance these obligations or pay the principal and interest on the note in default, we will use our available funds for such purpose or it may be necessary to modify the terms of the convertible notes. If the limited partners who have the right to demand repayment of their capital accounts exercise their right, which can trigger the maturing of loans in the total principal amount of $2.0 million, as of December 31, 2025, we may not have sufficient funds to make these payments, and we can give no assurance that we will be able to obtain funding from other sources or reasonable terms, if at all. As noted above, we are in default on the payment of convertible notes in the principal amount of $14.3 million at December 31, 2025. 20 Table of Contents We require significant funds to pay our other debt obligations, including obligations to management. Our debt obligations at December 31, 2025, in addition to the obligations described in the previous risk factor, accrued compensation of $2.4 million to our chief executive officer for the cancellation of restricted stock issued to him ($675,000) and for his deferred salary from 2019 through 2013 and deferred bonus from 2017 and 2018 ($1.7 million). Payment of these amounts has been deferred and they are currently being paid in twelve monthly installments commencing December 31, 2025. Our inability to obtain any financing we require could affect our ability to continue in business. We did not generate any revenue for our Chinese segment since 2021 and we cannot assure you that we will not have to discontinue our Chinese operations. We did not generate any revenue from our China operations during subsequent to 2021 and we do not have any agreements with respect to any project in China and we are not engaged in any negotiations and we are not engaged in any marketing activities in China. If we decide to recommence operations in China, we will require substantial funds to develop this business with no assurance of success, either with SPIC or other potential customers, and our operations will be subject to significant regulation relating to conducting business in China. If we are unable to generate profitable business in China, it may be necessary for us to discontinue our China operations. In the event that we discontinue our China operations, our historical financial statements will reflect the operations of our China operations as a discontinued operation. Our failure to control our costs could impair our financial results. Our cost of revenues and our operating expenses may increase significantly both in dollars and as a percentage of revenues. Unless we are able to reduce both our cost of revenues and our operating costs, we will not be able to operate profitably. There are many factors beyond our control that may affect our costs, such as the price of components, cost of labor and the availability of warehouse and office space at reasonable rents as well as the effect of competition, and recently, inflation. Further, as a public company we have additional expenses that we did not incur as a private company. Unless we are able to control our costs, we will not be able to operate profitably. We cannot assure you that we can or will operate profitably. Changes in utility regulations and pricing could impair the market for our products. The market for alternative energy products is affected by utility regulation and pricing policies. Changes in regulations or pricing could result in a significant reduction in the demand for solar products. Depending on the region, electricity generated by solar energy systems competes most effectively with expensive peak-hour electricity from the electric grid, rather than the less expensive average price of electricity. Modifications to the utility companies’ peak hour pricing policies affect the competitive nature of our systems. To the extent that we have to lower prices, the profitability of our systems could be impaired. In addition, any changes to government or internal utility regulations and policies that favor electric utilities rather than renewal energy such as solar could reduce our competitiveness and cause a significant reduction in demand for our products and services. 21 Table of Contents Our business may be affected by increases in the price of solar energy products, including price increases resulting from the United States’ trade and tariff policies and the war against Iran. The declining cost of solar panels has been a key factor in the pricing of our solar energy systems, which, in turn affects the potential customer’s decision to use solar energy. With any stabilization or increase of solar panel and other component prices, our ability to market our solar energy systems could be impaired, which would affect our revenues and gross profit. The cost of solar panels and raw materials could increase in the future due to tariff penalties or other factors. The U.S. government has imposed tariffs on solar cells, solar panels and aluminum used in solar panels manufactured overseas. These tariffs have increased the price of solar panels containing foreign manufactured solar cells. At present, we purchase solar panels containing solar cells and panels manufactured overseas for our United States installations. While solar panels containing solar cells manufactured inside the United States are not subject to these tariffs, the prices of these solar panels are, and may continue to be, more expensive than panels produced using overseas solar cells, before giving effect to the tariff penalties and the tariff policies may result in an increase in prices of domestic products and, to the extent that domestic products use foreign components or metal, the price of such products is likely to increase. If additional tariffs are imposed or other negotiated outcomes occur, as well as increased inflation resulting from the war against Iran and Iran’s response to attacks by the United States and Israel, our ability to purchase these products on competitive terms from those countries could be limited. Any of those events could impair our financial results if we incur the cost of trade penalties or purchase solar panels or other system components from alternative, higher-priced sources. Changes in net metering regulations in California is likely to result has resulted in a reduced level of benefits, which is impairing the market for residential solar products. Net metering is a billing mechanism that credits solar energy system owners for the electricity that they add to the electricity grid. If the owner of a solar system generates more electricity than it consumes, the excess electricity is sold back to the grid. California’s first net metering policy set a "cap” for the three investor-owned utility companies in the state: Pacific Gas & Electric (PG&E), San Diego Gas & Electric (SDG&E), and Southern California Edison (SCE). All three have reached their cap where total solar installations in each utility’s territory were capped at five percent of total peak electricity demand. The California Public Utilities Commission (CPUC) created the current program known as "Net Metering 2.0” (NEM 2.0) that extends California net metering. NEM 2.0 is slightly different from the first net metering policy. Under NEM 2.0, customers will still receive the retail credit for electricity produced but will be required to pay more in Non-Bypassable Charges. NEM 2.0 also requires new solar customers to pay a one-time Interconnection Application Fee, the amount of which is dependent upon the utility company. For systems under 1MW this fee is $132 for San Diego Gas & Electric, $145 for Pacific Gas & Electric, and $75 for Southern California Edison. NEM 2.0 customers are also required to use Time of Use (ToU) rates. The California Public Utilities Commission (CPUC) has adopted NEM 3.0 which establishes the successor to NEM 2.0 in California. NEM 3.0 features a 75% reduction in export rates (the value of excess electricity pushed onto the grid by solar systems), thereby reducing the overall savings and increasing the payback period of home solar installations. The changes under NEM 3.0 result in reduced benefits for most residential solar users and could alter the return on investment for solar customers. To the extent that utility companies are not required to purchase excess electricity from owners of solar systems or are permitted to lower the amounts paid, the market for solar systems may be impaired. Because net metering can enable the solar system owner to further reduce the cost of electricity by selling excess electricity to the utility company, any elimination or reduction of this benefit would reduce the cost savings from solar energy. The recent changes in California’s net metering payments are reducing the market for residential solar installations to the extent that the installation of the homeowner’s decision to install a solar system is based on the benefits of the net metering structure, which has been modified to reduce the benefits to the home owner. In January 2024, we laid off a portion of our employees associated with the design and installation of residential solar systems in response to a slowdown in demand after NEM 3.0 took effect in April 2023. The layoff represented approximately 25% of our residential solar system design and installation team. Approximately half of the employees who were laid off had been hired in late 2022 to help install our growing backlog of residential solar systems under contract in anticipation of NEM 3.0, and the contracts representing that backlog were completed during 2023. We may need to revise our pricing metrics to reflect the change resulting from NEM 3.0 in order for the purchase of a solar system to be economically attractive to the customer, which may result in lower prices and reduced margins. Although our business plan contemplates that the near-term impact of NEM 3.0 on residential solar contracts will be offset by commercial solar contracts for which we use third-party subcontractors to complete the installations, we cannot assure you that our overall business will not be impacted by the effects of NEM 3.0 or that we will be able to develop our commercial solar business. Our significant decrease in both revenue and gross margin in the nine months ended September 30, 2024 from the comparable period of 2023 reflect both a surge in revenue in 2023 in anticipation of the effectiveness of NEM 3.0 in April 2023 and a sharp decline in revenue resulting from the effectiveness of NEM 3.0. We cannot assure you that net metering will not be eliminated or the benefits significantly reduced for future solar systems, which may dampen the market for solar energy or that our sales, particularly for residential units, will not be impaired. 22 Table of Contents We may be subject to cybersecurity risks . We face significant and persistent cybersecurity risks due to the need to protect both our business generally and any transaction which we are considering or with respect to which we are in negotiation, as well as the need to protect the confidentiality of information concerning our personnel and others with whom we conduct business. We face threats from bad actors who seek to disrupt our business as well as others who are engaging in malicious activities for profit, to make a political point or for no particular reason other than creating disruption. Disclosure of certain information as a result of a cybersecurity breach may result is a breach of privacy laws. The substantial level of harm that could occur to us and those with whom we conduct business were we to suffer impacts of a material cybersecurity incident requires us to maintain robust governance and oversight of these risks and to implement mechanisms, controls, technologies, and processes designed to help us assess, identify, and manage these risks. While we have not, as of the date of this annual report, experienced a cybersecurity threat or incident, we cannot assure you that we will not experience such an incident in the future. Any cybersecurity incidents, whether or not successful, could result in our incurring additional costs related to, for example, rebuilding our internal systems, implementing additional threat protection measures, responding to regulatory inquiries or actions, paying damages or making payments to obtain access to our computer systems, or taking other remedial steps with respect to third parties. We cannot assure you that the steps we are taking will not be successful in preventing a cybersecurity breach, that we will not suffer cybersecurity breaches or that we will not incur significant expenses in seeking to deal with the consequences of any attempted or successful cybersecurity breaches or that, if we suffer a material cybersecurity breach that we will be able to continue in business following such breach. 23 Table of Contents We may be subject to liability if private information that we receive is not secure or if we violate privacy laws and regulations. We are or may become subject to a variety of laws and regulations in the United States and abroad regarding privacy, data security, cybersecurity and data protection. These laws and regulations are continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly with respect to foreign laws. In particular, there are numerous United States federal, state, and local laws and regulations and foreign laws and regulations regarding privacy and the collection, sharing, use, processing, disclosure, and protection of personal information and other user data. Such laws and regulations often vary in scope, may be subject to differing interpretations, and may be inconsistent among different jurisdictions. In June 2018, California adopted the California Consumer Privacy Act ("CCPA”), which became effective in 2020. Under the law, any California consumer has a right to demand to see all the information a company has saved on the consumer, as well as a full list of all the third parties that data is shared with. The consumer also has the right to request that a company delete the information it has on the consumer. The CCPA broadly defines "protected data.” The CCPA also has specific requirements for companies subject to the law. The CCPA provides for a private right of action for unauthorized access, theft or disclosure of personal information in certain situations, with possible damage awards of $100 to $750 per consumer per incident, or actual damages, whichever is greater. The CCPA also permits class action lawsuits. In November 2016, the Standing Committee of China’s National People’s Congress passed China’s first Cybersecurity Law ("CSL”), which became effective in June 2017. The CSL is the first Chinese law that systematically lays out the regulatory requirements on cybersecurity and data protection, subjecting many previously under-regulated or unregulated activities in cyberspace to government scrutiny. The legal consequences of violation of the CSL include penalties of warning, confiscation of illegal income, suspension of related business, winding up for rectification, shutting down the websites, and revocation of business license or relevant permits. The costs of compliance with, and other burdens imposed by, CSL may limit the use and adoption of our products and services and could have an adverse impact on our business. The European Union Parliament approved a new data protection regulation, known as the General Data Protection Regulation ("GDPR”), which came into effect in May 2018. The GDPR includes operational requirements for companies that receive or process personal data of residents of the European Economic Area. The GDPR imposes significant penalties for non-compliance. Although we do not conduct any business in the European Economic Area, in the event that residents of the European Economic Area access our website and input protected information, we may become subject to provisions of the GDPR. We are also subject to laws restricting disclosure of information relating to our employees. We strive to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy, data security, cybersecurity and data protection. However, given that the scope, interpretation, and application of these laws and regulations are often uncertain and may be conflicting, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived failure by us or our third-party service-providers to comply with our privacy or security policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other user data, may result in governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on our business and operating results. Although we maintain cybersecurity insurance, we cannot assure you that this insurance will cover or satisfy any claim made against us or adequately cover any defense costs we may incur. In addition, we are required to report security breaches and describe steps we are taking to address potential cybersecurity threats. 24 Table of Contents Pandemics and epidemics, natural disasters, war, terrorist activities, political unrest, the relationship between China and the United States and other outbreaks could disrupt our delivery and operations, which could materially and adversely affect our business, financial condition, and results of operations. Global pandemics, epidemics in China or elsewhere in the world, or fear of spread of contagious diseases, such as Ebola virus disease (EVD), coronavirus disease 2019 (COVID-19), Middle East respiratory syndrome (MERS), severe acute respiratory syndrome (SARS), H1N1 flu, H7N9 flu, avian flu and monkeypox, as well as hurricanes, earthquakes, tsunamis, or other natural disasters and political unrest and the relationship between the United States and China could disrupt our business operations, reduce or restrict our operations and services, incur significant costs to protect our employees and facilities, or result in regional or global economic distress, which may materially and adversely affect our business, financial condition, and results of operations. Actual or threatened war, terrorist activities, political unrest, civil strife, including the war against Iran and the actions taken by Iran, and the conflicts between Israel and Lebanon and Hamas or any other hostilities in the Middle East and other geopolitical uncertainty could have a similar adverse effect on our business, financial condition, and results of operations. Any one or more of these events may impede our operation and delivery efforts and adversely affect our sales results, or even for a prolonged period of time, which could materially and adversely affect our business, financial condition, and results of operations. Our business would be impaired if we lose our licenses, if more stringent government regulations are enacted or if we fail to comply with the growing number of regulations pertaining to solar energy and consumer financing industries. Our business is subject to numerous federal and state laws and regulations. The installation of solar energy systems performed by us is subject to oversight and regulation under local ordinances, building, zoning and fire codes, environmental protection regulation, utility interconnection requirements, and other rules and regulations. · require us to obtain and maintain licenses and qualifications; · limit certain interest rates, fees and other charges it is allowed to charge; · limit or prescribe certain terms of the loans to our customers; and · require specific disclosures and the use of special contract forms. Non-compliance with certain consumer disclosure requirements related to home solicitation sales and home improvement contract sales affords residential customers with a right to rescind such contracts in some jurisdictions, including California. The number of laws affecting both aspects of our business continues to grow. We can give no assurances that we will properly and timely comply with all laws and regulations that may affect us. If we fail to comply with these laws and regulations, we may be subject to civil and criminal penalties. A material decrease in the retail price of electricity from the local utility company or from other sources would affect our ability to generate revenues. We believe that a customer’s decision to buy a solar energy system from it is primarily driven by a desire to pay less for electricity. Decreases in the retail prices of electricity from utility companies or other renewable energy sources, which is not likely in the foreseeable future as a result of climbing energy prices, would impair our ability to offer competitive pricing which would, in turn, affect our ability both to generate revenue and to maintain gross margins. The price of electricity from utility companies could decrease as a result of such factors as a reduction in the price of oil or natural gas as a result of new drilling techniques or a relaxation of associated regulatory standards; the development of energy conservation technologies and public initiatives to reduce electricity consumption; the construction of a significant number of new power generation plants, including nuclear, natural gas or renewable energy technologies. Often large commercial customers pay less for energy from utility companies than residential customers. To the extent that utility companies offer commercial customers a lower rate for electricity, they may be less willing to switch to solar energy. Under such conditions, we may be unable to offer solar energy systems in commercial markets that produce electricity at rates that are competitive with the price of retail electricity they are able to obtain from the local utility company. In such event, we would be at a competitive disadvantage compared to the local utility company and may be unable to attract commercial customers, which would impact our revenues. Changes in regulations relating to fossil fuel can impact the market for renewable energy, including solar. The market for renewable energy in general and solar energy in particular is affected by regulations relating to the use of fossil fuel and the encouragement of renewable energy. To the extent that changes in regulations have the effect of reducing the cost of gas, oil and coal or encouraging the use of such fuels, the market for solar systems may be impaired. 25 Table of Contents Solar energy and other forms of renewable energy compete with other forms of energy and the attractiveness of solar energy reflects the cost of electricity from the local grid. Solar energy competes with other all other forms of energy, including, particularly local utility companies, whose pricing structure effectively determines the market for solar energy. If consumers, whether residential or commercial, believe that they are paying and will continue to pay too much for electricity from a local utility company, they may consider other alternatives, including alternative providers of electricity from local utility companies as well as forms of renewable energy. If they are in a location where, because of the climate and geography, solar energy is a possibility, they may consider solar energy as an alternative, provided they are satisfied that they will receive a net savings in their cost of electricity and their system will provide them with a constant source of energy. Further, although some customers may purchase a solar energy system because of environmental considerations, we believe that the cost of electricity is the crucial factor that influences the decision of a user, particularly a commercial user, to elect to use solar energy. Within the solar energy market, we face intense and increasing competition in the market of solar energy system providers, which exposes us to the risk of reduction of our market penetration and of our gross margin. The solar energy system installation market is highly and increasingly competitive. The number of new solar energy installation businesses that have entered the industry in California has almost doubled since 2008 when we commenced business. We compete with major companies in the solar business, particularly in California, as well as a large number of small companies. The solar energy industry may continue to expand and possibly consolidate. We may continue to encounter increasing competition from larger companies that have greater resources than we and which would enjoy more economies of scale and greater name recognition than we have. Further, increasing competition may also lead to an excessive supply of solar energy installation services on the market which could continue to affect both our ability to generate revenue as well as our gross margin. To the extent that our ability to provide financing to our customers is an important element in selling our systems, we will compete with both other solar companies that provide financing and with banks, leasing companies and other businesses that seek to offer financing alternatives to purchasers of solar systems. Since early 2020, because we did not have the capital to support such operations, we suspended making loans to our solar customers. The results of our operations may vary significantly from quarter to quarter. In our experience in the United States, consumers generally, and residential customers in particular, express interest in a solar energy system during March and April, when they are preparing their tax returns, and in July and August, when they experience high electricity charges from the local utility company. Since the selling cycle for residential systems is typically three to four months, we generally install systems two to three months after the contract date, and we recognize revenue using a cost-based input method that recognizes revenue as work is performed. If we cannot complete a sale to a customer when the customer expresses interest in a solar system, that potential customer may seek alternative sources. Factors which may cause our quarterly results to fluctuate include: · local weather and climate conditions and long-term projected climate developments, including the effects of wildfires, unusually heavy rain and floods in California and climate change generally, which may affect both our ability to enter into contracts for the installation of solar systems and our ability to complete the construction and installation in a timely manner and may result in financial obligation to customers pursuant to production guarantees; · expiration, initiation or reduction of tax and other rebates and utility incentives; · our revenue recognition policies, whereby significant work can be performed before we recognize revenue; · our ability to complete installations in a timely manner; · our ability to process applications for third-party financing; · our ability to expand our operations and the timing of any expansion; · changes in competitors’ pricing and financing policies and other changes in the competitive environment in the solar energy industry; · pricing policies of local electricity providers; · gas and oil prices; and · changes in customer demands for solar energy systems. 26 Table of Contents If we commence operations in China, the results of our China operations may also vary significantly from quarter to quarter since revenue from our China operations would be dependent upon both the timing of contracts and the timing of our work and the completion of our obligations on projects for which we have contracts and our ability to price our work to generate a profit on the project. Changes in revenue and the results of any operations in China from quarter to quarter may have a negative effect on our net income and the market for and price of our common stock and may also affect our cash requirements to the extent that there is a delay in receipt of payment following the completion of the work for which payment is required. The last year in which we generated revenue from our China operations was 2021, and all of our revenue in that year was generated in the second quarter. We had no revenue from the China operations for subsequent to 2021 through the date of this annual report, and we have no contracts in place for us to perform any services in China, are not engaged in negotiations and have no marketing effort in China. Because we are dependent on our chief executive officer, the loss of his services and our failure to hire additional qualified key personnel could harm our business. Our business is largely dependent upon the continued efforts of one of our founders and our chief executive officer, David Hsu. Although we have an employment agreement with Mr. Hsu, this agreement does not guarantee that Mr. Hsu will continue to work for us. The loss of Mr. Hsu could affect our ability to operate profitably in both the United States and China. If we recommence operations in China, we will need to engage experience executive and operational personnel, and we would be competing with other companies, including Chinese companies, for such personnel. If we are unable to engaged qualified personnel in a timely manner we may not be able to conduct business in China. Further, because our senior management is based in the United States, if we recommence operations in China, our failure to develop senior management personnel in China may strain our management resources and make it difficult for our corporate management to monitor both the China operations and United States operations efficiently. Our failure to have qualified executive personnel in China who can operate in accordance with and implement our business plan and who understand and can comply with applicable United States and Chinese laws and regulations may impair our ability to generate revenue and operating income from the China operations, which could impair our overall operations and financial condition and could prevent our ability to conduct business in China. In order to develop our business, we need to identify, hire and retain qualified sales, installation and other personnel. To develop our business, we need to hire, train, deploy, manage and retain a substantial number of skilled employees, including sales, installation and other employees and marketing and, if we engage in financing activities, lending personnel for these activities. Identifying, recruiting and training qualified personnel requires significant time, expense and attention. If we are unable to hire, develop and retain qualified personnel or if our personnel are unable to achieve the desired level of productivity for a reasonable period of time, we may have difficulty in developing our business. Competition for qualified personnel in the solar industry is increasing, particularly for skilled installers and other personnel involved in the installation of solar energy systems. We also compete with the homebuilding and construction industries for skilled labor. As these industries recover and seek to hire additional workers, our cost of labor may increase. The unionization of our United States labor force could also increase our labor costs. Shortages of skilled labor could significantly delay a project or otherwise increase costs. Because our profit on a particular installation is based in part on assumptions as to the cost of such project, cost overruns, delays or other execution issues may cause us to not achieve our expected margins or cover our costs for that project. In addition, we compete for a limited pool of technical and engineering resources in the United States and, if we seek to conduct business in China, in China that requires us to pay wages that are competitive with relatively high regional standards for employees in these fields. We not only compete for highly qualified personnel, but we also face other companies seeking to hire our personnel, particularly our highly skilled personnel. If we cannot meet our hiring, retention and efficiency goals, we may be unable to complete the customers’ projects on time, in an acceptable manner, if at all. Any significant failures in this regard would materially impair our growth, reputation, business and financial results. If we are required to pay higher compensation than we anticipate, the increased cost may adversely impact our financial results and our ability to develop our business. 27 Table of Contents Although our employees in the United States are co-employed by a professional employer organization, we may be liable for the failure of the organization to comply with our obligations under applicable law. We contract with a professional employer organization, or PEO, that administers our human resources, payroll and employee benefits functions for our United States employees. Although we recruit and select our personnel, our United States employees are co-employed by the PEO and us. Pursuant to the agreement with the PEO, our United States personnel are compensated through the PEO, receive their W-2s from the PEO and are governed by the personnel policies of the PEO. This relationship permits management to focus on our operations rather than human resource administration, but this relationship also exposes us to some risks. Among other risks, if the PEO fails to adequately withhold or pay employer taxes or to comply with other laws, such as the Fair Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act or state and federal anti-discrimination laws, health and safety laws, sexual harassment laws and laws protecting the security of employee information, all of which are outside of our control, we would be liable for such violations, and the indemnification provisions of our agreement with the PEO, if applicable, may not be sufficient to insulate us from those liabilities. Court and administrative proceedings related to these matters could distract management from our business and cause us to incur significant expense. If we were held liable for violations by the PEO of applicable laws, such liability may adversely affect our business and the results of our operations and our cash flow. Since we act as a general contractor in the United States, we face typical risks of a construction company. We act as the licensed contractor for our United States customers and are subject to risks associated with construction, cost overruns, delays, regulatory compliance and other contingencies, any of which could have a material adverse effect on our business and results of operations. For our residential projects, it is the general contractor, construction manager and installer. For our commercial projects, we are the general contractor and construction manager, and we typically rely on licensed subcontractors to support some of our solar panel installations. In either case we are responsible for the completion of the project and must take steps to make sure that we and our subcontractors comply with all applicable laws and regulations. We may be liable to customers for any damage we cause to their home or facility, or belongings or property during the installation of our systems. In addition, shortages of skilled labor for our commercial projects could significantly delay a project or otherwise increase costs. Because our profit on a particular installation is based in part on assumptions we make as to the cost of such project, cost overruns, delays or other execution issues may impair our ability to generate the gross margins that we are seeking. In addition, the installation of solar energy systems and the evaluation and modification of buildings as part of our energy efficiency business is subject to oversight and regulation in accordance with national, state and local laws and ordinances relating to building codes, safety, environmental protection, utility interconnection and metering, and related matters. It is difficult and costly to track the requirements of every individual authority with jurisdiction over our installations and to design solar energy systems to comply with these varying standards. Any new government regulations or utility policies pertaining to our systems may result in significant additional expenses to us and our customers and, as a result, could cause a significant reduction in demand for our systems. Compliance with occupational safety and health requirements and best practices can be costly, and noncompliance with such requirements may result in potentially significant monetary penalties, operational delays and adverse publicity. The installation of solar energy systems requires employees to work at heights with complicated and potentially dangerous electrical systems. The evaluation and modification of buildings as part of our energy efficiency business requires our employees to work in locations that may contain potentially dangerous levels of asbestos, lead or mold. There is substantial risk of serious injury or death if proper safety procedures are not followed. Our operations are subject to regulation under the U.S. Occupational Safety and Health Act, or OSHA, and equivalent state laws. Changes to federal or state OSHA requirements, or stricter interpretation or enforcement of existing laws or regulations, could result in increased costs. If we fail to comply with applicable OSHA regulations, even if no work-related serious injury or death occurs, we may be subject to civil or criminal enforcement and be required to pay substantial penalties, incur significant capital expenditures, or suspend or limit operations. Any such accidents, citations, violations, injuries or failure to comply with industry best practices may subject us to adverse publicity, damage our reputation and competitive position and adversely affect our business. 28 Table of Contents The availability and price of silicon raw materials may affect our gross margins and profitability. Polysilicon is an essential raw material in the production of solar power products. The costs of silicon wafers and other silicon-based raw materials have accounted for a large portion of the costs associated with solar panels. Although the price of silicon had declined in recent years, recent increases in the price of polysilicon in the past have resulted in increases in the price of wafers, leading to increases solar panel costs. Due to the volatile market prices, we cannot assure you that the price of polysilicon will remain at its current levels particularly in view of inflationary pressures, especially if the global solar power market gains its growth momentum. Moreover, in the event of an industry-wide shortage of polysilicon, we may experience late or non-delivery from suppliers and it may be necessary for us to purchase silicon raw materials of lower quality that may result in lower efficiencies and reduce our average selling prices and revenues. Our business is subject to the effects of inflation and has been subject to supply chain issues. Our business is subject to the inflationary pressures that are affecting many domestic and foreign companies. The effects of inflation and supply side issues with respect to polysilicon are described in the preceding risk factor. The effects of inflation may also affect the marketability of our solar systems to residential users. Our cost of revenue per watt of solar systems, which made up approximately 22% of our cost of revenues, increased approximately 20% in 2025 compared to the same period a year ago. Although we have been able to increase the selling price, our ability to increase is limited by competition, which resulted in our increase in 2025 of only 13%, a lower increase than the increase in our unit cost of revenue which resulted in a lower margin. We will continue to source panels at the best available prices, there is no assurance we can continue to source panels at more favorable prices. We have increased the price of solar system installations to offset this increase in cost. Our cost, even of domestic products, may also be affected by tariffs imposed by the United States and counter-tariffs imposed by other countries. The increase in prices due to inflation may also affect the marketability of our solar systems. To the extent that homeowners are incurring high expenses generally, they may have less available cash to invest in a solar system. Although we do not have any data as to the effect of higher utility costs on purchases of solar systems, it has been our experience that, as inflationary pressures are increasing the cost of electricity generally, our domestic business has grown as homeowners are seeking alternatives to what they see as high utility bills. As a result, we have been able to increase our prices which has reduced the effect of increased prices of raw materials. In 2024, our unit cost of revenue increased by 20%, which was partially offset by an increase in unit price of 14%. However, competitive factors limit the amount we can increase our prices, and our price increases have reduced what would otherwise have been a greater decline in gross margin. We are seeking to reduce the effect of increased prices in raw materials by purchasing in greater quantities. However, to the extent inflation continues or increases, we may not be able to raise prices sufficiently to prevent a significant decline in our gross margins and the results of our operations, and if our prices are too high, the residential customer may not see the value of installing our solar system. Because we derive most of our residential solar system revenue from sales of our solar energy systems in California, we depend on the economic and regulatory climate and weather and other conditions in California. We currently derive most of our residential solar system revenue from solar energy projects from California. This geographic concentration exposes us more to government regulations, economic conditions, weather conditions, earthquakes, mudslides, fire, including wildfires, power outages, and other natural disasters and effects of climate change, and changes affecting California than if we operated in more states. We cannot predict the effect of the recent forest fires, heavy rains and flooding in California will have on both the market for solar systems in California and on our business in particular and on our ability to solar systems in a timely manner. Any inability to install solar systems in a timely manner, whether because of wildfires, heavy rain or flooding or other causes will also affect the timing of our revenue flow. Furthermore, these conditions may impact our systems’ ability to meet the production guarantee, which would result in payment obligations if our systems fail to meet production guarantees. 29 Table of Contents Because we provide a production guarantee for some solar systems in California, we may incur additional costs if the output of our systems does not meet the required minimums. Commencing in 2015, our standard contract for residential systems provides for a production guarantee, which means that we guarantee that the system would generate a specified minimum amount of solar energy during a year. The agreements generally have a term specified in the contract, which is generally ten years. In our standard contract, we specify a minimum annual production and provide that if the power generated by the system is less than 95% of the estimate, we will reimburse the owner for the cost of the shortfall. Because our obligations are not contingent upon external factors, such as sunlight, changes in weather patterns or increases in air pollution, unusual rain, flooding and wildfires and other factors could affect the amount of solar power that is generated and could increase our exposure under the production guarantee. Although our obligations under these agreements have not been significant through December 31, 2024, we cannot assure you that in the future any obligations we have under these agreements will not have a material adverse effect upon our revenue and the results of our operations. Although we believe that the conditions relating to those installations were unique and that we have taken corrective action, we cannot assure you that we will not have unanticipated liability in the future for the failure of systems to comply with applicable production guarantees regardless of the cause of such failure. Our warranty costs may exceed our warranty reserve. We provide warranties to the clients of our EPC services for one year in China and for up to 25 years to the purchasers of our solar systems in the United States. Although we generally pass the warranties from our equipment suppliers to the purchasers of the systems, we provide the warranty with respect to our installation and related services. We maintain a warranty reserve on our financial statements, and our warranty claims may exceed the warranty reserve. Any significant warranty expenses could adversely affect our financial condition and results of operations. Our warranty expenses relating to systems with a production guarantee may be affected by significant changes in weather conditions which substantially reduce sun exposure. Significant warranty problems could impair our reputation which could result in lower revenue and a lower gross margin. Although we believe that the problems associated with the systems installed for the leasing company do not apply to our present solar systems, we cannot assure you that we will not incur unanticipated warranty costs in the future. Because of the rapid development of solar panels and other components for solar systems, we may be subject to inventory obsolescence. The solar industry has seen rapid technological development. We have an inventory of raw materials that include silicon wafers and other consumables and construction materials used in solar system installations. We evaluate our inventory on a quarterly basis for excess and obsolete inventory, based on assumptions as to market demand, market conditions and technological developments. We cannot assure you that we will not incur significant inventory write-offs resulting from obsolete inventory. 30 Table of Contents If we seek to expand our business through acquisition, we may not be successful in identifying acquisition targets or integrating their businesses with our existing business. In 2013 and 2015, we acquired three companies, LED in the United States in 2013 and two companies in China. In 2015, we incurred impairment losses in connection with the LED acquisition, resulting in impairment write-offs relating to the goodwill associated with the acquisition, and in 2024, we recognized impairment charge for the entire balance of the goodwill associated with our China operations of $7.5 million, which related to our 2015 acquisition of the two companies in China. There are significant risks associated with any acquisition program, including, but not limited to, the following: · We may incur significant expenses and devote significant management time to the acquisition, and we may be unable to consummate the acquisition on acceptable terms. · If we identify an acquisition, we may face competition from other companies in the industry or from financial buyers in seeking to make the acquisition. · The integration of any acquisition with our existing business may be difficult and, if we are not able to integrate the business successfully, we may not only be unable to operate the business profitably, but management may be unable to devote the necessary time to the development of our existing business; · The key employees who operated the acquired business successfully prior to the acquisition may not be happy working for us and may resign, thus leaving the business without the necessary continuity of management. · Even if the business is successful, our two senior executive officers may need to devote significant time to the acquired business, which may distract them from their other management activities. · If the business does not operate as we expect, we may incur an impairment charge based on the value of the assets acquired. · We may have difficulty implementing and maintaining the necessary quality control over the acquired business and our products and services. · To the extent that an acquired company operates at a loss prior to our acquisition, we may not be able to develop profitable operations following the acquisition. · Problems and claims relating to the acquired business that were not disclosed at the time of the acquisition may result in increased costs and may impair our ability to operate the acquired company. · The acquired company may have liabilities or obligations and cybersecurity issues or problems which were not disclosed to us, or the acquired assets may not have the value we anticipated. · Any indemnification obligations of the seller under the purchase agreement may be inadequate to compensate us for any loss, damage or expense which we may sustain, including undisclosed claims or liabilities. · To the extent that the acquired company is dependent upon our management to maintain relationships with existing customers, we may have difficulty in retaining the business of these customers if there is a change in management. · Government agencies may seek damages after we make the acquisition for conduct which occurred prior to the acquisition and may not have adequate recourse against the seller. · We may require significant capital both to acquire and to operate the business, and the capital requirements of the business may be greater than we anticipated. Our failure to obtain capital on reasonable terms may impair the value of the acquisition and may impair our continuing operations. · The acquired company may be impacted by unanticipated events, such as a pandemic such as the COVID-19 or other pandemic, the effect of climate changes, international conflicts or hostilities or social unrest or other factors over which we or the acquired company may have no control. 31 Table of Contents Our business is largely dependent upon government subsidies and incentives. The solar energy industry depends on the continued effectiveness of various government subsidies and tax incentive programs existing at the federal and state level to encourage the adoption of solar power. Government policies, in the form of both regulation and incentives, have accelerated the adoption of solar technologies by businesses and consumers. We and our customers benefit from these regulations in the form of federal tax incentives, state utility rebates and depreciation. Because of the high cost of installing solar energy systems, the existence of tax incentives as well as regulations requiring utility companies to purchase excess power from solar energy systems connected to the grid are important incentives to the installation of a solar energy system. California’s adoption of NEM 3.0 has had a negative impact on the purchase of solar energy systems in California, as reflected in our decline in revenue from 2023 to 2024. Should any of the incentives be discontinued or materially reduced, our business and the results of our operations may be impaired. United States government policies that favor gas and oil over renewable energy including solar and wind may adversely affect our ability to sell our solar systems. United States trade policy affects our ability to purchase domestic solar panel and pricing generally. One of the effects of the United States tariffs on imported solar panels, including solar panel from China, is an increased demand for products manufactured in the United States which may affect both our ability to purchase solar panels and the price and other terms at which solar panels are available to us. Our inability to obtain domestically produced solar panels at a reasonable cost can impair our ability to generate revenue and maintain reasonable gross margins. Furthermore, to the extent that the United States imposes tariffs on goods generally and other countries impose counter-tariffs, our business could be impaired as a result of higher prices resulting from the tariffs which we may not be able to pass along our customer. Two of our directors are located outside of the United States; therefore, investors may not be able to enforce federal securities laws or their other legal rights against those directors located outside the United States. All of our executive officers and directors are located in the United States except that two directors are located in China. As a result, it may be difficult, or in some cases not possible, for investors in the United States to enforce their legal rights, to effect service of process upon those directors located outside the United States, to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties on them under United States securities laws. In particular, the PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States and many other countries and regions. Therefore, recognition and enforcement in the PRC of judgments of United States courts in relation to any matter not subject to a binding arbitration provision may be difficult or impossible. There is uncertainty as to whether the courts of the PRC would enforce judgments of United States courts obtained against these persons predicated upon the civil liability provisions of the United States federal and state securities laws. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States. Under the PRC Civil Procedures Law, foreign shareholders may originate actions based on PRC law against a company in China for disputes if they can establish sufficient nexus to the PRC for a PRC court to have jurisdiction, and meet other procedural requirements, including, among others, the plaintiff must have a direct interest in the case, and there must be a concrete claim, a factual basis and a cause for the suit. It will be, however, difficult for U.S. shareholders to originate actions in the PRC against us or our directors who are located in the PRC in accordance with PRC laws because we are incorporated under the laws of the State of Nevada and it will be difficult for U.S. shareholders, by virtue only of holding our common stock, to establish a connection to the PRC for a PRC court to have jurisdiction as required under the PRC Civil Procedures Law. In addition, it also takes the costs and time for U.S. shareholders to take such court procedures in order to enforce liabilities and judgments in China. As a result of the foregoing, it would be very expensive and time-consuming for a stockholder to either seek to enforce a U.S. judgment in China or to commence an action in a Chinese court, with a strong likelihood that the stockholder will not be successful. 32 Table of Contents Risks Related to our Common Stock We had a significant deficiency in our internal controls over financial statements presentation and disclosure which was remediated as of December 31, 2025. Although such significant deficiency does not constitute a material weakness in our internal controls, it may have an adverse impact on the market price of, and the market for, our common stock. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls, internal control over financial reporting, and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. If we are not able to protect our computer system, including our financial records and client and personnel information, against cybersecurity attacks, including ransomware attacks, we may not be able to maintain effective disclosure controls or internal controls over financial reporting. From April 2023 through December 31, 2025, we did not make the required payments of principal and interest on some of our convertible notes, which resulted in an event of default under the terms of the notes. As a result, the holders of the notes had the right to accelerate payment on the principal amount of notes which would require payment of interest at the annual rate of 12% per annum, rather than the 4% stated interest rate. We did not disclose these defaults in our financial statements for the years ended December 31, 2024 and 2023 or in our quarterly financial statements in the years ended December 31, 2025, 2024 and 2023. At December 31, 2025, the aggregate principal amount of these notes was $14.3 million, all of which $10.7 million is treated as short-term liabilities. Since April 2023, one holder has demanded payment of principal in the amount of $200,000 and we paid the full principal amount with interest. We assessed these disclosure failures and concluded that our failure to record such defaults in our financial statements and the classification of the long-term portion of the convertible notes where the holder has the right to accelerate as long-term debt notwithstanding the right of the holders to accelerate payment is a significant deficiency in our internal controls over financial statements presentation and disclosure which was remediated as of December 31, 2025. Although the failure to report such defaults constitutes a significant deficiency in our internal controls, we do not believe such significant deficiency constitutes a material weakness in our internal controls over financial reporting based on our consideration of our current financial position and results of our operations. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our internal controls may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could adversely affect our operating results, or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal controls could also adversely affect the results of operations. Ineffective disclosure controls and procedures and internal control over financial reporting as well as our failure to disclose the events of default on our convertible notes, even if they do not rise to a material weakness, could cause investors to lose confidence in our reported financial and other information which could adversely impact the market for and the price of our common stock. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended and are continuing to expend significant resources, including accounting-related costs, and provide significant management oversight. Any failure to maintain the adequacy of our internal controls, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and materially and adversely affect our ability to operate our business. In the event that our internal controls are perceived as inadequate or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results, and the stock price of our ordinary shares could decline. In addition, if we are unable to continue to meet these requirements, we may not be able to maintain listings on Nasdaq. Our independent registered public accounting firm is not required to attest to the effectiveness of our internal controls over financial reporting and will not be required to attest to such effectiveness as long as we continue to be an emerging growth company. At such time as our independent registered public accounting firm is required to attest to the effectiveness of our internal controls, such firm may issue a report that our internal controls are not effective if it is not satisfied with the level at which our controls are documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating results. An active, liquid and orderly trading market for our common stock may not be maintained, and our stock price is volatile. We cannot predict the nature of the market for our common stock, and we cannot assure you that an active, liquid or orderly trading market for our common stock will be maintained. Since we completed our initial public offering, the market price for our common stock has been volatile, with a high of $15.82 per share and a low of $0.60 per share. If there is no active, liquid or orderly market for our common stock, the reported bid and asked price at the time you seek to purchase or sell shares may not reflect the price at which you could either buy or sell shares of our common stock. Because the price of our common stock on Nasdaq is less than $1.00 per share, we have received a notice from Nasdaq that we do not meet the continued listing requirement that our stock price maintain a minimum bid price of $1.00. On March 3, 2026, we received a notice from The Nasdaq Stock Market that we do not meet Nasdaq’s continued listing requirement of Rule 5550(a)(2) that we maintain a minimum bid price of $1.00 per share. The Nasdaq rules provide that we have a compliance period of 180 calendar days to regain compliance. This period expires on August 31. 2026. To become compliant, the closing bid price of our common stock must be at least $1.00 for a minimum of ten consecutive business days. In the event we do not regain compliance within such 180 day period, we may be eligible for additional time. To qualify, we will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and we will need to provide written notice of our intention to cure the deficiency during the second 180-day compliance period, by effecting a reverse stock split, if necessary. However, if it appears to Nasdaq staff that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq will provide notice that our securities will be subject to delisting. If we choose to implement a reverse stock split to increase the bid price of our common stock, which we may consider, we must complete the split no later than ten business days prior to the expiration of the applicable compliance period. In the event we do does not regain compliance with the rule prior to the expiration of the applicable compliance period, we will receive written notification that our securities are subject to delisting. The Nasdaq rules also provide that if during any compliance period a company’s security has a closing bid price of $0.10 or less for ten consecutive trading days, the Listing Qualifications Department shall issue a Staff Delisting Determination under Rule 5810 with respect to that security. We cannot assure you that we will be able to meet the requirement for a continued listing of our common stock on Nasdaq. Further, if we effect a reverse split, which requires stockholder approval, we can give no assurance that the market price per share of our common stock, post reverse split, will not suffer a significant decline. 33 Table of Contents The price of our common stock may be affected by a number of factors. Factors that may affect our common stock include the following: · the perception of our ability to meet the Nasdaq continued listing requirements; · the perception of our ability to raise funds we require from time to time, including funds to pay our outstanding debt, including convertible debt with respect to which we are in default, and terms on which we issue securities in private equity transactions; · the perception of our ability to generate a reasonable gross profit from BESS systems; · volatility in the trading prices and trading volumes of solar or renewable energy stocks; · changes in operating performance and stock market valuations of other energy companies generally, or those in our industry in particular; · sales of shares of our common stock by us or our stockholders; · failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our Company, or our failure to meet these estimates or the expectations of investors, and unfavorable recommendations by securities analysts; · any financial projections we may provide to the public, any changes in those projections, or our failure to meet those projections; · announcements by us or our competitors of new products, features, or services; · actual or anticipated changes in our results of operations or fluctuations in our results of operations; · actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; · if we commence business in China, the perception of our ability to operate profitably and generate positive cash flow in China and our failure to generate significant business from any operations we may commence in China; · rumors and market speculation involving us or other companies in our industry; · the public’s reaction to our press releases, other public announcements and filings with the SEC; · litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; · announced or completed acquisitions of businesses, products, services or technologies by us or our competitors; · new laws or regulations or new interpretations of existing laws or regulations applicable to our business; · changes in accounting standards, policies, guidelines, interpretations or principles; · any significant change in our management or our failure or perceived failure to engage additional executive and other senior level personnel; and · general economic conditions and slow or negative growth of our markets. In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of listed companies. Broad market and industry factors may significantly affect the market price of our common stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our common stock shortly following our initial public offering. In addition, in the past, following periods of volatility in the overall market and in the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. 34 Table of Contents Our amended and restated articles of incorporation and amended and restated bylaws and our employment agreement with our chief executive officer, as well as Nevada law, contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our common stock. Our amended and restated articles of incorporation authorize our board of directors to issue preferred stock without stockholder approval. If our board of directors issues preferred stock, such issuance could make it more difficult for a third party to acquire us. Our employment agreements with our David Hsu, chief executive officer, provides that, in the event of a termination of his employment following a change of control, we are to pay Mr. Hsu, upon termination, a lump sum payment equal to two times the highest annual compensation for the three years preceding the date of termination, multiplied by the number of years he has been employed by us. Mr. Hsu’s employment commenced in February 2008. In addition, some provisions of our amended and restated articles of incorporation and bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our stockholders, including: · limitations on the removal of directors; · limitations on the ability of our stockholders to call special meetings; · establishing advance notice provisions for stockholder proposals and nominations for elections to the board of directors to be acted upon at meetings of stockholders; · providing that the board of directors is expressly authorized to adopt, or to alter or repeal our bylaws; and · establishing advance notice and certain information requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings. Provisions of our bylaws and Nevada law could deter a change of our management, which could discourage or delay offers to acquire us. Certain provisions of Nevada law and of our bylaws could discourage or make it more difficult to accomplish a proxy contest or other change in our management or the acquisition of control by a holder of a substantial amount of our voting stock. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interests or in our best interests. These provisions include: · requiring stockholders who wish to request a special meeting of the stockholders to disclose certain specified information in such request and to deliver such request in a specific way within a certain timeframe, which may inhibit or deter stockholders from requesting special meetings of the stockholders; · requiring that stockholders can only call a special meeting if the request is made by the holders of two-thirds of the entire capital entitled to vote; · requiring that stockholders who wish to act by written consent request a record date from us for such action and such request must include disclosure of certain specified information, which may inhibit or deter stockholders from acting by written consent; · requiring that, if a matter is to be brought before a meeting of stockholders which is not specified in the notice of meeting or brought at the direction of the board of directors, it can only be brought up at the meeting if brought by stockholders of record holding two-thirds of the outstanding stock; · establishing the board of directors as the sole entity to fill vacancies in the board, which lengthens the time needed to elect a new majority of the board; · establishing a two-thirds majority vote of the stockholders to remove a director or all directors, which lengthens the time needed to elect a new majority of the board; · providing that our bylaws may be amended only by either the affirmative vote of two-thirds of the stockholders entitled to vote or by the board of directors, which limits the ability of stockholders to amend our bylaws, including amendments to provisions in the bylaws that are described in this risk factor; and · establishing more detailed disclosure in any stockholder’s advance notice to nominate a new member of the board, including specified information regarding such nominee, which may inhibit or deter such nomination and lengthen the time needed to elect a new majority of the board. 35 Table of Contents A portion of the compensation to our senior executive officers may not be deductible, which may increase our taxes Section 162(m) of the Internal Revenue Code limits the deduction that public companies may take for annual compensation paid to its chief executive officer, chief financial officer and the three other most highly compensated officers, who are referred to as "covered employees.” All compensation in excess of $1.0 million paid to a covered employee, including post termination compensation and death benefits, may be nondeductible for federal income tax purposes, with certain exceptions pursuant to certain contracts that were in effect on November 2, 2017. In the event that the compensation we pay to any covered employee exceeds $1.0 million, such excess may not be deductible which, if our operations are profitable, could increase our income taxes and reduce our net income, which could negatively affect the price of our stock. Because our bylaws limit the court in which you may bring an action against us, you may have difficulty enforcing any rights which you may claim. Our bylaws provide that any person who acquires equity in us shall be deemed to have notice and consented to the forum selection provision of our bylaws, which require actions to be brought only in the state courts in Clark County, Nevada, which may inhibit or deter stockholders’ actions (i) on behalf of us, (ii) asserting claims of breach of fiduciary duty by officers or directors of us, or (iii) arising out of the Nevada Revised Statutes. Further, this exclusive forum provision may limit our stockholders’ ability to obtain what they believe to be a favorable judicial forum for disputes with us and our officers and directors. This provision does not apply to claims brought under the Securities Act of 1933 or the Securities Exchange Act of 1934. Because we do not intend to pay dividends on our common stock for the foreseeable future, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates. We do not plan to declare dividends on shares of our common stock in the foreseeable future. As a result, your only opportunity to achieve a return on your investment will be if you sell your common stock at a price greater than you paid for it. The price of our common stock has fluctuated significantly since our initial public offering and we cannot assure you that the price of our common stock that will prevail in the market will ever equal or exceed the price that you pay for our stock. Future sales of our common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us. All of our outstanding shares of common stock, except for 561,798 shares issued in March 2025, are eligible for sale pursuant to Rule 144, subject to limitations provided by Rule 144 with respect to affiliates. In addition, the holders of our convertible notes in the principal amount of $15.6 million at March 15, 2026, have conversion rights at an average conversion price of $2.02 per share. The conversion price is $3.20, which is 80% of our initial public offering price of $4.00 with respect to convertible notes in the principal amount of $9.5 million which were issued prior to our initial public offering, and 80% of the market price on the date of the convertible note with respect to notes issued subsequent to our initial public offering. We require additional capital and, to the extent that we raise funds through the sale of equity securities or equity-based securities and to the extent that that the remaining limited partners of the partnerships that have outstanding loans to us in the principal amount of $9.0 million receive convertible notes in respect of their investment in the limited partnership that made loans to us, the holders will have the right to sell such shares six months after issuance or earlier if the shares are registered for sale pursuant to the Securities Act of 1933. Both the sale and the market’s reaction to the possible sale of such shares could have a material adverse impact on the market price of and the market for our common stock. 36 Table of Contents We intend to file a registration statement with the SEC on Form S-8 providing for the registration of shares of our common stock issued or reserved for issuance under our equity incentive plan or pursuant to stock options. Subject to the satisfaction of vesting conditions shares registered under the registration statement on Form S-8 will be available for resale immediately in the public market without restriction other than those restrictions imposed on sales by affiliates pursuant to Rule 144. We cannot predict the size of future issuances of our common stock or securities convertible into common stock or the effect, if any, that future issuances and sales of shares of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock (including shares issued in connection with any acquisition we may make), or the perception that such sales, including sales by our existing stockholders pursuant to Rule 144, could occur, may adversely affect prevailing market prices of our common stock. We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock. Our amended and restated articles of incorporation authorize us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations and relative rights, including preferences over our common stock respecting dividends and distributions, as our board of directors may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. For example, we might grant holders of preferred stock the right to elect one or more directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might grant to holders of preferred stock could affect the residual value of the common stock. For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies. We are classified as an "emerging growth company” under the JOBS Act. For as long as we are an emerging growth company, which may be up to five full fiscal years, we will not be required to, among other things, (i) provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, (ii) comply with any new requirements adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, (iii) provide certain disclosure regarding executive compensation, or (iv) hold nonbinding advisory votes on executive compensation. We will remain an emerging growth company for up to five years from our initial public offering, although we will lose that status sooner if we have more than $1.235 billion of revenues in a fiscal year, have more than $700 million in market value of our common stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period. To the extent that we rely on any of the exemptions available to emerging growth companies, you will receive less information about our executive compensation and internal control over financial reporting than issuers that are not emerging growth companies. If some investors find our common stock to be less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. Because our directors and executive officers own or have the right to vote approximately 20.9% of our outstanding common stock, they may be able to elect all directors, approve all matters requiring stockholder approval and block any action which may be beneficial to stockholders. Our directors and executive officers beneficially own approximately 20.9% of our outstanding common stock, based on the stock they presently own, excluding shares issuable upon exercise of options. Our bylaws provide that one-third of the outstanding common stock constitutes a quorum for a meeting of stockholders. As a result, they may have the ability to elect all of our directors and to approve actions requiring stockholder approval as well as to prevent any action from being taken which they oppose even if such action would benefit our stockholders. 37 Table of Contents