SolarMax Technology, Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are designed to provide that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Management's Annual Report on Internal Control over Financial Reporting As of December 31, 2025, we believe that our internal controls over financial reporting are effective in providing reasonable assurance regarding the reliability of our financial reporting. Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Limitations on Effectiveness of Controls and Procedures Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. As an “emerging growth company,” we may take advantage of certain temporary exemptions from various reporting requirements, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act (and the SEC rules and regulations thereunder). Accordingly, this Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm. Item 9B. Other Information We have adopted an insider trading policy. Our insider trading policy is available on our website and is filed as an exhibit to this annual report. Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections. Not applicable 58 Table of Contents Part III Item 10. Directors, Executive Officers and Corporate Governance Executive Officers and Directors Set forth below is certain information with respect to our directors and executive officers: Name Age Title David Hsu 62 Chief executive officer and director Stephen Brown 66 Chief financial officer Simon Yuan 71 Director Wei Yuan Chen 66 Director Lei Zhang, Ph.D. 43 Director Steve Chen 67 Director David Hsu, together with Simon Yuan and Ching Liu, who was formerly an executive officer and director and is a 5% stockholder, are our founders. Mr. Hsu has served as our chief executive officer and a director since our organization in February 2008. Mr. Hsu has more than 20 years of experience in sales, international business development and management in the automotive and energy industries. Before starting SolarMax in 2008, Mr. Hsu served as a consultant to China Sunergy, a leading photovoltaic panel manufacturer and solar energy company. Mr. Hsu received a bachelor’s degree in electrical engineering from Shanghai Jiao Tong University School of Engineering. Mr. Hsu’s solar energy industry experience and his relationships with industry experts qualify him to serve as a director. Stephen Brown has served as our chief financial officer since May 2017. From 2013 until April 2017, he was chief financial officer of STAAR Surgical Company. Mr. Brown was vice president, global finance of Bausch & Lomb from 2008 until 2013 and chief financial officer of Hoya Surgical Optics from 2007 to 2008. He served in various capacities over a 13-year period with Johnson & Johnson including chief financial officer of the Advanced Sterilization Products division. His 35-year business career also includes the founding of Degree Baby Products, a privately held company that was sold after six years of operations to Johnson & Johnson. Mr. Brown holds an M.B.A. degree from University of California, Los Angeles Anderson School of Management and earned a B.A. degree in Business Administration from California State University, Fullerton. Simon Yuan, one of our founders, served as a director since February 2008 and chief financial officer from February 2008 until May 2017. In 1989, Mr. Yuan founded Simon & Edward, LLP, a PCAOB registered public accounting firm of which he has been managing partner since its founding. Prior to founding Simon & Edward, Mr. Yuan was employed by Wells Fargo Bank as a senior internal auditor and by the State of California as a tax auditor. Mr. Yuan was also a supervising senior auditor with the international accounting firm of Moore Stephens. Mr. Yuan’s professional experience encompasses more than 30 years of public accounting, with expertise in a broad range of business accounting and auditing, and international taxation, estate planning, business merger and acquisition, and general business consulting. Mr. Yuan is an active leader, officer and participant of many professional and charitable organizations. He is a director of the Sino-American Certified Public Accountants Association and also served as its president in 1998. Mr. Yuan received a Master of Accountancy from Ohio State University. Mr. Yuan’s accounting background, as well as his service as our chief financing officer, qualify him to serve as a director. 59 Table of Contents Wei Yuan Chen has served as a director since April 2010. Mr. Chen, who is semi-retired, was the chief designer and director for Xing Rong Project Management Company, Shanghai, China, a position he held from 1990 to 2010. In 2002, Mr. Chen received the "Design and Build” of the year award for designing the headquarters of Applied Material, Shanghai, China. Mr. Chen earned his bachelor’s degree from Tsinghua University. Mr. Chen brings to us his project management knowledge and 20 years of experience of implementation and integration of renewable sources into his architectural designs. Mr. Chen’s experience in project management and familiarity with the Chinese market qualify him to serve as a director. Dr. Lei Zhang has been a director since November 2020. She has been a professor, which is a tenured position, in the Department of Mechanical Engineering at the University of Alaska, Fairbanks since July 2024, having been an associate professor from August 2018 to June 2024, and an assistant professor in that department from August 2013 to June 2018. She is co-author of a number of annual books on energy technology and is co-author of a number of articles in her field in peer reviewed journals. Dr. Zhang received her B.Eng. and M.S. in Material Science and Engineering from China University of Mining & Technology, Beijing, and her Ph.D. from Michigan Technological University. Dr. Zhang’s knowledge of the energy industry qualifies her to serve as a director. Steve Chen has been a director since November 2025. Mr. Chen is a private investor and business operator since 1998. He actively manages a portfolio of commercial and hospitality real estate assets in the United States. His professional experience includes founder and chief executive officer of ALPS European Whole Grain in Shanghai, China, the first microbrewery in China, from 1994 to 2000, and founder and chief executive officer from 2009 to 2016 of Speedy Sails, a regional distribution business for U.S. manufactured catamarans aimed at China’s emerging marine leisure market. Mr. Chen received his degree from World College of Journalism in Taipei, Taiwan. We believe his business experience qualifies him to serve as a director. All of our executive officers and directors are located in the United States except that two directors (Wei Yuan Chen and Stephen Chen, who are not related) are located in China. As a result, it may be difficult, or in some cases not possible, for investors in the United States to enforce their legal rights, to effect service of process upon those directors located outside the United States, to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties on our directors under United States securities laws. 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 judgement of United States courts in relation to any matter not subject to a binding arbitration provision may be difficult or impossible. Information about the Board of Directors Our board of directors oversees our business and affairs and monitors the performance of management. In accordance with corporate governance principles, the board does not involve itself in day-to-day operations. The directors keep themselves informed through discussions with our chief executive officer and other key executives, by reading the reports and other materials that we send them, and by participating in board and committee meetings. Directors hold office for a term of one year and until their successors have been elected and qualified unless the director resigns or by reasons of death or other cause is unable to serve in the capacity of director. Terms of Directors Our directors are elected for a term of one year, until the next annual meeting of stockholders and until their successors are elected and qualified. Pursuant to our bylaws, our officers serve at the pleasure of the board of directors subject to any rights they may have pursuant to employment agreements and applicable law. Committees of the Board of Directors We have established an audit committee, a compensation committee and a nominating and corporate governance committee. We have adopted a charter for each of the three committees. Each committee’s members and functions are described below. 60 Table of Contents Audit Committee. Our audit committee consists of Simon Yuan, as chair, Wei Yuan Chen and Lei Zhang, Ph.D. We have determined that each of the audit committee members satisfies the "independence” requirements of the Nasdaq Listing Rules and meet the independence standards under Rule 10A-3 under the Exchange Act. We have determined that each of Mr. Yuan qualifies as an "audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of our financial statements. The audit committee is responsible for, among other things: · selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm; · reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; · reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; · discussing the annual audited financial statements with management and the independent registered public accounting firm; · reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any special steps taken to monitor and control major financial risk exposures; · annually reviewing and reassessing the adequacy of our audit committee charter; · meeting separately and periodically with management and the independent registered public accounting firm; · monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; · establishing procedures for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; and · reporting regularly to the board. Our audit committee reviews all proposed related party transactions on an ongoing basis and any such transactions must be approved by the audit committee. The audit committee has the authority, with the assistance of management, to advise the board and any other board committee if the clawback provisions of our clawback policy are triggered based upon a financial statement restatement or other financial statement change. The audit committee also has the responsibility to implement and oversee our cybersecurity and information security policies and periodically review the policies and manage potential cybersecurity incidents. Compensation Committee . Our compensation committee consists of Wei Yuan Chen, as chair, Simon Yuan and Lei Zhang, Ph.D. We have determined that each of the committee members satisfies the "independence” requirements of the Nasdaq Listing Rules. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated upon. The compensation committee is responsible for, among other things: · reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers; · reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; · reviewing periodically and approving any incentive compensation or equity plans, programs or other similar arrangements; and · selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management. 61 Table of Contents The compensation committee shall, with the assistance of management, have the authority and responsibility to, either by itself or in coordination with the audit committee, make any determinations and take or authorize the taking of any action contemplated by our clawback policy. Nominating and Corporate Governance Committee . Our nominating and corporate governance committee consists of Lei Zhang, Ph.D., Wei Yuan Chen and Steve Chen. We have determined that each of the committee members satisfies the "independence” requirements of the Nasdaq Listing Rules. The nominating and corporate governance committee assists the board in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee is responsible for, among other things: · recommending nominees to the board for election or re-election to the board, or for appointment to fill any vacancy on the board; · reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience, expertise, diversity and availability of service to us; · selecting and recommending to the board the names of directors to serve as members of the audit committee and the compensation committee, as well as of the nominating and corporate governance committee itself; · developing and reviewing the corporate governance principles adopted by the board and advising the board with respect to significant developments in the law and practice of corporate governance and our compliance with such laws and practices; and · evaluating the performance and effectiveness of the board as a whole Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our directors, executive officers and 10% stockholders to file initial reports of ownership and reports of changes in ownership of our common stock with SEC and to furnish us with copies of all Section 16(a) forms that they file. Chen Wei Yuan and Zhang Lei, Ph.D. were late in their filings, and Steve Chen is delinquent in his Form 3 filings. 62 Table of Contents Item 11. Executive Compensation The following table sets forth information regarding the compensation awarded to, earned by, or paid during the years ended December 31, 2025 and 2024 to our chief executive officer and the most highly paid executive officer other than the chief executive officer. These two officers, who are our only executive officers, are referred to as our "Named Executive Officers.” Summary Compensation Table Salary Cash Bonus Stock Bonus Option Awards Non-Equity Incentive Plan Compensation Non-qualified Deferred Compensation Earnings All Other Compensation 2 Total Name and principal position Year ($) ($) ($) ($) ($) ($) ($) ($) David Hsu, 2025 $ 760,065 $ - $ - $ - $ - $ - $ - $ 760,065 Chief executive officer 1 2024 $ 737,924 $ - $ - $ - $ - $ - $ - $ 737,924 Stephen Brown, 2025 $ 350,000 $ 105,000 $ - $ - $ - $ - $ 13,489 $ 468,489 Chief financial officer 2024 $ 350,000 $ 105,000 $ - $ - $ - $ - $ 26,896 $ 481,896 ____________ 1 Pursuant to his employment agreement, Mr. Hsu is eligible for an annual bonus in which 70% is payable in stock and 30% is payable in cash. 2 All other compensation represents the value of paid time off accrued. Employment Agreements On October 7, 2016, we entered into an employment agreement with David Hsu-pursuant to which it agreed to employ Mr. Hsu as our chief executive officer for a five-year term commencing January 1, 2017 and continuing on a year-to-year basis unless terminated by us or Mr. Hsu on not less than 90 days’ notice prior to the expiration of the initial term or any one-year extension. We agreed to include Mr. Hsu as a nominee of the board of directors for election as a director during the term of his agreement, and, upon his election as a director, Mr. Hsu is to serve as chairman of the board. Mr. Hsu’s initial salary was $600,000, with an annual increase of not less than 3%. Mr. Hsu’s employment agreement provides for a salary increases of at least 3% annually and a bonus based on our revenues. Mr. Hsu’s compensation was at the annual rate of $760,065 for 2025 and $737,924 for 2024. His compensation for 2026 is at the annual rate of $782,867. Mr. Hsu is entitled to an annual bonus based on consolidated revenues for the year in accordance with the following table: Revenue Bonus in Dollars or Percentage of Revenues Less than $30 million $ - More than $30 million but less than $50 million $ 250,000 More than $50 million but less than $100 million 0.55 % More than $100 million but less than $200 million 0.60 % More than $200 million but less than $300 million 0.75 % More than $300 million 1.00 % 70% of the bonus payable for any calendar year is to be paid in restricted stock and 30% is to be paid in cash and shall be paid no later than the earlier of (i) 30 days following the issuance of our audited financial statements for the calendar year in which the bonus is earned or (ii) the last business day of December of such next following calendar year. Our audited financial statements shall be deemed to be issued on the date we file our annual report on Form 10-K. The equity component of the bonus shall be based on the average closing market price of the common stock on the principal exchange or market on which the common stock is traded for the period beginning on the first day of the quarter in which the bonus is payable and ending on the third trading day prior to the date payment is made; except that, if the common stock is not publicly traded, the common stock shall be valued at the most recent price at which the common stock was sold in a private placement to non-affiliated investors. The restricted stock will vest immediately on issuance. Mr. Hsu waived his bonus for 2025 in connection with the suspension of incentive programs for our key employees since 2019. Mr. Hsu is eligible for restricted stock grants or stock options, which shall not exceed 1.5% of our outstanding common stock prior to the grant. The agreement also provides Mr. Hsu with $2.0 million of life insurance, medical and dental insurance and long-term disability insurance providing monthly benefits of not less than $25,000. In the event of Mr. Hsu’s termination in the event of his disability or death, we will pay Mr. Hsu or his beneficiary severance payments or death benefits equal to his highest compensation, which is his salary plus bonus, during the three calendar years prior to the year in which the termination of employment for disability or death occurs, multiplied by the number of full years Mr. Hsu has been employed by us. Mr. Hsu’s employment commenced in February 2008. These termination payments shall be made in annual installments, each equal to one year’s total compensation. In the event of a termination not for cause, by Mr. Hsu for good cause or termination of employment within 18 months of a change of control, we shall pay Mr. Hsu, a lump sum termination payment equal to two times his highest annual compensation for the three years preceding the year in which the termination of employment occurs multiplied by the number of full years that Mr. Hsu was employed by us. In connection with Mr. Hsu’s exchange of 674,107 restricted shares for options to purchase 1,428,432 shares of common stock at $5.01 per share and 674,107 restricted shares for a cash payment of $675,000, which has not been paid as of December 31, 2025. In addition, at December 31, 2024, we owed Mr. Hsu $1,712,770, representing deferred salary from 2019, 2020, 2021, 2022 and 2023 and cash bonuses deferred from 2017 and 2018. Mr. Hsu agreed that this deferred salary and bonus be paid in twelve equal monthly installments, the first payment becoming due on the February 27, 2025 which date was extended to December 31, 2025. As of March 15, 2026, Mr. Hsu has been paid $415,547 under this agreement, and $2,077,735 remains due to Mr. Hsu and is being paid under this agreement. 63 Table of Contents We have an employment agreement dated March 23, 2017 with Stephen Brown pursuant to which we pay Mr. Brown an annual salary of $350,000. Mr. Brown’s agreement provides that his employment is at will. Clawback Policy Our board of directors adopted a clawback policy covering our executive officers. An executive officer is our chief executive officer, president, principal financial officer, principal accounting officer (or if there is no such accounting officer, the controller), any vice-president in charge of a significant principal business unit, division, or function (such as sales, administration, or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for us. As of the date of this annual report, our only executive officers are our chief executive officer and our chief financial officer. The clawback policy relates to incentive-based compensation, which is any compensation that is granted, earned or vested based wholly or in part upon the attainment of a financial reporting measure. The clawback policy covers the recovery of incentive-based compensation from an executive officer only in the event that we are required to prepare an accounting restatement due to the material noncompliance of our financial reporting requirement under the United States securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. Questions as to "materiality” will be made by the Compensation Committee in coordination with the Audit Committee. The incentive-based compensation subject to recovery is the incentive-based compensation received during the three completed fiscal years immediately preceding the date that we are required to prepare an accounting restatement as described above, provided that the person served as an executive officer at any time during the performance period applicable to the incentive-based compensation in question provided that the clawback policy shall only apply if the incentive-based compensation is received while we have a class of securities listed on Nasdaq and on or after October 2, 2023. David Hsu, our chief executive officer, has an employment agreement which provides for incentive-based compensation during the year ended December 31, 2025; however, Mr. Hsu waived his bonus for 2025 in connection with the suspension of incentive programs for our key employees. Employee Benefit Plans In October 2016, our board of directors adopted, and in November 2016, our stockholders approved, the 2016 Long-Term Incentive Plan (the "Plan”), pursuant to which a maximum of 3,810,949 shares of common stock may be issued pursuant to restricted stock grants, incentive stock options, non-qualified stock options and other equity-based incentives may be granted. In March 2019, the board and stockholders approved an increase in the number of shares subject to the plan to 8,988,084. As of December 31, 2025, there were outstanding options to purchase a total of 6,189,749 shares of common stock at an average exercise price of $5.01, including options granted prior to the adoption of the Plan. The following table sets forth information as to options held by our officers, directors and 5% stockholders. Name Shares David Hsu 1,428,432 Simon Yuan 1,269,717 Ching Liu 1,058,098 Stephen Brown 199,736 Total 3,955,983 The grantees of the restricted stock grants have all rights of ownership with respect to the shares, including the right to vote the shares and to receive dividends and distributions with respect to the shares until and unless a forfeiture event shall occur; provided, however, that prior to a forfeiture termination event, (i) the grantees shall have no rights to sell, encumber or otherwise transfer the shares, and (ii) any shares of any class or series of capital stock which are issued to the grantee as a holder of the shares as a result of a stock dividend, stock split, stock distribution, reverse split, recapitalization, or similar event, shall be subject to the same forfeiture provisions as the shares. A forfeiture termination event shall mean such date as is six months following our initial public offering, which is the vesting date with respect to the shares. The shares were subject to forfeiture if we did not complete our initial public offering by April 30, 2024. The options became exercisable as to 50% of the shares in August 2024 and became exercisable as to the remaining 50% in August 2025. 64 Table of Contents Outstanding Equity Awards The following table sets forth information as to outstanding equity awards at December 31, 2025 for the Named Executive Officers: Option swards Stock awards Shares underlying unexercised option # exercisable Shares underlying unexercised option # unexercisable Equity incentive plan awards: number of securities underlying unexercised unearned options Option exercise price Option expiration date Number of shares that have not vested Market value of shares that have not vested Equity incentive plan awards: number of unearned shares or other rights that have not vested David Hsu 1,428,432 - 5.01 02/12/34 - - - Stephen Brown 199,736 - - 5.01 04/30/27 - - - Director Compensation The following table sets forth information as to the compensation paid to our directors in 2025, other than those named in the Summary Compensation Table: Name Cash Compensation Stock Awards Total Steve Chen - - - Wei Yuan Chen - - - Simon Yuan - - - Lei Zhang, Ph.D. - - - Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters The following table sets forth information with respect to the beneficial ownership of our common stock as of March 15, 2026 by: · each person known to us to beneficially own 5% or more of our common stock; · each director; · each of our Named Executive Officers; and · all officers and directors as a group. 65 Table of Contents All information with respect to beneficial ownership has been furnished by the respective 5% or more stockholders, directors or executive officers, as the case may be. Each person is deemed to own beneficially shares of common stock that are issuable upon exercise of options, warrants or upon conversion of convertible securities if they are exercisable or convertible within 60 days of March 15, 2026. Unless otherwise noted, the mailing address of each listed beneficial owner is 3080 12th Street, Riverside, California 92507. Name of Beneficial Owner Shares Beneficially Owned Percentage 1 David Hsu 2 6,174,946 10.7 % Jinxi Lin 3 3,566,700 6.3 % Changzhou Almaden Co. Ltd. 3 3,566,700 6.3 % Ching Liu 4 3,955,447 6.9 % Simon Yuan 5 4,101,664 7.1 % Wei Yuan Chen 1,757,670 3.1 % Lei Zhang, Ph.D. - - % Stephen Brown 6 199,736 0.3 % All officers and directors as a group 2,3,5,6 (five individuals beneficially owning stock) 12,234,016 20.9 % ____________ * Less than 1% 1 The percentages are based on 56,906,572 shares of common stock outstanding. 2 Represents 5,460,730 shares owned by Mr. Hsu and 714,216 shares issuable upon exercise of options held by Mr. Hsu. 3 The shares beneficially owned by Jinxi Lin represent the 3,566,700 shares owned by AMD, of which Mr. Lin is chairman and chief executive officer and has the right to vote and dispose of the shares. The address for Mr. Lin and AMD is No. 639, Qinglong East Road, Changzhou, Jiangsu, China. 4 Represents 2,368,300 shares owned by Ms. Liu and 529,049 shares subject to options held by Ms. Liu. The address for Ms. Liu is 2810 Steeplechase Lane, Diamond Bar, CA 91765 5 Represents 3,466,805 shares owned by Mr. Yuan and 634,859 shares issuable upon exercise of options held by Mr. Yuan. 6 Shares beneficially owned by Mr. Brown represents an option to purchase 199,736 shares of common stock. Except as otherwise indicated each person has the sole power to vote and dispose of all shares of common stock listed opposite his or her name. Item 13. Certain Relationships and Related Transactions, and Director Independence Related Party Transactions EB-5 Notes On January 3, 2012, CEF entered into a loan agreement with SREP, pursuant to which CEF agreed to make loans to the subsidiary in an amount not to exceed $45 million. CEF advanced $45 million pursuant to the agreement. On August 26, 2014, CEF II entered into a loan agreement with LED, for up to $13.0 million CEF II advanced $10.5 million pursuant to the agreement. The proceeds of the loans were used by our subsidiaries for their operations. The loans from CEF and CEF II accrue interest at 3% per annum, payable quarterly in arrears. The loans are secured by a security interest in the accounts and inventory of the borrowing subsidiary. CEF and CEF II are limited partnerships, the general partner of which is Inland Empire Renewable Energy Regional Center, LLC ("Inland Empire”). Inland Empire is owned by David Hsu, our chief executive officer and a director, and Ching Liu, our former executive vice president and former director and a 5% stockholder. Simon Yuan, a director, resigned from Inland Empire in January 2024. He had not been involved in the management of CEF or CEF II. The limited partners of both CEF and CEF II are unaffiliated investors who made a capital contribution to CEF or CEF II pursuant to the United States EB-5 immigration program and are not related parties. The EB-5 immigrant investor visa is a federal program that grants green cards and a path to citizenship to foreign investors who invest at least $500,000 toward job-creating projects. 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 10 permanent full-time jobs for qualified United States workers. We are a commercial enterprise that creates permanent full-time jobs in the United States. 66 Table of Contents The loans from CEF and CEF II become due, as to the investment of each limited partner, four years from the date of the loan and may be extended as may be necessary to meet applicable USCIS immigrant investor visa requirements, which will be the date that the limited partner is eligible for a green card. Under the limited partnership agreements for CEF and CEF II, the limited partners may demand repayment of their capital account when the petition is approved, which demand may trigger a maturity of the loan from CEF or CEF II in the amount of the limited partner’s investment. The initial four-year term of notes in the principal amount of $55.5 million, which were issued to CEF and CEF II, and had expired prior to December 31, 2023 and are on extension until the limited partner meets applicable immigrant investor visa requirements. We cannot determine the period of the extensions. As of March 15, 2026, limited partners whose capital contributions funded loans of $43.5 million had received their green card approval and their extensions expired and one limited partner whose capital contribution funded $500,000 had withdrawn from CEF II and his capital contribution was returned. The petitions of limited partners of CEF and CEF II whose capital contribution funded loans of $8.0 million are pending. As the loans matured and the limited partners requested return of their capital contribution, we offered the limited partners, in lieu of the payment by the limited partnership, a convertible note 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 CEF and CEF II. As of March 15, 2026, we had issued convertible notes in the principal amount of $43.5 million to former limited partners of CEF, of which principal payments of $25.0 million had been made on the anniversary of the respective dates of issuance, and convertible notes in the principal amount of $3.0 million had been purchased by us for $2.1 million, leaving convertible notes in the principal amount of $15.6 million outstanding. As of March 15, 2026, notes to CEF and CEF II in the aggregate principal amount of $9.0 million were outstanding. Six of the limited partners commenced an action against CEF, SolarMax and others, including Mr. Hsu and Mr. Yuan, seeking cash payment of their capital contribution to CEF totaling $3.0 million and other relief, including a declaration that the $45.0 million note to CEF is due and payable. All six of these limited partners settled their actions. One of these limited partners accepted a convertible note for $500,000, the amount of his claim. Interest expense on the loans from CEF and CEF II were approximately $325,000 and $400,000 for the years ended December 31, 2024 and 2023, respectively. Other Related Party Loan On October 10, 2022, SMXP made unsecured loans to us for $944,077 and $414,581 at an interest rate of 8%, with interest payable quarterly at the end of each quarter. The principal amount plus accrued interest of both notes was initially due on October 10, 2024 and was extended to October 10, 2025. The proceeds of the loans were used to pay the security deposit and lease obligations for one month owed to the new owner of our headquarters building under the new lease agreement and for rent on our headquarters building from June 1, 2022 to October 12, 2022. David Hsu, our chief executive officer and a director, and Ching Liu, formerly our executive vice president, a director and 5% stockholder are the principal management group of SMXP. Simon Yuan, a director, has a non-controlling interest in SMXP and is not part of its management. The loan for $414,581 was paid in full in July 2025, and the loan for $944,077 was paid in full in September 2025. Related Party Leases We had a lease for our Diamond Bar, California office with Fallow Field, LLC. Fallow Field, LLC, a related party. The lease commenced on November 1, 2016 and had a ten year term with one five-year renewal option. The initial annual base rent is $229,272 plus the Company’s share of utilities. Fallow Field is owned by Mr. Hsu, Ms. Liu and a minority stockholder. Effective March 31, 2024, we terminated the lease with Fallow Field. 67 Table of Contents We did not incur any rental expense for related party leases in 2025 since all related party leases were terminated in 2024. Total related party rental expense included in general and administrative expenses was approximately $36,000 for the year ended December 31, 2024. Equity Transactions with Officers and Directors In October 2016, the board of directors granted 3,810,949 shares, of which 3,045,963 shares were granted to officers and directors. The following table sets forth information relating to the restricted stock grants to officers and directors. Name No. of Restricted Shares David Hsu 1,348,213 Ching Liu 1 998,676 Simon Yuan 599,206 Chung Jen Tsai 2 99,868 ____________ 1 Ms. Liu resigned as an officer and director on February 24, 2020. 2 Mr. Tsai resigned as a director on July 6, 2020. On March 23, 2019, the board of directors: · Granted to the holders of 1,184,434 restricted shares, including Mr. Yuan and Mr. Tsai, the right to exchange their restricted shares for a ten-year option to purchase 2.119 shares of common stock at $5.01 per share for each share of restricted stock exchanged; and · Granted to Mr. Hsu, Ms. Liu and one other employee, who held 1,348,213, 998,676 and 199,736 restricted shares, respectively, the right (a) to exchange 50% of their restricted shares for a ten-year option to purchase 2.119 shares of common stock at $5.01 per share for each share exchanged and (b) transfer to us 50% of their restricted shares for $1,275,000, or $1.01 per share. These payments, which are treated as compensation, were initially due in December 2019 and the payment date was extended and we made these payments from the proceeds of our initial public offering. Pursuant to their exchange agreements with us, we granted Mr. Yuan, a director, an option to purchase 1,269,717 shares and Mr. Tsai, who was a director, an option to purchase 211,620 shares in exchange for their restricted shares. Pursuant to their exchange agreements with us, Mr. Hsu converted 674,107 shares of common stock into options to purchase 1,428,432 shares of common stock and transferred 674,107 of his restricted shares stock to us for $675,000, and Ms. Liu converted 499,338 of common stock into options to purchase 1,058,098 shares of common stock and transferred 499,338 shares of common stock to us for $500,000. The payments to Mr. Hsu and Ms. Liu were initially to have been paid by December 15, 2019, which date has been extended several times and the payments to Ms. Liu and another employee were made from the proceeds of our initial public offering. The payment to Mr. Hsu is to be paid in twelve monthly installments, commencing December 31, 2025. Director Independence We believe that four of our directors, Mr. Steve Chen, Mr. Wei Yuan Chen, Mr. Yuan, and Dr. Zhang are independent directors using the Nasdaq definition of independence. 68 Table of Contents Item 14. Principal Accounting Fees and Services The following table sets forth the fees billed by CBIZ CPAs P.C. and by Marcum LLP, our registered independent public accounting firms, for 2025 and 2024, respectively, for the categories of services indicated. Years Ended December 31, 2025 2024 Audit fees $ 440,104 $ 542,000 Audit – related fees $ 41,200 $ 16,260 Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements. Audit-related fees consist of fees related to the annual audit of the standalone financial statements of a subsidiary. Our policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants. These services may include audit services, audit-related services, tax services and other services. Since we do not have an audit committee, the pre-approval is made by the board of directors. Our board approved all services that our independent accountants provided to us in the past two fiscal years. 69 Table of Contents Part IV Item 15. Exhibits, Financial Statement Schedules Financial Statements begin on Page F-1 Exhibits Exhibit number Description 3.1 Amended and Restated Articles of Incorporation, as amended. 1 3.2 Amended and Restated Bylaws. 1 4.1 Description of Securities of the Registrant 3 10.1 Employment agreement dated October 7, 2016 between the Company and David Hsu. 1† 10.2 Form of restricted stock agreement. 1† 10.3 2016 Long-term incentive plan. 1† 10.4 Loan agreement dated August 26, 2014, between Clean Energy Funding II, LP and SolarMax LED, Inc. 1 10.5 Loan agreement dated January 3, 2012, between Clean Energy Funding, LP ("CEF”) and SolarMax Renewable Energy Provider, Inc. ("SREP”) 1 10.6 Lease agreement dated October 13, 2022 between the Company and 3080 12th Street, LLC. 1 10.7 Client Service Agreement dated October 14, 2019 between SolarMax Renewable Energy Provider, Inc. and Insperity PEO Services, L.P. and Client Service Agreement Terms & Conditions 1 10.8 Client Service Agreement dated October 14, 2019 between SMX Capital, Inc. and Insperity PEO Services, L.P. and Client Service Agreement Terms & Conditions 1 10.9 Client Service Agreement dated October 14, 2019 between SolarMax LED, Inc. and Insperity PEO Services, L.P. and Client Service Agreement Terms & Conditions 1 10.10 Promissory note dated October 24, 2019 payable to SMX Property, LLC 1 10.11 Form of exchange agreement among CEF, SREP, the issuer and the limited partners of CEF 1 10.12 Form of 4% secured subordinated convertible note issued by the Company and SREP to limited partners of CEF pursuant to the exchange agreement (Exhibit 10.1) 1 10.13 Form of exchange agreement among CEF II, LED, the Company and the limited partners of CEF II 3 10.14 Form of 4% secured subordinated convertible note issued by the Company and LED to limited partners of CEFII pursuant to the exchange agreement (Exhibit 10.13) 3 10.15 Exchange agreement dated March 27, 2019 between and Company and David Hsu 1 10.16 Promissory note dated October 10, 2022 issued by the Company to SMX Property, LLC. For $944,076.88. 1 10.17 Promissory note dated October 10, 2022 issued by the Company to SMX Property, LLC. For $414,580.65. 1 10.18 Letter agreement dated March 27, 2025 between the Company and David Hsu deferring payment of deferred compensation 3 . 10.19 Form of stock purchase used in stock placements in 2025 and 2026 3 . 10.20 Engineering, Procurement and Construction Agreement, by and between Longfellow Bess I LLC and SolarMax Renewable Energy Provider, Inc., dated July 31, 2025 6 10.21 Engineering, Procurement and Construction Agreement, by and between Naguabo BESS LLC and SolarMax Renewable Energy Provider, Inc., dated December 31, 2025 7 10.22 Engineering, Procurement and Construction Agreement, by and between Yububo BESS LLC and SolarMax Renewable Energy Provider, Inc., dated December 31, 2025 7 10.23 Engineering, Procurement and Construction Agreement, by and between Navboot BESS LLC and SolarMax Renewable Energy Provider, Inc., dated December 31, 2025 7 10.24 JC International Group, Inc. Agreement Dated February 20, 2025 4 14.1 Code of Ethics 2 19.1 Insider Trading Policy 2 21.1 List of Subsidiaries. 3 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 5 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 5 32.1 Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer. 4 97.1 Executive Compensation Clawback Policy 2 101.INS Inline XBRL Instance Document. 3 101.SCH Inline XBRL Taxonomy Extension Schema Document. 3 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 3 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 3 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 3 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 3 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) 3 ____________ 1 Filed as an exhibit to the Company’s registration statement on Form S-1, File No. 333-266206 and incorporated herein by reference. 2 Filed as an exhibit to the Company’s Form 10-K for the year ended December 31, 2023 which was filed with the SEC on April 14, 2024 and incorporated herein by reference. 3 Filed as an exhibit to the Company’s Form 10-K for the year ended December 31, 2024 which was filed with the SEC on March 31, 2025 and incorporated herein by reference. 4 Furnished herewith 5 Filed herewith 6 Filed as an exhibit to the Company’s Form 8-K, which was filed with the SEC on August 6, 2025 and incorporated herein by reference. 7 Filed as an exhibit to the Company’s Form 8-K, which was filed with the SEC on January 6, 2026 and incorporated herein by reference. † Compensatory plan or arrangement. Item 16. Form 10-K Summary Not Applicable 70 Table of Contents SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. * Date: April 6, 2026 SOLARMAX TECHNOLOGY, INC. By: /s/ David Hsu Name: David Hsu Title: Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ David Hsu Chief executive officer and director (principal executive officer) April 6, 2026 David Hsu /s/ Stephen Brown Chief financial officer (principal financial officer) April 6, 2026 Stephen Brown /s/ Simon Yuan Director April 6, 2026 Simon Yuan /s/ Steve Chen Director April 6, 2026 /s/ Wei Yuan Chen Director April 6, 2026 Wei Yuan Chen /s/ Lei Zhang Director April 6, 2026 Lei Zhang 71 Table of Contents Part IV INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Accounting Firm (PCAOB ID 199) F-2 Report of Independent Registered Accounting Firm (PCAOB ID 688 ) F-3 Consolidated Balance Sheets as of December 31, 2025 and 2024 F-4 Consolidated Statements of Operations for the years ended December 31, 2025 and 2024 F-5 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2025 and 2024 F-6 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2025 and 2024 F-7 Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 F-8 Notes to consolidated Financial Statements F-10 Condensed Financial Information of Parent F-43 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors of SolarMax Technology Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of SolarMax Technology Inc. (the “Company”) as of December 31, 2025, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity (deficit) and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Explanatory Paragraph – Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ CBIZ CPAs P.C. CBIZ CPAs P.C. We have served as the Company’s auditor since 2015 (such date takes into account the acquisition of the attest business of Marcum llp by CBIZ CPAs P.C. effective November 1, 2024). Costa Mesa, CA April 6, 2026 F-2 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors of SolarMax Technology Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of SolarMax Technology, Inc. (the “Company”) as of December 31, 2024, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity (deficit) and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Explanatory Paragraph – Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /S/ Marcum LLP Marcum LLP We have served as the Company’s auditor from 2015 to 2025. Costa Mesa, CA April 6, 2026 F-3 Table of Contents Financial Statements SolarMax Technology, Inc. and Subsidiaries Consolidated Balance Sheets As of December 31, 2025 and 2024 December 31, 2025 2024 Assets Current assets: Cash and cash equivalents $ 7,966,797 $ 786,333 Accounts receivable, net 12,939,589 4,231,575 Receivable from SPIC, net 1,007,229 2,963,272 Held to maturity debt investments 522,599 6,337,574 Contract assets, net 46,107,784 474,280 Customer loans receivable, current, net 874,617 1,287,397 Inventories, net 2,061,558 1,302,568 Deferred project costs 2,168,725 1,841,509 Other receivables and current assets, net 1,700,215 1,725,351 Total current assets 75,349,113 20,949,859 Property and equipment, net 138,890 200,889 Operating lease right-of-use assets 1,638,649 3,178,978 Investments in unconsolidated companies 10,714,811 10,020,888 Customer loans receivable, noncurrent, net 2,256,366 3,076,186 Restricted cash, noncurrent 280,016 276,744 Other assets 909,209 926,347 Total assets $ 91,287,054 $ 38,629,891 Liabilities and stockholders' deficit Current liabilities: Accounts payable $ 59,565,812 $ 2,665,721 Operating lease liabilities, current 1,712,329 1,571,084 Unsecured loans, current - 2,900,000 Secured loans from related parties, current 5,500,000 5,358,658 Secured convertible notes, current 14,650,000 9,770,000 Accrued expenses and other payables 14,282,578 12,474,559 Total current liabilities 95,710,719 34,740,022 Operating lease liabilities, noncurrent - 1,712,330 Secured loans from related parties, noncurrent, net of debt discount and issuance costs 5,000,000 7,000,000 Secured convertible notes, noncurrent, net of debt discount and issuance costs 339,882 6,530,448 Deferred tax liability 251,807 1,620,495 Other liabilities 2,194,744 2,105,538 Total liabilities 103,497,152 53,708,833 Commitments and contingencies (Note 20) Stockholders’ deficit: Preferred stock, par value $ 0.001 per share; 15,000,000 shares authorized, none issued and outstanding as of December 31, 2025 and 2024 - - Common stock, par value $ 0.001 per share; 297,225,000 shares authorized, 56,168,067 and 46,532,355 shares issued as of December 31, 2025 and 2024, respectively, and 54,906,572 and 45,270,860 shares outstanding as of December 31, 2025 and 2024, respectively 56,168 46,532 Additional paid-in capital 101,042,566 91,889,317 Treasury stock, at cost, 1,261,495 and 1,261,495 shares at December 31, 2025 and 2024, respectively ( 1,979,294 ) ( 1,979,294 ) Accumulated deficit ( 109,911,673 ) ( 103,586,305 ) Accumulated other comprehensive loss ( 1,417,865 ) ( 1,449,192 ) Total stockholders’ deficit ( 12,210,098 ) ( 15,078,942 ) Total liabilities and stockholders’ deficit $ 91,287,054 $ 38,629,891 See accompanying notes to consolidated financial statements. F-4 Table of Contents SolarMax Technology, Inc. and Subsidiaries Consolidated Statements of Operations For the Years Ended December 31, 2025 and 2024 Years Ended December 31, 2025 2024 Revenues $ 90,982,535 $ 22,986,881 Cost of revenues (includes stock-based compensation expense of $78,411 and $1,264,690 for the years ended December 31, 2025 and 2024, respectively) 86,752,407 20,672,306 Gross profit 4,230,128 2,314,575 Operating expenses: General and administrative (includes stock-based compensation expense of $442,310 and $17,271,494 for the years ended December 31, 2025 and 2024, respectively) 10,159,696 27,439,177 Selling and marketing 366,705 517,058 Goodwill impairment loss - 7,461,888 Total operating expense 10,526,401 35,418,123 Operating income (loss) ( 6,296,273 ) ( 33,103,548 ) Other income (expense): Interest income 539,439 500,540 Interest expense ( 1,366,205 ) ( 1,565,732 ) Equity in income of unconsolidated companies 253,524 634,802 Gain (loss) on debt extinguishment ( 976,219 ) 302,729 Gain (loss) on early termination of lease - 77,207 Other income (expense), net 385,791 ( 144,504 ) Total other income (expense), net ( 1,163,670 ) ( 194,958 ) Income (loss) before income taxes ( 7,459,943 ) ( 33,298,506 ) Income tax provision (benefit) ( 1,134,575 ) 1,663,830 Net income (loss) $ ( 6,325,368 ) $ ( 34,962,336 ) Net income (loss) per share Basic $ ( 0.13 ) $ ( 0.79 ) Diluted $ ( 0.13 ) $ ( 0.79 ) Weighted average shares used to compute net income (loss) per share Basic 49,976,772 44,342,876 Diluted 49,976,772 44,342,876 See accompanying notes to consolidated financial statements. F-5 Table of Contents SolarMax Technology, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) For the Years Ended December 31, 2025 and 2024 Years Ended December 31, 2025 2024 Net income (loss) $ ( 6,325,368 ) $ ( 34,962,336 ) Other comprehensive income (loss) Foreign currency translation adjustments 31,327 ( 166,604 ) Total comprehensive income (loss) $ ( 6,294,041 ) $ ( 35,128,940 ) See accompanying notes to consolidated financial statements. F-6 Table of Contents SolarMax Technology, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity (Deficit) For the Years Ended December 31, 2025 and 2024 Preferred Stock Common Stock Additional Paid- In Treasury Stock Accumulated Accumulated Other Comprehensive Shares Amount Shares Amount Capital Shares Amount Deficit Loss Total Balance at December 31, 2024 - $ - 46,532,355 $ 46,532 $ 91,889,317 ( 1,261,495 ) $ ( 1,979,294 ) $ ( 103,586,305 ) $ ( 1,449,192 ) $ ( 15,078,942 ) Stock-based compensation - - - - 520,721 - - - - 520,721 Shares issued in public offering - - 9,635,712 9,636 8,632,528 - - - - 8,642,164 Net income (loss) - - - - - - - ( 6,325,368 ) - ( 6,325,368 ) Currency translation adjustments - - - - - - - - 31,327 31,327 Balance at December 31, 2025 - $ - 56,168,067 $ 56,168 $ 101,042,566 ( 1,261,495 ) $ ( 1,979,294 ) $ ( 109,911,673 ) $ ( 1,417,865 ) $ ( 12,210,098 ) Preferred Stock Common Stock Additional Paid- In Treasury Stock Accumulated Accumulated Other Comprehensive Shares Amount Shares Amount Capital Shares Amount Deficit Loss Total Balance at December 31, 2023 - $ - 40,983,881 $ 40,984 $ 55,786,634 ( 1,248,345 ) $ ( 1,808,889 ) $ ( 68,623,969 ) $ ( 1,282,588 ) $ ( 15,887,828 ) Vesting of restricted stock - - 264,650 264 ( 264 ) - - - - - Stock-based compensation - - - - 18,536,184 - - - - 18,536,184 Shares issued on warrant exercise - - 207,311 207 ( 207 ) - - - - - Shares issued on option exercise - - 36,563 37 ( 37 ) - - - - - Shares returned for tax withholding on option exercise - - - - - ( 13,150 ) ( 170,405 ) - - ( 170,405 ) Shares issued in initial public offering - - 5,039,950 5,040 18,571,998 - - - - 18,577,038 Public offering costs previously capitalized - - - - ( 1,004,991 ) - - - - ( 1,004,991 ) Net income (loss) - - - - - - - ( 34,962,336 ) - ( 34,962,336 ) Currency translation adjustments - - - - - - - - ( 166,604 ) ( 166,604 ) Balance at December 31, 2024 - $ - 46,532,355 $ 46,532 $ 91,889,317 ( 1,261,495 ) $ ( 1,979,294 ) $ ( 103,586,305 ) $ ( 1,449,192 ) $ ( 15,078,942 ) See accompanying notes to consolidated financial statements. F-7 Table of Contents SolarMax Technology, Inc. and Subsidiaries Consolidated Statements of Cash Flows For the Years Ended December 31, 2025 and 2024 Years Ended December 31, 2025 2024 Operating activities Net income (loss) $ ( 6,325,368 ) $ ( 34,962,336 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization expense 61,929 81,545 Amortization of loan discounts on customer loan receivables - ( 2,332 ) Amortization of convertible note discount and debt issuance costs 102,844 198,418 Amortization of operating lease right-of-use assets 1,540,329 1,464,601 Provision for (recovery of) credit losses and loan losses ( 47,763 ) 164,198 Provision for receivables from SPIC 659,276 659,316 Provision for excess and obsolete inventories 73,701 45,930 Provision for warranty and production guaranty 551,873 410,108 Equity in income of investment in solar project companies in excess of $0 distribution received ( 253,524 ) ( 634,802 ) Deferred income tax provision ( 1,400,381 ) 1,831,735 Loss (gain) on disposal of property and equipment 144 ( 12,068 ) Gain on debt extinguishment related to convertible notes ( 13,410 ) ( 302,729 ) Loss on debt extinguishment related to promissory notes 989,629 - Gain on early termination of lease - ( 77,207 ) Stock-based compensation 520,721 18,536,183 Goodwill impairment - 7,461,888 Changes in operating assets and liabilities: Accounts Receivable ( 8,695,297 ) ( 214,474 ) Contract Assets ( 45,633,504 ) 74,838 Receivable from SPIC 1,369,322 - Customer loans receivable 1,326,521 2,046,295 Inventories ( 832,691 ) ( 7,101 ) Other receivables and current assets ( 284,385 ) 1,133,595 Other assets 17,138 ( 45,726 ) Accounts payable 56,900,091 ( 718,474 ) Operating lease liabilities ( 1,571,085 ) ( 1,447,263 ) Accrued expenses and other payables 1,918,799 ( 3,716,300 ) Other liabilities ( 476,860 ) ( 1,097,948 ) Net cash provided by (used in) operating activities 498,049 ( 9,130,110 ) Investing activities Purchase of short-term investments - ( 7,685,171 ) Principal repayment on debt investments 5,838,748 1,348,334 Proceeds from disposal of property and equipment - 20,972 Net cash provided by (used in) investing activities 5,838,748 ( 6,315,865 ) Financing activities Accrued legal settlement ( 345,536 ) ( 276,269 ) Proceeds from private placement sale of common stock 4,752,535 - Gross proceeds from initial public offering, net of underwriting fees - 18,950,212 Share issuance costs - ( 373,174 ) IPO offering costs paid - ( 346,427 ) Proceeds from note issuances - 900,000 Principal payments on convertible notes ( 3,258,658 ) ( 5,545,007 ) Net cash provided by (used in) financing activities 1,148,341 13,309,335 Effect of exchange rate ( 301,402 ) 305,901 Net increase (decrease) in cash, cash equivalents, and restricted cash 7,183,736 ( 1,830,739 ) Cash, cash equivalents, and restricted cash, beginning of year 1,063,077 2,893,816 Cash, cash equivalents, and restricted cash, end of year $ 8,246,813 $ 1,063,077 Supplemental disclosures of cash flow information: Interest paid in cash $ 1,375,246 $ 1,355,835 Income taxes paid in cash $ 170,939 $ 158,795 Non-cash activities for investing and financing activities: Issuance of common stock in exchange of note payable $ 2,900,000 $ - Shares returned for tax withholding on options exercised $ - $ 170,405 Reversal of previously capitalized offering cost upon IPO $ - $ 658,564 Convertible notes issued to non-related parties in connection with cancellation of EB-5 loans $ 500,000 $ 6,000,000 See accompanying notes to consolidated financial statements. F-8 Table of Contents SolarMax Technology, Inc. and Subsidiaries Consolidated Statements of Cash Flows For the Years Ended December 31, 2025 and 2024 (Continued) As of December 31, 2025 2024 Cash balance at the beginning of the year: Cash and cash equivalents $ 786,333 $ 2,539,312 Restricted cash, noncurrent 276,744 354,504 $ 1,063,077 $ 2,893,816 Cash balance at the end of the year: Cash and cash equivalents $ 7,966,797 $ 786,333 Restricted cash, noncurrent 280,016 276,744 $ 8,246,813 $ 1,063,077 See accompanying notes to consolidated financial statements. F-9 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 1. Description of Business SolarMax Technology, Inc. and subsidiary companies (the "Company”) is an integrated solar and renewable energy company. A solar energy system retains the direct current (DC) electricity from the sun and converts it to alternating current (AC) electricity that can be used to power residential homes and commercial businesses. The solar business is based on the ability of the users of solar energy systems to save on energy costs and reduce their carbon imprint as compared with power purchased from the local electricity utility company. The Company was founded in 2008 to engage in the solar business in the United States. Since the third quarter of 2025, the Company’s primary business has been negotiating contracts and performing engineering, procurement and construction (“EPC”) services for solar-based battery energy storage systems (“BESS”) commercial systems. As of December 31, 2025, the Company had commenced EPC services on a 430 MWh battery storage project in Texas pursuant to an agreement dated July 31, 2025 with Longfellow BESS I, LLC, Texas limited liability company (“Longfellow”). During the year ended December 31, 2025, the Company generated revenue of $ 60.2 million, representing 66.1 % of the Company's revenue, from EPC services pursuant to this contract. All of this revenue was generated during the second half of 2025. On December 31, 2025, the Company entered into three EPC agreements for large scale BESS systems, two in Puerto Rico and one in Corpus Christi, Texas. Prior to the third quarter of 2025, the Company's primary business was the sale and installation of photovoltaic and battery backup systems for residential and commercial customers, sales of LED systems and services to government and commercial users. The Company is continuing to develop this business but, because of changes in California law, this part of the Company's business is developing more slowly. The Company also generates revenue from financing the sale of photovoltaic and battery backup systems. Since early 2020, because the Company did not have the capital to support such operations, the Company ceased making loans to solar customers, and the Company does not anticipate engaging in such activities. The Company’s finance revenue reflects revenue earned on its current portfolio, with no new loans having been added since 2022. In 2015, the Company commenced operations in China, and the Company engaged in business in China through 2021. Substantially all of the Company’s China revenues for 2021 and 2020 were generated from four projects for State Power Investment Corporation Guizhou Jinyuan Weining Energy Co., Ltd (“SPIC”), which is a large state-owned enterprise under the administration of the Chinese government. Subsequent to December 31, 2021 through the date of this annual report, the Company did not generate revenues from China, and the Company is not engaged in any negotiations with SPIC or any other potential customer, and it is not engaged in any marketing activities. In the event that the Company does not seek to recommence operations in China, it may discontinue its China operations. In the United States, the Company has four wholly-owned subsidiaries at December 31, 2025 as follows: · SolarMax Renewable Energy Provider, Inc., a California corporation ("SREP”) was established on July 19, 2011 and is engaged in the business of developing, selling and installing integrated photovoltaic systems and energy storage systems for residential and commercial customers in the U.S., including EPC services for BESS contracts. · SolarMax LED, Inc., a California corporation ("LED") was established on July 15, 2013 in connection with the 2013 acquisition of Act One and is engaged in the business of commercial LED light integration projects, customized governmental special projects, commercial consulting projects, as well as battery storage system projects in the U.S. · SolarMax Financial, Inc., a California corporation ("SolarMax Financial”) was established on September 9, 2009 and was engaged in the business of providing secured installment financing to purchasers of residential and commercial photovoltaic systems, and servicing installment sales for SREP and LED customers in the U.S. The Company has not provided financing to purchasers since 2022, and all revenues from SolarMax Financial reflects revenue earned on its current portfolio, with no new loans having been added since early 2022. · SMX Capital, Inc., a New Jersey corporation ("SMX Capital”) was acquired by the Company in June 2011. SMX Capital is engaged in the business of owning and funding renewable energy projects in the U.S. and operates its business through operating leases and power purchase agreements primarily in the commercial markets. Its business is conducted directly and indirectly through a 30% equity interest in three companies. SMX Capital has not been engaged in leasing new systems since 2014 and its primary business is the ownership and maintenance of systems under existing leases. F-10 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 The Company has three wholly-owned subsidiaries outside the U.S., through which the Company conducted its China operations and which are not actively engaged in any business activities since the Company is not actively involved in any business activities in China. Initial Public Offering In March 2024, the Company issued 5,039,950 shares of common stock in its initial public offering at a public offering price of $ 4.00 per share less a 6 % underwriting discount pursuant to an underwriting agreement (the “Underwriting Agreement”) with Kingswood, a division of Kingswood Capital Partners, LLC (the “Representative”), as representative of the underwriters. The shares issued includes the partial exercise of the underwriters’ overallotment option. Pursuant to the Underwriting Agreement, the Company paid the Representative a 1 % non-accountable expense allowance and reimbursed the Representative for certain accountable expenses of $ 175,000 . The aggregate gross proceeds from the offering were approximately $ 20.0 million, prior to deducting the underwriting discounts, commissions and offering expenses payable by the Company. Net proceeds from the Company’s initial public offering of approximately $ 18.6 million reflect the gross proceeds net of underwriting discounts, the non-accountable expense allowance, accountable expenses of the underwriters that were paid by the Company and other expenses that were deducted from gross proceeds at the closing. Pursuant to the Underwriting Agreement, the Company issued to the Representative warrants (the “Representative’s Warrants”) to purchase 403,196 shares of common stock at an exercise price of $ 4.80 per share. On March 13, 2024, the Representative’s Warrants were fully exercised on a cashless basis. Based on the formula for cashless exercise, the Company issued a total of 207,311 shares of common stock, and, as a result of the exercise, no Representative’s Warrants remained outstanding. 2. Basis of Presentation and Summary of Significant Accounting Policies Basis of Accounting The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP”). Principles of Consolidation Amounts reported in the consolidated financial statements are stated in U.S. dollars, unless stated otherwise. The functional currency of the Company’s Chinese subsidiaries is the Chinese renminbi ("RMB”). These transactions are translated from the local currency into U.S. dollars at exchange rates during or at the end of the reporting period. All significant intercompany accounts and transactions have been eliminated in consolidation. Reclassification Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net loss. F-11 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates reflected in the Company’s consolidated financial statements include the cost-based inputs to estimate revenues on long-term construction contracts, the collectability of accounts receivable, the receivable from SPIC and loans receivable, the value of investments in unconsolidated solar project companies, the value of held to maturity debt investments, the useful lives and impairment of property and equipment, the fair value of stock options granted and stock-based compensation expense, warranty and customer care reserve, the valuation of deferred tax assets, inventories and provisions for income taxes. Actual results could differ materially from those estimates. Liquidity and Going Concern The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern. The Company’s history of net losses and negative cash flow from operating activities, including its net loss for the year ended December 31, 2025, along with its increased accumulated deficit and stockholders’ deficit, its default on principal and interest since 2023 on convertible notes in the principal amount of $ 14.7 million, as of December 31, 2025, the low price of the Company’s common stock, which is below the Nasdaq continued listing requirement of a closing bid price of $ 1.00 per share and the possibility that the Company may effect a reverse split of its common stock in order to regain compliance with the Nasdaq minimum closing bid price requirement raise substantial doubt about the Company's ability to continue as a going concern. At December 31, 2025, the Company reported a working capital deficit of approximately $ 20.4 million. In addition, the accumulated deficit was approximately $ 109.9 million and the stockholders’ deficiency was approximately $ 12.2 million. In connection with these consolidated financial statements, management evaluated whether there were conditions and events, that, considered in the aggregate, raise substantial doubt about the Company’s ability to meet its obligations as they become due within one year from the date of issuance of these financial statements. Management assessed that there were such conditions and events, including a history of recurring operating losses, a history of negative cash flows from operating activities, defaults on principal amount of convertible notes, and significant current debt. As of December 31, 2025, the Company’s principal sources of liquidity consisted of approximately $ 8.0 million of cash and cash equivalents, proceeds from the sale of common stock and cash generated by the Company’s operations. The Company believes its current cash balances coupled with anticipated cash generated from operating activities are sufficient to meet the Company’s working capital requirements for at least one year from the date of the issuance of the accompanying consolidated financial statements, excluding approximately $ 20.2 million of debt that is due in the next twelve months which the Company is seeking to have exchanged for five-year convertible notes and debt which the holders have the right to accelerate payment and seek interest at the default interest rate of 12 % per annum. Management is focused on expanding the Company’s existing business, primarily its commercial EPC business, and to expand its marketing to commercial solar installations in the United States. The Company is looking to continue to negotiate an exchange of a large portion of the approximately $ 5.5 million of the current portion of long-term related party loans for convertible notes that mature in periods beyond one year. The Company cannot predict whether it will be successful in these efforts or whether it will be necessary to change the proposed terms of any such exchanges. However, the low price of the Company’s common stock and the Company’s defaults on outstanding convertible debt make it unlikely that the beneficial owners of the EB-5 debt may be reluctant either to accept convertible notes on the present, if any, terms or to convert outstanding convertible notes. During the year ended December 31, 2025, the Company raised a total of approximately $ 7.7 million from the sale of common stock at a 25% discount from market. Under the Nasdaq regulations, the Company may not be able to raise any significant funding from the sale of common stock at a discount from market, as defined by Nasdaq, in the near future without stockholder approval. As a result of the above, there is substantial doubt regarding the Company’s ability to continue as a going concern within one year from the date of issuance of these financial statements. The Company cannot give assurance that it will be able to pay or refinance its current debt, including convertible notes in the principal amount of $ 14.3 million on which the Company is in default, can increase its cash balances or limit its cash consumption or obtain the exchange of any of its current debt for secured convertible debt and thus maintain sufficient cash balances for its planned operations. Future business demands may lead to cash utilization at levels greater than recently experienced. If the Company cannot refinance or pay its current debt obligations, including convertible notes in the principal amount of $14.3 million on which the Company is in default and with respect to which the holders have the right to accelerate payment of principal and interest, or it cannot raise the funding it requires for its business, it may not be able to continue in business. If the Company generates business for its China operations, and no assurance can be given that it will be successful in such efforts, any revenue and cash flow from the Company’s China operations would be irregular because of the timing of solar projects and the significant funding requirements for its China operations, particularly during periods when there is little or no revenue or cash flow from projects. As of December 31, 2025, the Company did not have any agreements for its China operations and was not in negotiation with respect to any agreement. In the event that the Company is not able to develop business in China, the Company may terminate its China operations. F-12 Table of Contents During the year ended December 31, 2025, the Company (i) raised approximately $ 4.8 million in cash from the private placement of common stock and (ii) issued common stock as payment of $ 2.9 million of promissory notes. The Company is likely to require additional capital in the future. Because of NASDAQ regulation, the Company is limited in its ability to continue to raise funds by the private placement of common stock at a discount from market, as defined by Nasdaq. In view of the foregoing and the low price of the Company’s common stock and the possibility that the common stock may be delisted from Nasdaq or effect a reverse split in order to raise the price of the Company’s common stock, the Company cannot assure that it will be able to raise additional capital on acceptable terms, if at all. Cash and Cash Equivalents Cash and cash equivalents consist of deposit accounts and highly liquid investments purchased with an original maturity of three months or less. The standard insurance coverage for non-interest bearing transaction accounts in the U.S. is $ 250,000 per depositor under the general deposit insurance rules of the Federal Deposit Insurance Corporation. The standard insurance coverage for non-interest bearing transaction accounts in the PRC is RMB 500,000 (approximately $ 73,000 ) per depositor per bank under the applicable Chinese general deposit insurance rules. Held to Maturity Debt Investments Held to maturity debt investments consist of short-term note receivables with original maturities of 12 months or less and are accounted for at amortized cost. Restricted Cash Restricted cash includes cash held to collateralize ACH transactions and outstanding credit card borrowing facilities. Restricted cash at December 31, 2025 and 2024 consisted of: December 31, 2025 2024 Deposit held by a US financial institution as collateral for ACH transactions and business credit cards $ 280,016 $ 276,744 Less: current portion - - Noncurrent portion $ 280,016 $ 276,744 Accounts Receivable Accounts receivable are reported at the outstanding principal balance due from customers. In the U.S., accounts receivable substantially include customer billings for large-scale EPC projects and for the sales of LED products and services. In the PRC segment, accounts receivable represents the amounts billed under the contracts but uncollected on completed construction contracts. Accounts receivable are recorded at net realizable value. The Company maintains allowances for the applicable portion of receivables, including accounts receivable, government rebate receivables and other receivables, that represent the Company’s estimate of the current expected loss inherent in accounts receivable as of the balance sheet date. The adequacy of the allowance for credit losses is assessed quarterly and the assumptions and models used in establishing the allowance are evaluated regularly. Because credit losses can vary substantially over time, estimating credit losses requires a number of assumptions about matters that are uncertain. Once a receivable is deemed to be uncollectible, it is written off against the allowance. The expense related to rebates receivable is recorded as a reduction to revenues. Contract Balances The contract assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date, primarily for the solar energy system sales in the U.S. The contract assets are transferred to receivables when the rights become unconditional (i.e., when the permission to operate is issued). For industrial construction contracts, contract assets represent costs and estimated earnings in excess of billings on uncompleted contracts. F-13 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 The contract liabilities primarily relate to the advance consideration received from customers related to the solar energy system sales in the U.S., for which the transfer of ownership has not occurred. For industrial construction contracts, contract liabilities represent billings in excess of costs and estimated earnings on uncompleted contracts. Applying the practical expedient in ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), paragraph 340‑40-25-4, the Company recognizes the incremental costs of obtaining contracts (i.e., commission fees) in cost of revenue when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in cost of revenues. Deferred Project Costs Deferred project costs relate to costs incurred by the Company on projects which the corresponding revenue is not yet recognized. Deferred project costs are presented as a current asset on the balance sheet, and is recognized as cost of revenue when revenue is recognized on the corresponding project. Customer Loans Receivable In the U.S. segment, the Company offered its customers who meet the Company’s credit eligibility standards the option to finance the purchase of solar energy systems through installment loans underwritten through SolarMax Financial. All loans are secured by the solar energy systems or other projects being financed. The outstanding customer loan receivable balance is presented net of an allowance for loan losses. Provisions for loan losses are charged to operations in amounts sufficient to maintain the allowance for loan losses at levels considered adequate to cover expected credit losses on the customer loans. In determining expected credit losses, the Company considers its historical level of credit losses, current economic trends, and reasonable and supportable forecasts that affect the collectability of the future cash flows. Loans offered at the promotional interest rate below the market interest rate are accounted for as loan discounts and are amortized on an effective interest method to interest income over the terms of the loans. The Company has not entered into any new loan agreements since early 2020, and its revenues from financing related to its existing loan portfolio. Inventories Inventories consist of (a) work in progress on solar systems on housing developments and projects not yet sold; and (b) components principally consisting of photovoltaic modules, inverters, construction and other materials, and LED products, all of which are stated at the lower of cost or net realizable value under the first-in first-out method. The Company reviews its inventories periodically for possible excess and obsolescence to determine if any reserves are necessary. All of the inventories are in the United States segment; the China operations has no inventory. The estimate for excess and obsolete inventories is based on historical sales and usage experience together with a review of the current status of existing inventories. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. The costs of additions and betterments are capitalized and expenditures for repairs and maintenance are charged to operations as incurred. Depreciation is calculated using the straight-line method over the estimated useful life of the asset. Leasehold improvements and solar systems leased to customers are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset. The estimated useful lives of the major classification of property and equipment are as follows: Automobiles 4 - 5 years Furniture and equipment 3 - 10 years Leasehold improvements Shorter of the asset’s useful life or lease term Solar systems leased to customers Lease term, 10 - 20 years F-14 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Goodwill Goodwill represents the excess of the purchase price in a business combination over the fair value of assets acquired and liabilities assumed. The Company had no goodwill at December 31, 2025 and 2024. The Company’s goodwill had been derived from the acquisition of businesses in China in April 2015, and the Company recognized impairment loss for the entire balance of the goodwill of $ 7.5 million for the year ended December 31, 2024. Impairment of Long-Lived Assets The Company’s long-lived assets include property and equipment which include solar energy systems leased to customers. In accordance with ASC Topic 360, Property, Plant, and Equipment, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of a long-lived asset, or group of assets, as appropriate, may not be recoverable. If the aggregate undiscounted future net cash flows expected to result from the use and the eventual disposition of a long-lived asset is less than its carrying value, then the Company would recognize an impairment loss based on the excess of the carrying value over the fair value. There was no impairment loss on the Company’s property and equipment for the years ended December 31, 2025 and 2024. Investments in Unconsolidated Companies The Company’s unconsolidated investments are held directly by the Company as well as through its subsidiary, SMX Capital, and consist of investments in U.S.-based solar limited liability companies: Alliance Solar Capital 1, LLC (“A#1”), Alliance Solar Capital 2, LLC (“A#2”), and Alliance Solar Capital 3, LLC (“A#3”). The Company also has an investment in a PRC-based panel manufacturer, Changzhou Hongyi New Energy Technology Co., Ltd (“Changzhou”). As a result of recurring historical losses, all the unconsolidated investments in the U.S. have zero cost basis at December 31, 2025 and 2024. At December 31, 2025 and 2024, the Company has unconsolidated investments in the PRC reflecting its 30 % non-controlling interests in three project companies for which it transferred a 70% interest in 2021 to SPIC, which operates these companies. For these investments, the Company does not have the controlling interests but it has the contractual ability to exercise significant influence over the operations and the financial decisions of the investees under the respective operating agreements although these investees are controlled by SPIC, which, as the 70% owner and the operator of the entities, has the ability to make all decisions concerning the investees. In each of the investments, the investee also maintains a separate capital account for each of its investors and accordingly, the Company has a separate capital account at each of the investees. Since the Company has the contractual right to exercise significant influence over the investees, the Company accounts for each of these investments using the equity method of accounting, under which the Company records its proportionate share of the investee’s profit or loss based on the specified profit and loss percentage. Distributions received from equity method investees are accounted for as returns on investment and classified as cash inflows from operating activities, unless the Company’s cumulative distributions received less distributions received in prior periods that were determined to be returns of investment exceed cumulative equity in earnings recognized by the Company. When such an excess occurs, the current year distribution up to this excess would be considered a return of investment and classified as cash inflows from investing activities. F-15 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Because the Company’s investments include privately-held companies where quoted market prices are not available and as a result, the cost method, combined with other intrinsic information, is used to assess the fair value of the investment. If the carrying value is above the fair value of an investment at the end of any reporting period, the investment is reviewed to determine if the impairment is other than temporary. Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. The Company monitors its investments in unconsolidated entities periodically for impairment. No impairment indicators were identified and no impairment losses were recorded during the years ended December 31, 2025 and 2024. Warranties Workmanship Warranty For the sale of solar and battery systems in the U.S., the Company provides a workmanship warranty for 25 years to cover the quality of the Company’s installation. The warranty is designed to cover installation defects and damages to customer properties caused by the Company’s installation of the solar energy systems and battery storage systems which generally are uncovered within 2-3 years after the installation. The 25 -year warranty is consistent with the term provided by competitors and is provided by the Company to remain market competitive. The workmanship warranty does not include the warranties on components, such as panels and inverters which are covered directly by the manufacturers and are, generally provided for 25 years on panels and inverters, and 10 years for energy storage systems. The Company determined that its 25-year workmanship warranty for solar energy systems constitutes an assurance-type warranty and should continue to be accounted for under ASC Topic 460, Guarantees, instead of a service-type warranty which would be accounted for under Topic 606 as a cost of revenues. Warranty for EPC Services For the PRC operations, the Company provided construction quality warranty on EPC services generally for one year after completion. The customer typically retains 3-5% of the contract price which will not be paid to the Company until the expiration of the warranty period which is accounted by the Company as retainage receivable. The Company currently provides a reserve for such potential liabilities based on a nominal percentage of project revenues for the PRC segment in the approximate amount of $ 251,000 and $ 247,000 as of December 31, 2025 and 2024, respectively, which is included in accrued expenses and other liabilities. To date the Company has not incurred significant claims on the quality warranty. The liability is reversed when the warranty period expires. For the US segment. the Company provides a three year workmanship warranty after the project is completed. The equipment is covered by the manufacturer warranty for ten years. The Company currently provides a reserve for warranty based on a nominal percentage of project revenues recognized for the period and is included in other liabilities. Production Guaranty For solar systems sold in the U.S., the Company warrants that modules installed in accordance with agreed-upon specifications will produce at least 98 % of their labeled power output rating during the first year, with the warranty coverage reducing by 0.5 % every year thereafter throughout the approximate 10 -year production guaranty period. In resolving claims under the production guaranty, the Company typically makes cash payments on an annual basis to customers who claim for the production shortfall in power output. The Company currently provides a reserve for the production guaranty at 0.2% of the total solar revenue . LED Warranties The Company’s warranty for LED products and services ranges from one year for labor and up to seven years for certain products sold to governmental municipalities. The Company currently provides a warranty reserve for LED sales based on 1.0 % of LED revenue. F-16 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Fair Value Measurements ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), defines a framework for determining fair value, establishes a hierarchy of information used in measuring fair value, and enhances the disclosure information about fair value measurements. ASC 820 provides that the “exit price” should be used to value an asset or liability, which is the price at which an asset could be sold or a liability could be transferred in an orderly process that is not a forced liquidation or distressed sale at the measurement date. ASC 820 also provides that relevant market data, to the extent available and not internally generated or entity specific information, should be used to determine fair value. ASC 820 requires the Company to estimate and disclose fair values on the following three-level hierarchy that prioritizes market inputs. Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The carrying amount of cash and cash equivalents, accounts receivable, inventories, other current assets, accounts payable, deposits, taxes payable, warranty liability and accrued payroll and expenses approximates fair value because of the short maturity of these instruments. The following table presents the fair value and carrying value of the Company’s cash equivalents, loans receivable and borrowings as of December 31, 2025: Fair Value Carrying Level 1 Level 2 Level 3 Value Assets Cash equivalents $ 280,016 $ - $ - $ 280,016 Customer loans receivable - - 3,439,868 3,130,983 Held to maturity debt investments - 522,599 - 522,599 Liabilities Bank and other loans - - - - Secured loans from related parties - - 9,897,955 10,500,000 Secured convertible debt - - 15,083,327 14,989,882 The following table presents the fair value and carrying value of the Company’s cash equivalents, loans receivable and borrowings as of December 31, 2024: Fair Value Carrying Level 1 Level 2 Level 3 Value Assets Cash equivalents $ 276,744 $ - $ - $ 276,744 Customer loans receivable - - 4,686,809 4,363,583 Held to maturity debt investments - 6,337,574 - 6,337,574 Liabilities Bank and other loans - 2,900,000 - 2,900,000 Secured loans from related parties - - 10,054,200 12,358,658 Secured convertible debt - - 12,172,858 16,300,448 Cash equivalents – Cash equivalents consist of money market accounts and are carried at their fair value. Customer loans receivable – The fair value of customer loans receivable is calculated based on the carrying value and unobservable inputs which include the credit risks of the customers, the market interest rates and the contractual terms. The Company’s underwriting policies for the customer loans receivable have not changed significantly since the origination of these loans. The overall credit risk of the portfolio also has not significantly fluctuated as evidenced by the minimal historical write-offs, and lastly the market interest rates have remained relatively consistent since the origination of the loans. F-17 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Held to maturity debt investments – Held to maturity debt investments consist of short-term note receivables with initial maturities of 12 months or less. Accordingly, their carrying values approximate their fair value. Bank and other loans – The fair value of such loans payable had been determined based on the variable nature of the interest rates and the proximity to the issuance date. Secured loans from related parties – The related party loans were issued at the fixed annual interest rates of 3.0 % in the U.S. segment, and the fair value of the loans has been estimated by applying the prevailing borrowing annual interest rates for a comparable loan term which the Company estimated to be 9.0% to the estimated cash flows through the maturities of the loans. Secured convertible debt – The secured convertible debt was issued at the fixed annual interest rates of 4.0 % in the U.S. segment, and the fair value of the loans was determined based on the proximity to the issuance date. Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, and its various updates (“Topic 606”). Revenue is measured based on the considerations specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when the Company satisfies a performance obligation by transferring control over a product or service to a customer. Taxes assessed by government authorities that are imposed on, or concurrent with, a specific revenue-producing transaction are collected by the Company from the customer and excluded from revenue. The Company’s principal activities from which the Company generates its revenue are described below. Revenue from EPC Services For energy generation assets owned and controlled by the customer, the Company recognizes revenue for sales of EPC services over time as the Company’s performance creates or enhances an energy generation asset controlled by the customer. Furthermore, the sale of EPC services represents a single performance obligation for the development and construction of a single generation asset, which is a complete solar energy project. For such sale arrangements, the Company recognizes revenue using cost-based input methods, which recognize revenue and gross profit as work is performed based on the relationship between actual costs incurred compared to the total estimated costs of the contract after consideration of the customer’s commitment to perform its obligations under the contract, which is typically measured through the receipt of cash deposits or other forms of financial security issued by creditworthy financial institutions or parent entities. Payment for EPC services is made by the customer pursuant to the billing schedule stipulated in the EPC contract which is generally based on the progress of the construction. Once the bills are issued to the customer, the customer generally has 30 days to make the payment on the amount billed less a retainage provision which is approximately 3-5%, depending on the contract. The retainage amount is withheld by the customer and is paid at the conclusion of the 12-month warranty period . In applying cost-based input methods of revenue recognition, the Company uses the actual costs incurred relative to the total estimated costs to determine the progress towards contract completion and to calculate the corresponding amount of revenue and gross profit to recognize. Cost based input methods of revenue recognition are considered a faithful depiction of the Company’s efforts to satisfy long-term construction contracts and therefore reflect the transfer of goods to a customer under such contracts. Costs incurred that do not contribute to satisfying the Company’s performance obligations (“inefficient costs”) are excluded from the Company’s input methods of revenue recognition as the amounts are not reflective of the Company’s transferring control of the solar energy system to the customer. Costs incurred towards contract completion may include costs associated with solar modules and batteries, direct materials, labor, subcontractors, and other indirect costs related to contract performance. The Company recognizes the cost of solar modules, batteries, and direct material costs as incurred when such items have been installed in a system. For industrial projects, the Company uses the actual installation costs incurred relative to the total estimated installation costs to determine the progress towards contract completion and to calculate the corresponding amount of revenue and gross profit to recognize. The Company recognizes revenue, but not profit, on uninstalled materials on industrial projects. The revenue on uninstalled materials is recognized when the control is transferred. F-18 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Cost-based input methods of revenue recognition require the Company to make estimates of net contract revenues and costs to complete its projects. In making such estimates, significant judgment is required to evaluate assumptions related to the amount of net contract revenues, including the impact of any performance incentives, liquidated damages, and other payments to customers. Significant judgment is also required to evaluate assumptions related to the costs to complete its projects, including materials, labor, contingencies, and other system costs. If the estimated total costs on any contract, including any inefficient costs, are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known. The cumulative effect of revisions to estimates related to net contract revenues or costs to complete contracts are recorded in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated. The effect of the changes on future periods are recognized as if the revised estimates had been used since revenue was initially recognized under the contract. Such revisions could occur in any reporting period, and the effects may be material depending on the size of the contracts or the changes in estimates. The Company’s arrangements may contain clauses such as contingent repurchase options, delay liquidated damages, rebates, penalties or early performance bonus, most favorable pricing or other provisions, if applicable, that can either increase or decrease the transaction price. The Company has historically estimated variable considerations that decrease the transaction price (e.g., penalties) and recorded such amounts as an offset to revenue, consistent with requirements under Topic 606. Under Topic 606, the Company estimates and applies a constraint on variable considerations and includes that amount in the transaction price. Because the Company’s historical policies on estimating variable considerations that would decrease the transaction price have largely mirrored the requirements under Topic 606, and because variable considerations that would increase the transaction price have historically been immaterial or would likely be constrained under Topic 606, there is no cumulative effect adjustment. The Company estimates variable considerations for amounts to which the Company expects to be entitled and for which it is not probable that a significant reversal of cumulative revenue recognized will occur. For energy generation assets not owned and controlled by the customer during the construction, as well as contracts with customers that do not require progress payments during construction and whereby the contracts include restrictive acceptance provisions before any progress payments are made by the customers, the Company recognizes revenues at a point in time when the Company determines it has transferred control to the customer. Solar Energy and Battery Storage Systems and Components Sales Revenue recognition associated with sales of solar energy systems, battery storage systems, and other products is recognized over time as the Company’s performance creates or enhances the property controlled by the customer (the asset is being constructed on a customer’s premises that the customer controls). The Company’s principal performance obligation is to design and install a solar energy system that is interconnected to the local power grid and for which permission to operate has been granted by a utility company to the customer. The Company recognizes revenue over time as control of the solar energy system transfers to the customer which begins at installation and concludes when the utility company has granted the permission to operate. All costs to obtain and fulfil contracts associated with system sales and other product sales are expensed to cost of revenue when the corresponding revenue is recognized. For solar energy and battery storage system sales, the Company recognizes revenue using a cost-based input method that recognizes revenue and gross profit as work is performed based on the relationship between actual costs incurred compared to the total estimated cost of the contract. In applying cost-based input methods of revenue recognition, the Company uses the actual costs incurred for installation and obtaining the permission to operate, each relative to the total estimated cost of the solar energy and battery storage system, to determine the Company’s progress towards contract completion and to calculate the corresponding amount of revenue and gross profit to recognize. Cost‑based input methods of revenue recognition are considered a faithful depiction of the Company's efforts to satisfy solar energy and battery system contracts and therefore reflect the transfer of goods to a customer under such contracts. Costs incurred towards contract completion may include costs associated with solar modules, battery components, direct materials, labor, subcontractors, and other indirect costs related to contract performance. F-19 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 The Company sells solar energy and battery storage systems to residential and commercial customers in California and recognizes revenue net of sales taxes. Cash sales include direct payments from the customer (including financing obtained directly by the customer), third-party financing arranged by the Company for the customer, and third-party leasing agreements arranged by the Company for the customer. Direct payments are made by the customer as stipulated in the underlying home improvement or commercial contract which generally includes an upfront down payment at contract signing, payments at delivery of materials and installation ranging from 70% to 85% of the contract price , and the payment of the final balance at the time of the city signoff or when the permission to operate the solar system is granted by a utility company. For third-party financing arranged by the Company for the customer, direct payments are made by the financing company to the Company based on an agreement between the financing company and the Company, with the majority of the payments made by the time of completion of installation but not later than the date on which the permission to operate the solar system is granted by the utility company. For a lease through the third party leasing company, direct payments are made by the leasing company to the Company based on an agreement between the leasing company and the Company, which is generally 80% upon the completion of installation and 20% when permission to operate is granted. LED Product Sales and Service Sales For product sales, the Company recognizes revenue at a point in time following the transfer of control of the products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. For contracts involving both products and services (i.e., multiple performance obligations), the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product is transferred to the customer, in satisfaction of the corresponding performance obligations. Revenue from services is recognized when services are completed which is upon acceptance by the customer. The standalone selling price of the warranty is not material and, therefore, the Company has not allocated any portion of the transaction price to any performance obligation associated with the warranty. Payment for products is generally made upon delivery or with a 30 day term. Extended payment terms are provided on a limited basis not to exceed twelve months. Payment for services is due when the services are completed and accepted by the customer. For certain LED product sales, the Company provides the customers with a right of return subject to restocking fees. The Company assessed such rights of return as variable consideration and recognizes revenue based on the amount of consideration the Company expects to receive after returns are made. Based on the Company’s historical experience, the Company has determined the likelihood and magnitude of a future returns to be immaterial and currently has not provided for a liability for such returns on the LED product sales. For contracts where the Company agreed to provide the customer with rooftop solar energy systems (including design, materials, and installation of the system) in addition to providing LED products and LED installation, these agreements may contain multiple performance obligations: 1) the combined performance obligation to design and install rooftop solar energy system; 2) the performance obligation to deliver the LED products; and, 3) the performance obligation to install the LED products. Topic 606 permits goods and services that are deemed to be immaterial in the context of a contract to be disregarded when considering performance obligations within an agreement. The Company will compare the standalone selling price of the installations and products to the total contract value to determine whether the value of these installations and products is quantitatively immaterial within the context of the contract. Similarly, these services may be qualitatively immaterial in the eyes of the customer. While the customer ordered these products and has received a separate quote for them, they may not be a material driving factor within the agreement for a solar energy system. Further, a reasonable person may not consider providing and installing LED products to be a material part of the arrangement to design and construct a large solar facility. If these products and services are determined to be immaterial within the context of the contract, they will be combined with the performance obligation to design and install the rooftop solar energy system. If management determines that the products and services are determined to be material to the overall project, they would represent a separate performance obligation. F-20 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Solar Leases and Solar Power Purchase Agreements (PPAs) in the U.S. The Company has entered into long-term solar leases as well as contracts for the sale of energy generated by PV solar power systems under PPAs that do not meet the criteria for recognition under ASC 842, either because the agreements are not deemed to contain a lease, or the agreements qualify for the short-term lease exemption. These systems were installed on the customers’ properties but are owned by the Company. Loan Interest Income Prior to 2023, the Company provided installment financing to qualified U.S. customers to purchase residential or commercial photovoltaic systems, energy storage systems, as well as LED products and services, and some of these loans remain outstanding. The Company has not entered into new loans since early 2020, and its finance revenues are from its existing loan portfolio. Customer loans receivable are classified as held-for-investment based on management’s intent and ability to hold the loans for the foreseeable future or to maturity. Loans held-for-investment are carried at amortized cost and are reduced by an allowance for estimated credit losses as necessary. The Company recognizes interest income on loans, including the amortization of discounts and premiums, using the interest method. The interest method is applied on a loan-by-loan basis when collectability of the future payments is reasonably assured. Interest on loans generally continues to accrue until the loans are charged off. Premiums and discounts are recognized as yield adjustments over the term of the related loans. Loans are transferred from held-for-investment to held-for-sale when management’s intent is not to hold the loans for the foreseeable future. Advertising Costs The Company charges advertising and marketing costs related to radio, internet and print advertising to operations as incurred. Advertising and marketing costs for the years ended December 31, 2025 and 2024 were approximately $ 367,000 and $ 517,000 , respectively. Income Taxes The Company accounts for income taxes pursuant to the FASB ASC Topic 740, Income Taxes (“ASC 740”). The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. The Company accounts for the investment tax credits under the flow-through method which treats the credits as a reduction of federal income taxes of the year in which the credit arises or is utilized. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. The Company has determined it is more likely than not that its deferred tax assets related to its U.S. operations will not be realizable and has recorded a full valuation allowance against its deferred tax assets. In the event the Company is able to realize such deferred income tax assets in the future in excess of the net recorded amount, the Company would make an adjustment to the valuation allowance, which would reduce the provision for income taxes. Topic 740-10 clarifies the accounting for uncertainty in income taxes recognized in the Company’s consolidated financial statements in accordance with U.S. GAAP. The calculation of the Company’s tax provision involves the application of complex tax rules and regulations within multiple jurisdictions. The Company’s tax liabilities include estimates for all income-related taxes that the Company believes are probable and that can be reasonably estimated. To the extent that the Company’s estimates are understated, additional charges to the provision for income taxes would be recorded in the period in which the Company determines such understatement. If the Company’s income tax estimates are overstated, income tax benefits will be recognized when realized. The Company recognizes interest and penalties related to unrecognized tax positions as income tax expense. For the years ended December 31, 2025 and 2024, the Company did not incur any related interest and penalties. The Company does not record U.S. income taxes on the undistributed earnings of its foreign subsidiaries based upon the Company’s intention to permanently reinvest undistributed earnings to ensure sufficient working capital and further expansion of existing operations outside the U.S. As of December 31, 2025 and 2024, the Company’s foreign subsidiaries operated at a cumulative deficit for U.S. earnings and profit purposes. F-21 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Comprehensive Income (Loss) The Company accounts for comprehensive income loss in accordance with ASC 220, Income Statement – Reporting Comprehensive Income (“ASC 220”). Under ASC 220, the Company is required to report comprehensive income (loss), which includes net income (loss) as well as other comprehensive income (loss). The only significant component of accumulated other comprehensive income (loss) as of December 31, 2025 and 2024 is the currency translation adjustment. Net Income (Loss) Per Share The Company calculates net income (loss) per share by dividing income or losses allocated to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted weighted average shares is computed using basic weighted average shares plus any potentially dilutive securities outstanding during the period using the treasury-stock-type method and the if-converted method, except when their effect is anti-dilutive. Potentially dilutive securities are excluded from the computation of diluted earnings per share for the years ended December 31, 2025 and 2024 because the effect would be antidilutive. Stock-Based Compensation The Company accounts for stock-based compensation costs under the provisions of ASC Topic 718, Compensation – Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest for both employees and non-employees. Stock-based compensation expense recognized includes the compensation cost for all share-based payments granted to employees and non-employees, net of estimated forfeitures, over the employee requisite service period or the non-employee performance period based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Foreign Currency Amounts reported in the consolidated financial statements are stated in U.S. dollars. The Company’s subsidiaries in the PRC use the Chinese RMB as their functional currency and all other subsidiaries use the U.S. dollar as their functional currency. In accordance with ASC 830, Foreign Currency Matters (“ASC 830”), the Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from RMB into U.S. dollar are recorded in stockholders’ equity (deficit) as part of accumulated other comprehensive income (loss). Further, foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency. Losses on those foreign currency transactions of approximately $ 31,000 and $ 167,000 for the years ended December 31, 2025 and 2024, respectively, are included in other income (expense), net for the period in which exchange rates change. Segment Information Operating segments are defined as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the chief executive officer. Based on the financial information presented to and reviewed by the chief operating decision maker in deciding how to allocate the resources and in assessing the performance of the Company, the Company has determined that it has one operating segment, and one reporting segment which is the operation in the United States for the year ended December 31, 2025. Prior to January 1, 2024, the Company considered its operation in China an operating segment and a reporting segment. However, because the operation in China has had no revenues and no operations in China since 2022, its principal activity having been seeking to collect its receivable from SPIC, and the Company has no agreement and is not engaged in any negotiations or marketing activities in China, the Company no longer considers its operation in China an operating segment or a reporting segment. F-22 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Recently Issued Accounting Pronouncements As an emerging growth company, the Company has elected to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Securities and Exchange Act of 1934. In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740). ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The Company adopted this standard prospectively for the year ended December 31, 2025. The adoption impacted the Company’s income tax disclosures, but did not impact the Company’s consolidated financial statements. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This update requires that at each interim and annual reporting period public entities disclose (1) the amounts of purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions; (2) certain amounts that are already required to be disclosed under current GAAP in the same disclosure as the other disaggregation requirements; (3) a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively; and (4) the total amount of selling expenses and, in annual reporting periods, the definition of selling expenses. In January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This update clarifies that ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact on its financial statements of adopting this guidance. In July 2025, the FASB issued ASU 2025-05, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025-05 is intended to improve the estimation of expected credit losses for contracts arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers. The amendments in this ASU will be applied prospectively and are effective for fiscal years beginning after December 15, 2025, with early adoption permitted. The Company is currently evaluating the impact of implementing this guidance on its financial statements. The Company has reviewed all other recently issued accounting pronouncements and concluded they were either not applicable or not expected to have a material impact on the Company’s consolidated financial statements. 3. Disaggregation of Revenue The following table summarizes the Company’s revenue by business line for the years ended December 31, 2025 and 2024: Years Ended December 31, 2025 2024 Solar energy and battery storage systems Large-scale EPC contracts $ 60,172,308 $ - Sales on non-installment basis 16,915,708 13,828,244 Third-party leasing arrangements 6,339,216 3,983,612 Operating lease revenues 64,289 71,082 Power purchase agreement revenues 15,811 26,757 Total solar energy and battery storage systems 83,507,332 17,909,695 LED projects 7,193,087 4,737,075 Financing related 282,116 340,111 Total revenues $ 90,982,535 $ 22,986,881 4. Cash, Cash Equivalents and Restricted Cash As of December 31, 2025 and 2024, insured and uninsured cash including the balance classified as restricted cash were as follows: December 31, 2025 2024 US Operations Insured cash $ 909,229 $ 523,096 Uninsured cash 1,898,809 497,311 2,808,038 1,020,407 China Operations Insured cash 309,048 42,669 Uninsured cash 5,129,727 - 5,438,775 42,669 Total cash and cash equivalents and restricted cash 8,246,812 1,063,076 Less: Cash and cash equivalents 7,966,797 786,332 Restricted cash $ 280,016 $ 276,744 F-23 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 5. Accounts Receivable, Net The activity of the allowance for credit losses for accounts receivable for the years ended December 31, 2025 and 2024 is as follows: Years Ended December 31, 2025 2024 Balance – beginning of period $ 40,826 $ 4,598 Provision for credit losses 46,158 36,228 Receivables charged off ( 56,485 ) - Balance – end of period $ 30,499 $ 40,826 6. Held to Maturity Debt Investments In March 2024, the Company made short-term investments of $ 7.0 million in 8% promissory notes, originally due June 1, 2024 issued by Webao Limited, an unrelated party, based in Hong Kong. The notes were extended multiple times and the note was paid in December 2025. In March 2024, the Company made short-term investments of RMB 5.0 million, approximately $ 693,000 , in a 5% promissory note due June 25, 2024 issued by Qingdao Xiaohuangbei Technology Co., Ltd. , an unrelated party based in PRC. The maturity date of the note was extended to December 31, 2025 . At December 31, 2025, the unpaid balance of the promissory note was RMB 3.7 million (approximately $ 523,000 ) and on February 19, 2026, the unpaid principal and accrued interest were fully paid. 7. Receivable from SPIC, Net The Company had previously initiated arbitration proceedings against SPIC, the state-owned company related to the receivable balances of several photovoltaic EPC projects that the Company completed in 2020 and 2021. In April 2025, the arbitration tribunal issued awards in favor of the Company and subsequently the Company collected approximately RMB 42.5 million ($ 6.0 million) of the receivable balance. At December 31, 2025, the unpaid receivable balance was RMB 7.0 million ($ 1.0 million) and no additional payments were received since. Accordingly, the Company initiated another enforcement proceeding to collect the balance of the arbitration awards. In connection with the enforcement actions, the court has frozen certain bank accounts and real estate assets of the related SPIC subsidiaries and has issued enforcement notices requiring a power supply bureau that owned money to SPIC to withhold electricity sales proceeds generated by the photovoltaic power plants. As of December 31, 2025, no cash recoveries had been received. Based on discussions with legal counsel and the enforcement court, management expects that collections will occur through the withholding of electricity revenues generated by the projects. While management believes recovery is probable, the timing and amount of collections remain subject to enforcement procedures and operating performance of the power plants. The Company continues to monitor the status of the enforcement proceedings and will update its assessment of collectability as additional information becomes available. 8. Large-scale EPC Contracts On July 31, 2025, SREP, entered into an EPC agreement (the “Longfellow Contract”) with Longfellow, for an industrial project to develop a BESS facility. Based on the terms of the contract, the contract is expected to generate revenues of approximately $ 120.1 million and financing income of $ 7.2 million related to milestone payments that extend beyond the project completion date. Longfellow will own and operate the facility, which will be located in Pecos County, Texas and is expected to have a storage capacity of 430 megawatt-hours. The BESS facility is expected to be completed during 2026. One of Longfellow's members is a stockholder of the Company with 2.3 % interest at December 31, 2025. The Company has committed to make a $ 5.0 million contribution to capital in Longfellow for an 8 % equity interest. This capital contribution was due by December 31, 2025. At December 31, 2025, and on the date of these financial statements, the Company has not made such contribution and has not recorded the investment at December 31, 2025. The Company’s chief executive officer, who is representing the Company, is one of the five members of Longfellow’s board of managers, which has collectively managed the affairs of Longfellow since June 2025. The EPC contract with Longfellow is a fixed-price contract consisting of batteries of $ 75.3 million and services of $ 52.0 million, of which $ 7.2 million is financing income. As of December 31, 2025, batteries of $ 58.8 million were procured and delivered to the customer’s premise but have not yet been installed, resulting in revenues related to batteries being reported at the Company’s cost. Additionally, the Company completed engineering and pre-construction services under the contract totaling $1.0 million, representing 2.9% progress of completion, which is included in cost of revenue for the year ended December 31, 2025. Accordingly, the Company recorded revenues of $ 60.2 million and cost of revenues of $ 59.8 million at December 31, 2025. As of December 31, 2025, accounts receivable from Longfellow were $ 9.4 million, and the contract asset, representing unbilled revenue was $ 45.8 million. On December 31, 2025, the Company entered into three EPC agreements for large scale BESS systems, two in Puerto Rico and one in Corpus Christi, Texas. Pursuant to an EPC agreement with Naguabo BESS, LLC, a Texas limited liability company (“Naguabo”), the Company will develop a BESS facility in Ceiba Municipality, Puerto Rico. The contract is expected to generate revenues of approximately $ 122.3 million. Naguabo will own and operate the facility, which is expected to have a storage capacity of 320 megawatt-hours. The Company will have a 9 % membership interest in Naguabo. Pursuant to an EPC agreement with Yabucoa BESS, LLC, a Texas limited liability company (“Yabucoa”), the Company will develop a BESS facility in Humacao Municipality, Puerto Rico. The contract is expected to generate revenues of approximately $ 35.9 million. Yabucoa will own and operate the facility, which is expected to have a storage capacity of 80 megawatt-hours. The Company will have a 9 % membership interest in Yabucoa. Pursuant to an EPC agreement with Navboot Holdco, LLC, a Delaware limited liability company (“Navboot”), the Company will develop a BESS facility in Corpus Christi, Texas. The contract is expected to generate revenues of approximately $ 258.1 million. Navboot will own and operate the facility, which is expected to have a storage capacity of 600 megawatt-hours. As of December 31, 2025, work had not commenced on these three projects. F-24 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 9. Customer Loans Receivable Prior to 2023, the Company provided financing to qualified customers to purchase residential or commercial photovoltaic systems, as well as other products the Company offered in the U.S. Depending on the credit rating of customers, the interest rate generally ranges from 0.00 % to 10.99 % per annum with financing terms ranging from one to fifteen years. At December 31, 2025 and 2024, the percentage of the Company’s loan portfolio with a 0 % interest rate is 0.4% and 2.7 %, respectively. The customer gave the Company a security interest in the photovoltaic systems and other products financed. The following tables summarize the Company’s customer loan receivables by credit rating, determined at origination, for each vintage of the customer loan receivable portfolio at December 31, 2025: Year of origination December 31, 2025 2022 2021 Prior Total % Prime - FICO score 680 and greater $ - $ - $ 2,950,941 $ 2,950,941 88.5 % Near-prime - FICO score 620 to 679 122 - 251,723 251,845 7.5 % Sub-prime - FICO score less than 620 - - 124,373 124,373 3.7 % Business entity — FICO not available - 10,303 - 10,303 0.3 % Total Customer Loan Receivables, gross $ 122 $ 10,303 $ 3,327,037 $ 3,337,462 100.0 % The following tables summarize the Company’s customer loan receivables by credit rating, determined at origination, for each vintage of the customer loan receivable portfolio at December 31, 2024: Year of origination December 31, 2024 2022 2021 2020 Prior Total % Prime - FICO score 680 and greater $ - $ - $ 23,094 $ 4,000,091 $ 4,023,185 86.7 % Near-prime - FICO score 620 to 679 12,699 - 2,809 481,901 497,409 10.7 % Sub-prime - FICO score less than 620 - - - 83,973 83,973 1.8 % Business entity — FICO not available - 31,904 7,194 - 39,098 0.8 % Total Customer Loan Receivables, gross $ 12,699 $ 31,904 $ 33,097 $ 4,565,965 $ 4,643,665 100.0 % Customer loans receivable consist of the following as of December 31, 2025 and 2024: December 31, 2025 December 31, 2024 Customer loans receivable, gross $ 3,337,462 $ 4,643,665 Allowance for loan losses ( 206,479 ) ( 280,082 ) Customer loans receivable, net 3,130,983 4,363,583 Less: Current portion 874,617 1,287,397 Non-current portion $ 2,256,366 $ 3,076,186 F-25 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Principal maturities of the customer loans receivable at December 31, 2025 are summarized as follows: For the year ending December 31, Amount 2026 $ 874,617 2027 809,825 2028 643,165 2029 454,303 Thereafter 555,552 Total customer loans receivable $ 3,337,462 The Company is exposed to credit risk on the customer loans receivable. Credit risk is the risk of loss arising from the failure of customers to meet the terms of their contracts with the Company or otherwise fail to perform as agreed. The activity in the allowance for loan losses for customer loans receivable for the years ended December 31, 2025 and 2024 is as follows: Years Ended December 31, 2025 2024 Balance – beginning of period $ 280,082 $ 256,808 Provision (recovery) for loan losses ( 93,921 ) 127,970 Chargeoffs and adjustments 20,318 ( 104,696 ) Balance – end of period $ 206,479 $ 280,082 Total interest income on the customer loans receivable included in revenues was approximately $ 274,000 and $ 332,000 for the years ended December 31, 2025 and 2024, respectively. 10. Inventories, net The activity in the reserve for excess and obsolete inventories for the years ended December 31, 2025 and 2024 is as follows: Years Ended December 31, 2025 2024 Balance – beginning of period $ 642,297 $ 596,367 Provision for excess and obsolete inventories 73,701 45,930 Balance – end of period $ 715,998 $ 642,297 Inventories consisted of the following as of December 31, 2025 and 2024: December 31, 2025 2024 Solar panels, inverters, battery storage and components $ 1,753,458 $ 1,342,148 LED lights 1,024,098 602,717 Total inventories, gross 2,777,556 1,944,865 Less: reserve for excess and obsolete inventories ( 715,998 ) ( 642,297 ) Total inventories, net $ 2,061,558 $ 1,302,568 11. Other Receivables and Current Assets, Net Other receivables and current assets, net consisted of the following at December 31, 2025 and 2024: December 31, 2025 2024 Receivable from seller (Uonone Group - Note 18) $ 428,885 $ 419,471 Prepaid expenses and other current assets 949,803 626,820 Advances to suppliers 281,439 667,140 Accrued interest on held to maturity debt investment 18,971 - Accrued interest on customer loans receivable 21,117 11,920 Total other receivables and current assets $ 1,700,215 $ 1,725,351 F-26 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 On June 12, 2024, the Company entered into an offset agreement with Sunspark Technology, Inc. ("Sunspark") whereby Sunspark's unpaid rents, utilities and security allocations through June 30, 2024 of $ 638,000 was offset against the Company's accrued payables for the panels and other expenses of $ 601,000 . Following the offset agreement, the remaining balance owed by Sunspark is approximately $ 197,000 and is included in prepaid expenses and other current assets at December 31, 2024. Sunspark is a subtenant of the Company and is one of the Company's panel suppliers. In July 2025, the Company entered into an asset transfer and debt assignment with Sunspark and Sun Pioneer USA Inc. ("Sun Pioneer") to resolve certain outstanding rents and other amounts due from Sunspark under the sublease agreement with Sunspark dated October 11, 2022. Pursuant to the July 2025 agreement, Sun Pioneer agreed to assume the debt balance owed by Sunspark. In connection therewith, Sun Pioneer issued its short-term $460,000 promissory note to repay the debt to the Company that it assumed from Sunspark, at 0% interest rate, with payments of $150,000 due upon signing of the agreement, $100,000 payable on July 15, 2025, $42,000 per month from August 1, 2025 to December 1, 2025 . At December 31, 2025, Sun Pioneer had not paid the amounts owed for September through December 2025 totaling $ 168,000 and is included in prepaid expenses and other current assets. The $ 168,000 balance was paid in January 2026. 12. Property and Equipment Components of property and equipment, net are as follows: December 31, 2025 2024 Automobiles $ 727,756 $ 723,703 Furniture and equipment 1,381,185 1,375,634 Solar systems leased to customers 1,261,703 1,663,468 Leasehold improvements 2,294,833 2,287,650 Total property and equipment, gross 5,665,477 6,050,455 Less: accumulated depreciation and amortization ( 5,526,587 ) ( 5,849,566 ) Total property and equipment, net $ 138,890 $ 200,889 For the years ended December 31, 2025 and 2024, depreciation expenses were approximately $ 62,000 and $ 82,000 , respectively. 13. Goodwill The activity of goodwill is as follows: December 31, 2025 2024 Balance – beginning of period $ - $ 7,584,779 Effect of exchange rate - ( 122,891 ) Asset impairment - ( 7,461,888 ) Balance – end of period $ - $ - During the year ended December 31, 2024, as a result of the continued headwinds facing China's economy after the pandemic and the economic indicators seem to indicate further future contraction, all of which have a direct impact on the Company's ability to generate new businesses in its China operations in the foreseeable future, accordingly the Company recognized a $ 7.5 million goodwill impairment. F-27 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 14. Investments in Unconsolidated Companies At December 31, 2025 and 2024, the Company has a 30 % non-controlling interest in three PRC companies. These PRC companies were project subsidiaries previously owned by the Company that previously performed EPC services for three projects pursuant to agreement with SPIC. The project subsidiaries are the entities that hold the ownership and operate the solar farms. When the projects were completed in 2020, the customer, SPIC, purchased a 70 % equity interest in these project subsidiaries. Since 2020, the Company has been accounting for its 30 % equity interest using the equity method. Activity in the Company’s 30 % non-controlling investments in these entities for the years ended December 31, 2025 and 2024 is reflected in the following tables: Investee 1 Investment Balance at December 31, 2024 Share of Investee’s Net Income Effect of Exchange Rate Investment Balance at December 31, 2025 Yilong #2 $ 4,345,908 $ 76,210 $ 190,071 $ 4,612,189 Xingren 2,070,551 40,610 90,674 2,201,835 Ancha 3,604,428 136,704 159,655 3,900,787 Total $ 10,020,887 $ 253,524 $ 440,400 $ 10,714,811 Investee 1 Investment Balance at December 31, 2023 Share of Investee’s Net Income (Loss) Effect of Exchange Rate Investment Balance at December 31, 2024 Yilong #2 $ 4,213,276 $ 268,156 $ ( 135,524 ) $ 4,345,908 Xingren 2,031,774 103,741 ( 64,964 ) 2,070,551 Ancha 3,453,258 262,905 ( 111,735 ) 3,604,428 Total $ 9,698,308 $ 634,802 $ ( 312,223 ) $ 10,020,887 1 The investee is the name of the project. The following tables present the summary of the unaudited combined financial statements of the three solar project companies in which the Company has a 30% equity interest as of December 31, 2025 and 2024, and for the years ended December 31, 2025 and 2024: December 31, 2025 2024 Current assets $ 18,213,527 $ 23,521,069 Non-current assets 73,173,887 68,737,593 Total assets $ 91,387,414 $ 92,258,662 Current liabilities $ 1,727,555 $ 2,987,980 Noncurrent liabilities 53,339,576 55,663,978 Members’ capital 36,320,283 33,606,704 Total liabilities and members’ capital $ 91,387,414 $ 92,258,662 Years Ended December 31, 2025 2024 Revenue $ 8,086,769 $ 9,146,808 Gross profit 2,645,874 4,109,153 Net income $ 845,080 $ 2,116,007 Revenue of these project companies is generated from the power purchase agreements with the PRC utility companies as well as government subsidies. On April 29, 2025, Longfellow was formed as a Texas limited liability company and commenced its business on the same date. Longfellow is a special purpose company created to own and operate a new battery storage system located in Pecos County, Texas. Pursuant to the LLC agreement, the Company owns an 8 % interest percentage and shall make a Phase 2 contribution of $ 5.0 million the earlier of December 31, 2025 or when the board of managers determines such contributions are necessary to meet Longfellow's obligations under the EPC agreement dated July 2025 for which the Company is the EPC contractor (see Note 8). Longfellow's business is managed by the board of managers comprising of five managers, one of whom is David Hsu who is representing SolarMax. David Hsu is the CEO of SolarMax. SolarMax' interest in Longfellow is effective in June 2025, even though its capital contribution was not due until December 31, 2025 per the LLC agreement. At December 31, 2025, SolarMax has not yet paid its $ 5.0 million contribution and accordingly, has not recorded its $ 5.0 million investment. The Company's management has obtained a waiver from Longfellow waiving the due date of the Company's capital commitment to a later date, such date has not yet been determined. F-28 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 15. Financing Arrangements As of December 31, 2025 and 2024, the Company had the following borrowings: December 31, 2025 2024 Unsecured loan from unrelated party at 8.0% fixed interest due June 30, 2025 $ - $ 2,000,000 Unsecured loan from unrelated party at 12.0% fixed interest due June 30, 2025 - 900,000 Secured convertible notes payable at 4.0% per annum, due various dates through September 2029 15,150,000 16,550,000 EB-5 loans - see details below 10,500,000 11,000,000 Notes payable to SMX Property, a related party, at 8% per annum, due October 10, 2025 - 1,358,658 Total 25,650,000 31,808,658 Less: debt discount and debt issuance costs ( 160,118 ) ( 249,552 ) Current portion ( 20,150,000 ) ( 18,028,658 ) Noncurrent portion $ 5,339,882 $ 13,530,448 Unsecured Loans On April 16, 2025, the $ 900,000 unsecured promissory note was assigned by the original creditor to two unrelated individuals, who then exchanged the promissory note for a total of 1,046,512 shares of the Company’s common stock at a purchase price of $ 0.86 per share, representing a discount of 25 % of the market price of the common stock. In connection with the exchange, the Company recognized a loss from debt extinguishment of $ 313,953 based on the market price of the common stock. On April 3, 2025, the $ 2,000,000 unsecured promissory note was transferred to another unrelated PRC individual, who subsequently cancelled the promissory note on July 31, 2025 by exchanging the promissory note for 2,702,703 shares of the Company’s common stock at a purchase price of $ 0.74 per share, representing a discount of 25 % of the market price of the common stock. In connection with this transaction, the Company recognized a loss from debt extinguishment of $ 675,676 in July 2025 based on the market price of the shares. F-29 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Related party EB-5 financings The Company’s borrowings under the EB-5 program from related parties consisted of the following as of December 31, 2025 and 2024: December 31, 2025 2024 Loan from Clean Energy Funding, LP $ 3,500,000 $ 3,500,000 Loan from Clean Energy Funding II, LP 7,000,000 7,500,000 Total 10,500,000 11,000,000 Less: current portion ( 5,500,000 ) ( 4,000,000 ) Noncurrent portion $ 5,000,000 $ 7,000,000 On January 3, 2012, CEF entered into a secured loan agreement with SREP, a wholly owned subsidiary of the Company. Under the secured loan agreement, CEF agreed to make loans to SREP in an amount not to exceed $ 45.0 million, to be used to finance the installment purchases for customers of the solar energy systems. A total of $ 45.0 million was lent. The loan accrues interest at 3 % per annum, payable quarterly in arrears. Each advanced principal amount is due and payable 48 months from the advance date or the U.S. Immigration Form I-829 approval date if later. The I-829 petition includes evidence that the immigrant investors successfully met all U.S. Citizenship and Immigration Services requirements of the EB‑5 program. As of both December 31, 2025 and 2024, the principal loan balance was $ 3.5 million. On August 26, 2014, CEF II entered into a secured loan agreement with LED, a wholly-owned subsidiary of the Company, for up to $ 13.0 million. A total of $ 10.5 million was lent. The proceeds of the loan were used by LED for its operations. The loan accrues interest at fixed interest rate of 3.0 % per annum, payable quarterly in arrears. Each advance of principal is due and payable in 48 months or the U.S. Immigration Form I-829 approval date if longer. As of December 31, 2025 and 2024, the principal loan balance was $ 7.0 million and $ 7.5 million, respectively. The general partner of CEF and CEF II is Inland Empire Renewable Energy Regional Center (“IERE”). The principal members and managers of IERE consist of the Company’s chief executive officer and its former executive vice president and director, who was a 5% stockholder. A current director resigned from IERE in January 2024 and, prior to his resignation from IERE, he had not been involved in its management. Convertible Notes The Company has issued 4% secured subordinated convertible notes to former limited partners of CEF and CEF II, pursuant to exchange agreements with the limited partners. The limited partners accepted the notes in lieu of cash payments of their capital contribution which resulted in a reduction of SREP’s and LED's notes to CEF and CEF II, respectively, in the same amount, reducing the outstanding EB-5 loan balance. Payment of the notes is secured by a security interest in SREP’s and LED's accounts and inventory, which are the same assets as secure the note to CEF and CEF II. The convertible notes are payable in equal installments on the first, second, third, fourth and fifth anniversaries of the date of issuance. The convertible notes made prior to, or on or about the date of, the Company’s initial public offering are convertible into common stock at a conversion price of $3.20 which was 80% of the initial public offering price of $ 4.00 per share. The convertible notes made after the Company’s initial public offering are convertible into common stock at a conversion price equal to 80% of the average closing price of the Company’s common stock for the ten trading days preceding the date of the exchange agreement with the limited partner which range from $0.65 to $9.07. The convertible notes may be converted into common stock at the first, second, third, fourth and fifth anniversaries of the date of issuance, but not earlier than six months from the date of the Company’s initial public offering or for convertible notes issued after the initial public offering, six months after the issuance of the notes. F-30 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 All convertible notes issued contained redemption put features that allow the holders of the convertible notes the right to receive, for each conversion share that would have been issuable upon conversion immediately prior to the occurrence of an effective change in control event defined as a fundamental transaction, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration receivable as a result of such fundamental transaction by a holder of the number of shares of common stock for which these convertible notes are convertible immediately prior to such fundamental transaction. The Company evaluated the redemption put feature contained in the convertible notes under the guidance of ASC 815 and concluded that the requirements for contingent exercise provisions as well as the settlement provision for scope exception in ASC 815-10-15-74 has been meet. Accordingly, the redemption put features contained in the convertible notes were not bifurcated and accounted for as freestanding derivative instruments. During the year ended December 31, 2025, the Company issued convertible notes in the aggregate principal amount of $500,000 pursuant to exchange agreements which resulted in a reduction of EB-5 notes in the principal amount of $500,000 and recognized a gain on debt extinguishment of $ 13,000 . During the year ended December 31, 2024, the Company issued convertible notes in the aggregate principal amount of $ 6.0 million pursuant to exchange agreements which resulted in a reduction of EB-5 note in the principal amount of $ 6.0 million and recognized a gain on debt extinguishment of $ 303,000 . Event of Default on Convertible Notes From April 2023 through December 31, 2025, the Company did not pay annual principal installment payments and related quarterly interest payments which is an event of default on convertible notes. As of December 31, 2025, the aggregate principal amount of the notes in default was $ 14.3 million. The default provisions of the notes provide that if an event of default occurs the outstanding principal amount of this note, plus accrued but unpaid interest and other amounts owing in respect thereof through the date of acceleration, shall become, at the noteholder’s election, immediately due and payable in cash, and commencing five days after occurrence of any event of default that results in the eventual acceleration of the note, the interest rate on the note shall accrue at an interest rate of 12% per annum. Further, if an event of default occurs, the noteholders, together have rights to foreclose on the collateral securing the notes. The Company accrued interest at the rate of 4 % per annum since no noteholder has taken action to accelerate payment of principal and interest. Since the Company has accrued interest at 4% per annum on the outstanding notes, in the aggregate principal amount of $14.3 million, with respect to which there is an event of default but with respect to which the noteholders did not demand acceleration. Such accrued interest was approximately $297,000 at December 31, 2025. In the event that the holders of all of these note demand acceleration, the amount of interest on those at 12% would be approximately $1.7 million. The difference between the interest at 12% and the accrued interest at 4% as of December 31, 2025 , together with any additional interest due subsequent to December 31, 2025 is a contingent liability of the Company. If any noteholders exercise their right to accelerate, the accrued interest at the default rate of 12% will be reflected as an interest expense in the period the note is accelerated. F-31 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Notes Payable to SMX Property, LLC, a related party On October 10, 2022, SMXP made unsecured loans to the Company of $ 944,077 and $ 414,581 , for which the Company issued its 8 % promissory notes due October 10, 2025, with interest payable quarterly. The $ 944,077 loan was used to pay the security deposit and lease obligations for one month owed to the new owner of the Company’s headquarters building under the new lease agreement. On September 2, 2025, this loan obligation was repaid. The $ 414,581 loan was used to pay lease obligations owing to SMXP by the Company for rent on the Company’s headquarters from June 1, 2022 to October 12, 2022. On July 22, 2025, this loan obligation was repaid. The Company’s chief executive officer and its former executive vice president who was a director and a 5% stockholder are the principal management of SMXP. One other director has a non-controlling interest in SMXP and is not part of its management. Interest Expense For the years ended December 31, 2025 and 2024, interest expense incurred on the above long-term EB‑5 related party loans was approximately $ 325,000 and $ 400,000 , respectively. Total interest expense incurred (including interest on long-term related party loans) was approximately $ 1.4 million and $ 1.6 million for the years ended December 31, 2025 and 2024, respectively. The weighted average interest rate on loans outstanding was 4 .0% and 3.7 % as of December 31, 2025 and 2024. Principal maturities for the financing arrangements as of December 31, 2025 are as follows: For the year ending December 31, EB-5 Loans - Related Party Convertible Notes Total 2026 $ 5,500,000 $ 14,650,000 $ 20,150,000 2027 3,500,000 200,000 3,700,000 2028 1,500,000 200,000 1,700,000 2029 - 100,000 100,000 Total $ 10,500,000 $ 15,150,000 $ 25,650,000 16. Accrued Expenses and Other Payables Accrued expenses and other payables consisted of the following as of December 31, 2025 and 2024: December 31, 2025 2024 Customer deposits $ 3,020,272 $ 1,621,943 Accrued operating and project payables 2,086,146 1,353,291 Payable to Uonone (See Note 18) 2,578,783 2,471,864 Accrued compensation expenses 3,270,154 3,282,481 Retainage payable to vendors 580,750 684,609 Preacquisition liability 1,533,891 1,470,295 Accrued settlement - 276,428 Accrued warranty expense 551,170 540,756 VAT taxes payable 298,598 611,412 Income taxes payable 348,518 147,777 Refundable vendor bid deposits 14,296 13,703 Total accrued expenses and other payables $ 14,282,578 $ 12,474,559 F-32 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Accrued Compensation At December 31, 2025, accrued compensation includes $ 675,000 of compensation to the Company’s chief executive officer in connection with the cancellation in March 2019 of restricted stock grants and $ 1.8 million of accrued but unpaid compensation to the chief executive officer pursuant to his employment agreement. At December 31, 2024, accrued compensation includes $ 675,000 of compensation to the Company’s chief executive officer in connection with the cancellation in March 2019 of restricted stock grants, $ 1.7 million of accrued but unpaid compensation to the chief executive officer pursuant to his employment agreement, $ 600,000 due to the former executive vice president, who was also a 5% stockholder, and one other employee in connection with the cancellation in March 2019 of restricted stock grants and $ 338,095 of deferred compensation to its former executive vice president, all of which was paid in March 2024. The remaining balance relates to accrued unpaid commissions and accrued paid time off. Customer Deposits Customer deposits represent customer down payments and progress payments received prior to the completion of the Company’s earnings process. The amounts paid by customers are refundable during the period which, under applicable state and federal law, the customer’s order may be cancelled and the deposit refunded. Once the cancellation period has expired, the customer still may cancel the project but the Company is entitled to retain the deposit payments for work that was completed and materials that were delivered. Accrued Settlement In November 2022, the Company entered into a settlement agreement with two former limited partners of Clean Energy Funding L.P., pursuant to which the Company agreed to pay each of the limited partners a sum of $533,749.98, payable $50,000 at the time of the agreement execution and the remainder in 14 quarterly installments of $34,533.57 . At December 31, 2025 and 2024, the balance of the accrued settlement is $ 69,627 and $ 414,963 , respectively. The $ 69,627 is included in accounts payable at December 31, 2025. Accrued Warranty The activity of the warranty liability (included in other liabilities) for the years ended December 31, 2025 and 2024 is as follows: Years Ended December 31, 2025 2024 Balance – beginning of period $ 2,146,522 $ 2,175,487 Provision for warranty liability 551,873 410,108 Expenditures and adjustments ( 341,689 ) ( 431,321 ) Effect of exchange rate 10,414 ( 7,752 ) Balance – end of period 2,367,120 2,146,522 Less: current portion (accrued expenses and other payables) ( 551,170 ) ( 540,756 ) Non-current portion (other liabilities) $ 1,815,950 $ 1,605,766 17. Concentrations Major Customers For the years ended December 31, 2025, one customer, Longfellow, accounted for $ 60.2 million, or 66.1 %, of revenues, $ 9.4 million, or 72.4 %,of accounts receivable, and $ 45.8 million, or 99.0 % of contract assets (see Note 8). There were no customers that accounted for 10% or more of the Company’s revenues , accounts receivable, and contract assets for the year ended December 31, 2024. F-33 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Major Suppliers During the year ended December 31, 2025, one supplier, Renewable Energy Resolution, Inc. ("RER") accounted for purchases of $ 58.8 million, or 76.4 % of total purchases, and accounted for $ 56.4 million, or 94.6 %, of accounts payable at December 31, 2025. In September 2025, the Company entered into a supply agreement valued at approximately $ 71.2 million with RER to supply certain specialized batteries that are specifically required for the Longfellow Contract. During the year ended December 31, 2025, another supplier accounted for purchases of $ 8.6 million, or 11.1 % of total purchases, and accounted for $ 1.5 million, or 2.5 %, of accounts payable at December 31, 2025. During the year ended December 31, 2024, one supplier accounted for purchases of approximately $ 4.0 million, or 11.9 %, and accounted for $ 1.2 million, or 36.7 %, of accounts payable at December 31, 2024. Another supplier accounted for purchases of approximately $ 4.0 , or 11.9 %, and accounted for $ 15,000 , or 0.05 %, of accounts payable at December 31, 2024. 18. Acquisition Contingencies and Other Payable to Uonone Group Effective on May 12, 2016, one of the Company’s PRC subsidiaries entered into a debt settlement agreement (the “Debt Settlement Agreement”) with one of the former owners of the subsidiary, Uonone Group Co., Ltd., (“Uonone Group”), pursuant to which the subsidiary and Uonone Group agreed to settle a list of pending business transactions from December 31, 2012 to December 31, 2015, pursuant to which Uonone Group agreed and had paid the subsidiary a total amount of RMB 8,009,716 . An additional contingent liability related to estimated costs of a project known as Ningxia project completed by the subsidiary prior to the Company’s acquisition of the subsidiary of approximately RMB 3.0 million (or approximately $ 429,000 ) was also included as a receivable from Uonone Group (see Note 11 – Other Receivables and Current Assets, Net) with the corresponding liability recognized by the Company on the date of acquisition. As of December 31, 2021, Uonone Group had repaid all the amounts agreed to under the debt settlement agreement except for the RMB 3.0 million contingent receivable from Uonone Group discussed above. Uonone Group’s obligation on the contingent receivable does not arise until and unless the Company becomes obligated to pay the contingent liability. At December 31, 2025 and 2024, the Company had no payment obligations with respect to the assumed contingent liability and accordingly, Uonone Group had no obligation to the Company with respect to the contingent receivable. Under the debt settlement agreement, any legal settlement proceeds, less fees and expenses, received by the subsidiary related to the projects completed prior to the April 2015 acquisition of the subsidiary would be repaid to the Uonone Group. During the year ended December 31, 2025 the Company did not receive any additional legal settlement proceeds, nor did the Company make any payments to Uonone. At both December 31, 2025 and 2024, the amount payable to Uonone, was approximately RMB 18.0 million ($ 2.6 million) (see Note 16). 19. Related Party Transactions See Note 15 for related party lease and loan transactions and Note 20 for the termination of related party lease. 20. Commitments and Contingencies Operating Leases The Company has entered into various non-cancellable operating lease agreements for certain of its offices, warehouse facilities and office equipment, vehicles, and solar energy systems, both in the U.S. and in the PRC. The Company determines if an arrangement is a lease, or contains a lease, at inception and records the leases in the consolidated financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor. Effective March 31, 2024, the Company terminated its lease with Fallow Field, LLC, a related party, for its office space in Diamond Bar, California. In connection with the early lease termination, the Company recognized a gain on the lease termination of approximately $ 77,000 during the year ended December 31, 2024. Related party rent expense related to Fallow Field, a related party, was $ 36,436 for the year ended December 31, 2024. The Company had no related party lease arrangements in the year ended December 31, 2025. For the years ended December 31, 2025 and 2024, rent expense for offices, warehouse facilities and equipment, including rental expense for related party leases in 2024, was approximately $ 1.7 million and $ 1.8 million, respectively. These amounts include short-term leases and variable lease costs, which are immaterial. The Company did not incur any rental expense for related party leases in 2025 since all related party leases were terminated in 2024. F-34 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Future minimum lease commitments as of December 31, 2025, consisting primarily of the lease on the Company's Riverside headquarters, are as follows: For the year ending December 31, Total 2026 $ 1,784,829 2027 16,341 2028 9,805 Total $ 1,810,975 As of December 31, 2025, the maturities of the Company’s operating lease liabilities (excluding short-term leases) are as follows: For the year ending December 31, Total 2026 $ 1,768,488 Total minimum lease payments 1,768,488 Less: Interest ( 56,159 ) Present value of lease obligations 1,712,329 Less: current portion ( 1,712,329 ) Noncurrent portion $ - Other information related to leases is as follows: As of December 31, 2025 Weighted average remaining lease term (in years) 0.9 Weighted average discount rate 8.00 % The Company entered into subleases for portions of its office space, generally on a month-to-month basis. For the years ended December 31, 2025 and 2024, the total sublease income recognized totaled approximately $ 1.1 million and $ 1.0 million, respectively. The sublease income is recognized as an offset to operating lease costs reported in general and administrative expenses. At December 31, 2025, the Company has two tenants and both are on a month-to-month lease. At December 31, 2025, the Company has security deposits payable of approximately $ 102,000 . The following table summarizes the Company’s operating lease cost for the years ended December 31, 2025 and 2024: Years Ended December 31, 2025 2024 Operating lease cost $ 1,694,808 $ 1,731,244 Short-term lease cost 36,124 39,978 Less: Sublease income ( 1,056,082 ) ( 981,509 ) Operating lease cost, net $ 674,850 $ 789,713 Employment Agreements On October 7, 2016, the Company entered into an employment agreement with its chief executive officer for a five-year term commencing on January 1, 2017 and continuing on a year-to-year basis unless terminated by the Company or the executive on not less than 90 days’ notice prior to the expiration of the initial term or any one-year extension . The agreement provides for an initial annual salary of $ 600,000 , with an increase of not less than 3 % on January 1st of each year, commencing January 1, 2018, and an annual bonus payable in restricted stock and cash, commencing with the year ending December 31, 2017, equal to a specified percentage of consolidated revenues for each year. The bonus is based on a percentage of consolidated revenue in excess of $30 million, ranging from $250,000 and $200,000, respectively, for revenue in excess of $30 million but less than $50 million, to 1.0% and 0.9%, respectively, of revenue in excess of $300 million . In connection with the suspension of the Company’s incentive bonuses to key employees that started in 2019, the Company’s chief executive officer has agreed to waive his bonuses since 2019. The agreement also provides for severance payments equal to one or two times, depending on the nature of the termination, of the highest annual total compensation of the three years preceding the year of termination, multiplied by the number of whole years the executive has been employed by the Company, which commenced in February 2008. The annual salary for the chief executive officer was $ 760,065 for 2025 and $ 737,924 in 2024. F-35 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Legal Matters In the ordinary course of the Company’s business, the Company is involved in various legal proceedings involving contractual relationships, product liability claims, and a variety of other matters. The Company does not believe there are any pending legal proceedings that will have a material impact on the Company’s financial position or results of operations. During 2024, the Company commenced arbitration procedures in Shanghai with SPIC to collect on the receivables owed by SPIC related to three completed EPC projects as well as other advances and reimbursements totaling approximately RMB 49.5 million ($ 6.8 million) at December 31, 2024. On April 16, 2025, the Company received the written arbitration award results and subsequently, SPIC entered into a payment agreement with the Company. As of December 31, 2025, the receivable balance has been reduced to RMB 7.0 million ($ 1.0 million). As of December 31, 2025, the Company is planning to file a lawsuit against SPIC to recover the remaining receivable balance, as well as other related performance matters on the projects. Default on Convertible Notes See Note 15 in connection with contingent liabilities resulting from the Company’s default on outstanding convertible notes. 21. Stockholders’ Equity (Deficit) Issuance of Common Stock under Private Placement During the year ended December 31, 2025, the Company issued a total of 9,635,712 shares for a total consideration of $ 7,652,535 , at prices ranging from $ 0.70 to $ 0.90 , with an average purchase price of $ 0.79 . The purchase price was 75% of the market price on the date of the respective agreements. Under the Nasdaq regulations, the Company may not be able to raise any significant funding from the sale of common stock at a discount from market in the near future without stockholder approval. The consideration for the shares includes cash payments and cancellation of indebtedness of the Company. 2016 Long-Term Incentive Plan During the years 2015 to 2019, the Company granted shares of restricted stock and incentive stock options to employees and consultants, of which 264,650 shares of restricted stock and incentive stock options to purchase 5,898,137 shares were outstanding at the date of the Company’s initial public offering. Under the terms of the restricted stock and incentive stock options, the restricted stock and options became vested and non-forfeitable upon the completion of the Company’s initial public offering, which occurred on February 12, 2024, the effective date of the registration statement relating to the Company’s initial public offering. Under GAAP, upon the completion of the initial public offering, the value of the restricted stock as well as the incentive stock options is treated as compensation expense in the period in which the restricted stock and incentive stock options become non-forfeitable and are deemed to have met the performance-based indicator (i.e., the completion of the initial public offering). Using the Black Scholes valuation method, the fair value of the incentive stock options at the time of the Company’s initial public offering was approximately $ 18.5 million, which is stock-based compensation that does not reflect a cash expense, of which approximately $ 1.3 million is included in cost of revenues and $ 15.9 million is included in general and administrative expense in the year ended December 31, 2024. Restricted Stock In the year ended December 31, 2024, upon completion of the Company’s initial public offering, which triggered realization of all unrealized compensation expense and stock options, which became vested upon completion of the Company’s initial public offering, based on the estimate of the then most recent price at which shares were sold of $ 5.01 per share. F-36 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 The following table below summarizes the activity of the restricted shares: Number of Shares Weighted Average Grant Date Fair Value per Share Outstanding at December 31, 2024 264,650 5.01 Nonvested as of December 31, 2024 264,650 5.01 Outstanding at December 31, 2025 - - Nonvested as of December 31, 2025 - - Stock Options From time to time, the Company granted non-qualified stock options to its employees and consultants for their services. Option awards are generally granted with an exercise price equal to the estimated fair value of the Company’s stock at the date of grant; those option awards generally vest between 18 months and 36 months of continuous service and have contractual terms of seven to ten years. The vested options are exercisable for six months after the termination date unless (i) termination is due to optionee’s death or disability, in which case the option shall be exercisable for 12 months after the termination date, or (ii) the optionee is terminated for cause, in which case the option will immediately terminate. All outstanding options are vested at December 31, 2025 and 2024. A summary of option activity is as follows: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual (years) Aggregate Intrinsic Value Outstanding at December 31, 2024 6,195,743 4.93 4.3 - Nonvested as of December 31, 2024 - - - - Exercisable as of December 31, 2024 6,195,743 4.93 4.3 - Granted - - - - Exchanged - - - - Exercised - - - - Cancelled or forfeited ( 5,994 ) - - - Outstanding at December 31, 2025 6,189,749 4.97 3.1 - Nonvested as of December 31, 2025 - - - - Exercisable as of December 31, 2025 6,189,749 4.97 3.1 - Forfeitures are accounted for as actual forfeitures occur. The aggregate intrinsic value represents the total pretax intrinsic value. The aggregate intrinsic values as of December 31, 2024 are based upon the value per share of $ 5.01 , which was the latest sale price of the Company’s common stock in May 2018. As a result of the Company’s completion of its initial public offering in February 2024, all the stock options which are performance-based awards became vested and compensation cost of $ 17.2 million related to such stock options was recognized in the year ended December 31, 2024 as the performance condition of such awards were met on the public offering date of February 12, 2024. The compensation cost of $ 17.2 million is determined using the Black Scholes model that includes key assumptions for each grant of options as follows: volatility ranging from 54.34 % to 67.75 %, the risk-free rate ranging from 1.55 % to 2.34 %, and an expected term ranging from 5 to 6.5 years. For the year ended December 31, 2024, approximately $ 1.3 million and $ 15.9 million of compensation cost was charged to cost of revenue and general and administrative expenses, respectively, related to stock options. On August 29, 2025, the Company’s board of directors approved a 3-year extension for all previously granted options that will be expiring over the next three years from August 31, 2025. These options had an exercise price ranging from $ 3.50 to $ 5.01 . As a result of this modification, the Company recognized a stock-based compensation expense of $ 520,721 for year ended December 31, 2025, representing the difference between the fair value of the options before and after the modification using the Black Scholes model that includes key assumptions as follows: volatility of 107.46 %, the risk-free rate of 3.58 %, and an expected term of 2.25 years. For the year ended December 31, 2025, approximately $ 78,411 and $ 442,310 of compensation cost was charged to cost of revenue and general and administrative expenses, respectively, related to stock option modifications. F-37 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 22. Income Taxes The components of the pretax income (loss) from operations for the years ended December 31, 2025 and 2024 are as follows: Years Ended December 31, 2025 2024 Domestic (U.S. operations) $ ( 7,159,752 ) $ ( 25,131,654 ) Foreign (PRC operations) ( 300,191 ) ( 8,166,852 ) Income (loss) before income taxes $ ( 7,459,943 ) $ ( 33,298,506 ) The income tax provisions (benefits) for the years ended December 31, 2025 and 2024 are as follows: Years Ended December 31, 2025 2024 Current U.S. federal $ - $ - State and local 68,331 6,000 Foreign (PRC operations) 197,475 ( 173,904 ) Total current income tax expense (benefit) 265,806 ( 167,904 ) Deferred U.S. federal - - State and local - - Foreign (PRC operations) ( 1,400,381 ) 1,831,734 Total deferred income tax expense (benefit) ( 1,400,381 ) 1,831,734 Income tax expense (benefit) $ ( 1,134,575 ) $ 1,663,830 Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 2, Summary of Significant Accounting Policies, the reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended December 31, 2025 was as follows: December 31, 2025 Rate Amount Income taxes at statutory rates 21.00 % $ ( 1,566,588 ) State taxes in Texas and made up the majority (greater than 50%) of the tax effect in this category, net of federal benefit ( 0.72 )% 53,982 Foreign rate differential China Valuation allowance 15.22 % ( 1,135,313 ) Other 0.06 % ( 4,554 ) Effects of cross-border tax laws ( 0.12 )% 8,777 Tax credits - % - Change in valuation allowance ( 7.02 )% 523,459 Nontaxable or nondeductible items Non-deductible interest expense 163(l)- Convertible debt ( 2.28 )% 169,947 Debt Extinguishment Loss ( 2.79 )% 207,822 Other ( 0.16 )% 12,172 Other adjustments Executives Compensation ( 7.29 )% 543,974 Equity investment basis true-up ( 1.08 )% 80,875 Other adjustment 0.39 % ( 29,128 ) Effective income tax rate 15.21 % $ ( 1,134,575 ) F-38 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 The reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows: December 31, 2024 Rate Amount Income taxes at statutory rates 21.00 % $ ( 6,992,686 ) State income tax, net of federal benefit 4.05 % ( 1,348,747 ) Foreign rate differential 0.08 % ( 26,723 ) Non-deductible interest ( 0.53 )% 177,673 Other permanent items ( 0.04 )% 13,621 Goodwill impairment ( 4.71 )% 1,566,997 Section 162(m) adjustment ( 2.37 )% 788,746 Stock-based compensation ( 0.05 )% 17,694 Subpart F ( 0.02 )% 6,721 State rate change ( 0.05 )% 16,231 Return-to-provision true-up 0.22 % ( 73,256 ) Change in valuation allowance ( 22.16 )% 7,469,750 Other adjustment ( 0.42 )% 47,809 Effective income tax rate ( 5.00 )% $ 1,663,830 The amount of cash income taxes paid (refunded) by the Company for the year ended December 31, 2025 are as follows: December 31, 2025 U.S. operations State $ 8,537 Foreign PRC operations 162,402 Total $ 170,939 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2025 and 2024 are as follows: December 31, 2025 2024 Deferred tax assets Investment credit $ 1,037,362 $ 1,037,362 Net operating loss carryforwards 17,712,635 16,836,965 Stock-based compensation and accrued bonus 2,958,932 4,078,345 Depreciation 35,156 62,445 Operating lease liabilities 399,721 907,557 Contract accounting 3,364,768 3,029,238 Other 1,159,764 1,396,714 Total deferred tax assets 26,668,338 27,348,626 Valuation allowance ( 23,755,429 ) ( 25,132,983 ) Total deferred tax assets, net of allowance 2,912,909 2,215,643 Deferred tax liabilities Operating lease right-of-use assets ( 382,521 ) ( 878,693 ) Contract Accounting ( 2,782,194 ) ( 2,957,445 ) Total deferred tax liabilities ( 3,164,715 ) ( 3,836,138 ) Deferred tax assets (liability), net $ ( 251,806 ) $ ( 1,620,495 ) The Company has established a valuation allowance against its net deferred tax assets due to the uncertainty surrounding the realization of such assets. The Company periodically evaluates the recoverability of the deferred tax assets. At such time as it is determined that it is more likely than not that deferred assets are realizable, the valuation allowance will be reduced. The Company has recorded a valuation allowance of $ 23.8 million as of December 31, 2025 as it does not believe it is more likely than not that certain deferred tax assets will be realized primarily due to the generation of pre-tax book losses in the current year, the lack of feasible tax-planning strategies, the limited existing taxable temporary differences, and the subjective nature of forecasting future taxable income into the future. The Company decreased its valuation allowance by approximately $ 1.4 million during the year ended December 31, 2025. As of December 31, 2025, the Company had federal and state tax net operating loss ("NOL”) carryforwards of $ 62.2 million, and $ 65.6 million, respectively. The federal NOL generated in 2018 and after for the amount of $ 39.8 million will carry forward indefinitely and be available to offset up to 80% of future taxable income each year. The remaining federal and state NOL carryforwards will begin to expire in 2031, and the state NOL carryforwards will begin to expire in 2032 unless previously utilized . The Company also had China NOL carryforwards of approximately $ 400,000 as of December 31, 2025. The China NOL will begin to expire in 2027 , unless previously utilized. In addition, as of December 31, 2025 the Company had investment tax credits of $ 1.0 million, for building qualifying energy properties and projects under IRC section 48, which will expire in 2034 . F-39 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 The above NOL carryforwards and the investment tax credit carryforwards are subject to limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, and similar state provisions which limit the amount NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Sections 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period. The Company has performed an IRC Section 382 as of December 31, 2020, in which it was determined that no significant change in ownership had occurred. In addition, the Company has not experienced the ownership change greater than 50% subsequent to December 31, 2020 and up to 2025. The following table summarizes the reconciliation of the unrecognized tax benefits activity during the years ended December 31, 2025 and 2024: December 31, 2025 2024 Unrecognized tax benefits – beginning $ 2,137,790 $ 2,137,790 Increases (decreases) related to current year tax positions - - Increases (decreases) related to prior year tax positions - - Expiration of the statute of limitations for the assessment of taxes - - Other - - Unrecognized tax benefits – ending $ 2,137,790 $ 2,137,790 Included in the balance of unrecognized tax benefits as of December 31, 2025, is $ 1.9 million that, if recognized, would not impact the Company's income tax benefit or effective tax rate as long as the deferred tax asset remains subject to a full valuation allowance. The Company does not foresee material changes to its liability for uncertain tax benefits within the next twelve months. The Company's policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on the Company's balance sheets as of December 31, 2025 and has not recognized interest and/or penalties in the Statement of Operations for the year ended December 31, 2025. The Company is subject to taxation in the United States, various state jurisdictions and China. Due to the existence of federal, state, and foreign net operating loss and credit carryovers, the Company's tax years that remain open and subject to examination by tax jurisdiction are years 2011 forward for federal and years 2012 and forward for the state. The Company’s PRC subsidiaries are subject to a 25% statutory income tax rate according to the PRC's income tax laws. Tax regulations are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. All tax positions taken, or expected to be taken, continue to be more likely than not ultimately settled at the full amount claimed. The Company's PRC subsidiaries' tax filings are subject to the PRC tax bureau’s examination for a period up to five years. These subsidiaries are not currently under examination by the PRC tax bureau. As of December 31, 2025, the Company’s foreign subsidiaries operated at a cumulative deficit for U.S. earnings and profit purposes. The Company does not record U.S. income taxes on the undistributed earnings of its foreign subsidiaries based upon the Company’s intention to permanently reinvest undistributed earnings to ensure sufficient working capital and further expansion of existing operations outside the U.S. In the event the Company is required to repatriate funds from outside of the U.S., such repatriation would be subject to local laws, customs, and tax consequences. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted. The Company adopted this standard prospectively for the period ending December 31, 2025. The adoption impacted the Company's income tax disclosures only and did not otherwise impact the Company's financial statements. F-40 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 On July 4, 2025, the reconciliation bill commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States. The OBBBA includes a broad range of tax reform provisions affecting U.S. corporate income taxation. Certain provisions became effective beginning in 2025, including an elective deduction for domestic research and development expenditures, reinstatement of 100% first-year bonus depreciation, and repeal of the fiscal year-end requirement for certain non-U.S. corporations. Other provisions of the OBBBA will become effective in 2026 and subsequent years, including a more favorable tax rate applicable to Foreign-Derived Deduction Eligible Income and income from non-U.S. subsidiaries (Net CFC Tested Income). Due to the Company’s full valuation allowance on deferred tax assets, the enactment of the OBBBA did not have a material impact on the Company’s financial statements for the year ended December 31, 2025. 23. Net Income (Loss) Per Share The following table presents the calculation of the Company's basic and diluted net income (loss) per share for the years ended December 31, 2025 and 2024: Years Ended December 31, 2025 2024 Numerator Net income (loss) $ ( 6,325,368 ) $ ( 34,962,336 ) Denominator Weighted average shares used to compute net loss per share, basic 49,976,772 44,342,876 Weighted average shares used to compute net loss per share, diluted 49,976,772 44,342,876 Basic net income (loss) per share $ ( 0.13 ) $ ( 0.79 ) Diluted net income (loss) per share $ ( 0.13 ) $ ( 0.79 ) For the year ended December 31, 2025, outstanding options to purchase 6,189,749 shares of common stock and 5,984,893 shares issuable upon conversion of convertible notes were excluded from the computation of diluted earnings per share as the impact of including those shares would be anti-dilutive. For the year ended December 31, 2024, outstanding options to purchase 6,189,749 shares of common stock and 5,950,381 shares issuable upon conversion of convertible notes were excluded from the computation of diluted earnings per share as the impact of including those shares would be anti-dilutive. 24. Segment Reporting The chief operating decision maker ("CODM") is the Chief Executive Officer. As of January 1, 2024, the Company has determined that it has one reporting segment which is solar energy systems in the United States. The Company has not generated any revenue from its China operations since 2021, it does not have any contracts for services in China, it does not have any marketing activities in China and its China operations is no longer considered a reporting segment. The CODM regularly reviews operations and financial performance at the consolidated level and uses net income (loss) to allocate resources (including labor, technology and capital resources) for the single reporting segment to make decisions regarding annual budget, entering new markets, marketing decisions, pursuing new business, and driving the Company's mission. F-41 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 The following table shows the operations of the Company’s reporting segment for the years ended December 31, 2025 and 2024: Years Ended December 31, 2025 2024 Segment revenue Large-scale EPC contracts $ 60,172,308 $ - Solar energy systems 21,461,983 16,675,612 Battery only sales 1,794,460 1,136,065 LED operations 7,191,567 4,737,254 90,620,318 22,548,931 Reconciliation of revenue Finance revenue 277,667 336,937 Other non-core revenue 84,550 101,013 90,982,535 22,986,881 Less Direct and indirect costs 81,662,519 10,949,411 Subcontractor costs 737,547 2,154,031 Commissions and lender fees 3,491,278 2,805,218 Compensation and benefits 2,289,447 6,991,057 Leasing and rental expense 662,387 752,086 Insurance expense 1,486,295 1,041,734 Selling and marketing expense 3,165,250 517,058 Professional services 1,482,262 1,658,190 ( 3,994,450 ) ( 3,881,904 ) Reconciliation of segment profit or loss Other corporate overhead expense 1,157,140 1,238,470 Provision for various reserves 450,722 620,236 Stock-based compensation 95,717 18,536,184 Interest expense, net 867,703 1,094,244 Other (gains) and other (income), net 842,952 ( 239,384 ) China goodwill impairment - 7,461,888 China other expenses 300,191 699,060 Elimination adjustment ( 248,932 ) 5,904 Income before income taxes $ ( 7,459,943 ) $ ( 33,298,506 ) 25. Subsequent Events Convertible Notes Issued In January and February 2026, the Company issued two convertible notes in the principal amount of $ 1.0 million to limited partners of CEF I, which resulted in a reduction of $ 1.0 million in the principal amount of the related party notes to CEF I. In January 2026, the Company issued a convertible note in the principal amount of $ 500,000 to a limited partner of CEF II, which resulted in a reduction of $ 500,000 in the principal amount of the related party notes to CEF II. Recent Sales of Common Stock In January 2026, the Company issued a total of 2,000,000 shares of common stock to two accredited investors for a total of $ 1,096,000 . The shares were issued at a price per share of $ 0.548 which represented a 25 % discount from the market price of the common stock. No brokers were involved in the sales. The issuance of the shares was exempt from registration pursuant to Section 4(a)(2) of the Securities Act as a transaction not involving a public offering. The proceeds from the sale are being used for working capital. Lease Amendment On January 28, 2026, the Company entered into an amendment to the lease for its facilities at 3080 12th Street, Riverside, California. The amendment extends the expiration date of the lease from December 31, 2026 to December 31, 2033. The annual base rent during the term, as extended is $1,855,566 for 2026 and it increases annually until $2,282,112 for 2033 . The Company also pays certain operating expenses in the same manner as with the prior lease. The amendment provides for certain construction expenses, a portion of which are payable by the landlord and a portion of which are payable by the Company. The extension also provides for mutual releases. F-42 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Condensed Financial Information of Parent Condensed Balance Sheets As of December 31, 2025 and 2024 December 31, 2025 2024 Assets Current assets: Cash and cash equivalents $ 1,313,857 $ 20,244 Other current assets 625,527 488,473 Inventories, net 64,945 64,723 Short-term investments - 5,700,000 Total current assets 2,004,329 6,273,440 Due from affiliates 47,158,516 30,192,630 Other assets 2,493,754 4,043,284 Total assets $ 51,656,599 $ 40,509,354 Liabilities and stockholders' deficit Current liabilities: $ 3,395,490 $ 3,424,405 Long-term debt, current - 2,000,000 Total current liabilities 3,395,490 5,424,405 Long-term debt, noncurrent - 1,358,658 Losses in excess of invested capital in unconsolidated subsidiaries 60,297,407 46,943,931 Other liabilities 173,800 1,861,302 Total liabilities 63,866,697 55,588,296 Stockholders’ deficit: Preferred stock - - Common stock 56,168 46,532 Additional paid-in capital 101,042,566 91,889,317 Treasury stock ( 1,979,294 ) ( 1,979,294 ) Accumulated deficit ( 109,911,673 ) ( 103,586,305 ) Accumulated other comprehensive loss ( 1,417,865 ) ( 1,449,192 ) Total stockholders’ deficit ( 12,210,098 ) ( 15,078,942 ) Total liabilities and stockholders’ deficit $ 51,656,599 $ 40,509,354 F-43 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Condensed Financial Information of Parent Condensed Statement of Operations For the Years Ended December 31, 2025 and 2024 Years Ended December 31, 2025 2024 Management fee income $ 10,900,935 $ 2,455,855 Total Revenues 10,900,935 2,455,855 Cost of revenues (includes stock-based compensation expense of $78,411and $1,264,690 for the years ended December 31, 2025 and 2024, respectively) 400,259 1,218,342 Gross profit 10,500,676 1,237,513 Expenses: General and administrative (includes stock-based compensation expense of $442,310 and $17,271,494 for the years ended December 31, 2025 and 2024, respectively) 2,881,558 19,852,420 Interest income ( 495,272 ) ( 464,952 ) Interest expense 201,298 257,867 Other income (expense), net 788,520 329,908 Total expenses 3,376,104 19,975,243 Income (loss) before equity in losses of affiliates 7,124,572 ( 18,737,730 ) Equity in losses of affiliates ( 13,384,808 ) ( 16,221,806 ) Income (loss) before income taxes ( 6,260,236 ) ( 34,959,536 ) Income tax provision (benefit) 65,132 2,800 Net income (loss) $ ( 6,325,368 ) $ ( 34,962,336 ) F-44 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Condensed Financial Information of Parent Condensed Statement of Cash Flows For the Years Ended December 31, 2025 and 2024 Years Ended December 31, 2025 2024 Net cash provided by (used in) operating activities $ ( 7,800,264 ) $ ( 13,179,446 ) Net cash provided by (used in) investing activities 10,452,535 ( 6,385,171 ) Net cash provided by (used in) financing activities ( 1,358,658 ) 19,477,038 Net increase (decrease) in cash, cash equivalents, and restricted cash 1,293,613 ( 87,579 ) Cash, cash equivalents, and restricted cash, beginning of year 20,244 107,823 Cash, cash equivalents, and restricted cash, end of year $ 1,313,857 $ 20,244 Supplemental disclosures of cash flow information: Issuance of common stock in exchange of note payable $ 2,000,000 $ - Interest paid in cash $ 214,887 $ 111,512 Income taxes paid in cash $ 8,537 $ - F-45 Table of Contents SolarMax Technology, Inc. and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended December 31, 2025 and 2024 Condensed Financial Information of Parent Notes to Condensed Financial Statements For the Years Ended December 31, 2025 and 2024 1. Basis of Presentation The accompanying condensed financial statements of SolarMax Technology, Inc. ("Parent”) should be read in conjunction with the consolidated financial statements and notes thereto of SolarMax Technology, Inc. and Subsidiaries (the "Company”). Parent’s significant accounting policies are consistent with those of the Company. 2. Related Party Transactions Management Fee Income At a board of directors meeting in July 2016, the board discussed charging management fees from Parent to each United States subsidiary. Subsequently, executive directors implemented a management fee based on 10% of the subsidiary’s revenue to compensate for Parent’s management of each United States subsidiary. Headquarter Rent Expense Allocation For both the years ended December 31, 2025 and 2024, the total rent expense of the headquarters was $ 1,694,808 , of which $ 1,257,786 was allocated to United States subsidiaries, based on the estimated square feet occupied by employees and other personnel assigned to such subsidiaries. Intercompany receivables and payables Currently, Parent does not have any plans to settle the receivables from and payables to its various subsidiaries. Accordingly, Parent reports the balances in the receivables from and payables to subsidiaries in its investments in subsidiaries. F-46