What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-31 compared with 2024-04-09 · 405 added, 452 removed, 1004 unchanged (46% of the section changed)

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Our consolidated financial statements are presented beginning on page F-1 following this caption.

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Index to Consolidated Financial Statements

Report s of Independent Registered Public Accounting Fir ms for Deloitte & Touche LLP (PCAOB ID No .

34 ) and Marcum LLP (PCA OB ID No.

Report of Independent Registered Public Accounting Firm for Deloitte & Touche LLP (PCAOB ID No .

Consolidated Balance Sheets as of December 31, 202 4 and 20 23

3 unchanged sentences

Notes to Consolidated Financial Statements

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Spruce Power Holding Corporation (the "Company") as of December 31, 2023, the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the year ended December 31, 2023, 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, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

The consolidated financial statements of the Company for the year ended December 31, 2022, before the effects of the adjustments to retrospectively apply the reverse stock split discussed in Note 2 to the financial statements, were audited by other auditors whose report, dated March 30, 2023, expressed an unqualified opinion on those statements.

We have also audited the adjustments to the 2022 consolidated financial statements to retrospectively apply the reverse stock split in 2023, as discussed in Note 2 to the financial statements.

In our opinion, such retrospective adjustments are appropriate and have been properly applied.

However, we were not engaged to audit, review, or apply any procedures to the 2022 consolidated financial statements of the Company other than with respect to the retrospective adjustments, and accordingly, we do not express an opinion or any other form of assurance on the 2022 consolidated financial statements taken as a whole.

We have audited the accompanying consolidated balance sheets of Spruce Power Holding Corporation (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in stockholders' equity, and cash flows, for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements").

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

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.

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

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.

We conducted our audits 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.

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

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.

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

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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

SEMTH Acquisition – Refer to Note 4 to the Financial Statements

Critical Audit Matter Description

In March 2023, the Company completed the acquisition of SS Holdings 2017, LLC and its subsidiaries (“SEMTH”) resulting in the acquisition of 20-year use rights to customer payment streams.

The Company concluded that SEMTH does not meet the definition of a business or a variable interest entity.

We identified the SEMTH Acquisition as a critical audit matter because of the significant judgment made by the Company to determine that SEMTH has sufficient equity at risk and thus was not a variable interest entity.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve specialists and senior members of the engagement team.

How the Critical Audit Matter Was Addressed in the Audit

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Our audit procedures to evaluate the accounting treatment of the SEMTH Acquisition included the following, among others:

• With the assistance of professionals in our firm having expertise in business combinations and consolidation, we evaluated the Company’s conclusion that SEMTH does not meet the definition of a business per ASC 805, Business Combinations , or a variable interest entity per ASC 810, Consolidation .

• With the assistance of fair value specialists, we evaluated the reasonableness of the assumptions used in the cash flows used in the equity at risk analysis, including testing the mathematical accuracy of the calculation.

• We evaluated the reasonableness of the Company’s projections of revenue by comparing the assumptions used in the projections to long-term agreements and historical data.

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

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

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue – Refer to Note 2 to the Financial Statements

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Our audit procedures to evaluate revenue included the following, among others:

• We performed detail testing procedures to evaluate the Company’s conclusion regarding the application of ASC 606 for contracts related to energy generation, both the sale of solar energy and the rental of solar equipment, and solar renewable energy credits.

• We obtained the Company’s assessment regarding the application of ASC 606 for contracts related to energy generation, both the sale of solar energy and the rental of solar equipment, and solar renewable energy credits.

◦ We evaluated the Company’s assessment of the application of ASC 606 for contracts related to energy generation, both the sale of solar energy and the rental of solar equipment, and solar renewable energy credits.

◦ For certain types of revenue, we obtained management representations regarding the conclusion of when control transfers under ASC 606.

• We obtained the Company’s assessment of whether there have been significant changes in facts or circumstances that require a reassessment of the accounting treatment under ASC 606.

◦ We evaluated the Company’s assessment of any significant changes in facts or circumstances, including the Company’s policy related to the collectability of consideration.

◦ We tested the Company’s identification of contracts that were concluded to no longer be collectable under ASC 606.

◦ We tested the mathematical accuracy of the impact to revenue for those contracts that were concluded to no longer being collectable under ASC 606.

• We performed detail testing procedures to test revenue recorded for energy generation, both the sale of solar energy and the rental of solar equipment, and solar renewable energy credits.

◦ We evaluated the Company’s assessment of any significant changes in facts or circumstances, including the Company’s policy related to the collectability of consideration, under ASC 606.

◦ We tested the mathematical accuracy of the impact to revenue of any significant changes under ASC 606.

• We performed procedures, including test of details and substantive analytical procedures, to test revenue recorded for energy generation, both the sale of solar energy and the rental of solar equipment, and solar renewable energy credits.

/s/ Deloitte & Touche LLP

April 8, 2024

We have served as the Company's auditor since 2023.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Spruce Power Holding Corporation

(formerly known as XL Fleet Corp.)

Opinion on the Financial Statements

We have audited, before the effects of the adjustments to retrospectively apply the reverse stock split described in Note 2, the accompanying consolidated balance sheet of Spruce Power Holding Corporation (formerly known as XL Fleet Corp.) (the “Company”) as of December 31, 2022, the related consolidated statements of operations, stockholders’ equity and cash flows the year then ended, and the related notes (the 2022 financial statements before the effects of the reverse stock split discussed in Note 2 are not presented herein) (collectively referred to as the “financial statements”).

In our opinion, the 2022 financial statements before the effects of the reverse stock split discussed in Note 2, present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

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.

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.

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the reverse stock split described in Note 2 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied.

Those adjustments were audited by other auditors.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

Initial measurement of fair value of assets related to a business combination

The Company completed the acquisition of all of the membership interests of Spruce Holding Company 1 LLC, Spruce Holding Company 2 LLC, Spruce Holding Company 3 LLC, and Spruce Manager LLC The Company has accounted for this acquisition as a business combination under ASC Topic 805 “Business Combinations.” Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values.

We identified the initial fair value measurement of intangible assets as a critical audit matter because of the significant estimates and assumptions management makes to fair value these assets for purposes of recording the acquisition.

This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s initial estimates of cash flows including the need to involve our fair value specialists.

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Our audit procedures related to these forecasts included the following, among others:

– Testing the source information underlying the estimates

– With the assistance of our fair value specialists:

– Evaluating the reasonableness of the valuation methodology

– Developing a range of independent estimates for the discount rates and comparing those to the discount rates selected by management

/s/ Marcum LLP

We have served as the Company’s auditor from 2020 to 2023.

March 31, 2025

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We have served as the Company's auditor since 2023.

Spruce Power Holding Corporation

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Prepaid expenses and other current assets 6,014 9,879

Current assets of discontinued operations — 10,977

Total current assets 136,430 203,341

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Total assets $ 898,479 $ 895,021

Liabilities, redeemable noncontrolling interests and stockholders’ equity

Liabilities, noncontrolling interests and stockholders’ equity

Current liabilities

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Commitments and contingencies (Note 16)

Redeemable noncontrolling interests — 85

Stockholders’ equity:

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Common stock, $ 0.0001 par value;

350,000,000 shares authorized at December 31, 2024 and 2023;

19,093,186 and 18,292,536 shares issued and outstanding at December 31, 2023, respectively, and 18,046,903 issued and outstanding at December 31, 2022

19,403,262 and 18,311,054 shares issued and outstanding at December 31, 2024, respectively, and 19,093,186 and 18,292,536 issued and outstanding at December 31, 2023, respectively

Additional paid-in capital 478,366 475,654

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Treasury stock at cost, 1,092,208 shares and 800,650 at December 31, 2024 and 2023, respectively

( 6,277 ) ( 5,424 )

Noncontrolling interests 2,438 2,325

Total stockholders’ equity 146,152 214,669

Total liabilities, redeemable noncontrolling interests and stockholders’ equity $ 895,021 $ 826,552

Total liabilities, noncontrolling interests and stockholders’ equity $ 898,479 $ 895,021

See Notes to Consolidated Financial Statements.

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Spruce Power Holding Corporation

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Operating expenses:

Cost of revenues 37,813 9,949

Cost of revenues - solar energy systems depreciation 23,377 23,823

Cost of revenues - operations and maintenance 16,597 13,990

Selling, general and administrative expenses 58,889 56,122

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Gain on asset disposal ( 2,504 ) ( 4,724 )

Impairment of goodwill 28,757 —

Total operating expenses 132,500 116,676

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Interest expense, net 40,232 41,936

Gain on extinguishment of debt — ( 4,527 )

Change in fair value of obligation to issue shares of common stock to sellers of World Energy — ( 535 )

Change in fair value of warrant liabilities ( 17 ) ( 239 )

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Net loss from continuing operations ( 70,078 ) ( 62,487 )

Net loss from discontinued operations

Net income (loss) from discontinued operations

(including loss on disposal of $ 3,083 for the year ended December 31, 2023)

( 4,123 ) ( 40,112 )

Net loss ( 70,053 ) ( 66,610 )

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Net loss from continuing operations per share, basic and diluted $ ( 3.79 ) $ ( 3.40 )

Net loss from discontinued operations per share, basic and diluted $ ( 0.22 ) $ ( 2.25 )

Net income (loss) from discontinued operations per share, basic and diluted $ — $ ( 0.22 )

Net loss attributable to stockholders per share, basic and diluted $ ( 3.82 ) $ ( 3.58 )

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See Notes to Consolidated Financial Statements.

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Spruce Power Holding Corporation

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Year Ended December 31, 2024

Redeemable Noncontrolling Interests Common Stock Additional

Common Stock Additional

Capital Accumulated

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Balance at December 31, 2023 19,093,186 $ 2 $ 475,654 $ ( 257,888 ) 800,650 $ ( 5,424 ) $ 2,325 $ 214,669

Exercise of stock options — 489,436 — 1,004 — — — — 1,004

Purchase accounting measurement period adjustments 240 — — ( 1,813 ) — — — ( 5,490 ) ( 7,303 )

Issuance of restricted stock 310,076 — — — — — — —

Issuance of common stock — 25,818 — 150 — — — — 150

Share repurchases — — — — 291,558 ( 853 ) — ( 853 )

Cumulative-effect adjustment of ASC 326 adoption — — — — 1,285 — — — 1,285

Stock-based compensation expense — — — 2,885 — — — — 2,885

Net income (loss) 3 — — — ( 65,831 ) — — ( 782 ) ( 66,613 )

Buyout of redeemable noncontrolling interests ( 55 ) — — — — — — — —

Stock-based compensation expense, net — — 2,712 — — — — 2,712

— — — ( 70,489 ) — — 436 ( 70,053 )

Capital distributions to noncontrolling interests — — — — — — ( 323 ) ( 323 )

Equity related to buyout of redeemable noncontrolling interest ( 139 ) — — 139 — — — — 139

Balance at December 31, 2024 19,403,262 $ 2 $ 478,366 $ ( 328,377 ) 1,092,208 $ ( 6,277 ) $ 2,438 $ 146,152

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Year Ended December 31, 2023

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Exercise of stock options — 489,436 — 1,004 — — — — 1,004

Purchase accounting measurement period adjustments 240 — — ( 1,813 ) — — — ( 5,490 ) ( 7,303 )

Issuance of restricted stock — 531,029 — — — — — — —

Issuance of shares as contingent consideration relating to Quantum business acquisition — 12,500 — 186 — — — — 186

Stock-based compensation expense — — — 9,996 — — — — 9,996

Net income (loss) 846 — — — ( 93,931 ) — — 294 ( 93,637 )

Noncontrolling interests related to acquisition of Legacy Spruce Power 7,159 — — — — — — 12,164 12,164

Buyout of noncontrolling interests ( 6,517 ) — — 1,258 — — — ( 3,024 ) ( 1,766 )

Issuance of common stock — 25,818 — 150 — — — — 150

Share repurchases — — — — — 800,650 ( 5,424 ) — ( 5,424 )

Cumulative-effect adjustment of ASC 326 adoption — — — — 1,285 — — — 1,285

Stock-based compensation expense, net — — — 2,885 — — — — 2,885

Buyout of redeemable noncontrolling interests ( 55 ) — — — — — — — —

Capital distributions to noncontrolling interests ( 134 ) — — — — — — ( 345 ) ( 345 )

Equity related to buyout of redeemable noncontrolling interest ( 139 ) — — 139 — — — — 139

Net income (loss) 3 — — — ( 65,831 ) — — ( 782 ) ( 66,613 )

Balance at December 31, 2023 $ — 19,093,186 $ 2 $ 475,654 $ ( 257,888 ) 800,650 $ ( 5,424 ) $ 2,325 $ 214,669

See Notes to Consolidated Financial Statements.

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Spruce Power Holding Corporation

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Net loss $ ( 70,053 ) $ ( 66,610 )

Net loss from discontinued operations 4,123 40,112

Net (income) loss from discontinued operations ( 25 ) 4,123

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation 2,885 9,996

Stock-based compensation, net 2,712 2,885

Bad debt expense 1,386 1,841

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Depreciation and amortization expense 21,284 21,586

Impairment of goodwill 28,757 —

Accretion expense 236 300

Change in fair value of obligation to issue shares of common stock — ( 535 )

Change in fair value of interest rate swaps 2,753 4,816

1 unchanged sentence

Interest income related to SEMTH master lease agreement ( 16,823 ) ( 11,486 )

Gain on extinguishment of debt — ( 4,527 )

Gain on disposal of assets ( 2,504 ) ( 4,724 )

24 unchanged sentences

Financing activities:

Proceeds from issuance of long-term debt 21,396 —

Proceeds from issuance of non-recourse debt 239,842 21,396

Payment of deferred financing costs ( 3,374 ) ( 391 )

Repayments of long-term debt ( 32,843 ) ( 9,302 )

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Repayments of non-recourse debt ( 155,943 ) ( 32,843 )

Repayments under financing leases — ( 165 )

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Buyout of redeemable non-controlling interest — ( 55 )

Net cash used in continuing financing activities ( 16,807 ) ( 19,088 )

Net cash used in discontinued financing activities — ( 99 )

Net cash used in financing activities

Net cash provided by (used in) continuing financing activities 79,349 ( 16,807 )

Net cash provided by discontinued financing activities 81 —

Net cash provided by (used in) financing activities

79,430 ( 16,807 )

9 unchanged sentences

Settlement of finance lease liability $ — $ 43

Settlement of contingent liability through issuance of shares $ — $ 186

See Notes to Consolidated Financial Statements.

5 unchanged sentences

The Company is engaged in the ownership and maintenance of home solar energy systems for homeowners in the U.S.

The Company provides clean, solar energy typically at savings compared to traditional utility energy.

The Company’s primary customers are homeowners and the Company’s core solar service offerings generate revenues primarily through (i) the sale of electricity generated by its home solar energy systems to homeowners pursuant to long-term agreements, which requires the Company’s subscribers to make recurring monthly payments, (ii) third party contracts to sell solar renewable energy credits (“ SRECs”) generated by the solar energy systems for fixed prices and (iii) the servicing of those agreements for other institutional owners of home solar energy systems.

In addition, the Company generates cash flows and earns interest income from an investment through a master lease agreement.

The Company holds subsidiary fund companies, defined below as the Funds, that own and operate portfolios of home solar energy systems, which are subject to solar lease agreements (“SLAs”) and power purchase agreements (“PPAs”, together with the SLAs, “Customer Agreements”) with residential customers who benefit from the production of electricity generated by the solar energy systems.

The solar energy systems may qualify for subsidies, renewable energy credits and other incentives as provided by various states and local agencies.

The Company’s primary customers are homeowners and its core solar service offerings to these customers generate revenues primarily through (i) the sale of electricity generated by its home solar energy systems to homeowners pursuant to long-term Customer Agreements as defined below, which require the homeowners to make recurring monthly payments, (ii) third party contracts to sell solar renewable energy credits (“ SRECs”) generated by the Company’s home solar energy systems for contracted prices, and (iii) the servicing of third-party owned solar energy systems through the Company’s Spruce Pro servicing platform, which is contracted to offer portfolio managed services to third party owners, as well as to the Company’s portfolio of home solar energy systems (the “Portfolio”).

These portfolio managed services include (a) billing and collections/asset recovery, (b) account support services, (c) financial asset management, (d) homeowner support and servicing technology, (e) asset operations, and (f) transaction and execution services related to SRECs.

In addition to the Company’s core solar service offerings, the Company generates cash flows and earns interest income from customer contracts related to the SEMTH Master Lease, defined below.

The Company holds subsidiary fund companies, defined below as the Funds, that own and operate the Company’s portfolio of home solar energy systems, which are subject to solar lease agreements (“SLAs”) and power purchase agreements (“PPAs”, together with the SLAs, “Customer Agreements”) with residential customers who benefit from the production of electricity generated by the Company’s Portfolio, which may qualify for subsidies, renewable energy credits and other incentives as provided by various states and local agencies.

These benefits have generally been retained by the Company's subsidiaries that own the systems, with the exception of the investment tax credit (“ITCs”) under Section 48 of the Internal Revenue Code, as amended, (the “IRC”), which were generally passed through to the various financing partners of the solar energy systems.

The Company also offers services which include asset management services and operating and maintenance services for home solar energy systems.

Corporate History and Discontinued Operations

Historically, the Company had provided fleet electrification solutions for commercial vehicles in North America, offering its systems for vehicle electrification (the “Drivetrain” segment) and through its energy efficiency and infrastructure solutions business, offering and installing charging stations to enable customers to develop the charging infrastructure required for their electrified vehicles (the “XL Grid” segment).

In the first quarter of 2022, the Company initiated a strategic review of its overall business operations which included assessing its offerings, strategy, processes and growth opportunities.

As a result of the strategic review, in the first quarter of 2022, the Company made the following decisions relating to the restructuring of its Drivetrain business:

(i) the elimination of a substantial majority of the Company’s hybrid drivetrain products;

(ii) the elimination of its plug-in hybrid electric vehicles products;

(iii) the reduction in the size of the Company’s workforce by approximately 50 employees;

(iv) the closure of the Company’s production center and warehouse in Quincy, IL;

(v) the closure of the Company’s engineering activities in its Boston office;

and (vi) the termination of the Company’s partnership with eNow.

Following the strategic review, the Company decided to pursue transformational mergers and acquisition (“M&A”) opportunities, which included the implementation of a process to institutionalize the M&A effort, resulting in the formation of an investment committee comprised of senior members of the Company’s executive team and members of its Board of Directors.

The objective of the investment committee was to continue the exploration of value-generative opportunities in the decarbonization and energy transition ecosystem, focused on three core requirements, (i) a business that makes an impact on decarbonization, (ii) a leader in an established, growing market segment and (iii) a company that generates positive earnings before interest, taxes, depreciation and amortization (“EBITDA”).

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

As a result of these efforts, on September 9, 2022, the Company acquired 100 % of the membership interests of Spruce Holding Company 1 LLC, Spruce Holding Company 2 LLC, Spruce Holding Company 3 LLC and Spruce Manager LLC (collectively and together with their subsidiaries, “Legacy Spruce Power”) (See Note 3.

Business Combinations).

Legacy Spruce Power was a privately held owner and operator of home solar energy systems in the U.S.

at the time of the transaction, with approximately 51,000 customer subscribers as of December 31, 2022.

Spruce Power sells the power generated by solar energy systems to its homeowners pursuant to long-term agreements that require subscribers to make recurring monthly payments.

In November 2022, the Company changed its corporate name from “XL Fleet Corp.” to “Spruce Power Holding Corporation.” Additionally, the Company changed its ticker symbol from “XL” to “SPRU.”

With the completion of the acquisition of Legacy Spruce Power, the Company analyzed strategic alternatives related to its Drivetrain business.

In December 2022, the Company commenced the exit of its Drivetrain business and sold a portion of the business for an immaterial amount to Shyft Group USA (“Shyft”), which closed in January 2023.

Shyft also (i) acquired certain technical equipment and assumed the Company’s Wixom, Michigan facility, (ii) offered employment to certain engineers and other sales personnel and (iii) assumed completion of the Company’s pilot development agreement with the Department of Defense related to vehicle hybridization (with the Company retaining rights to potential future royalties from the program).

In the fourth quarter of 2022, the Company also sold certain battery inventory and its legacy hybrid technology to RMA Group, an automotive and equipment supplier in Southeast Asia.

Historically, as XL Fleet Corp.

(“XL Fleet”), the Company provided fleet electrification solutions for commercial vehicles in North America, offering its systems for vehicle electrification (the “Drivetrain” business) and offering and installing charging stations to enable customers to develop charging infrastructure required for electrified vehicles (the “XL Grid” business).

In early 2022, the Company performed a strategic review of its overall business operations, which resulted in (i) the sale of the Company’s Drivetrain and XL Grid businesses in January 2023, and (ii) the decision to pursue merger and acquisition (“M&A”) opportunities.

On September 9, 2022, the Company acquired 100 % of the membership interests of Spruce Holding Company 1 LLC, Spruce Holding Company 2 LLC, Spruce Holding Company 3 LLC and Spruce Manager LLC (collectively and together with their subsidiaries, “Legacy Spruce Power”) (See Note 3.

Business Combinations), which was one of the largest privately held owner and operator of home solar energy systems in the U.S.

at the time of the transaction.

In November 2022, following the acquisition of Legacy Spruce Power, the Company changed its corporate name from “XL Fleet Corp.” to “Spruce Power Holding Corporation.” Additionally, the Company changed its ticker symbol from “XL” to “SPRU.”

After the acquisition of Legacy Spruce Power, the Company also commenced a review of its XL Grid business to evaluate its strategic fit with Legacy Spruce Power, and in the fourth quarter of 2022, the Company entered into a non-binding letter of intent for the sale of World Energy Efficiency Services, LLC (“World Energy”) for an immaterial amount.

1 unchanged sentence

Both the Drivetrain and XL Grid operations are presented as discontinued operations in the consolidated financial statements.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

In the first quarter of 2023, the Company completed the acquisition of all issued and outstanding interests in SS Holdings 2017, LLC and its subsidiaries (“SEMTH”) from certain funds managed by HPS Investment Partners, LLC, pursuant to a membership interest purchase and sale agreement as of that date (the “SEMTH Acquisition”).

The SEMTH related asset includes a 20-year use rights to customer payment streams of approximately 22,500 customer contracts (the “SEMTH Master Lease”).

Subsequently on August 18, 2023, the Company acquired approximately 2,400 home solar assets and customer contracts, with an average remaining contract life of approximately 11 years, from a publicly traded, regulated utility company (the “Tredegar Acquisition”).

In the fourth quarter of 2024, the Company completed the acquisition of a residential solar portfolio consisting of approximately 9,800 home solar assets and customer contracts, with an average remaining contract life of over 11 years, from a publicly traded energy services company (the “NJR Acquisition”).

With the completion of the NJR Acquisition, the Company has, in the aggregate, 14 portfolios of rooftop solar Customer Agreements.

In the aggregate, as of December 31, 2024, the Company offered subscription-based services and owned the cash flows from approximately 85,000 home solar assets and customer contracts.

Summary of Significant Accounting Policies

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Excluding the par value and the number of authorized shares of the Company’s common stock, all share, per share amounts, and the values of the common stock outstanding and related effect on additional paid in capital included in this Form 10-K have been retrospectively presented as if the Reverse Stock Split had been effective from the beginning of the earliest period presented.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Use of estimates

The preparation of financial statements in conformity with U.S.

GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of expenses during the reporting period.

The Company’s most significant estimates and judgments involve (i) inventory reserves, (ii) deferred income taxes, (iii) warranty reserves, (iv) valuation of stock-based compensation, (v) valuation of warrant liability, (vi) the useful lives of certain assets and liabilities, (vii) the allowance for current expected credit losses and (viii) the valuation of business combinations, including the fair values and useful lives of acquired assets and assumed liabilities, goodwill and the fair value of purchase consideration of asset acquisitions.

The Company’s most significant estimates and judgments involve (i) deferred income taxes, (ii) warranty reserves, (iii) valuation of stock-based compensation, (iv) valuation of warrant liability, (v) the useful lives of certain assets and liabilities, (vi) the allowance for current expected credit losses, (vii) valuation of business combinations, including the fair values and useful lives of acquired assets and assumed liabilities, and the fair value of purchase consideration of asset acquisitions, and (viii) valuation of goodwill.

Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

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Variable interest entities

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The Company consolidates any variable interest entity (“VIE”) of which it is the primary beneficiary.

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The Company evaluates its relationships with the VIEs on an ongoing basis to determine if it is the primary beneficiary.

As of December 31, 2022, the Company had its initial investment in Level Solar Fund IV LLC (“Level Solar Fund IV”) and similar investments in the Funds as defined below (collectively, the “Prior Funds”), which were each determined to be a VIE upon investment.

During 2023, the Company purchased 100 % of the membership interests in Level Solar Fund IV (See Note 13.

Redeemable Noncontrolling Interests and Noncontrolling Interests) and it ceased being a VIE upon purchase.

A s of December 31, 2023, the Company had its investments in Volta Solar Owner II, LLC and ORE F4 HoldCo, LLC (collectively, the “Funds”).

The Company’s initial investment in Level Solar Fund IV LLC (“Level Solar Fund IV”) and similar investments in the Funds as defined below (collectively, the “Prior Funds”) were each determined to be a VIE upon investment.

During 2023, the Company purchased 100 % of the membership interests in Level Solar Fund IV and it ceased being a VIE upon purchase and as of December 31, 2023.

The Company’s initial investments in Volta Solar Owner II, LLC and ORE F4 HoldCo, LLC (collectively, the “Funds”) were determined to be VIEs and remained as such as of December 31, 2024 and 2023.

Redeemable Noncontrolling Interests and Noncontrolling Interests.

The Company considered the provisions within the contractual arrangements that grant it power to manage and make decisions that affect the operation of the VIEs, including determining the solar energy systems contributed to the VIEs, and the operation and maintenance of the solar energy systems.

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The HLBV method is commonly applied to investments where cash distribution percentages vary at different points in time and are not directly linked to an equity member's ownership percentage.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The HLBV method is a balance sheet-focused approach.

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The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is used to derive each member's share of the income or loss for the period.

Factors used in the HLBV calculation include GAAP income (loss), taxable income (loss), capital contributions, ITCs, capital distributions and the stipulated targeted investor return specified in the subsidiaries' operating agreements.

Factors used in the HLBV calculation include U.S.

GAAP income (loss), taxable income (loss), capital contributions, ITCs, capital distributions and the stipulated targeted investor return specified in the subsidiaries' operating agreements.

Changes in these factors could have a significant impact on the amounts that investors would receive upon a hypothetical liquidation.

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Subsequent to the purchase of 100 % of the membership interests in Level Solar Fund IV in 2023, the Company had no redeemable noncontrolling interest as of December 31, 2023.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Cash and cash equivalents

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Cash equivalents are carried at cost, which approximates fair value due to their short-term nature.

The Company’s cash and cash equivalents are placed with high-credit quality financial institutions and issuers, and at times exceed federally insured limits.

To date, the Company has experienced no credit losses relating to its cash and cash equivalents.

The Company’s cash and cash equivalents are placed with large financial institutions, and at times exceed federally insured limits.

To date, the Company has not experienced any credit loss relating to its cash and cash equivalents.

Concentration of credit risks and revenue

Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents.

At times, such cash may be in excess of the FDIC limit.

At December 31, 2023 and 2022, the Company had cash in excess of the $250,000 federally insured limit.

The Company believes it is not exposed to any significant credit risk on cash and cash equivalents as most of the balances are kept in treasury bills, which are government backed securities.

At times, the Company may hold cash balances at a single bank in excess of the Federal Deposit Insurance Corporation deposit insurance limit of $250,000.

At December 31, 2024 and 2023, the Company had cash in excess of the federal deposit insurance limit.

The Company believes it is not exposed to any significant credit risk on cash and cash equivalents as most of the balances are invested in treasury bills, which are government backed securities.

As of and for the year ended December 31, 2024 and 2023, the Company had no customers that represented at least 10% of the Company’s revenues or its accounts receivable balances.

Restricted cash

Restricted cash held at December 31, 2023 and 2022 of $ 31.6 million and $ 19.8 million, respectively, primarily consists of cash that is subject to restriction due to provisions in the Company's financing agreements and the operating agreements of the Funds and Prior Funds .

Restricted cash held at December 31, 2024 and 2023 of $ 36.3 million and $ 31.6 million, respectively, primarily consists of cash that is subject to restriction due to provisions in the Company's financing agreements and the operating agreements of the Funds.

The carrying amount reported in the consolidated balance sheets for restricted cash approximates its fair value.

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Accounts receivable primarily represent amounts due from the Company’s customers.

Accounts receivable is recorded net of allowance for expected credit losses in accordance with the current expected credit losses standard (“CECL”), defined below, which is determined by the Company’s assessment of the collectability of customer accounts based on the best available data at the time of the assessment.

Accounts receivable is recorded net of allowance for expected credit losses in accordance with the current expected credit losses standard, which is determined by the Company’s assessment of the collectability of customer accounts based on the best available data at the time of the assessment.

Management reviews the allowance by considering factors such as historical experience, contractual term, aging category and current economic conditions that may affect customers.

The following table presents the changes in the allowance for credit losses recorded within accounts receivable, net on the consolidated balance sheets:

The following table presents the changes in the allowance for credit losses recorded against accounts receivable, net on the consolidated balance sheets:

As of December 31,

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Prepaid expenses and other current assets include prepaid insurance, prepaid rent, and supplies, which are expected to be recognized or realized within the next 12 months.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Investment related to SEMTH master lease agreement and interest income

The Company accounts for its investment related to the SEMTH, as defined below, master lease agreement in accordance with Accounting Standards Codification (“ASC”) 325-40, Investments—Other—Beneficial Interests in Securitized Financial Assets .

The Company recognizes accretable yield as interest income over the life of the related beneficial interest using the effective yield method, which is reflected within interest income in the consolidated statements of operations in the amount of $ 11.5 million for the year ended December 31, 2023.

On a recurring basis, the Company evaluates changes in the cash flows expected to be collected from the cash flows previously projected, and when favorable or adverse changes are deemed other than temporary, the Company prospectively updates its expectation of cash flows to be collected and recalculates the amount of accretable yield for the related beneficial interest.

Favorable or adverse changes deemed other than temporary are accounted for as a change in estimate in conformity with ASC 250, Accounting Changes and Error Corrections , with the amount of periodic accretion adjusted over the remaining life of the master lease agreement.

During the year ended December 31, 2024, the Company revised its estimated cash flows expected to be collected related to the SEMTH master lease agreement, and as a result, recognized additional accretable yield of $ 1.8 million within interest income in the consolidated statements of operations.

The Company estimates approximately $ 3.0 million of additional interest income per year over the life of the related beneficial interest.

Property and equipment, net

Property and equipment, net consists of solar energy systems and other property and equipment.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Solar energy systems , net

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Intangible assets, net

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The Company’s intangible assets include solar renewable energy credit agreements, performance based incentive agreements, and a trade name.

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Impairment of long-lived asset s

The Company reviews long-lived assets, including solar energy systems, other property and equipment, and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate that an asset group’s carrying amount may not be recoverable.

The Company reviews long-lived assets, such as property and equipment and intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate that an asset group’s carrying amount may not be recoverable.

The Company groups assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluates the asset group against the sum of the undiscounted future cash flows.

If the undiscounted cash flows do not indicate the carrying amount of the asset group is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

In the fourth quarter of 2022, the Company determined there was an indicator of impairment for intangible assets in its discontinued operations of the Drivetrain and XL Grid businesses and concluded the asset was not recoverable.

Comparing the carrying value of the asset to its fair value, the Company determined the entire asset was impaired and recognized an impairment charge of $ 0.9 million, which is reflected within net loss from discontinued operations in the consolidated statements of operations for the year ended December 31, 2022 (See Note 20.

Discontinued Operations).

There was no long-lived asset impairment charge during the year ended December 31, 2023.

There were no long-lived asset impairment charges during the years ended December 31, 2024 and 2023.

The Company determines if an arrangement is a lease, or contains a lease, at the inception of the arrangement and evaluates whether the lease is an operating lease or a finance lease at the commencement date.

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Asset retirement obligations

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Asset retirement obligations (“ARO”) can arise from contractual or regulatory requirements to perform certain asset retirement activities at the time the solar energy systems are to be disposed.

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Inherent in the calculation of the fair value of AROs are numerous assumptions and judgments, including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, and timing of settlement.

As of December 31, 2023 and 2022, ARO was $ 3.0 million and $ 0 million , respectively.

For the years ended December 31, 2023 and 2022, accretion expenses were $ 0.3 million and $ 0 million , respectively.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The following is a roll forward of the Company’s ARO:

Years Ended December 31,

(Amounts in thousands) 2024 2023

Balance at the beginning of the period $ 3,033 $ —

Accretion expense 236 300

Balance at the end of the period $ 3,536 $ 3,033

Asset acquisitions

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The Company has historically recorded goodwill in connection with its business combinations.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The Company performs its annual goodwill impairment assessment on October 1 of each fiscal year, or more frequently if events or circumstances arise which indicate that goodwill may be impaired.

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Any goodwill impairment is limited to the total amount of goodwill.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The Company evaluates the fair value of the Company’s reporting unit using the market and income approach.

Under the market approach, the Company uses multiples of EBITDA or revenues of the comparable guideline public companies by selecting a population of public companies with similar operations and attributes.

Under the market approach, the Company uses multiples of earnings before interest, taxes, depreciation and amortization (“EBITDA”) or revenues of the comparable guideline public companies by selecting a population of public companies with similar operations and attributes.

Using this guideline public company data, a range of multiples of enterprise value to EBITDA or revenue is calculated.

The income approach of computing fair value is based on the present value of the expected future economic benefits generated by the asset or business, such as cash flows or profits which will then be compared to its book value.

In the first quarter of 2022, the Company believed there were indicators that the carrying amount of its goodwill may be impaired due to a decline in the Company’s stock price and market capitalization.

As a result, the Company performed an assessment of its goodwill for impairment.

The Company elected to forego the qualitative test and proceeded to perform a quantitative test.

The Company compared the book value of its single reporting unit to the fair value of its public float.

The market capitalization was below the fair value of the Company by an amount in excess of its reported value of goodwill.

As a result, the Company recorded a charge of $ 8.6 million to fully impair its goodwill related to XL Fleet Corp., which is reflected within net loss from discontinued operations in the consolidated statements of operations for the year ended December 31, 2022 (See Note 20.

Discontinued Operations).

During the year ended December 31, 2024, the Company recorded a charge of $ 28.8 million to fully impair its goodwill within the consolidated statements of operations.

There was no goodwill impairment charge during the year ended December 31, 2023.

Goodwill for further information on the Company’s determination relating to impairment of goodwill.

Customers who purchased the Company's Drivetrain systems were provided limited-assurance-type warranties for equipment and work performed under the contracts.

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Warranty expense is recorded as a component of discontinued operations in the consolidated statements of operations.

With the Company’s exit from the Drivetrain business and the subsequent sale of World Energy, the Company will not enter into any additional warranty obligations and expects the existing warranty obligation to substantially run-off over the subsequent 15-month period.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The following is a roll forward of the Company’s accrued warranty liability:

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Balance at the beginning of the period $ 602 $ 1,125

Accrual for warranties issued — 116

Transfer of inventory to servicers — ( 498 )

Accrual related to World Energy — ( 25 )

Changes in estimates for preexisting warranties — ( 955 )

Warranty fulfillment charges ( 386 ) —

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The Company’s warranty liability is included in accrued expenses and other current liabilities on the consolidated balance sheets.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Warrant liabilities

As of December 31, 2023 and 2022, the Company had outstanding private warrants, which are related to the December 2020 merger and organization of legacy XL Hybrids Inc.

(“Legacy XL”) to become XL Fleet Corp.

As of December 31, 2024, the Company had outstanding private warrants, which are related to the December 2020 merger and organization of legacy XL Hybrids Inc.

to become XL Fleet.

With the merger, the Company assumed private placement warrants to purchase 529,167 shares of common stock, with an exercise price of $ 92.00 per share (the “Private Warrants”).

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Contingencies

The Company is unable to anticipate the ultimate outcome of all pending legal proceedings.

When it is probable that a loss has occurred and the loss amount can be reasonably estimated, the Company records liabilities for loss contingencies.

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When such recoveries are in excess of a loss recognized in the Company’s financial statements, the Company recognizes a gain contingency at the earlier of when the gain has been realized or when it is realizable, however when the Company expects recovery of proceeds up to the amount of the loss recognized, a receivable, which offsets the related loss contingency, is recognized when realization of the claim for recovery is determined to be probable.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Fair value measurements

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An assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset or liability.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The Company’s financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, net, accounts payable, accrued expenses and other current liabilities, long-term debt, interest rate swaps and warrant liabilities.

The carrying value of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses and other current liabilities each approximates fair value due to the short-term nature of those instruments.

The carrying value of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses and other current liabilities approximates fair value due to the short-term nature of those instruments.

Fair Value Measurements for additional information on assets and liabilities measured at fair value.

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Stock Options

The Company uses the Black-Scholes option pricing model to determine the fair value of stock-based awards and recognizes the compensation cost on a straight line basis over the requisite service period of the awards for employee, which is typically the four-year vesting period of the award, and effective contract period specified in the award agreement for non-employee.

The Company uses the Black-Scholes option pricing model to determine the fair value of stock-based awards and recognizes the compensation cost on a straight line basis over the requisite service period of the awards for employees, which is typically the four-year vesting period of the award, and effective contract period specified in the award agreement for non-employees.

The fair value of common stock is determined based on the closing price of the Company’s common stock on the NYSE at each award grant date.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The determination of the fair value of stock-based payment awards utilizing the Black-Scholes model is affected by the stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends.

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The Company accounts for the forfeiture of equity awards as they occur.

The Company’s revenue is derived from its home solar energy portfolio, which primarily generates revenue through the sale to homeowners of power generated by the home solar energy systems and the rental of solar equipment by certain homeowners, pursuant to long-term agreements.

Pursuant to ASC 606 defined below, the Company has elected the “right to invoice” practical expedient, and revenues for the performance obligations related to energy generation and servicing revenue are recognized as services are rendered based upon the underlying contractual arrangements.

The following table presents the detail of the Company’s revenues as reflected within the consolidated statements of

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

operations for the years ended December 31, 2023 and 2022:

The Company’s revenue is derived from its home solar energy portfolio and servicing platform, which primarily generates revenue through the sale to homeowners of power generated by the home solar energy systems pursuant to long-term agreements.

Pursuant to ASC 606 defined below, the Company has elected the “right to invoice” practical expedient for PPA and servicing revenues, and revenues for the performance obligations related to energy generation and servicing revenue are recognized as services are rendered based upon the underlying contractual arrangements.

The following table presents the detail of the Company’s revenues as reflected within the consolidated statements of operations for the years ended December 31, 2024 and 2023:

Years Ended December 31,

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• PPA revenues - Under ASC 606, Revenue from Contracts with Customers (“ASC 606”) issued by the Financial Accounting Standards Board (“FASB”) , PPA revenue is recognized when generated based upon the amount of electricity delivered as determined by remote monitoring equipment at solar rates specified under the PPAs.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

• SLA revenues - The Company has SLAs, which do not meet the definition of a lease under ASC 842, Leases , and are accounted for as contracts with customers under ASC 606.

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The differences between revenue recognition and cash payments received are reflected as deferred rent assets on the consolidated balance sheets.

Certain SLAs contain provisions to provide customers a performance guarantee that each solar energy system will achieve certain specified minimum solar energy production output.

If the solar energy system does not produce the guaranteed production amount, the Company is obligated to pay a performance guarantee calculated as the product of (a) the shortfall production amount and (b) guaranteed rate per kWh as defined in the SLA.

Solar renewable energy credit revenues

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The Company recognizes revenue for SRECs based on pricing predetermined within the respective contracts at a point in time when the SRECs are transferred.

As SRECs can be sold separate from the actual electricity generated by the renewable-based generation source, the Company accounts for the SRECs it generates from its solar energy systems as governmental incentives with no costs incurred to obtain them and do not consider those SRECs output of the underlying solar energy systems.

As SRECs can be sold separate from the actual electricity generated by the renewable-based generation source, the Company accounts for the SRECs it generates from its solar energy systems as governmental incentives and does not consider those SRECs output of the underlying solar energy systems.

The Company classifies these SRECs as inventory held until sold and delivered to third parties.

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PBIs are accounted for under ASC 606 and are earned based upon the actual electricity produced by the eligible systems.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Servicing revenues

The Company earns operating and maintenance revenue from third-party solar fund customers at pre-determined rates for various operating and maintenance and asset management services as specified in Maintenance Service Agreements (“MSAs”) and Operating Service Agreements (“OSAs”).

The MSAs and OSAs contain multiple performance obligations, including routine maintenance, nonroutine maintenance, renewable energy certificate management, inventory management, delinquent account collections and customer account management.

The MSAs contain multiple performance obligations, including routine maintenance, nonroutine maintenance, renewable energy certificate management, inventory management, delinquent account collections and customer account management.

Other revenue

Other revenue relates to revenue generating activities that do not fall into the Company’s primary revenue categories discussed above, including uniform commercial code revenues, other fees charged to the Company’s customers pursuant to the Company’s long-term Customer Agreements and servicing contracts, and other miscellaneous revenue and income.

Deferred revenue

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Deferred revenue, in the aggregate, as of December 31, 2024 and 2023 was $ 4.0 million and $ 2.7 million, respectively.

During the year ended December 31, 2023, the Company recognized revenues of less than $ 0.1 million related to deferred revenue as of December 31, 2022.

Cost of revenues

Cost of revenues primarily consists of the depreciation expense relating to the solar energy systems, costs of third parties used to service the systems and any cost associated with meter swaps.

During the years ended December 31, 2024 and 2023, the Company recognized revenues of $ 0.2 million and $ 0.1 million related to deferred revenue as of December 31, 2023 and 2022, respectively.

Cost of revenues - solar energy systems depreciation

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Cost of revenues - solar energy systems depreciation consists of the depreciation expense relating to the solar energy systems.

Cost of revenues - operations and maintenance

Cost of revenues - operations and maintenance primarily consists of costs of third parties used to service the Company’s systems and any cost associated with meter swaps.

The Company accounts for income taxes using the asset and liability method under which deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards.

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As a result, the Company's effective income tax rate was 0 % for the years ended December 31, 2024 and 2023.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Net income (loss) per share

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Segment reporting

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Segment reporting is based on the management approach, following the method that management organizes the Company’s reportable segments for which separate financial information is made available to, and evaluated regularly by, the Company’s chief operating decision maker (“CODM”) in allocating resources and in assessing performance.

The Company’s CODM is its Chief Executive Officer (“CEO”).

In the fourth quarter of 2022, the Company determined that the Drivetrain and XL Grid operations were discontinued operations, which resulted in the Company having only one reportable segment.

The Company is organized and managed as a single operating and reportable segment, on a consolidated basis, which engages in the sole business of providing solar energy and related services to its customers, and as of December 31, 2024 and 2023, the Company had one operating and reportable segment.

Segment Information for further information.

Related parties

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A party which can significantly influence the management or operating policies of the transacting parties or that has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

SEC Climate Disclosure Rule

In March 2024, the SEC issued final rules requiring public entities to disclose certain climate-related information in their registration statements and annual reports.

The rules will be effective for non-accelerated filers and smaller reporting companies commencing with the fiscal year beginning on or after January 1, 2027.

In April 2024, the SEC issued an administrative stay of the implementation of these rules, pending judicial review.

In February 2025, the SEC issued a request that the U.S.

Court of Appeals for the Eighth Circuit not schedule the case for oral argument in order to allow time for the SEC to determine next steps in light of certain changes.

The Company is evaluating the impact of the final rules on its consolidated financial statements and related disclosures.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Recent Accounting Pronouncements

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

Recent Accounting Pronouncements Adopted

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvement to Reportable Segment Disclosures, (“ASU 2023-07”), which requires enhanced disclosures for reportable segments, primarily in relation to significant segment expenses, even in the event an entity has a single reportable segment in accordance with Topic 280.

ASU 2023-07 was effective for the Company for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company adopted this ASU as of December 31, 2024 and has retrospectively applied its requirements to all prior periods based on the significant segment expense categories identified and disclosed in its consolidated financial statements in the period of adoption.

Segment Information.

Recent Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”), which requires enhanced detailed disclosures about the types of expenses in commonly presented expense line items of entities.

Subsequent to issuance of ASU 2024-03, the FASB issued ASU 2025-01 of the same topic to clarify the effective date of ASU 2024-03, stating that all public entities are required to adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027.

The Company will adopt this ASU as of December 31, 2027 and will prospectively apply its requirements to expense disclosures presented in the notes to the consolidated financial statements in the period of adoption.

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

Improvements to Income Tax Disclosures, (“ASU 2023-09”), which requires enhancements regarding the transparency and decision usefulness of income tax disclosures.

ASU 2023-09 is effective for the Company on December 31, 2025.

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

The Company will adopt this ASU as of December 31, 2025 and will prospectively apply its requirements to income tax disclosures presented in the notes to the consolidated financial statements in the period of adoption.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

ASU 2023-07 is effective for the Company on December 31, 2024.

The Company will adopt this ASU as of December 31, 2024 and will retrospectively apply its requirements to all prior periods based on the significant segment expense categories identified and disclosed in its consolidated financial statements in the period of adoption.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , (“ASU 2021-08”), which requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with ASC 606.

ASU 2021-08 is effective for the Company beginning January 1, 2023.

The Company adopted this ASU effective January 1, 2023 and has prospectively accounted for its customer contracts acquired in business combinations in accordance with ASC 606.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses of Financial Instruments , (“ASU 2016-13” or “CECL”) which, together with subsequent amendments, amended the requirement on the measurement and recognition of expected credit losses for financial assets held, replaced the incurred loss model for financial assets measured at amortized cost, and required entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

ASU 2016-13 is effective for the Company beginning January 1, 2023.

The Company adopted this ASU effective January 1, 2023 using the modified retrospective approach for its trade accounts receivable, which resulted in a cumulative-effect adjustment to stockholders' equity of approximately $ 1.3 million as of that date.

Results for reporting periods prior to January 1, 2023 continue to be presented in accordance with previously applicable GAAP, while results for subsequent reporting periods are presented under ASC 326.

The following table presents the impact of the adoption of ASU 2016-13 on the consolidated balance sheets as of January 1, 2023:

(Amounts in thousands) Accounts Receivable, Net

Balance at the beginning of the period (pre-ASC 326 adoption) $ 8,336

Impact of ASC 326 adoption 1,285

Balance at the beginning of the period (post-ASC 326 adoption) $ 9,621

Business Combination

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Based on the evaluation of the applicable factors, Management noted that all factors, with the exception of the relative size of organization, were indicators that the Company was the acquiring entity resulting in Management’s conclusion that for accounting purposes, the Company acquired Legacy Spruce Power.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The acquisition was accounted for as a business combination.

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The excess of the purchase price over those fair values was recorded as goodwill.

The Company’s evaluations of the facts and circumstances available as of the Acquisition Date, to assign fair values to assets acquired and liabilities, remained ongoing subsequent to the Acquisition Date.

The Company’s evaluations of the facts and circumstances available as of the Acquisition Date, to assign fair values to assets acquired and liabilities assumed, remained ongoing subsequent to the Acquisition Date.

As the Company completed further analysis of assets including solar systems, intangible assets, as well as noncontrolling interests and debt, additional information on the assets acquired and liabilities assumed became available.

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These provisional adjustments were recognized during the reporting period in which the adjustments were determined.

The Company has finalized its purchase price allocation as of September 8, 2023.

The Company finalized its purchase price allocation as of September 8, 2023.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Accounting for business combinations requires management to make significant estimates and assumptions, especially at the Acquisition Date, including the Company’s estimates of the fair value of solar systems, production based incentives, solar renewable energy agreements, non-controlling interest, trade name and debt, where applicable.

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Total assets acquired and liabilities assumed $ 32,585 $ — $ 32,585

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

As reflected in the preceding table, as a result of third party valuation reports received in the first quarter of 2023, the Company adjusted solar energy systems and intangible assets with corresponding changes to goodwill.

2 unchanged sentences

Additional paid in capital was also downward revised by $ 1.8 million, which included the fair value adjustment associated with the purchase of 100 % of the membership interests in Ampere Solar Owner IV, LLC, ORE F5A HoldCo, LLC, ORE F6 HoldCo, LLC, RPV Fund 11 LLC and RPV Fund 13 LLC, Sunserve Residential Solar I, LLC's and Level Solar Fund III, LLC in 2022.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The gross intangibles acquired are amortized over their respective estimated useful lives as follows:

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Goodwill is primarily attributable to the Company's ability to leverage and use its existing capital and access to capital markets along with Legacy Spruce Power's established operations and M&A capabilities to grow the Spruce Power business.

Supplemental disclosure of pro forma information

The following unaudited pro forma financial information represents the combined results of the operations of the Company, including Legacy Spruce Power, as if the acquisition of Legacy Spruce Power on the Acquisition Date had occurred as of January 1, 2021.

The results of operations related to the Company’s Drivetrain and XL Grid businesses, which were determined to be discontinued operations in the fourth quarter of 2022, are presented as net loss from discontinued operations.

The unaudited pro forma revenues and pro forma net income (loss) reflect the continuing operational results of the Company’s corporate functions and the results of operations for Legacy Spruce Power.

The unaudited pro forma financial information is not necessarily indicative of what the consolidated results of operations actually would have been had the respective acquisitions been completed on January 1, 2021.

In addition, the unaudited pro forma financial information does not purport to project the future results of operations of the combined Company.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The following table presents the Company’s pro forma combined results of operations for the year ended December 31, 2022:

Year Ended December 31,

(Amounts in thousands, except per share data) 2022

Revenues $ 79,253

Net loss from continuing operations

Net loss from discontinued operations ( 40,112 )

Per share amounts:

Net loss from continuing operations - basic and diluted

Net loss from discontinued operations - basic and diluted

Goodwill for further information on the Company’s determination relating to the Company’s impairment of goodwill.

SEMTH Master Lease Agreement

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Interest Rate Swaps) held by SEMTH and its subsidiaries at the close of the acquisition.

The Company concluded that SEMTH does not meet the definition of a business or variable interest entity.

The Company concluded that SEMTH does not meet the definition of a business or VIE.

The purchase of SEMTH's future revenue has been accounted for as an acquisition of financial assets.

9 unchanged sentences

Non-Recourse Debt ) .

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The Tredegar Acquisition has been accounted for as an acquisition of assets, wherein the total consideration paid was allocated to the assets acquired and liabilities assumed based on their relative fair value.

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The Company estimated the fair value of the Tredegar Acquisition to be approximately $ 21.2 million, inclusive of transaction costs of $ 0.3 million, of which $ 19.6 million was allocated to the solar energy systems.

NJR Acquisition

On November 22, 2024, the Company acquired approximately 9,800 solar energy systems from the subsidiary of a publicly traded, regulated utility company for $ 132.5 million (the “NJR Acquisition”) pursuant to an asset purchase agreement (the “APA”).

The solar energy systems acquired have an average remaining contract life of approximately 11 years.

The NJR Acquisition was funded in part by the proceeds from the concurrent issuance of the SP5 Facility, as defined below (See Note 8.

Non-Recourse Debt ) and $ 22.7 million of the Company’s cash balances.

Under the APA, the Company may be obligated to acquire approximately 200 additional solar energy systems, subject to those systems having achieved operational milestones.

Assuming those milestones are achieved, the aggregate purchase consideration payable with respect to these additional solar energy systems would be approximately $ 5.0 million pursuant to the APA, subject to adjustment thereof.

Subsequently in 2025, the Company has acquired 83 of these additional solar energy systems, in the aggregate, for approximately $ 1.5 million in cash.

The Company is unable to anticipate the ultimate outcome of these additional solar energy systems that it may be obligated to acquire.

The NJR Acquisition has been accounted for as an acquisition of assets, wherein the total consideration paid was allocated to the assets acquired and liabilities assumed based on their relative fair value.

The Company’s determination of the fair value of assets acquired and liabilities assumed was based on an independent third-party valuation, which involved significant estimates and assumptions, including Level 3 (unobservable) inputs, using the income method approach to value long-lived assets.

The Company engages third-party appraisal firms to assist in the fair value determination, however management is responsible for, and ultimately determines the fair value.

The Company estimated the fair value of the NJR Acquisition to be approximately $ 132.5 million, inclusive of transaction costs of $ 0.3 million, all of which was allocated to the solar energy systems.

Spruce Power Holding Corporation

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Property and Equipment, Net

Property and equipment consisted of the following as of December 31, 2023 and 2022:

Property and equipment, net consisted of the following as of December 31, 2024 and 2023:

As of December 31,

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Property and equipment, net $ 589,014 $ 484,406

Depreciation expense related to solar energy systems is included within cost of revenues in the consolidated statements of operations, and for the years ended December 31, 2023 and 2022 was $ 23.8 million and $ 6.5 million, respectively.

Depreciation expense related to other property and equipment is included within selling, general and administrative expenses in the consolidated statements of operations, and for the years ended December 31, 2023 and 2022 was $ 0.4 million and $ 0.8 million, respectively.

Depreciation expense related to solar energy systems is included within cost of revenues - solar energy systems depreciation within the consolidated statements of operations, and for the years ended December 31, 2024 and 2023 was $ 23.4 million and $ 23.8 million, respectively.

Depreciation expense related to other property and equipment is included within selling, general and administrative expenses within the consolidated statements of operations, and for the years ended December 31, 2024 and 2023 was $ 0.2 million and $ 0.4 million, respectively.

Intangible Assets, Net

The following table presents the detail of intangible assets, net as recorded in the consolidated balance sheets as of December 31, 2023:

The following table presents the detail of intangible assets, net as recorded in the consolidated balance sheets as of December 31, 2024 and 2023:

As of December 31,

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Amortization of intangible assets for the year ended December 31, 2024 was $ 1.2 million, of which $ 0.5 million and $ 0.7 million were recorded within revenues and selling, general and administrative expenses, respectively.

As of December 31, 2023, expected amortization of intangible assets for each of the five succeeding fiscal years and thereafter is as follows:

Amortization of intangible assets for the year ended December 31, 2023 was $ 1.8 million, of which $ 0.8 million and $ 1.0 million were recorded within revenues and selling, general and administrative expenses, respectively.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

As of December 31, 2024, expected amortization of intangible assets for each of the five succeeding fiscal years and thereafter is as follows:

As of December 31,

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Accrued taxes, stock-based compensation 1,138 752

Accrued settlements — 451

Deferred purchase price consideration, World Energy — 201

Accrued operating and maintenance 1,890 2,079

Accrued expenses and other current liabilities

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Non-Recourse Debt

The following table provides a summary of the Company’s debt as of December 31, 2023 and 2022:

The following table provides a summary of the Company’s non-recourse debt as of December 31, 2024 and 2023:

As of December 31,

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Deutsche Bank Credit Agreement, SP4 Facility August 2025 — 125,000

Barings GPSF Credit Agreement, SET Facility

April 2042 130,000 —

Banco Santander Credit Agreement, SP5 Facility

November 2027 109,842 —

Unamortized fair value adjustment (1)

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Unamortized deferred financing costs ( 3,342 ) ( 341 )

Total non-recourse debt

705,331 618,780

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This adjustment to fair value is being amortized to interest expense over the life of the related debt instruments using the effective interest method.

Amortization expense for the fair value adjustment for the years ended December 31, 2023 and 2022 was $ 5.9 million and $ 1.8 million, respectively.

Amortization expense for the fair value adjustment and deferred financing costs for the years ended December 31, 2024 and 2023 was $ 6.0 million and $ 5.9 million, respectively.

SVB Credit Agreement

The SVB Credit Agreement (the “SP 1 Facility”), executed with Silicon Valley Bank (“SVB”), a division of First-Citizens Bank & Trust Company, includes a debt service reserve letter of credit (the “SP 1 LC”) with related amounts outstanding of $ 6.1 million as of December 31, 2023.

Amounts outstanding under the SP 1 LC bear interest of 2.38 % per annum and unused amounts bear interest at 0.50 % per annum.

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The applicable margin is 2.25 % per annum for the first three years, 2.375 % per annum from the third anniversary through the sixth anniversary and 2.5 % per annum starting on the sixth anniversary.

The effective interest rate on the SP 1 Facility as of December 31, 2023 was 7.96 %.

The obligations of the Company under the SP 1 Facility are secured by substantially all of the assets and equity interest in the Company.

The effective interest rate on the SP 1 Facility was 7.16 % and 7.96 % as of December 31, 2024 and 2023, respectively.

The obligations of the Company under the SP 1 Facility are secured by substantially all of the assets and equity interest in certain of the Company’s subsidiaries.

The SP 1 Facility requires the Company to be in compliance with various covenants, including debt service coverage ratios and as of December 31, 2024, the Company was in compliance with the required covenants under the SP 1 Facility.

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The SP2 Facility Amendment was treated as a debt modification under ASC 470-50, Debt — Modifications and Extinguishments .

The Company also incurred related $ 0.4 million of deferred financing costs, which is being amortized to interest expense over the term of the loan.

The Company also incurred $ 0.4 million of deferred financing costs, which is being amortized to interest expense over the term of the loan.

Related unamortized deferred financing costs were $ 0.9 million as of December 31, 2024.

Amounts outstanding under the SP 2 LC, as amended, were $ 7.0 million as of December 31, 2023.

The effective interest rate on the SP 2 Facility as of December 31, 2023 was 8.04 %.

The obligations of the Company under the SP 2 Facility are secured by substantially all of the assets and equity interest in one of the Company’s subsidiaries.

Amounts outstanding under the SP 2 LC, as amended, were $ 6.0 million and $ 7.0 million as of December 31, 2024 and 2023, respectively.

The effective interest rate on the SP 2 Facility was 7.25 % and 8.04 % as of December 31, 2024 and 2023, respectively.

The obligations of the Company under the SP 2 Facility are secured by substantially all of the assets and equity interest in certain of the Company’s subsidiaries.

The SP 2 Facility requires the Company to be in compliance with various covenants, including debt service coverage ratios, and as of December 31, 2024, the Company was in compliance with the required covenants under the SP 2 Facility.

Key Bank Credit Agreement

The Key Bank Credit Agreement (the “SP 3 Facility”), executed with KeyBank National Association, includes a debt service reserve letter of credit (the “SP 3 LC”) with related amounts outstanding of $ 4.1 million as of December 31, 2023.

Amounts outstanding under the SP 3 LC bear interest of 3.00 % per annum.

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The applicable margin is 3.00 % per annum for the first three years, 3.125 % per annum from the third anniversary through the fifth anniversary and 3.25 % per annum starting on the fifth anniversary.

The effective interest rate on the SP 3 Facility as of December 31, 2023 was 8.66 %.

The obligations of the Company under the SP 3 Facility are secured by substantially all of the assets and equity interest in one of the Company’s subsidiaries.

The effective interest rate on the SP 3 Facility was 7.86 % and 8.66 % as of December 31, 2024 and 2023, respectively.

The obligations of the Company under the SP 3 Facility are secured by substantially all of the assets and equity interest in certain of the Company’s subsidiaries.

The SP 3 Facility requires the Company to be in compliance with various covenants, including debt service coverage ratios, and as of December 31, 2024, the Company was in compliance with those required covenants under the SP 3 Facility.

Second Key Bank Credit Agreement

The Second Key Bank Credit Agreement, executed with Key Bank National Association as the administrative agent and certain third parties as the lenders, includes term loans which require quarterly principal payments, mature in April 2030 and bear interest at 8.25 % per annum.

The effective interest rate on term loans under the Second Key Bank Agreement as of December 31, 2023 was 8.25 %.

The Second Key Bank Credit Agreement, executed with Key Bank National Association as the administrative agent and certain third parties as the lenders, includes term loans which require quarterly interest payments, mature in April 2030 and bear interest at 8.25 % per annum.

The effective interest rate on term loans under the Second Key Bank Agreement was 8.25 % as of December 31, 2024 and 2023, respectively.

The obligations of the Company under the Second Key Bank Agreement are secured by substantially all of the assets and equity interest in certain of the Company’s subsidiaries.

The Second Key Bank Credit Agreement requires the Company to be in compliance with various covenants, including debt service coverage ratios, and as of December 31, 2024, the Company was in compliance with those required covenants under the Second Key Bank Credit Agreement.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Deutsche Bank Credit Agreement

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For the period from the Closing Date through the first twelve months , the applicable margin is 2.25 % per annum, 2.50 % for the following six months , and 2.75 % for the next six months , and 3.00 % through the maturity date.

The term loan required quarterly payments, which began on August 17, 2022, and if the outstanding loan balance exceeded the borrowing base on a calculation date, the remaining balance would become due in a single payment in August 2025.

On June 26, 2024, the Company fully repaid the outstanding balance on the SP4 Facility of $ 125.0 million using proceeds from the SET Facility, as defined below.

The repayment of the SP4 Facility was treated as a debt extinguishment under ASC 470-50, Debt—Modifications and Extinguishments .

In connection with the repayment of the SP4 Facility, the Company settled the related interest rate swap contracts (see Note 9.

Interest Rate Swaps for further discussion).

Barings GPSF Credit Agreement

On June 26, 2024, Spruce SET Borrower 2024, LLC (the “SET Borrower”), a wholly owned subsidiary of the Company, entered into a non-recourse Credit Agreement with Barings GPSF LLC, which provided a fixed interest term loan in the aggregate principal amount of $ 130.0 million (the “SET Facility”).

The proceeds of the SET Facility were primarily used to repay the SP4 Facility discussed above.

The SET Borrower incurred approximately $ 2.1 million of deferred financing costs related to the SET Facility, which are being amortized on a straight-line basis over the anticipated debt servicing period.

The SET Facility matures on April 17, 2042 and requires quarterly interest payments at 6.89 % per annum beginning August 2024.

The effective interest rate on the SET Facility as of December 31, 2024 was 6.89 %.

Effective December 26, 2027, the SET Facility requires additional interest to be accrued on any outstanding aggregate principal or unpaid accrued interest.

The SET Facility is collateralized by all of the assets and property of the SET Borrower.

The SET Facility requires the SET Borrower to be in compliance with various covenants, and the SET Borrower was in compliance with the required covenants under the SET Facility as of December 31, 2024.

Banco Santander Credit Agreement

On November 22, 2024, Spruce Power 5 Borrower 2024, LLC (the “SP5 Borrower”), a wholly owned subsidiary of the Company, entered into a non-recourse credit agreement with Banco Santander, S.A., New York, which provided for a 3-year term loan facility in the aggregate principal amount of approximately $ 109.8 million (the “SP5 Facility”), of which proceeds were used to fund the NJR Acquisition.

The SP5 Facility matures on November 22, 2027 and requires quarterly interest payments with the remaining balance due in a single payment on November 22, 2027.

Borrowings under the SP5 Facility bear interest at a variable rate equal to the SOFR as administered by the Federal Reserve Bank of New York plus a margin of 2.15 % from the original closing date through the end of the 24th month after the original closing date, and 2.75 % from the beginning of the 25th month after the original closing date until the date all principal and accrued and unpaid interest has been paid in full.

The effective interest rate on the SP5 Facility as of December 31, 2024 was 6.48 %.

The term loan requires quarterly payments, which began on August 17, 2022 and should the outstanding loan balance exceed the borrowing base on such calculation date, the remaining balance would become due in a single payment in August 2025.

The SP4 Facility requires the Company to be in compliance with various affirmative and negative covenants and as of December 31, 2023, the Company was in compliance with the covenants under the SP 4 Facility.

The SP5 Facility is collateralized by all of the assets and property of the SP5 Borrower.

The SP5 Facility requires the SP5 Borrower to be in compliance with various covenants, and the SP5 Borrower was in compliance with the required covenants under the SP5 Facility as of December 31, 2024.

Spruce Power Holding Corporation

4 unchanged sentences

2025 $ 28,310

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Interest Rate Swaps

The purpose of the Company’s swap agreements is to convert the floating interest rate on its credit agreements (discussed above) to a fixed rate.

In connection with the acquisition of Legacy Spruce Power, the Company assumed interest rate swaps from agreements Legacy Spruce Power executed with four financial institutions.

The purpose of the swap agreements is to convert the floating interest rate on the Company's debt obligation under its credit agreements to a fixed rate.

As of December 31, 2023 and 2022, the notional amount of the interest rate swaps covers approximately 95 % and 97 % of the balance of the Company’s floating rate term loans, respectively.

As part of the SEMTH Acquisition in 2023, the Company assumed interest rate swaps related to the SP4 Facility, which were settled concurrently with the full repayment of the SP4 Facility in June 2024 and resulted in a gain of approximately $ 3.6 million within interest expense, net during the year ended December 31, 2024.

The Company also completed the early settlement of certain interest rate swaps, which resulted in a gain of approximately $ 1.6 million within interest expense, net during the year ended December 31, 2024.

As of December 31, 2024 and 2023, the notional amount of the interest rate swaps covered approximately 91 % and 95 % of the balance of the Company’s floating rate term loans, respectively.

As of December 31, 2024, the following interest rate swaps are outstanding (in thousands):

# Notional Amount Fixed Rate Effective Date Early Termination Date Maturity Date Total Fair Value Asset (Liability)

# Notional Amount Fixed Rate Effective Date Maturity Date Total Fair Value Asset (Liability)

1 $ 11,339 0.78 % 10/31/2022 1/31/2031 $ 1,094

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$ 399,972 $ 24,287

(1) The amount reflects the swap related to the SP2 Facility Amendment transacted concurrently with the Tredegar Acquisition to hedge the floating rate of the incremental term loan (See Note 8.

Non-Recourse Debt).

(2) The amount reflects the swap related to the SP5 Facility transacted concurrently with the NJR Acquisition to hedge the floating rate of the term loan (See Note 8.

Non-Recourse Debt).

During the year ended December 31, 2024, the aggregate impact of the Company’s interest rate swaps in the consolidated statements of operation was $ 15.2 million, of which $ 2.8 million related to unrealized losses and $ 18.0 million related to realized gains, which is recognized within interest expense, net in the consolidated statements of operation.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

(1) The amounts reflect, respectively, the Deutsche Bank swap assumed by the Company as part of the SEMTH Acquisition and an additional swap related to the SP2 Facility Amendment transacted concurrently with the Tredegar Acquisition to hedge the floating rate of the incremental term loans (See Note 8.

Non-Recourse Debt).

During the year ended December 31, 2023, the aggregate change in the fair value of the interest rate swaps was $ 8.9 million, of which $ 4.8 million related to unrealized losses as reflected in the consolidated statements of operation and $ 13.7 million related to realized gains and is recognized within interest expense, net.

During the year ended December 31, 2022, the aggregate change in the fair value of the interest rate swaps was $ 7.7 million, of which $ 5.6 million related to unrealized gains as reflected in the consolidated statements of operation and $ 2.1 million related to realized gains and is recognized within interest expense, net in the consolidated statements of operations.

During the year ended December 31, 2023, the aggregate impact of the Company’s interest rate swaps in the consolidated statements of operation was $ 8.9 million, of which $ 4.8 million related to unrealized losses and $ 13.7 million related to realized gains, which is recognized within interest expense, net in the consolidated statements of operations.

Fair Value Measurements for further information on the Company’s determination of the fair value of its interest rate swaps.

Right-of-Use Assets and Lease Liabilities

The Company’s operating leases are primarily office space, while finance leases are certain office equipment.

The Company’s related Right-of-Use (“ROU”) assets and lease liabilities are comprised of the following as of each period end:

The Company’s operating leases primarily relate to office space.

The Company’s related ROU assets and lease liabilities are comprised of the following as of each period end:

As of December 31,

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Operating leases:

Right-of-use assets $ 5,933 $ 2,686

Lease liability, current 1,166 781

Lease liability, non-current 5,731 2,365

Finance leases:

Right-of-use assets $ — $ 116

ROU assets $ 4,750 $ 5,933

Lease liability, current 892 1,166

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Sublease income 525 542

Operating cash flows from operating right-of-use assets 1,969 352

Initial recognition of operating right-of-use assets 933 —

Remeasurement of operating right-of-use assets 1,280 —

Operating cash flows from operating ROU assets 2,285 1,969

Initial recognition of operating ROU assets — 933

Remeasurement of operating ROU assets — 1,280

During the year ended December 31, 2023, the Company (i) recognized $ 0.9 million of operating ROU assets and lease liabilities due to a new lease for the relocation of its corporate office in September 2023, (ii) remeasured its operating ROU assets due to changes in the lease terms of certain underlying leases, resulting in an aggregate increase in the related ROU assets and lease liabilities of approximately $ 1.3 million, and (iii) settled certain operating leases, which were either terminated or assumed by a third party, in the amount of approximately $ 0.4 million (presented in the consolidated statements of cash flows) and a related net gain of less than $ 0.1 million included within gain on asset disposal in the consolidated statements of operations.

In addition, during the year ended December 31, 2023, the Company purchased the equipment related to its existing finance leases for approximately $ 0.1 million, thereby settling all outstanding finance lease liabilities as of December 31, 2023.

The Company also recognized a related loss of approximately $ 0.1 million included within gain on asset disposal in the consolidated statements of operations.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

During the year ended December 31, 2023, the Company (i) recognized $ 0.9 million of operating right-of-use assets and lease liabilities due to a new lease for the relocation of its corporate office in September 2023, (ii) remeasured its operating right-of-use assets due to changes in the lease terms of certain underlying leases, resulting in an aggregate increase in the related right-of-use assets and lease liabilities of approximately $ 1.3 million, and (iii) settled certain operating leases, which were either terminated or assumed by a third party, in the amount of approximately $ 0.4 million (presented in the consolidated statements of cash flows) and a related net gain of less than $ 0.1 million included within (gain) loss on asset disposal in the consolidated statements of operations.

The Company also recognized a related loss of approximately $ 0.1 million included within (gain) loss on asset disposal in the consolidated statements of operations.

The Company was a party to a noncancelable lease agreement for office, research and development, and vehicle development and installation facilities with a holder of more than 5% of the Company’s Common Stock, of which the lease expired in the third quarter of 2022.

The related operating lease costs for the year ended December 31, 2022 was $ 0.1 million.

As of December 31,

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Weighted-average discount rate – operating leases 7.2 % 7.2 %

As of December 31, 2023, the annual minimum lease payments of the Company’s operating lease liabilities were as follows (in thousands):

As of December 31, 2024, the annual minimum lease payments of the Company’s operating lease liabilities were as follows:

As of December 31,

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Present value of future minimum lease payments $ 5,740

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Fair Value Measurements

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Private Warrants are valued using a Black-Scholes model, pursuant to the inputs provided in the table below:

The Private Warrants were valued using a Black-Scholes model, pursuant to the inputs provided in the table below:

Assumptions for Assets and Liabilities Measured at Fair Value on a Recurring Basis

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The interest rate swap valuation is classified as Level 2 of the fair value hierarchy.

The fair value of the Company’s non-recourse debt as of December 31, 2024 and 2023 was $ 723.8 million and $ 628.2 million, respectively.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The following table sets forth the Company’s assets and liabilities which are measured at fair value on a recurring basis by level within the fair value hierarchy:

4 unchanged sentences

Money market accounts 72,142 — — 72,142

Treasury securities

108,964 — — 108,964

Total $ 72,142 $ 24,672 $ — $ 96,814

Debt $ — $ 628,177 $ — $ 628,177

Private Warrants — — 17 17

Interest rate swaps $ — $ 385 $ — $ 385

Total $ — $ 385 $ — $ 385

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Fair Value Measurements as of

5 unchanged sentences

Total $ 130,439 $ 27,883 $ — $ 158,322

Debt $ — $ 533,168 $ — $ 533,168

Private Warrants — — 17 17

Fair value of obligation to issue shares of common stock to sellers of World Energy — — 151 151

Total $ — $ — $ 17 $ 17

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Balance at the beginning of the period $ 17 $ 407

Fair value adjustments – warrant liability ( 239 ) ( 5,148 )

Fair value adjustments and settlements of liability, net – World Energy (1)

Fair value adjustments – Private Warrants

( 17 ) ( 239 )

Fair value adjustment of contingent consideration and settlements of liability, net – Quantum contingent consideration (1)

Fair value adjustments and settlements of liability, net – World Energy (1)

Balance at the end of the period $ — $ 17

(1) Related to discontinued operations.

During the year ended December 31, 2024, the Company identified indicators that the carrying amount of goodwill may be impaired due to a continuous decline in the Company’s stock price and market capitalization.

The Company performed a quantitative test using a market approach and an income approach, which both resulted in an impairment of goodwill.

As such, the Company recorded a charge of $ 28.8 million to fully impair the Company’s goodwill within the consolidated statements of operations for the year ended December 31, 2024.

There was no goodwill impairment charge during the year ended December 31, 2023.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Stock-Based Compensation Expense

Stock-based compensation expense for stock options and restricted stock units for the years ended December 31, 2024 and 2023 was $ 2.7 million and $ 2.9 million, respectively.

As of December 31, 2023, there was $ 7.1 million of unrecognized compensation cost, respectively, related to stock options and restricted stock units which is expected to be recognized over the remaining vesting periods, with a weighted-average period of 2.8 years.

As of December 31, 2024, there was $ 7.6 million of unrecognized compensation cost related to stock options and restricted stock units which is expected to be recognized over the remaining vesting periods, with a weighted-average period of 2.6 years.

Stock Options

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A summary of stock option award activity for the years ended December 31, 2024 and 2023 was as follows:

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Options Shares

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Outstanding at December 31, 2022

Granted 5,435 15.60

761,408 $ 11.12 2.7

Exercised ( 489,436 ) 1.94

2 unchanged sentences

193,156 $ 17.89 5.8

Granted 295,229 3.75

Exercised — —

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Cash received from options exercised for the years ended December 31, 2024 and 2023 was approximately $ 0.0 million and $ 0.9 million, respectively.

There were no stock options issued during the year ended December 31, 2023.

The fair value of stock options issued during the year ended December 31, 2022 was measured with the following assumptions:

During the year ended December 31, 2024, the Company granted 295,229 stock options to its President and Chief Executive Officer (the “CEO”) upon his appointment to such positions effective April 12, 2024.

There were no stock options granted during the year ended December 31, 2023.

The fair value of stock options granted during the year ended December 31, 2024 was measured with the following assumptions:

Expected volatility 71.3 - 78.4 %

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Restricted stock units activity during the years ended December 31, 2024 and 2023 was as follows:

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Shares Weighted Average Grant Date Fair Value Per Share

11 unchanged sentences

2,233,816 $ 4.60

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Restricted Stock Award Modifications

In connection with the sale of the Company’s Drivetrain business to Shyft which closed in January 2023, the Company modified certain stock awards to employees of the Drivetrain business who were terminated in December 2022 and subsequently commenced employment at Shyft.

The modification consisted of the acceleration of the vesting of all awards including stock options and restricted stock units scheduled to vest in 2023, which would have otherwise been forfeited.

The vesting date of these awards was accelerated to December 31, 2022, resulting in an incremental stock based compensation expense of $ 0.3 million in 2022.

CEO's Ladder Restricted Stock Unit Award

On September 9, 2022, in connection with the acquisition of Legacy Spruce Power and his appointment as the Company's President, the Company granted to its CEO a restricted stock unit award (the “Ladder RSUs”) of 208,333 shares of common stock.

The Ladder RSUs vest in 10 % increments on the dates the Plan administrator certifies the applicable milestone stock prices have been achieved or exceeded, provided that the CEO remains employed on the date of certification and such achievement occurs within ten years of the date of the grant.

The Company used a Monte Carlo simulation valuation model to determine the fair value of the award as of the Acquisition Date, which is presently accounted for as a liability.

During the year ended December 31, 2024, the Company granted restricted stock unit awards of 88,636 shares of common stock to the CEO upon his appointment effective April 12, 2024.

In addition, upon the separation of the prior President and Chief Executive Officer (“Former CEO”) from the Company effective April 12, 2024, 97,994 and 244,267 restricted stock units awarded to the Former CEO were vested and forfeited, respectively.

The Company recorded $ 0.5 million of expense related to the 97,994 vested awards during the year ended December 31, 2024.

Former CEO's Ladder Restricted Stock Unit Award

In connection with the acquisition of Legacy Spruce Power and his appointment as the Company's President effective September 9, 2022, the Company granted to its Former CEO a restricted stock unit award (the “Ladder RSUs”) of 208,333 shares of common stock.

The Ladder RSUs were to vest in 10 % increments on the dates the Plan administrator certifies the applicable milestone stock prices have been achieved or exceeded, provided that the Former CEO remained employed on the date of certification and such achievement occurs within ten years of the date of the grant.

The Company used a Monte Carlo simulation valuation model to determine the fair value of the award as of the Acquisition Date, which was accounted for as a liability until the separation of the Former CEO effective April 12, 2024.

The following inputs were used in the simulation:

1 unchanged sentence

For each tranche, a fair value was calculated as well as a derived service period which represents the median number of years it is expected to take for the Ladder RSUs to meet their corresponding milestone stock price excluding the simulation paths that result in the Ladder RSUs not vesting within the 10 -year term of the agreement.

Each tranche's fair value will be amortized ratably over the respective derived service period.

Each tranche's fair value would have been amortized ratably over the respective derived service period.

The fair value and derived service period of each tranche was as follows:

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Stock Price Tranche Fair Value Derived Service Period (in years)

9 unchanged sentences

179.60 6.80 5.10

The Company recognized expense related to the Ladder RSUs of approximately $ 0.5 million and $ 0.1 million for the years ended December 31, 2023 and 2022.

The Company recognized no expense related to the Ladder RSUs for the year ended December 31, 2024, and recognized approximately $ 0.5 million related to the Ladder RSUs for the year ended December 31, 2023.

Upon separation of the Former CEO from the Company effective April 12, 2024, the Ladder RSUs were terminated and the Company recorded a gain of $ 0.7 million during the year ended December 31, 2024.

Redeemable Noncontrolling Interest and Noncontrolling Interests

In November 2022, the Company purchased the remaining membership interests in Ampere Solar Owner IV, LLC, RPV Fund 13, LLC and Level Solar Fund III, LLC for aggregate cash payments of $ 4.6 million.

In August 2023, the Company also purchased the remaining membership interests in Level Solar Fund IV for approximately $ 0.1 million, thereby owning 100 % of the membership interests and eliminating its only remaining redeemable noncontrolling interest upon the purchase.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

In August 2023, the Company purchased the remaining membership interests in Level Solar Fund IV for approximately $ 0.1 million, thereby owning 100 % of the membership interests and eliminating its only remaining redeemable noncontrolling interest upon the purchase.

The following table summarizes the Company’s noncontrolling interests as of December 31, 2024:

9 unchanged sentences

After the related flip date (or, if the tax equity investor has a deficit capital account, typically after such deficit has been eliminated), the Class A members' allocation of taxable income (loss) will typically decrease to 5 % (or, in some cases, a higher percentage if required by the tax equity investor) and the Class B members' allocation of taxable income (loss) will increase by an inverse amount.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The historical redeemable noncontrolling interests and noncontrolling interests are comprised of Class A units, which represent the tax equity investors' interest in the tax equity entities.

Both the Class A members and Class B members may have call options to allow either member to redeem the other member's interest in the tax equity entities upon the occurrence of certain contingent events, such as bankruptcy, dissolution/liquidation and forced divestitures of the tax equity entities.

Additionally, the Class B members may have the option to purchase all Class A units, which is typically exercisable at any time during the periods specified under their respective governing documents, and, in regards to the tax equity entities historically classified as redeemable noncontrolling interests, they had the contingent obligation to purchase all Class A units if the Class A members exercise their right to withdraw, which is typically exercisable at any time during the nine-month period commencing upon the applicable flip date.

The carrying values of the Company’s historical redeemable noncontrolling interests were equal to or greater than the estimated redemption values as of December 31, 2022.

The Company had no redeemable noncontrolling interests as of December 31, 2023.

Additionally, the Class B members may have the option to purchase all Class A units, which is typically exercisable at any time during the periods specified under their respective governing documents, and, in regards to the tax equity entities historically classified as redeemable noncontrolling interests, they had the contingent obligation to purchase all Class A units if the Class A members exercise their right to withdraw, which is typically exercisable at any time during the three-month period commencing upon the applicable flip date.

The Company had no redeemable noncontrolling interests as of December 31, 2024 and 2023.

Total assets on the consolidated balance sheets include $ 36.0 million as of December 31, 2024 and $ 38.0 million as of December 31, 2023 of assets held by the Company's VIEs, which can only be used to settle obligations of the VIEs.

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Restructuring

Subsequent to the acquisition of Legacy Spruce Power, the Company commenced the evaluation of personnel and processes of various corporate functions between Spruce Power and legacy XL Fleet Corp.

to optimize the Company’s future corporate structure and implemented certain restructuring actions.

As a result of exiting the Drivetrain business and corporate restructuring actions, the Company recognized, in the aggregate, restructuring and related charges of approximately $ 21.6 million during the year ended December 31, 2022, which included (i) $ 4.4 million of severance charges paid in 2022 or 2023, (ii) $ 5.0 million impact of accelerated vesting of certain equity awards and (iii) $ 12.3 million of charges related to inventory obsolescence.

During the year ended December 31, 2023, the Company recognized incremental restructuring charges of approximately $ 0.7 million related to severance charges, all of which were paid in 2023.

The severance charges and accelerated vesting of equity awards are included in selling, general and administrative expenses within the Company’s consolidated statements of operations for the years ended December 31, 2023 and 2022.

Inventory obsolescence charges are included in net loss from discontinued operations within the Company’s consolidated statements of operations for the year ended December 31, 2022.

The following table summarizes the activity during the years ended December 31, 2023 and 2022 for the Company's restructuring liability:

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Years Ended December 31,

As a result of exiting the Drivetrain business and related corporate restructuring actions, the Company recognized severance charges of approximately $ 0.7 million during the year ended December 31, 2023, all of which were paid in 2023.

The severance charges are included in selling, general and administrative expenses within the Company’s consolidated statements of operations for the year ended December 31, 2023, and the following table summarizes the activity during the period for the Company's restructuring liability:

Year Ended December 31,

(Amounts in thousands) 2023

3 unchanged sentences

Balance at the end of the period $ —

The Company recognized no severance charges during the year ended December 31, 2024.

Commitments and Contingencies

Sponsorship Commitment

In February 2021, the Company agreed to a sponsorship agreement with several entities related to the UBS Arena, Belmont Park and the NY Islanders Hockey Club.

Pursuant to that agreement, the Company was designated an “Official Electric Transportation Partner of UBS Arena” with various associated marketing and branding rights, including the development of electric vehicle charging stations.

The sponsorship agreement had a term of three years with a sponsor fee of approximately $ 0.5 million per year, of which approximately $ 0.3 million and $ 0.2 million were paid in June 2021 and January 2022, respectively.

One of the Company’s directors is a co-owner of the NY Islanders Hockey Club.

During the second quarter of 2022, the Company exercised its option to terminate the final two years of the agreement and incurred no further sponsor fees.

Legal Proceedings

The Company is periodically involved in legal proceedings and claims arising in the normal course of business, including proceedings relating to intellectual property, employment and other matters.

Management believes the outcome of these proceedings will not have a significant adverse effect on the Company’s financial position, operating results, or cash flows.

Management believes the outcome of these proceedings, as outlined below, will not have a significant adverse effect on the Company’s financial position, operating results, or cash flows.

Securities Class Action Proceedings

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1:21-cv-2002, and a lead plaintiff was appointed in June 2021.

On July 20, 2021, an amended complaint was filed alleging that certain public statements made by the defendants between October 2, 2020, and March 2, 2021, violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.

Following negotiations with a mediator, in September 2023, the Company and the plaintiffs agreed on a settlement in principle in the aggregate amount of $ 19.5 million (the “Settlement Amount”), and on December 6, 2023, the lead plaintiff and the defendants entered into a stipulation and agreement of settlement requiring the Company to pay the Settlement Amount to resolve the class action litigation and the related legal fees and administration costs.

Furthermore, on January 18, 2024, the court preliminarily approved the proposed settlement as being fair, reasonable, and adequate, and scheduled a hearing for April 30, 2024, to, among other things, consider whether to approve the proposed settlement.

The Company expects the Settlement Amount to be offset by approximately $ 4.5 million of related loss recoveries from the Company’s directors and officers liability insurance policies with third parties, which the amount is included in prepaid expenses and other current assets on the consolidated balance sheet as of December 31, 2023.

The Company accrued for the $ 19.5 million Settlement Amount as of December 31, 2023 (See Note 7.

Accrued Expenses and Other Current Liabilities) and paid the $ 15.0 million net settlement amount to the settlement claims administrator in February 2024.

On July 20, 2021, an amended complaint was filed alleging that certain public statements made by the defendants between October 2,

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

2020, and March 2, 2021, violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.

On April 30, 2024, the New York Court approved a final settlement of the Class Action Litigation.

The Settlement Amount was offset by approximately $ 4.5 million of related loss recoveries from the Company’s directors and officers liability insurance policy with third parties, which was paid out in February 2024.

The Company paid the $ 15.0 million net settlement amount to the settlement claims administrator in February 2024.

On September 20, 2021, and October 19, 2021, two class action complaints were filed in the Delaware Court of Chancery against certain of the Company’s current officers and directors, and the Company’s sponsor of its special purpose acquisition company merger, Pivotal Investment Holdings II LLC.

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2021-0808, and an amended complaint was filed on January 31, 2022.

The amended complaint alleges various breaches of fiduciary duty against the Company and/or its officers, several allegedly misleading statements made in connection with the merger, and aiding and abetting breaches of fiduciary duty in connection with the negotiation and approval of the December 21, 2020 merger and organization of Legacy XL to become XL Fleet Corp.

The Company believes the allegations asserted in both class action complaints are without merit and is vigorously defending the lawsuit.

At this time, the Company is unable to estimate potential losses, if any, related to the lawsuit.

Defendants filed a motion to dismiss the amended complaint on May 13, 2022, and on July 11, 2022, plaintiffs filed a second amended complaint.

The second amended complaint alleges various breaches of fiduciary duty against the Company and/or its officers, several allegedly misleading statements made in connection with the merger, and aiding and abetting breaches of fiduciary duty in connection with the negotiation and approval of the December 21, 2020 merger and organization of XL Hybrids, Inc., a Delaware corporation (“Legacy XL”) to become XL Fleet Corp.

On August 19, 2022, defendants moved to dismiss the second amended complaint, which was granted in part and denied in part on June 9, 2023.

The parties then engaged in discovery.

On November 13, 2024, the Company filed a stipulation and settlement agreement seeking court approval to settle this matter in full for $ 4.75 million, which is currently accrued for as of December 31, 2024 (See Note 7.

Accrued Expenses and Other Current Liabilities).

On March 26, 2025, the court approved the stipulation and settlement agreement.

Shareholder Derivative Actions

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The action was filed by a shareholder purportedly on XL Fleet Corp.’s behalf, and raises claims for contribution, as well as claims for breach of fiduciary duty, waste of corporate assets, unjust enrichment, and abuse of control.

On December 8, 2023, the parties submitted a joint status report advising the court that they had reached a settlement-in-principle to settle this action, the Reali v.

Griffin, et al.

action, the Tucci v.

Ledecky, et al.

action, and a stockholder litigation demand (collectively, the “Derivative Matters”).

Plaintiffs filed a motion for preliminary approval of the settlement on March 1, 2024, which is pending a decision from the court.

The settlement provides for certain corporate governance enhancements and no monetary payments.

Plaintiffs also intend to submit a petition for attorneys’ fees, which defendants intend on opposing.

At this time, the Company is unable to estimate potential losses, if any, related to the potential fee petition.

In March 2023, two shareholder derivative actions were filed in the U.S.

District Court for the District of Delaware (the “Delaware Derivative Actions”).

One action is captioned Reali v.

District Court for the District of Delaware, namely Reali v.

Griffin, et al., C.A.

1:23-cv-00289 and the other action is captioned Tucci v.

1:23-cv-00289 and Tucci v.

Ledecky, et al., C.A.

2 unchanged sentences

1:23-cv-00289.

As noted above, the consolidated action is part of a settlement agreement that has been filed in the U.S.

District Court for the District of Massachusetts.

In August 2023, an additional derivative action was filed in the U.S.

1 unchanged sentence

Ledecky, et al., C.A.

1:23-cv-8591.

On March 11, 2024, all defendants filed motions to dismiss the complaint in its entirety, which are pending before the court.

The settlement agreement for the Derivative Matters described above contains a release that would apply to claims in this action if the settlement agreement is approved by the U.S.

District Court for the District of Massachusetts.

On March 22, 2024, Boyce agreed to voluntarily dismiss the lawsuit.

1:23-cv- 8591 (collectively, the “Derivative Matters”).

On December 8, 2023, the parties reached a settlement-in-principle to settle, the Derivative Matters.

The court granted preliminary approval of the settlement on May 1, 2024, and final approval in full on August 8, 2024.

The settlement provides for certain corporate governance enhancements and no monetary payments.

On August 14, 2024, the court awarded attorney fees of $ 1.0 million, which were paid in September 2024.

State Attorney Generals’ Investigations

The Company has been asked to provide information and documents in response to subpoenas and other requests for information from certain state attorneys general offices regarding, among other things, its sales, marketing, billing, and operations practices.

Specifically, the Company has received subpoenas from the attorneys general for the states of Connecticut, New Jersey, New York and Texas.

The Company has been timely responding to the states’ information requests and otherwise cooperating with these investigations and intends to continue to do so until they are resolved.

At this time, the Company is unable to estimate potential losses, if any, related to these matters.

Spruce Power Holding Corporation

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In connection with the settlement, in October 2023, the Company (among other things) paid a civil monetary penalty of $ 11.0 million which, subject to the discretion of the SEC, will be made available to eligible legacy shareholders through a Fair Fund, termed and administered by the SEC.

On February 9, 2023, US Bank, through its affiliate, Firstar Development, LLC (“Firstar”), filed a motion for summary judgment in lieu of a complaint in New York Supreme Court (the trial level in New York) alleging that the Company failed to fulfill its reimbursement obligations under a 2019 tax recapture guaranty agreement between the parties arising from the alleged recapture by the Internal Revenue Service of tax credits taken by Firstar as an investor in the Company’s subsidiary, Ampere Solar Owner I, LLC.

On February 9, 2023, US Bank, through its affiliate, Firstar Development, LLC (“Firstar”), filed a motion for summary judgment in lieu of a complaint in New York Supreme Court (the trial level in New York) alleging that the Company failed to fulfill its reimbursement obligations under a 2019 tax recapture guaranty agreement between the parties arising from the alleged recapture by the Internal Revenue Service (“IRS”) of tax credits taken by Firstar as an investor in the Company’s subsidiary, Ampere Solar Owner I, LLC.

On May 23, 2023, the Company reached a settlement agreement with Firstar, as the plaintiff, for $ 2.3 million whereby the plaintiff discharged all claims filed against the Company.

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On February 11, 2022, BMZ USA Inc.

(“BMZ”), a battery manufacturer, sued Legacy XL for breach of contract, alleging that Legacy XL failed to timely purchase the full allotment of batteries required under a certain master supply agreement between the parties.

(“BMZ”), a battery manufacturer, sued XL Hybrids for breach of contract, alleging that XL Hybrids failed to timely purchase the full allotment of batteries required under a certain master supply agreement between the parties.

In January 2024, BMZ obtained a judgment for $ 3.9 million against XL Hybrids, Inc.

The Company is appealing the ruling while simultaneously pursuing a settlement.

The Company currently estimates the potential loss to be approximately $ 1.2 million, which has been accrued for as of December 31, 2023 (See Note 7.

In June 2024, BMZ sought to enforce the judgement against the Company in Massachusetts Trial Court and that enforcement action was dismissed in March 2025.

The Company believes it is probable that BMZ will seek to enforce the judgement in another jurisdiction and currently estimates the potential loss to be approximately $ 1.2 million, which has been accrued for as of December 31, 2024 (See Note 7.

Accrued Expenses and Other Current Liabilities).

ITC Recapture Provisions

The IRS may disallow and recapture some, or all, of the ITCs due to improperly calculated basis after a project was placed in service ("Recapture Event").

If a Recapture Event occurs, Spruce Power is obligated to pay the applicable Class A Member a recapture adjustment, which includes the amounts the Class A Members are required to repay the IRS, including interest and penalties, as well as any third-party legal and accounting fees incurred by the Class A Members in connection to the Recapture Event, as specified in the operating agreements.

Such a payment by Spruce Power to the Class A Members are not to be considered a capital contribution to the fund per the operating agreements, nor would it be considered a distribution to the Class A Members.

With the exception of the tax matter related to Ampere Solar Owner I noted above, a Recapture Event was not deemed to be probable by the Company, therefore no accrual has been recorded as of December 31, 2024 and 2023.

Plastic Omnium

Plastic Omnium is the assignee of the contractual rights of Actia Corp.

under a certain battery purchase order between Legacy XL and Actia Corp.

under a certain battery purchase order between XL Hybrids and Actia Corp.

On March 17, 2023, Plastic Omnium sued Legacy XL and the Company for breach of contract, alleging that Legacy XL ordered a total of 1,000 batteries from Plastic Omnium, paid for 455 of those batteries, and then reneged on 545 of those products.

While Plastic Omnium admits it never actually delivered the remaining 545 products, it claims it purchased materials to complete the order, and as a result, Legacy XL and the Company are liable for at least approximately $ 2.5 million.

The Company believes the allegations asserted in this action lack substantial merit, and as a result, is vigorously defending the lawsuit.

At this time, the Company is unable to estimate potential losses, if any, related to the lawsuit.

The Company reached a settlement in principle to settle the matter for $ 1.25 million, which was paid in December 2024.

Parker-Hannifin

On March 11, 2024, the Company filed a lawsuit against Parker-Hannifin for a declaratory judgment, captioned

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

XL Hybrids, Inc.

Parker-Hannifin Corporation, No.

1:24-cv-10894-WGY (D.

Mass, removed from Mass.

State Court No.

2484-CV-00661).

The case related to a contract for the purchase of motors designed, produced and manufactured by Parker-Hannifin for XL Hybrids, Inc.

which was executed in July 2019.

On April 5, 2024, Parker-Hannafin filed counterclaims, alleging that XL Hybrids, Inc.

and the Company were in breach of the contract.

On November 1, 2024, the

parties reached a settlement in principle to settle the matter for $ 0.5 million, which was accrued for as of December 31, 2024, and subsequently paid in January 2025 (See Note 7.

Accrued Expenses and Other Current Liabilities).

Master SREC Purchase and Sale Agreement

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In the event the Company does not deliver such SRECs to the counterparty, the Company could be forced to pay additional penalties and fees as stipulated within the contracts.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

In connection with the acquisition of RPV Holdco 1, LLC, a wholly owned subsidiary of the Company, guaranty agreements were established in May 2020 by and between Spruce Holding Company 1, LLC, Spruce Holding Company 2, LLC, and Spruce Holding Company 3, LLC (“Spruce Guarantors”) and the investor members in certain of the Funds and Prior Funds.

The Spruce Guarantors entered into guarantees in favor of the tax equity investors wherein they guaranteed the payment and performance of Solar Service Experts, LLC, a wholly owned subsidiary of the Company, under the Spruce Power 2 Maintenance Services Agreement and the Class B Member under the Limited Liability Company Agreement (“LLCA”).

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The duration of the Company’s indemnities and guarantees varies, however the majority of these indemnities and guarantees are limited in duration.

Historically, the Company has not been obligated to make significant payments for such obligations, does not anticipate future payments, and as such, no liabilities have been recorded for these indemnities and guarantees as of December 31, 2023 and 2022.

ITC Recapture Provisions

The IRS may disallow and recapture some, or all, of the ITCs due to improperly calculated basis after a project has been placed in service (“Recapture Event”).

If a Recapture Event occurs, the Company is obligated to pay the applicable Class A Member a recapture adjustment, which includes the amounts the Class A Members are required to repay the IRS, including interest and penalties, as well as any third-party legal and accounting fees incurred by the Class A Members in connection with the Recapture Event, as specified in the operating agreements.

Such a payment by the Company to the Class A Members is not to be considered a capital contribution to the fund per the operating agreements, nor would it be considered a distribution to the Class A Members.

With the exception of the tax matter related to Ampere Solar Owner I, LLC noted above, a Recapture Event was not deemed probable by the Company, therefore no related accrual has been recorded as of December 31, 2023 and 2022.

Historically, the Company has not been obligated to make significant payments for such obligations, does not anticipate future payments, and as such, no reserve has been established and no other liabilities have been recorded for these indemnities and guarantees as of December 31, 2024 and 2023.

Insurance Claims and Recoveries related to Maui Fires

In August 2023, a series of wildfires broke out in Hawaii, predominantly on the island of Maui, resulting in real and personal property and natural resource damage, personal injuries and loss of life and widespread power outages.

The Company is currently assessing the impact of these wildfires on its home solar systems and customer contracts in the area;

however, the Company has not been able to validate the extent of the related damage due to limited access to the area.

Based on the Company’s current assessment, the Company wrote off approximately $ 0.1 million during the year ended December 31, 2023, which is reflected within gain (loss) on asset disposal in the consolidated statements of operations.

No material loss claims have been reported to date or recognized within the consolidated financial statements as of December 31, 2023.

In addition, the Company has not recorded any related insurance recoveries as of December 31, 2023.

The Company does not expect this event to have a material impact on its financial position, operating results or cash flows.

The Company assessed the impact of these wildfires on its home solar systems and customer contracts in the area and wrote off $ 0.1 million during the year ended December 31, 2023, which is reflected within gain on asset disposal within the consolidated statements of operations.

Subsequently, the Company received $ 0.2 million related to the insurance recoveries during the year ended December 31, 2024, which is also reflected within gain on asset disposal within the consolidated statements of operations.

Stockholders’ Equity

4 unchanged sentences

Notes to Consolidated Financial Statements

The following shares of Common Stock are reserved for future issuance as of December 31, 2023:

Warrants issued and outstanding 529,931

Restricted stock units issued and outstanding 1,102,094

Stock options issued and outstanding 193,156

The following shares of common stock are issued and outstanding or unvested as of December 31, 2024:

Warrants 529,167

Restricted stock units 2,233,816

Stock options 488,385

Total 3,251,368

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Share Repurchase Program

On May 9, 2023, the Company's Board of Directors authorized a share repurchase program (the “Repurchase Program”) for the repurchase of up to $ 50.0 million of the Company's outstanding common stock through May 15, 2025.

The shares may be repurchased from time to time in open market transactions or privately negotiated transactions at the Company's discretion, subject to market conditions and other factors, including regulatory considerations.

The Repurchase Program does not require the Company to purchase a minimum number of shares, and may be suspended, modified or discontinued at any time without prior notice.

During the year ended December 31, 2023, the Company repurchased 0.8 million shares of common stock under the Repurchase Program in open market transactions at a weighted-average price of $ 6.77 per share for an aggregate purchase price of $ 5.4 million, inclusive of transaction costs.

In May 2023, the Company's Board of Directors approved a share repurchase program for the repurchase of up to $ 50.0 million of the Company's outstanding common stock through May 15, 2025 (the “Repurchase Program”).

The Repurchase Program authorizes the Company to effect repurchases through open market transactions, privately negotiated transactions, Rule 10b5-1 trading plans and/or Rule 10b-18 trading plans, and other means.

The Company is not obligated to repurchase any specific number of shares or dollar amount and may discontinue the Repurchase Program at any time.

The timing, number and purchase price of share repurchases, if any, will be determined by the Company’s management in its discretion and will depend on a number of factors, including the market price of shares, general market and economic conditions, and other alternatives available to the Company

During the years ended December 31, 2024 and 2023, the Company repurchased 0.3 million shares and 0.8 million shares of common stock under the Repurchase Program in open market transactions at a weighted-average price of $ 2.93 and $ 6.77 per share for an aggregate purchase price of $ 0.9 million and $ 5.4 million, respectively, inclusive of transaction costs.

As of December 31, 2024, $ 43.8 million remained available for future share repurchases under the Repurchase Program.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Net Loss Per Share

5 unchanged sentences

Net loss attributable to stockholders per share, basic and diluted $ ( 3.82 ) $ ( 3.58 )

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

For the years presented, potentially dilutive outstanding securities, which include stock options, restricted stock units and warrants, have been excluded from the computation of diluted net loss per share as their effect would be anti-dilutive for each year presented.

18 unchanged sentences

Net deferred tax assets $ — $ —

A reconciliation of the provision for income taxes with the amounts computed by applying the statutory Federal income tax to income before provision for income taxes is as follows:

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

A reconciliation of the provision for income taxes with the amounts computed by applying the statutory Federal income tax rate to income before provision for income taxes is as follows:

Years Ended December 31,

3 unchanged sentences

Option and RSU expense — % 0.4 %

Goodwill impairment ( 1.9 ) % — %

Other ( 1.9 ) % ( 8.6 ) %

3 unchanged sentences

Effective tax rate — % — %

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes.

13 unchanged sentences

During the years ended December 31, 2024 and 2023, the Company increased its valuation allowance by $ 25.1 million and $ 5.5 million, respectively.

As of December 31, 2023, the Company had federal and state net operating loss (“NOL”) carryforwards of $ 434.7 million and $ 395.9 million, respectively, and approximately $ 31.3 million of the federal NOL carryforward will expire at various dates commencing on 2029 and through 2037 and approximately $ 403.4 million were generated between the years ended December 31, 2018 and 2022 and have an indefinite life.

At December 31, 2023, the Company has federal tax credits of approximately $ 1.6 million.

As of December 31, 2024, the Company had federal and state net operating loss (“NOL”) carryforwards of $ 523.3 million and $ 525.7 million, respectively, of which approximately $ 31.3 million of the federal NOL carryforward will expire at various dates commencing on 2029 and through 2037 and approximately $ 492.0 million were generated between the years ended December 31, 2018 and 2024 and have an indefinite life.

At December 31, 2024, the Company had federal tax credits of approximately $ 1.6 million.

These federal tax credits are available to reduce future taxable income and expire at various dates commencing 2031 through 2041.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

Utilization of the NOLs and tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the IRC due to ownership change limitations that have occurred previously or that could occur in the future.

16 unchanged sentences

Employee elective deferrals and safe harbor matching contributions are 100 % vested at all times.

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

In connection with the acquisition of Legacy Spruce Power, the Company adopted the Spruce Power 401(k) plan, which contains features similar to those of the XL Fleet Corp.

2 unchanged sentences

Discontinued Operations

In the fourth quarter of 2022, the Company discontinued the operations of its Drivetrain and XL Grid operations.

The following table provides supplemental details of the Company’s discontinued operations contained within the consolidated statements of operations for the years ended December 31, 2024 and 2023:

1 unchanged sentence

(Amounts in thousands) 2024 2023

Net loss from discontinued operations:

XL Grid $ — $ ( 1,092 )

Net income (loss) from discontinued operations:

Drivetrain $ 25 $ ( 4,123 )

Impairment of goodwill — ( 8,606 )

Total $ ( 4,123 ) $ ( 40,112 )

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

The following table presents financial results of XL Grid operations:

Years Ended December 31,

XL Grid had no activity during the year ended December 31, 2024.

The following table presents financial results of XL Grid operations for the year ended December 31, 2023:

Year Ended December 31,

(Amounts in thousands) 2023

1 unchanged sentence

Operating expenses:

Cost of revenues - inventory and other direct costs 148 8,577

Cost of revenues - operations and maintenance 148

Selling, general, and administrative expenses 743

7 unchanged sentences

Operating expenses:

Cost of revenues - inventory and other direct costs 106 14,038

Engineering, research, and development — 9,819

Selling, general, and administrative expenses — 8,041

Loss on asset disposal 4,071 935

Cost of revenues - operations and maintenance 125 106

(Gain) loss on asset disposal ( 81 ) 4,071

Other (income) — ( 12 )

Total operating expenses 44 4,165

Net loss from discontinued operations $ ( 4,123 ) $ ( 30,414 )

Net income (loss) from discontinued operations $ 25 $ ( 4,123 )

The following table presents aggregate carrying amounts of assets and liabilities of discontinued operations contained within the consolidated balance sheets:

3 unchanged sentences

Drivetrain $ — $ 32

XL Grid — 7,373

Total assets from discontinued operations $ — $ 32

1 unchanged sentence

Drivetrain $ 40 $ 170

XL Grid — 3,648

Total liabilities from discontinued operations $ 40 $ 170

Segment Information

Spruce Power Holding Corporation

Notes to Consolidated Financial Statements

As of December 31, 2024 and 2023, the Company has one reportable segment, which sells electricity to homeowners and provides related services to the homeowners, as well as to third party owners.

The Company’s CODM is its CEO who is focused on strategic planning aimed at generating revenue and monetizing the Company’s home solar energy systems and its ability to provide top-tier related servicing solutions to its customers and third-parties.

The CEO is provided on a quarterly basis with the Company’s consolidated segment expenses as presented within the consolidated statements of operations for the years ended December 31, 2024 and 2023, which the CEO utilizes to assess the Company’s performance and for making decisions about resource allocation.

The following table presents the Company’s significant segment expenses for the years ended December 31, 2024 and 2023:

Years Ended December 31,

(Amounts in thousands) 2024 2023

Revenues $ 82,107 $ 79,859

Cost of revenues - solar energy systems depreciation 23,377 23,823

Cost of revenues - operations and maintenance 16,597 13,990

Selling, general and administrative expenses 58,889 56,122

Interest expense, net 40,232 41,936

Litigation settlements, net 7,384 27,465

Impairment of goodwill 28,757 —

Other segment items ( 23,076 ) ( 16,867 )

Net loss $ ( 70,053 ) $ ( 66,610 )

No segment asset information is presented in these consolidated financial statements since the CEO does not review segment information at a different level or category other than that presented on the Company’s consolidated balance sheets as of December 31, 2024 and 2023.

Subsequent Events

In January 2025, a series of wildfires broke out in the Los Angeles area of California, resulting in real and personal property and natural resource damage, personal injuries and loss of life.

The Company is currently assessing the impact of these wildfires on its home solar systems in the area;

however, the Company has not been able to validate the extent of the related damages due to limited access to the area.

The Company does not expect this event to have a material impact on its financial position, operating results or cash flows.

Management has reviewed all events subsequent to December 31, 2024 and prior to the filing of these consolidated financial statements, and except as referenced within the notes to the consolidated financial statements, the Company has determined there have been no events that have occurred that would require adjustments or disclosures within the consolidated financial statements.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data