What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-31 compared with 2025-03-31 · 71 added, 115 removed, 209 unchanged (47% of the section changed)

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Refer to Item 1, “Business” within this Annual Report for additional information on our corporate history and background.

Subsequent to the acquisition of Legacy Spruce Power, we performed an evaluation of personnel and processes of various corporate functions to optimize our future corporate structure and implemented certain restructuring actions.

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

These severance charges are included in selling, general and administrative expenses within our consolidated statements of operations for the year ended December 31, 2023.

There were no severance costs associated with restructuring charges during the year ended December 31, 2024.

Operating Highlights

For the years ended December 31, 2025 and 2024, our revenues totaled $111.8 million and $82.1 million, respectively, while our net loss attributable to stockholders was $26.0 million and $70.5 million, respectively.

Our 2024 financial performance was significantly impacted by fluctuations in the value of our hedging portfolio, impairment of our goodwill, variations in our operations and maintenance costs, and legal settlements during fiscal year 2024 and, due to the completion of the NJR Acquisition in November 2024, our fiscal year 2024 financial performance does not reflect the full incremental impact of this acquisition on our financial results.

Our 2025 financial performance reflects the full impact of the NJR Acquisition in November 2024, resulting in increased revenues from energy generation and SRECs.

2025 results were also impacted by fluctuations of our interest rate swaps and variations in our operations and maintenance costs.

Our 2024 financial performance was impacted by impairment of our goodwill and legal settlements during fiscal year 2024.

See the section titled “Results of Operations” in this Annual Report on Form 10-K for more information on our operating results for the years ended December 31, 2025 and 2024.

We focus on three core pillars in our operations:

• Ensure an industry leading customer experience.

For the year ended December 31, 2024, our customer satisfaction score improved to 83% compared to 74% for the year ended December 31, 2023.

• Deliver operational excellence in our clean energy portfolio for customers and communities.

Combined portfolio generation was approximately 515 thousand MWh of power for the year ended December 31, 2024 compared to 417 thousand MWh of power for the year ended December 31, 2023.

• Execute on our growth and capital strategies.

As of December 31, 2024, we owned cash flows from approximately 85,000 home solar assets and customer contracts across 18 U.S.

states with an average remaining contract life of approximately 11 years compared to approximately 75,000 home solar assets and customer contracts with an average remaining contract life of approximately 12 years as of December 31, 2023.

We focus on several core pillars in our operations and we strive to deliver operational excellence to our clean energy customers and the communities we serve.

For the year ended December 31, 2025, our portfolio generated approximately 709 thousand MWh of power, compared to 515 thousand MWh for the year ended December 31, 2024.

We prioritize a high level of customer satisfaction through our in-house call centers and customer service support teams.

For the year ended December 31, 2025, our customer satisfaction score was 81%.

We also execute a growth strategy focused on accretive acquisitions and a capital-light approach, while expanding our existing service offerings through Spruce Pro services.

As a result of this strategy, revenues increased 39% for the year ended December 31, 2025 from the year ended December 31, 2024.

Certain information above constitutes key operating metrics that we use to evaluate our operations, measure our performance and identify trends in our business.

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Recent Developments

Capital Investments, Acquisitions and Divestitures

In January 2023, we completed the sale of our legacy operations, including the Drivetrain and XL Grid businesses, each for an immaterial amount.

Both businesses are presented as discontinued operations within our consolidated financial statements.

In March 2023, we completed the acquisition of all the issued and outstanding interests of SEMTH to acquire the rights of the SEMTH Master Lease.

Total consideration for the SEMTH Acquisition included approximately $23.0 million of cash, net of cash received, and the assumption of $125.0 million of outstanding senior indebtedness (the “SP4 Facility”) held by SEMTH at the close of the acquisition.

In August 2023, we completed the Tredegar Acquisition acquiring 2,400 home solar assets and contracts for approximately $20.9 million.

The Tredegar Acquisition was funded by proceeds from the concurrent issuance of the SP2 Facility Amendment (defined below).

In November 2024, we completed the NJR Acquisition acquiring 9,800 solar energy systems for approximately $132.5 million, pursuant to an asset purchase agreement (the “APA”).

The NJR Acquisition was funded by proceeds from the concurrent issuance of the SP5 Facility (defined below) and $22.7 million of our cash.

Under the APA, we 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.

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

We are unable to anticipate the ultimate outcome of these additional solar energy systems that we may be obligated to acquire.

SP2 Facility Amendment

In August 2023, we entered into a second amendment to our existing non-recourse credit agreement with SVB (the “SP2 Facility Amendment”), resulting in incremental term loans of approximately $21.4 million, of which proceeds were primarily used to fund the Tredegar Acquisition.

In addition, we entered into an interest rate swap agreement to hedge the floating rate of the incremental SP2 Facility term loans, which included a notional amount of $17.6 million, a fixed rate of 4.24%, and a maturity date of January 31, 2032.

SET Facility and SP4 Facility

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In connection with the repayment of the SP4 Facility, we settled the related interest rate swap contracts.

Capital Investments, Acquisitions and Divestitures

In November 2024, we completed the NJR Acquisition acquiring approximately 9,800 solar energy systems for approximately $132.5 million, pursuant to an asset purchase agreement (the “APA”).

The NJR Acquisition was funded by proceeds from the concurrent issuance of the SP5 Facility (defined below) and $22.7 million of our cash.

During the year ended December 31, 2025, the Company acquired 200 additional systems for approximately $5.3 million in cash, inclusive of transaction costs of approximately $0.1 million.

In November 2024, we entered into a non-recourse credit agreement with Banco Santander, S.A., New York (the “SP5 Facility”), which provided a term loan of approximately $109.8 million, of which proceeds were used to partially fund the NJR Acquisition described above.

In addition, we entered into an interest rate swap agreement to hedge the floating rate of the SP5 Facility, which included a notional amount of $87.9 million, a fixed rate of 3.98%, and a maturity date of May 17, 2033.

Common Share Repurchase Program

In May 2023, our Board of Directors approved the Repurchase Program for the repurchase of up to $50.0 million of our outstanding common stock through May 15, 2025.

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.

We are 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, we repurchased 0.3 million and 0.8 million shares, respectively, of common stock under the Repurchase Program, for a total purchase price of $0.9 million and $5.4 million, respectively, inclusive of transaction costs.

Reverse Stock Split

On October 6, 2023, we effected the Reverse Stock Split with respect to our issued and outstanding shares of common stock.

Excluding the par value and the number of authorized shares of our common stock, all share, per share amounts, and the values of our 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.

No fractional shares of our common stock were issued in connection with the Reverse Stock Split.

In late October 2023, certain stockholders entitled to fractional shares of our common stock, upon the Reverse Stock Split, received aggregate cash payments of approximately $0.01 million in lieu of receiving fractional shares.

SP1 Facility Amendment

On March 27, 2026, the Company entered into an amendment (the “SP1 Facility Amendment”) to the SP1 Facility with Silicon Valley Bank (the “SP1 Facility”) which extends the maturity date to October 30, 2026 (the “Amended SP1 Maturity Date”), unless a signed term sheet for a long-term financing is obtained, in which case the Amended SP1 Maturity Date will be January 30, 2027 .

Under the terms of the SP1 Facility Amendment, the applicable margin is 2.75% per annum from the effective date of the extension to October 30, 2026 , and 3.25% per annum until maturity.

The SP1 Facility Amendment includes a cross-default provision with the Second Key Bank Credit Agreement.

Reportable Segments

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Information with respect to the consolidated statements of operations for the years ended December 31, 2025 and 2024 are presented below:

Years Ended December 31,

(in thousands, except per share amounts)

(in thousands)

Revenues $ 111,812 $ 82,107 $ 29,705 36 %

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Selling, general and administrative expenses 55,113 58,889 (3,776) (6) %

Litigation settlements, net 7,384 27,465 (20,081) (73) %

Litigation settlements 1,711 7,384 (5,673) (77) %

Gain on asset disposal (1,855) (2,504) 649 (26) %

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Total operating expenses 93,872 132,500 (38,628) (29) %

Loss from operations (50,393) (36,817) (13,576) 37 %

Income (Loss) from operations 17,940 (50,393) 68,333 (136) %

Other (income) expense:

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Net loss from continuing operations (25,643) (70,078) 44,435 (63) %

Net income (loss) from discontinued operations 25 (4,123) 4,148 (101) %

Net (loss) income from discontinued operations (64) 25 (89) (356) %

Net loss (25,707) (70,053) 44,346 (63) %

Net income (loss) attributable to redeemable noncontrolling interests and noncontrolling interests 436 (779) 1,215 (156) %

Net income attributable to noncontrolling interests 320 436 (116) (27) %

Net loss attributable to stockholders $ (26,027) $ (70,489) $ 44,462 (63) %

Revenues increased by $29.7 million, or 36%, to $111.8 million in 2025 as compared to 2024.

The increase was primarily due to increased PPA revenues of $2.4 million due to a full year in 2024 reflecting the Tredegar Acquisition, which was completed in August 2023.

Revenues related to our Drivetrain and XL Grid operations are included in net loss from discontinued operations.

The increase was primarily due to i) an increase in SREC revenue of $17.0 million related to the NJR Acquisition, ii) $10.4 million of incremental SLA revenue related to the NJR Acquisition, and (iii) $3.1 million increase due to incremental servicing revenues related to contracted services on third-party owned solar energy systems in 2025.

Cost of Revenues — Solar Energy Systems Depreciation

Cost of revenues - solar energy systems depreciation decreased by $0.4 million, or 2%, to $23.4 million in 2024 as compared to 2023.

The decrease in cost of revenue - solar energy systems depreciation was primarily due to the finalization of purchase price accounting in 2023, offset by incremental depreciation related to the NJR Acquisition in 2024.

Cost of revenues - solar energy systems depreciation increased by $5.8 million, or 25%, to $29.1 million in 2025 as compared to 2024.

The increase in cost of revenue - solar energy systems depreciation was primarily due to incremental depreciation related to the NJR Acquisition in November 2024.

Cost of Revenues — Operations and Maintenance

Cost of revenues - operations and maintenance increased by $2.6 million, or 19%, to $16.6 million in 2024 as compared to 2023.

The increase in cost of revenue - operations and maintenance was primarily due to increased operations and maintenance costs related to third party services.

Cost of revenues - operations and maintenance related to our Drivetrain and XL Grid operations are included in net loss from discontinued operations.

Cost of revenues - operations and maintenance decreased by $6.8 million, or 41%, to $9.8 million in 2025 as compared to 2024.

The decrease in cost of revenue - operations and maintenance was primarily due to cost reductions resulting from certain O&M efficiencies implemented in the second half of 2025, including greater leverage of our asset management platform to streamline third-party vendor management and return material authorization (RMA) processing .

In addition, we implemented processes to efficiently manage instances where we needed to initiate a truck roll to maintain or repair systems and managed customer contracts in a more cost-effective manner, both resulting in lower third-party contractor spend.

Furthermore, our in-house servicing team is fully operational in New Jersey, where we have a heavy concentration of solar assets.

This team is able to handle a majority of service calls in house, further driving down third-party contractor spend.

Selling, General and Administrative

Selling, general and administrative expenses increased by $2.8 million, or 5%, to $58.9 million in 2024.

The increase was primarily due to increased compensation expenses in 2024 relating to higher headcount and one-time severance costs of $1.9 million recognized upon separation of our former President and Chief Executive Officer from us effective April 12, 2024, partially offset by decreases in professional service costs.

Selling, general and administrative expenses related to our Drivetrain and XL Grid businesses are included in net loss from discontinued operations.

Selling, general and administrative expenses decreased by $3.8 million, or 6%, to $55.1 million in 2025.

The decrease was primarily due to $3.1 million decrease in professional service costs due to fewer outstanding legal cases, better utilization of in-house resources, and a decrease in payments to third party consultants.

Higher labor costs in the first half of the year were offset in the second half of the year through a reduction in labor force resulting in a net decrease in labor costs for the year.

Litigation Settlements, Net

Litigation settlements, net decreased by $5.7 million, or 77%, to $1.7 million in 2025.

The decrease related to costs incurred in 2023 associated with settlements of the SEC inquiry, shareholder lawsuits, and other Legacy XL legal matters, partially offset by additional settlement costs, net of related insurance recoveries from third parties, associated with various settled and ongoing legal proceedings in 2024.

The decrease related to 2024 costs associated with settlements of various Legacy XL legal matters.

Commitments and Contingencies in Part II, Item 8.

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Impairment of Goodwill

Impairment of goodwill increased by $28.8 million, or 100%, to $28.8 million in 2024 due to the full impairment of our goodwill during the third quarter of 2024 resulting from a continuous decline in our stock price and market capitalization.

During the third quarter of 2024, we recorded a full impairment of goodwill totaling $28.8 million resulting from a continuous decline in our stock price and market capitalization.

Interest Income

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Treasury securities.

The SEMTH assets were acquired in March 2023, and as such, earned interest income for a full year in 2024.

Interest Expense, Net

Interest expense, net of $40.2 million for 2024 primarily relates to (i) $52.2 million of interest expense related to the principal amounts of our outstanding non-recourse debt and (ii) $6.0 million related to the amortization of debt discount and deferred financing costs, both partially offset by $18.0 million of net realized gains from settlements of our interest rate swaps.

In comparison, interest expense, net of $41.9 million for 2023 primarily related to (i) $49.6 million of interest expense related to the principal amounts of our debt instruments and (ii) $5.9 million related to the amortization of debt discount and deferred financing costs, both partially offset by $13.7 million of net realized gains from settlements of our interest rate swaps.

Interest expense related to the principal amounts of our outstanding non-recourse debt increased in 2024 as compared to 2023 primarily due to new debt entered into as part of the NJR Acquisition in November 2024.

Non-Recourse Debt in Part II, Item 8.

Financial Statements and Supplementary Data for further information on our debt.

Interest expense, net is also impacted by the fluctuations in the settlements of our interest rate swaps, which we use to convert variable rates on our non-recourse debt into fixed recourse obligations and are subject to interest-rate risk.

Interest expense, net of $50.9 million for 2025 primarily relates to (i) $44.4 million of interest expense, related to the principal amounts of our outstanding non-recourse debt, net of swaps and (ii) $6.5 million related to the amortization of debt discount and deferred financing costs.

In comparison, interest expense, net of $40.2 million for 2024 primarily related to (i)$34.2 million of interest expense related to the principal amounts of our outstanding non-recourse debt, net of swaps and (ii) $6.0 million related to the amortization of debt discount and deferred financing costs.

Interest expense, net was negatively impacted by the fluctuations in the settlements of our interest rate swaps, which we use to convert variable rates on our non-recourse debt into fixed recourse obligations and are subject to interest-rate risk.

Interest Rate Swaps in Part II, Item 8.

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Other Expense, Net

Other expense, net of $2.2 million for 2024 consists of $2.7 million of unrealized losses from the change in fair value of interest rate swaps, partially offset by $0.5 million of other income, net, while other expense, net of $3.3 million for 2023 primarily consisted of $4.8 million of unrealized losses from the change in fair value of interest rate swaps, partially offset by $1.3 million of other income, net and $0.2 million of change in fair value of warrant liabilities.

Other expense, net of $13.4 million for 2025 consists of $12.6 million of unrealized losses from the change in fair value of interest rate swaps, in addition to $0.7 million of other expense, net, while other expense, net of $2.2 million for 2024 primarily consisted of $2.7 million of unrealized losses from the change in fair value of interest rate swaps, partially offset by $0.5 million of other income, net.

Liquidity and Capital Resources

As of December 31, 2024, we had working capital of $76.9 million, including cash and cash equivalents and restricted cash of $109.1 million.

As of December 31, 2025, we had negative working capital of $122.9 million.

Our working capital included cash and cash equivalents and restricted cash of $93.1 million.

We had net losses attributable to stockholders of $26.0 million and $70.5 million for the years ended December 31, 2025 and 2024, respectively.

Our principal sources of liquidity include cash and cash equivalents and cash flows from operations.

Our principal sources of liquidity include cash and cash equivalents and cash flows from operations as well as cash received from investment related to SEMTH Master Lease.

We receive cash from certain of our wholly-owned subsidiaries specifically related to the portfolio servicing fees provided for under the relevant servicing agreements between us and the subsidiaries, as well as reimbursement for any expenses we pay on behalf of those subsidiaries, which are allowed under certain agreements related to those subsidiaries.

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As of December 31, 2025, our debt balance was $676.8 million, net of $16.5 million of unamortized fair value adjustment and $2.3 million of unamortized deferred financing costs, all of which is non-recourse project-level debt.

Our debt consists of four senior debt facilities and two subordinate facilities, of which the earliest maturity date is April 2026.

Non-Recourse Debt.

Our debt consists of four senior debt facilities and two subordinate facilities, of which the earliest maturity date is October 30, 2026.

For additional information on our debt, refer to Note 7.

Non-Recourse Debt included within the accompanying audited consolidated financial statements.

Based on our current liquidity, we believe that our current cash and cash equivalents, together with the future cash generated from our operations, will be sufficient to satisfy the cash requirements of our current operations for the next 12 months.

We continually evaluate our cash needs to raise additional funds or seek alternative sources to invest in growth opportunities and other purposes.

We expect that we will continue to be dependent on financing from outside parties to complete future acquisitions, and we may invest our own cash in such future acquisitions.

If financing is not available to us on acceptable terms if and when needed, we may not be able to achieve further growth or complete identified acquisition opportunities.

The accompanying audited consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (GAAP) assuming the Company will continue as a going concern.

The Company’s debt obligations under the SP1 Facility are non-recourse to the Company (see Note 7.

Non-Recourse Debt included within the accompanying audited consolidated financial statements).

On March 27, 2026 , the Company entered into the SP1 Facility Amendment to extend the maturity of this facility to October 30, 2026 (the “Amended SP1 Maturity Date”), unless a signed term sheet for a long-term financing is obtained, in which case the extended maturity date will be January 30, 2027.

Because (i) the Amended SP1 Maturity Date is within twelve months from the date the accompanying audited consolidated financial statements are issued, (ii) the Company has not yet entered into a commitment to refinance the SP1 Facility, (iii) the Company has determined that it is unlikely to have sufficient cash on hand or proceeds from currently available liquidity sources to satisfy the SP1 Facility at the Amended SP1 Maturity Date (iv) the Company had negative working capital of $122.9 million as of December 31, 2025 solely due to the current maturity of the SP1 Facility at that date, and (v) the Company has experienced recurring net losses and negative cash flows from operations for the year ended December 31, 2025, these conditions raise substantial doubt about the Company’s ability to continue as a going concern .

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

The Company plans to refinance the SP1 Facility prior to the Amended SP1 Maturity Date consistent with the Company’s historical financing strategy for investing in solar assets on a leveraged basis.

The Company has commenced preliminary discussions with potential lenders, which are currently being reviewed by management.

The Company’s management believes that such refinancing will be completed prior to the Amended SP1 Maturity Date.

However, the Company can offer no assurances it will be able to obtain financing at acceptable terms or at all.

Therefore, the Company has concluded that there is substantial doubt about its ability to continue as a going concern.

Should the Company be unsuccessful in refinancing the SP1 Facility, this could result in a foreclosure of collateral and negatively impact operations.

Further, an event of default on the SP1 Facility, if not cured in the permittable time allowed under the agreement, would result in a cross default on the Second Key Bank Credit Agreement, which is also non-recourse.

Cash Flows Summary

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Continuing investing activities 24,780 (101,412)

Discontinued investing activities — 325

Continuing financing activities (37,253) 79,349

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Operating cash inflows include cash from the sale of solar energy power generated by our home solar energy systems and the servicing of long-term agreements for other institutional owners of home solar energy systems.

These operating cash inflows are primarily offset by operating expenses, operating lease payments and interest payments on our outstanding debt.

These operating cash inflows are primarily offset by operating expenses and interest payments on our outstanding debt.

The related cash flows for Drivetrain and XL Grid businesses are reflected as discontinued operating activities for the years presented.

The net cash used in continuing operating activities in 2024 was $41.7 million and consists of our corporate costs and certain other costs that were not allocated to our discontinued operations.

Cash used in continuing operations increased in 2024 compared to 2023 by $10.0 million primarily due to increases in operations and maintenance costs and compensation expenses in 2024 relating to higher headcount and one-time severance costs discussed above.

The net cash used in continuing operating activities in 2023 was $31.7 million, which primarily consisted of normal operating expenses, decreased stock-based compensation expenses and change in fair value of derivative instruments, offset primarily by increases in depreciation expense, accrued expenses and other current liabilities and interest income related to the SEMTH Master Lease.

Cash Flows Used in Investing Activities

The net cash used in continuing operating activities improved by $38.3 million in 2025 compared to 2024 primarily due to increased revenue and decreased operating expenses as a result of O&M efficiencies in 2025.

Cash Flows Provided by (Used in) Investing Activities

The net cash provided by continuing investing activities in 2025 was $24.8 million, which primarily relates to $24.7 million of proceeds from our investments under the SEMTH Master Lease and $5.6 million of proceeds from the sale of certain solar energy systems, partially offset by $5.3 million of net cash paid for incremental tranches purchased in 2025 related to the NJR Acquisition.

The net cash used in continuing investing activities in 2024 was $101.4 million, which primarily relates to $132.8 million of net cash paid for the NJR Acquisition in 2024, partially offset by $25.6 million of proceeds from our investments under the SEMTH Master Lease, and $6.1 million of proceeds from the sale of certain solar energy systems.

The net cash used in continuing investing activities in 2023 was $17.1 million, which primarily related to $43.1 million of aggregate cash net cash paid for acquisitions during 2023, consisting of $23.0 million for the SEMTH Acquisition and $20.1 million, net for the Tredegar Acquisition, partially offset by $20.2 million of proceeds from our investments under the SEMTH Master Lease, and $6.3 million of proceeds from the sale of solar energy systems.

Cash Flows Provided by (Used in) Financing Activities

The net cash provided by continuing financing activities in 2024 was $79.3 million, which primarily relates to $155.9 million for the repayment of non-recourse long-term debt, including the full repayment of $125.0 million for the SP4 Facility, and $3.4 million of payments for related deferred financing costs, both offset by $239.8 million of proceeds from the issuance of non-recourse long-term debt under the SET and SP5 Facilities in 2024.

The net cash used in continuing financing activities in 2023 was $16.8 million, which primarily related to $32.8 million for the repayment of long-term debt and $5.4 million of shares repurchased under our Repurchase Program, partially offset by $21.4 million of proceeds from the issuance of long-term debt under the SP2 Facility Amendment to fund the Tredegar Acquisition.

The net cash used in continuing financing activities in 2025 was $37.3 million, which primarily relates to $35.1 million for the repayment of non-recourse long-term debt, and $1.8 million related to shares repurchased under our Repurchase Program.

The net cash provided by continuing financing activities in 2024 was $79.3 million, which primarily relates to $239.8 million of proceeds from the issuance of non-recourse long-term debt under the SET and SP5 Facilities in 2024, partially offset by $155.9 million for the repayment of non-recourse long-term debt, including the full repayment of $125.0 million for the SP4 Facility, and $3.4 million of payments for related deferred financing costs.

Critical Accounting Policies and Estimates

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Preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

Our most critical accounting policies and estimates are those most important to the portrayal of its financial condition and results of operations and which require us to make its most difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.

Our most critical accounting policies and estimates are those most important to the portrayal of its financial condition and results of operations and which require us to make our most difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.

Although Management believes that its estimates and assumptions are reasonable, they are based on information available when they are made and, therefore, may differ from estimates made under different assumptions or conditions.

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Previously, we also derived revenue from the Drivetrain operations which generated revenue from the sales of hybrid electric powertrain systems, and the XL Grid operations which generated revenues through turnkey energy efficiency, renewable technology and other energy solutions.

As of and for the years ended December 31, 2024 and 2023, the Drivetrain business and XL Grid business are reported as discontinued operations.

Energy generation

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Investment related to SEMTH master lease agreement and interest income

We account for our investment related to the SEMTH master lease agreement in accordance with Accounting Standards Codification (“ASC”) 325-40, Investments—Other—Beneficial Interests in Securitized Financial Assets .

We account for our investment related to the SEMTH master lease agreement in accordance with ASC 325-40, Investments—Other—Beneficial Interests in Securitized Financial Assets .

We recognize 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 our consolidated statements of operations.

On a recurring basis, we evaluate 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, we prospectively update our expected cash flows accordingly.

Assumptions used in the development of the expected cash flows include expected cash inflows related to the market utility rates in the states where these solar assets are located, estimated production, and expected cash outflows associated with operating and maintenance of these solar assets.

Impairment of long-lived assets

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There were no long-lived asset impairment charges during the years ended December 31, 2025 and 2024.

Goodwill represents the excess of cost over the fair market value of net tangible and identifiable intangible assets of acquired businesses.

Goodwill is not amortized but instead is annually tested for impairment, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired.

We perform our 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.

An assessment can be performed by first completing a qualitative assessment on our single reporting unit.

We can also bypass the qualitative assessment in any period and proceed directly to the quantitative impairment test and then resume the qualitative assessment in any subsequent period.

Qualitative indicators that may trigger the need for annual or interim quantitative impairment testing include, among other things, deterioration in macroeconomic conditions, declining financial performance, deterioration in the operational environment, or an expectation of selling or disposing of a portion of the reporting unit.

Additionally, a significant change in business climate, a loss of a significant customer, increased competition, a sustained decrease in share price, or a decrease in estimated fair value below book value may trigger the need for interim impairment testing of goodwill.

If we believe that, as a result of our qualitative assessment, it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the quantitative impairment test is required.

The quantitative test involves comparing the fair value of the reporting unit with its carrying amount, including goodwill.

If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recorded as a reduction to goodwill with a corresponding charge to earnings in the period the goodwill is determined to be impaired.

The income tax effect associated with an impairment of tax-deductible goodwill is also considered in the measurement of the goodwill impairment.

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

We evaluate the fair value of our reporting unit using the market and income approach.

Under the market approach, we use multiples of earnings before interest, taxes, depreciation and amortization (“EBITDA”) or revenues of 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.

During the quarter ended September 30, 2024, we performed an assessment based on certain indicators that the carrying amount of our goodwill may be impaired due to a continuous decline in our stock price and market capitalization and performed a quantitative test using a market approach resulting in an impairment of goodwill during the period.

We also performed a quantitative test using the income approach, as discussed above, which also resulted in such impairment.

As a result, we recorded a goodwill impairment charge of $28.8 million, which fully impaired our 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.

Valuation of deferred tax assets

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Although we believe that our approach to estimates and judgments as described herein is reasonable, actual results could differ and we may be exposed to increases or decreases in income taxes that could be material.

Redeemable noncontrolling interests and noncontrolling interests

Noncontrolling interests

Noncontrolling interests represent third-party interests in the net assets of certain consolidated subsidiaries.

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As of December 31, 2025 and 2024, o ur investments in Volta Solar Owner II, LLC and ORE F4 HoldCo, LLC (collectively, the “Funds”) were each determined to be a VIE upon investment.

During the year ended December 31, 2023, we had investments in the Funds and Level Solar Fund IV LLC (collectively, the “Prior Funds”), which were individually determined to be VIEs upon investment.

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

We considered the provisions within the contractual arrangements that grant us 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.

We consider the rights granted to the other investors under the contractual arrangements to be more protective in nature rather than substantive participating rights.

As such, we were determined to be the primary beneficiary, and the assets, liabilities and activities of the Funds and Prior Funds (before any ceased being a VIE) were consolidated by us.

The distribution rights and priorities for the Funds and Prior Funds (before any ceased being a VIE) as set forth in their respective operating agreements differ from the underlying percentage ownership interests of the members.

As a result, we allocate income or loss to the noncontrolling interest holders of the Funds and Prior Funds (before any ceased being a VIE) utilizing the hypothetical liquidation of book value (“HLBV”) method, in which income or loss is allocated based on the change in each member's claim on the net assets at the end of each reporting period, adjusted for any distributions or contributions made during such periods.

As such, we were determined to be the primary beneficiary, and the assets, liabilities and activities of the Funds (before any ceased being a VIE) were consolidated by us.

The distribution rights and priorities for the Funds (before any ceased being a VIE) as set forth in their respective operating agreements differ from the underlying percentage ownership interests of the members.

As a result, we allocate income or loss to the noncontrolling interest holders of the Funds (before any ceased being a VIE) utilizing the hypothetical liquidation of book value (“HLBV”) method, in which income or loss is allocated based on the change in each member's claim on the net assets at the end of each reporting period, adjusted for any distributions or contributions made during such periods.

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.

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The use of the HLBV method to allocate income (loss) to the noncontrolling interest holders may create volatility in the consolidated statements of operations as the application of HLBV can drive changes in net income or loss attributable to noncontrolling interests from period to period.

We classify certain noncontrolling interests with redemption features that are not solely within our control outside of permanent equity in the consolidated balance sheets.

Redeemable noncontrolling interests are reported using the greater of the carrying value at each reporting date as determined by the HLBV method or the estimated redemption value at the end of each reporting period.

Estimating the redemption value of the redeemable noncontrolling interests requires the use of significant assumptions and estimates, such as projected future cash flows.

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

Interest Rate Swaps

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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 7. Management’s Discussion and Analysis