What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-04-15 compared with 2024-04-01 · 677 added, 541 removed, 663 unchanged (65% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID:

CONSOLIDATED BALANCE SHEETS

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REPORT OF MANAGEM ENT

The management of Pineapple Energy Inc.

The management of SUNation Energy, Inc.

and its subsidiary companies is responsible for the integrity and objectivity of the financial statements and other financial information contained in the annual report.

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The independent auditors have free access to this committee, without management present, to discuss the results of their audit work and their opinion on the adequacy of internal financial controls and the quality of financial reporting.

/s/ Kyle Udseth

/s/ Eric Ingvaldson

Eric Ingvaldson

/s/ Scott Maskin

/s/ James Brennan

James Brennan

Chief Executive Officer

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To the Board of Directors and

‎ Shareholders of Pineapple Energy Inc.

‎ Stockholders of SUNation Energy, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Pineapple Energy Inc.

and subsidiaries (the Company) as of December 31, 2023, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated 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.

We have audited the accompanying consolidated balance sheets of SUNation Energy, Inc.

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

In our opinion, the consolidated 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 years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

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

As discussed in Note 17 to the consolidated financial statements, the Company’s current financial position and the Company’s forecasted future cash flows for twelve months beyond the date of issuance of these financial statements indicate that the Company will not have sufficient cash to make the first SUNation earnout payment in the second quarter of 2024 or the first principal payment of the Long-Term Note due on November 9, 2024, factors which raise substantial doubt about the Company’s ability to continue as a going concern.

As discussed in Note 16 to the consolidated financial statements, the Company’s current financial position and the Company’s forecasted future cash flows for twelve months beyond the date of issuance of these financial statements indicate substantial doubt around the Company’s ability to continue as a going concern.

Management's plans in regards to these matters are also described in Note 16.

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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 consolidated financial statements.

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

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

We believe that our audits provide 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 consolidated 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 consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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.

Critical Audit Matter - Goodwill Impairment

At December 31, 2023, the carrying value of the Company’s goodwill was $20,545,850, of which $9,829,212 and $10,716,638 were allocated to the HEC and SUNation reporting units, respectively.

As discussed in Note 2 to the consolidated financial statements, goodwill is tested for impairment at the reporting unit level, annually on October 1 or more frequently if events or circumstances indicate that an impairment may have occurred.

At December 31, 2024, the consolidated carrying value of the Company’s goodwill was $20,545,850, of which $9,829,212 and $10,716,638 were allocated to the HEC and SUNation reporting units, respectively.

As disclosed in Note 2 to the consolidated financial statements, goodwill is tested for impairment at the reporting unit level, annually on October 1 or more frequently if events or circumstances indicate that an impairment may have occurred.

Management determined that a quantitative goodwill impairment analysis was required as of December 31, 2024.

The impairment test was performed by calculating the fair value of the Company’s reporting units, using a combination of an income approach and market approach.

The impairment test was performed by calculating the fair value of the Company’s reporting units, using a combination of an income approach and market approach, and comparing the fair value to the carrying value to determine if there was an impairment loss which would be equal to the carrying value exceeding the fair

Management engaged a third-party valuation specialist to assist with the analysis.

During the year ended December 31, 2023 no impairment was recorded.

As disclosed in Note 8 to the consolidated financial statements, the Company determined that HEC’s goodwill was impaired and recorded an impairment loss of $3,101,981 as of December 31, 2024.

Auditing management’s goodwill impairment test was complex and judgmental, due to the significant estimation required to determine the present value of each reporting unit’s future discounted cash flows.

The discounted cash flows were sensitive to

the projected revenue growth rates, EBITDA margins, terminal growth rates and the discount rates applied.

The discounted cash flows were sensitive to the projected revenue growth rates, EBITDA margins, terminal growth rates and the discount rate applied.

These significant assumptions are affected by expectations about future market and economic conditions.

There was also judgment in selecting the comparable publicly traded companies used by the Company to determine the revenue multiples under the market approach.

There was also management judgment in selecting the comparable publicly traded companies used by the Company to determine the revenue multiples under the market approach.

How the Critical Audit Matter Was Addressed in Our Audit

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We assessed the historical accuracy of management’s prior forecasts to actual results to evaluate management’s ability to accurately forecast future revenues and gross profit.

 Involved our valuation specialists to 1) assess management’s fair value methodology, compare the terminal growth rates to external industry and economic data, and to determine an independent estimate of the discount rates and 2) evaluate the comparable public companies utilized by management under the market approach.

 Involved our valuation specialists to 1) assess management’s fair value methodology, compare the terminal growth rates to external industry and economic data, and determine an independent estimate of the discount rates and 2) evaluated the comparable public companies utilized by management under the market approach.

 Evaluated certain inputs and assumptions for consistency where they were used by management in other accounting estimates impacting the consolidated financial statements.

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 Assessed the appropriateness of the disclosures in the financial statements.

Critical Audit Matter – Convertible Preferred Stock and Warrants

In 2022, the Company issued shares of Series A convertible preferred stock and warrants to investors.

The Company accounted for the convertible preferred stock and warrants in permanent equity.

The convertible preferred stock and the warrants were modified during the first quarter of 2024, which resulted in the Company not having sufficient authorized and unissued shares to settle the conversion and exercise to common stock.

As a result, the Company reclassified the convertible preferred stock to mezzanine equity and the warrants to a liability.

During the third quarter of 2024, the Company received shareholder approval on an increase in authorized shares, resulting in the convertible preferred stock and warrants being reclassified to permanent equity.

Additionally, the Series A convertible preferred stock and warrants were further modified prior to being exchanged for Series C convertible preferred stock in September 2024.

No preferred stock or warrants remained outstanding as of December 31, 2024.

As disclosed in Notes 2 and 12 to the consolidated financial statements, these transactions resulted in the following impact on the consolidated financial statements:

 Change in fair value of the warrant liability resulting in a loss of $974,823.

 Deemed dividends on modifications of Series A convertible preferred stock and warrants of ($11,447,251) and ($4,215,551), respectively, that reduced APIC and income available to common shareholders in calculating earnings per share (EPS).

 Deemed contribution on exchange of Series A preferred stock and warrants for Series C convertible preferred stock of $4,075,681 that increased APIC and income available to common shareholders in calculating EPS.

The accounting for convertible preferred stock and warrants required analysis under applicable authoritative guidance in Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity”, and ASC 815, “Derivatives and Hedging”.

Furthermore, the amounts recognized for the change in fair value of the warrant liability, deemed dividends, and deemed contribution were based on management’s estimates of fair value for these financial instruments.

Management engaged a third-party specialist to assist with the accounting and fair value analysis.

Auditing management’s conclusions related to these transactions required the interpretation of complex accounting literature in the areas of financial instruments and modifications of equity instruments.

In addition, auditing management’s fair value estimates was complex and judgmental because the measurements involved subjective models and unobservable inputs.

There was also management judgment in selecting the comparable publicly traded companies used by the Company to determine the volatility input.

How the Critical Audit Matter Was Addressed in Our Audit

Our audit procedures to evaluate the reasonableness of management’s accounting for the modifications of the Series A convertible preferred stock and warrants, and the exchange of the Series A convertible preferred stock and warrants for Series C convertible preferred stock included the following:

 Involved financial instrument accounting subject matter specialists to assess the Company's conclusions on equity vs liability classification of the convertible preferred stock and warrants and the EPS treatment of the modification and exchange transactions.

 Evaluated management’s accounting memorandums and read the underlying contracts and board resolutions for consistency with the conclusions reached.

 Involved our valuation specialists to 1) assess management’s fair value methodologies and 2) develop independent estimates of the fair values of the convertible preferred stock and warrants at each modification date and the exchange date.

 Assessed the appropriateness of the disclosures in the financial statements.

Critical Audit Matter - Embedded Derivative Liability

The Company’s Decathlon Fixed Loan includes a mandatory prepayment feature upon a contingent event that is considered an embedded derivative requiring separate accounting under ASC 815.

Under ASC 815, the embedded derivative is bifurcated and recorded at fair value at inception with subsequent changes in fair value recorded in earnings.

Based on management’s estimates of the likelihood of certain events occurring, the Company recognized an embedded derivative liability as of December 31, 2024.

As disclosed in Note 9 to the consolidated financial statements, the amortized cost of the Decathlon Fixed Loan was $6,586,325 and the fair value of the embedded derivative was $24,800 as of December 31, 2024.

Management engaged a third-party valuation specialist to assist with the accounting and fair value analysis.

Auditing management’s conclusions required the interpretation of complex accounting literature related to financial instruments, more specifically embedded derivatives in debt instruments.

In addition, auditing management’s fair value estimates was complex and judgmental because the measurements involved unobservable inputs.

There was management judgment in determining the probability of various payoff alternatives occurring as well as the estimated payoff date under each alternative.

How the Critical Audit Matter Was Addressed in Our Audit

Our audit procedures to evaluate the reasonableness of management’s accounting and fair value estimates for the Decathlon Fixed Loan included the following:

 Involved financial instrument accounting subject matter specialists to assess the Company's embedded derivative accounting conclusions.

 Evaluated management’s accounting memorandum and read the underlying contract for consistency with the conclusions reached.

 Involved our valuation specialists to 1) assess management’s fair value methodology and 2) develop an independent estimate of the fair value of the embedded derivative liability.

 Assessed the reasonableness of management’s payoff assumptions, more specifically the probabilities of various payoff alternatives occurring and the estimated payoff dates of each alternative.

We 1) made inquiries of management and the board, 2) inspected board meeting minutes, 3) compared forecasts used to support the assumptions with forecasts used by management in other accounting estimates as of December 31, 2024, and 4) evaluated events occurring subsequent to December 31, 2024.

 Assessed the appropriateness of the disclosures in the financial statements.

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

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April 15, 2025

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the board of directors of Pineapple Energy Inc.:

Opinion on the Consolidated Financial Statements

‎ We have audited the accompanying consolidated balance sheet of Pineapple Energy Inc.

and subsidiaries (the “Company”) as of December 31, 2022, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the year ended December 31, 2022, and the related notes (collectively, referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of their operations and their cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

‎ Substantial Doubt About the Company’s Ability to Continue as a Going Concern

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

As discussed in Note 17 to the consolidated financial statements, the Company has suffered losses and negative cash flows from operations and has negative working capital due to a note payable which matures in August 2023 that raise substantial doubt about its ability to continue as a going concern.

Management's plans in regards to these matters are also described in Note 17.

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

‎ Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated 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 consolidated financial statements are free of material misstatement, whether due to error or fraud.

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

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

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements.

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

We served as the Company’s auditor from 2021 to 2023.

/s/ Baker Tilly US, LLP

Minneapolis, Minnesota

April 14, 2023

PINEAPPLE ENERGY INC.

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SUNATION ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

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Inventories, net

Employee retention credit

Related party receivables

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Other current assets

Current assets held for sale

TOTAL CURRENT ASSETS

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Intangible assets, net

Noncurrent assets held for sale

TOTAL OTHER ASSETS

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Other current liabilities

Related party payables

Accrued loss contingencies

Income taxes payable

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Current portion of loans payable - related party

Current liabilities held for sale

Embedded derivative liability

TOTAL CURRENT LIABILITIES

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Earnout consideration

Contingent value rights

Long term liabilities held for sale

TOTAL LONG-TERM LIABILITIES

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STOCKHOLDERS' EQUITY

Convertible preferred stock, par value $ 1.00 per share;

Series A Convertible preferred stock, par value $ 1.00 per share;

3,000,000 shares authorized;

28,000 shares issued and outstanding

no and 28,000 shares issued and outstanding, respectively

Series B preferred stock, par value $ 1.00 per share;

3,000,000 shares authorized;

no shares issued and outstanding, respectively

Series C preferred stock, par value $ 1.00 per share;

35,000 shares authorized;

no shares issued and outstanding, respectively

Common stock, par value $ 0.05 per share;

112,500,000 and 75,000,000 shares authorized, respectively;

25,000,000 shares authorized;

1,868,638 and 13,663 shares issued and outstanding, respectively (1)

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( 27,081,411 )

Accumulated other comprehensive loss

TOTAL STOCKHOLDERS' EQUITY (DEFICIT)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

(1) Prior period results have been adjusted to reflect the reverse stock split of the common stock at a ratio of 1-for-50 that became effective October 17, 2024 and the reverse stock split of the common stock at a ratio of 1-for-15 that became effective June 12, 2024.

See Note 1, "Nature of Operations," for further details.

The accompanying notes are an integral part of the consolidated financial statements.

PINEAPPLE ENERGY INC.

SUNATION ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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Amortization expense

Transaction costs

Fair value remeasurement of SUNation earnout consideration

Impairment loss

( 1,000,000 )

Goodwill impairment loss

Intangible asset impairment loss

Total operating expenses

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( 7,466,865 )

Other income (expense):

Other (expense) income:

Investment and other income

Gain on sale of assets

Fair value remeasurement of earnout consideration

(Loss) gain on sale of assets

Fair value remeasurement of warrant liability

Fair value remeasurement of embedded derivative liability

Fair value remeasurement of contingent value rights

Interest and other expense

Interest expense

( 3,087,450 )

Other income, net

( 2,657,517 )

Loss on debt extinguishment

Other (expense) income, net

( 3,497,583 )

Operating loss from continuing operations before income taxes

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( 8,132,167 )

( 10,352,240 )

Other comprehensive income (loss), net of tax:

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( 11,447,251 )

Deemed contribution on exchange of equity instruments

Net loss attributable to common shareholders

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Weighted Average Dilutive Shares Outstanding (1)

See Note 1, "Nature of Operations," for further details.

The accompanying notes are an integral part of the consolidated financial statements.

PINEAPPLE ENERGY INC.

SUNATION ENERGY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Redeemable Convertible

Series A Convertible

Preferred Stock

Comprehensive

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( 8,132,167 )

( 10,352,240 )

Issuance of common stock for

professional services

Issuance of common stock for

conversion of related party payables

Issuance of common stock for

conversion of working capital note payable

Effect of reverse capitalization

Issuance of common stock for

HEC Asset Acquisition

Issuance of common stock for

SUNation Acquisition

Issuance of preferred stock and warrants

to PIPE investors, net of issuance costs

Conversion of Series A convertible

preferred stock to common stock

Contingent consideration related to

merger transaction

( 4,684,000 )

Issuance of common stock under Employee Stock Purchase Plan

Issuance of common stock under Equity Incentive Plan

Gain on extinguishment of related party debt

Share based compensation

Other share retirements

Other comprehensive loss

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( 15,849,805 )

Issuance of common stock under

Employee Stock Purchase Plan

Issuance of common stock under

Equity Incentive Plan

Gain on extinguishment of related party debt

Issuance of common stock under Employee Stock Purchase Plan

Issuance of common stock under Equity Incentive Plan

Issuance of common stock under registered direct offering, net of issuance costs

Issuance of Series B Preferred Stock

Cancellation of Series B Preferred Stock

Issuance of common stock under PIPE Warrant exercise

Reclassification of Series A Preferred Stock to temporary equity

( 30,940,875 )

( 30,968,875 )

Deemed dividend on extinguishment of Convertible Preferred Stock

Reclassification of PIPE Warrants to liabilities

( 10,592,220 )

Conversion of Redeemable Convertible Preferred Stock to Common Stock

( 15,277,055 )

Conversion of Series A Convertible Preferred Stock to Common Stock

Reclassification of temporary equity to Series A Preferred Stock

( 16,442,945 )

Reclassification of PIPE Warrants to equity

Exchange of Series A Preferred Stock and PIPE Warrants to Series C Preferred Stock

Issuance costs on exchange of Series A Preferred Stock and PIPE Warrants to Series C Preferred Stock

Conversion of Series C Preferred Stock to Common Stock

Issuance of Common Stock on At-the-Market sales, net of issuance costs

Cash in lieu payment on fractional shares under reverse stock split

Share based compensation

Other share retirements

Other comprehensive income

BALANCE AT DECEMBER 31, 2024

( 42,899,046 )

See Note 1, "Nature of Operations," for further details.

The accompanying notes are an integral part of the consolidated financial statements.

PINEAPPLE ENERGY INC.

SUNATION ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

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( 1,192,275 )

( 7,074,184 )

Net loss from continuing operations

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Deferred taxes

Impairment loss

Goodwill impairment loss

Intangible asset impairment loss

Credit loss provision

Fair value remeasurement of earnout consideration

( 1,000,000 )

Fair value remeasurement of warrant liability

Fair value remeasurement of embedded derivative liability

Fair value remeasurement of contingent value rights

( 2,674,966 )

( 2,125,949 )

Loss on extinguishment of debt

Gain on sale of assets

( 1,229,883 )

Loss on lease termination

Interest and accretion expense

Changes in assets and liabilities:

Trade and related party accounts receivables, net

Trade and related party accounts receivables

Inventories, net

Prepaid income taxes

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( 6,302,686 )

Net cash (used in) provided by operating activities - discontinued operations

Net cash used in operating activities - discontinued operations

Net cash used in operating activities

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Capital expenditures

Acquisition of business, net of cash acquired

( 10,991,128 )

Proceeds from the sale of fixed assets

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Net cash provided by (used in) investing activities - continuing operations

( 3,081,917 )

Net cash provided by (used in) investing activities - discontinued operations

Net cash provided by (used in) investing activities

( 3,097,406 )

Net cash provided by investing activities - discontinued operations

Net cash (used in) provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from working capital line of credit

Proceeds from loans payable

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( 7,277,334 )

Debt issuance costs paid

Equity issuance costs paid

( 2,699,370 )

Proceeds from the issuance of preferred stock & warrants to PIPE investors

Payments related to debt issuance costs

Payments related to equity issuance costs

Proceeds from the issuance of common stock under registered direct offering

Proceeds from the issuance of common stock under at-the-market offering

Proceeds from the issuance of Series B preferred stock

Payments for contingent value rights distributions

( 3,036,676 )

( 8,745,628 )

Proceeds from issuance of common stock, net of shares withheld

Cash in lieu payment on fractional shares under reverse stock split

Purchase of common stock

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

( 2,760,236 )

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

( 4,244,995 )

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR

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Capital contribution on related party debt extinguishment

Issuance of common stock for conversion of related party payables

Issuance of common stock for conversion of working capital payable

Issuance of common stock for the acquisition of HEC and E-Gear

Issuance of common stock for the acquisition of SUNation

Effect of reverse capitalization

Contingent consideration related to merger transaction

( 4,684,000 )

Loss on extinguishment of debt

Deemed dividend on Convertible Preferred Stock and PIPE Warrants

Conversion of redeemable convertible preferred stock to common stock

Operating right of use assets obtained in exchange for lease obligations

The accompanying notes are an integral part of the consolidated financial statements.

PINEAPPLE ENERGY INC.

SUNATION ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Description of Business

Pineapple Energy Inc.

(formerly Communications Systems, Inc.

and Pineapple Holdings, Inc.) (“PEGY”, “Pineapple”, “we” or the “Company”), was originally organized as a Minnesota corporation in 1969.

SUNation Energy, Inc.

(formerly Communications Systems, Inc., Pineapple Holdings, Inc., and Pineapple Energy Inc.) (“SUNE”, “SUNation Energy”, “we” or the “Company”), was originally organized as a Minnesota corporation in 1969.

On March 28, 2022, the Company completed its previously announced merger transaction with Pineapple Energy LLC (“Pineapple Energy”) in accordance with the terms of that certain Agreement and Plan of Merger dated March 1, 2021, as amended by an Amendment No.

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and commenced doing business using the Pineapple name, and subsequently, on April 13, 2022, changed its name to Pineapple Energy Inc.

In addition, on March 28, 2022 and immediately prior to the closing of the merger, Pineapple Energy completed its acquisition (“HEC Asset Acquisition”) of substantially all of the assets of two Hawaii-based solar energy companies, Hawaii Energy Connection, LLC (“HEC”) and E-Gear, LLC (“E-Gear”).

On November 9, 2022, the Company entered into a Transaction Agreement (the “Transaction Agreement”) with Solar Merger Sub, LLC, a New York limited liability company and wholly owned subsidiary of the Company (“Solar Merger Sub”), Scott Maskin, James Brennan, Scott Sousa and Brian Karp (collectively, the “Sellers”), and Scott Maskin as representative of each seller, pursuant to which the Company directly or indirectly acquired all of the issued and outstanding equity of SUNation Solar Systems, Inc.

and five of its affiliated entities:

SUNation Commercial, Inc., SUNation Service, Inc., SUNation Electric, Inc., SUNation Energy, LLC, and SUNation Roofing, LLC (collectively, “SUNation”).

Each of SUNation Service, Inc.

and SUNation Electric, Inc.

were acquired through a merger with and into Solar Merger Sub, with Solar Merger Sub surviving each merger, pursuant to a Plan of Merger, dated as of November 9, 2022 (the “Plan of Merger”).

The mergers closed contemporaneously with signing the Transaction Agreement (“SUNation Acquisition”) .

This acquisition was a further expansion in the residential and commercial solar markets and fits into the Company’s overall acquisition growth plan as it looks to expand further through the acquisition of regional residential solar companies and energy technology solution providers.

The Company is a growing domestic operator and consolidator of residential solar, battery storage, and grid services solutions.

On November 14, 2024, the Company filed articles of conversion with the Secretary of State of the State of Minnesota and filed a certificate of conversion with the Secretary of State of the State of Delaware changing its jurisdiction of incorporation from Minnesota to Delaware (the “Reincorporation”), as well as having filed a Certificate of Incorporation with the Secretary of State of the State of Delaware on this same date.

In addition to the Reincorporation, the Company effectuated a change to its name from Pineapple Energy Inc.

to SUNation Energy, Inc.

(the “Name Change”) and a change to its stock trading symbol from PEGY to SUNE, which Name Change and stock symbol change was effective November 19, 2024.

SUNation Energy’s vision is to power the energy transition through grass-roots growth of solar electricity paired with battery storage.

The Company is a domestic operator and consolidator of residential solar, battery storage, and grid services solutions.

Our strategy is focused on acquiring, integrating, and growing leading local and regional solar, storage, and energy services companies nationwide.

Pineapple is primarily engaged in the sale, design, and installation of photovoltaic solar energy systems and battery storage systems through its Hawaii-based HEC and New York-based SUNation entities.

We install systems that provide clean, reliable solar energy typically at savings relative to traditional utility offerings.

Our primary customers are residential homeowners.

We also provide solar energy systems to commercial owners and other municipal customers.

Through its E-Gear business, Pineapple also develops, manufactures, and sells patented edge-of-grid energy management software and hardware technology, such as energy management control devices.

These products allow homeowners to get the most out of their installed photovoltaic solar energy systems and utility grid support benefits.

Our primary customers for this technology are energy services companies and other utilities.

Pursuant to the merger agreement, the Company worked to divest its legacy operations and operating assets.

The Company sold substantially all of the assets of its JDL Technologies, Inc.

(“JDL”) and Ecessa Corporation (“Ecessa”) businesses on June 30, 2023.

Our current business units, Hawaii Energy Connection, LLC (“HEC”), and New York-based subsidiaries, the SUNation entities (collectively, “SUNation”).

are engaged in the design, installation, and maintenance of solar energy systems across residential, commercial, and municipal sectors.

Our team specializes in providing tailored solar solutions that meet the specific energy needs of each client, ensuring both efficiency and sustainability.

In addition to our core solar services, we also offer energy storage systems to optimize energy use and increase reliability.

Our New York business unit further integrates a broader range of services, including residential roofing solutions, to ensure seamless solar installations and long-term durability.

Additionally, we provide community solar services that allow groups of individuals, businesses, or organizations to share the benefits of a single solar array, making renewable energy accessible to more people in the community.

On June 30, 2023, the Company divested its legacy operations and operating assets through the sale of substantially all of the assets of its JDL Technologies, Inc.

(“JDL”) and Ecessa Corporation (“Ecessa”) businesses.

See Note 5, Discontinued Operations.

As a result, unless otherwise noted, all information in this Form 10-K related to the JDL and Ecessa businesses is discussed and presented as discontinued operations and the Company’s remaining business operations are reported as continuing operations.

As a result, unless otherwise noted, all information in this report on Form 10-K related to the JDL and Ecessa businesses are discussed and presented as discontinued operations and the Company reports its remaining business operations as continuing operations.

Reverse Stock Splits

June 2024 Reverse Stock Split

On January 3, 2024, the Company’s shareholders approved a reverse stock split of the Company’s common stock at a ratio within a range of 1-for-2 and 1-for-15 and granted the Company’s board of directors the discretion to determine the timing and ratio of the split within such range.

On May 28, 2024, the Company’s board of directors determined to effect the reverse stock split of the common stock at a 1-for-15 ratio (the “June Reverse Stock Split”) and approved an amendment to the Fourth Amended and Restated Articles of Incorporation of the Company to effect the June Reverse Stock Split.

Effective June 12, 2024, the Company amended its Fourth Amended and Restated Articles of Incorporation to implement the June Reverse Stock Split.

The Company's common stock began trading on a split-adjusted basis when the market opened on June 12, 2024 (the "June Effective Date").

As a result of the June Reverse Stock Split, on the June Effective Date, every 15 shares of common stock then issued and outstanding automatically were combined into one share of common stock, with no change in par value per share.

No fractional shares were outstanding following the June Reverse Stock Split, and any fractional shares that would have resulted from the June Reverse Stock Split were settled in cash.

The number of shares of common stock outstanding was reduced from 108,546,773 to 7,235,731 , with 720.901 fractional shares paid out in cash totaling $ 1,132 .

The total number of shares authorized for issuance was reduced to 7,500,000 in proportion to the June Reverse Stock Split ratio.

October 2024 Reverse Stock Split

On July 19, 2024, the Company’s shareholders approved a reverse stock split of the Company’s common stock at a ratio within a range of 1-for-2 and 1-for-200 and granted the Company’s board of directors the discretion to determine the timing and ratio of the split within such range.

Additionally, the shareholders also approved an increase in authorized shares to 133,333,333 shares.

On October 1, 2024, the Company’s board of directors determined to effect the reverse stock split of the common stock at a 1-for-50 ratio (the “October Reverse Stock Split”) and approved an amendment to the Fourth Amended and Restated Articles of Incorporation of the Company to effect the October Reverse Stock Split.

Effective October 17, 2024, the Company amended its Fourth Amended and Restated Articles of Incorporation to implement the October Reverse Stock Split.

The Company's common stock began trading on a split-adjusted basis when the market opened on October 17, 2024 (the "October Effective Date").

As a result of the October Reverse Stock Split, on the October Effective Date, every 50 shares of common stock then issued and outstanding automatically were combined into one share of common stock, with no change in par value per share.

No fractional shares were outstanding following the Reverse Stock Split, and any fractional shares that would have resulted from the October Reverse Stock Split were settled in cash.

The number of shares of common stock outstanding was reduced from 67,260,696 to 1,344,841 , with 372.92 fractional shares payable in cash totaling $ 1,891 .

The total number of shares authorized for issuance was reduced from 133,333,333 to 2,666,667 in proportion to the October Reverse Stock Split ratio.

The number of shares authorized for issuance was later increased to 25,000,000 as a result of the Reincorporation.

Effective as of the same time as the June 2024 Reverse Stock Split and October 2024 Reverse Stock Split (collectively known as the “Reverse Stock Splits”), the number of shares of common stock available for issuance under the Company's equity compensation plans were automatically reduced in proportion to the Reverse Stock Splits ratio.

Upon effectiveness, the Reverse Stock Splits also resulted in reductions in the number of shares of common stock issuable upon exercise or vesting of equity awards in proportion to the Reverse Stock Splits ratios and caused a proportionate increase in exercise price or share-based performance criteria, if any, applicable to such awards.

The effects of the Reverse Stock Splits have been reflected the consolidated financial statements for all periods presented.

Impact of the Reverse Stock Splits

The impact of the Reverse Stock Splits was applied retroactively for all periods presented in accordance with applicable guidance.

Therefore, prior period amounts are different than those previously reported.

The following table illustrates changes in common stock (in number of shares and dollar amount) and additional paid-in-capital, as previously reported prior to, and as adjusted subsequent to, the impact of the Reverse Stock Splits retroactively adjusted for the periods presented:

December 31, 2022

December 31, 2023

As Previously Reported

Impact of Reverse Stock Split

As Previously Reported

Impact of Reverse Stock Split

Common Stock shares

( 9,902,365 )

( 10,232,942 )

Common Stock amount

Additional Paid-in-Capital

The following table illustrates changes in loss per share and weighted average shares outstanding, as previously reported prior to, and as adjusted subsequent to, the impact of the Reverse Stock Splits retroactively adjusted for the periods presented:

Year Ended December 31, 2023

As Previously Reported

Impact of Reverse Stock Split

Weighted average shares outstanding - basic and diluted

( 10,022,672 )

Loss per share from continuing operations - basic and diluted

Loss per share from discontinued operations - basic and diluted

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Impact of the Merger

The Company accounted for the March 28, 2022 merger as a reverse recapitalization whereby it was determined that Pineapple Energy was the accounting acquirer and CSI was the accounting acquiree.

This determination was primarily based on:

 Former Pineapple Energy stockholders having the largest voting interest in the Company following the merger;

 The implied enterprise value of Pineapple Energy in the merger was well in excess of the market capitalization of CSI prior to the merger;

 At the Closing, the board of directors of the Company was fixed at seven members, two of which were selected by CSI and five of which were selected by Pineapple Energy;

 Pineapple Energy’s Chief Executive Officer serves as the Chief Executive Officer of the Company subsequent to the merger;

 The post-combination company assumed the “Pineapple Energy” name;

 The Company disposed of the pre-existing CSI headquarters during the second quarter of 2022 and expects to dispose of its legacy subsidiaries, JDL and Ecessa, and will continue Pineapple Energy operations in Hawaii.

Accordingly, for accounting purposes, the merger was treated as the equivalent of Pineapple Energy issuing stock for the net assets of CSI, accompanied by a recapitalization.

While CSI was the legal acquirer in the merger, because Pineapple Energy was determined to be the accounting acquirer, the historical financial statements of Pineapple Energy became the historical financial statements of the combined company upon the consummation of the merger.

As a result, the financial statements included in the accompanying consolidated financial statements reflect (i) the historical operating results of Pineapple Energy prior to the merger;

(ii) the consolidated results of legacy CSI, Pineapple Energy, HEC, and E-Gear following the closing of the merger;

(iii) the assets and liabilities of Pineapple Energy at their historical cost;

(iv) the assets and liabilities of CSI, HEC and E-Gear at fair value as of the merger date in accordance with ASC 805, Business Combinations, and (v) the Company’s equity structure for all periods presented.

In connection with the merger transaction, we have converted the equity structure for the periods prior to the merger to reflect the number of shares of the Company’s common stock issued to Pineapple Energy’s members in connection with the recapitalization transaction.

As such, the shares, corresponding capital amounts and earnings per share, as applicable, related to Pineapple Energy member units prior to the merger have been retroactively converted by applying the exchange ratio established in the merger agreement.

PIPE Transaction

On March 28, 2022, following the closing of the merger, the Company closed on a $ 32.0 million private investment in public equity (“PIPE”) transaction pursuant to a securities purchase agreement.

Under the terms of the securities purchase agreement, for their $ 32.0 million investment, the PIPE investors received shares of newly authorized CSI Series A convertible preferred stock convertible at a price of $ 13.60 per share into the Company’s common stock, together with warrants to purchase an additional $ 32.0 million of common shares at that same price.

The Company used the proceeds from the PIPE to fund the cash portion of the HEC Asset Acquisition, to repay $ 4.5 million ($ 5.6 million including five-year interest) of Pineapple Energy’s $ 7.5 million term loan from Hercules Capital, Inc., to pay for transaction expenses, and for working capital to support Pineapple Energy’s growth strategy of acquiring leading local and regional solar installers around the United States.

Principles of Consolidation

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Actual results could materially differ from those estimates.

The Company’s estimates consist principally of allowances for credit losses, revenue recognition on commercial projects based on percentage of completion, asset impairment evaluations, accruals for compensation plans, lower of cost or market inventory adjustments, the fair value of the term loan payable and related assets at the date of acquisition, the fair value of the contingent value rights and contingent consideration, provisions for income taxes and deferred taxes, depreciable lives of fixed assets, and amortizable lives of intangible assets.

The Company’s estimates consist principally of allowances for credit losses, revenue recognition on commercial projects based on percentage of completion, asset impairment evaluations, accruals for compensation plans, lower of cost or market inventory adjustments, fair value measurements (warrant liabilities, contingent value rights, contingent consideration, and debt instruments, including embedded derivative liabilities), provisions for income taxes and deferred taxes, depreciable lives of fixed assets, and amortizable lives of intangible assets.

Restricted Cash and Cash Equivalents

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however, it is possible to lose money investing in these funds.

The $ 1,821,060 of restricted cash and cash equivalents on the balance sheet as of December 31, 2023 are funds that can only be used to support the legacy CSI business, will be distributed to holders of the Company’s contingent value rights (“CVRs”) and cannot be used to support the working capital needs of the Pineapple Energy business.

Investments consist of corporate notes and bonds and commercial paper that are traded on the open market and are classified as available-for-sale and minority investments in strategic technology companies.

Available-for-sale investments are reported at fair value with unrealized gains and losses excluded from operations and reported as a separate component of stockholders’ equity, net of tax.

All investments have either converted to cash and cash equivalents or been distributed to the CVR holders as of December 31, 2023.

The $ 312,080 of restricted cash and cash equivalents on the balance sheet as of December 31, 2024 are funds that can only be used to support the legacy CSI business, will be distributed to holders of the Company’s contingent value rights (“CVRs”) and cannot be used to support the working capital needs of the SUNation Energy business.

Accounts Receivable, Net

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When uncertainty exists as to the collection of receivables, the Company records an allowance for credit losses and a corresponding charge to credit loss expense.

The current year provision for credit losses and write-off for uncollectible amounts included approximately $949,000 in receivables related to JDL that were not included in the sale of assets and were deemed uncollectible during the fourth quarter of 2023.

The prior year provision for credit losses and write-off for uncollectible amounts included approximately $ 949,000 in receivables related to JDL that were not included in the sale of assets and were deemed uncollectible during the fourth quarter of 2023.

The provision for credit losses is recorded within selling, general and administrative expenses.

The following table presents the changes in the allowance for credit losses since adoption at the beginning of the year:

The following table presents the changes in the allowance for credit losses for the years ended December 31, 2024 and 2023:

Year Ended December 31

19 unchanged sentences

The Company reassesses the value of our reporting units and related goodwill balances annually on October 1 and at other times if events have occurred or circumstances exist that indicate the carrying amount of goodwill may not be recoverable.

The Company recognized an impairment loss of $ 3,101,981 related to the goodwill of its HEC segment during the year ended December 31, 2024.

See Note 8, Goodwill and Intangible Assets for further information.

Recoverability of Long-Lived Assets and Intangible Assets

2 unchanged sentences

If the fair value, determined as the total of the expected undiscounted future net cash flows for the asset group is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset.

The Company recognized a loss of $ 750,000 related to the technology intangible asset within the HEC segment during the year ended December 31, 2024.

See Note 8, Goodwill and Intangible Assets for further information.

Mezzanine Equity

The Company has issued various financial instruments, including preferred stock.

Instruments containing redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control are classified as redeemable or mezzanine equity.

The purpose of this classification is to convey that such a security may not be permanently part of equity and could result in a demand for cash, securities or other assets of the entity in the future.

See Note 12, Equity, for further discussion regarding the reclassification of the Company’s Convertible Preferred Stock from permanent equity to mezzanine equity during the first quarter of 2024 and the reclassification from mezzanine equity to permanent equity in the third quarter of 2024.

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance, ASC 480 “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging.” Management’s assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815.

See Note 12, Equity, for further discussion regarding the reclassification of the Company’s PIPE Warrants from equity to liabilities during the first quarter of 2024 and the reclassification from liabilities to equity in the third quarter of 2024.

For issued or modified warrants that do not meet all the criteria for equity classification, such warrants are required to be recorded as a liability initially at their fair value on the date of issuance, and subsequently remeasured to fair value on each balance sheet date thereafter.

Changes in the estimated fair value of liability-classified warrants are recognized in other income (expense) in the condensed consolidated statements of operations in the period of change.

Revenue Recognition

23 unchanged sentences

Additionally, as part of the November 9, 2022 SUNation Acquisition, the Company also acquired the SUNation Solar Systems, Inc.

Employer contributions into this plan were $ 27,656 during the period under Company ownership in 2022 and $ 176,334 during 2023 until the plan was merged with the Employee Savings Plan on December 1, 2023.

Employer contributions into this plan were $ 176,334 during 2023 until the plan was merged with the Employee Savings Plan on December 1, 2023.

Share Based Compensation

12 unchanged sentences

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding the method to allocate resources and assess performance.

Our chief operating decision maker is comprised of our chief executive officer and chief financial officer.

Based on the financial information presented to and reviewed by our chief operating decision maker in deciding how to allocate resources and in assessing performance, we have determined we have two operating segments, but meet the aggregation criteria in order to aggregate into one reportable segment.

Our chief operating decision maker (“CODM”) is a committee comprised of our chief executive officer, chief operating officer and chief financial officer.

Based on the financial information presented to and reviewed by our CODM in deciding how to allocate resources and in assessing performance, we have determined we have two operating and reportable segments.

See Note 14, Segment Information, for further discussion.

Concentrations of Risk

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The Company depends on a limited number of suppliers for its solar panels and other system components.

During the years ended December 31, 2023 and 2022, the top five suppliers collectively accounted for approximately 53 % and 60 % of the Company’s total accounts payables, respectively.

During the years ended

December 31, 2024 and 2023, the top five suppliers collectively accounted for approximately 41 % and 53 % of the Company’s total accounts payables, respectively.

Net Loss Per Share

Basic net loss per common share is based on the weighted average number of common shares outstanding during each year.

Diluted net loss per common share adjusts for the dilutive effect of potential common shares outstanding.

The Company’s only potential additional common shares outstanding are common shares that would result from the conversion of the Series A convertible preferred shares, stock options, warrants and shares associated with the long-term incentive compensation plans, which resulted in no dilutive effect for the year ended December 31, 2023.

Basic net loss attributable to common shareholders per common share is based on the weighted average number of common shares outstanding during each year.

Diluted net loss attributable to common shareholders per common share adjusts for the dilutive effect of potential common shares outstanding.

The Company had $ 11,587,121 in deemed dividends during the year ended December 31, 2024, which decreases the numerator in the net loss per share calculation.

The Company’s only potential additional common shares outstanding are common shares that would result from the conversion of the convertible preferred shares, warrants, convertible debt and shares associated with the long-term incentive compensation plans, which resulted in no dilutive effect for the year ended December 31, 2024.

The Company calculates the dilutive effect of outstanding options, warrants and unvested shares using the treasury stock method and the dilutive effect of outstanding preferred shares using the if-converted method.

There were no options or deferred stock awards excluded from the calculation of diluted earnings per share because there were no outstanding options or deferred stock awards as of both December 31, 2024 and 2023.

Warrants totaling 5,176,471 would have been excluded from the calculation of diluted earnings per share for the years ended December 31, 2023 and 2022 and restricted stock units totaling 785,404 and 687,712 for the years ended December 31, 2023 and 2022, respectively, even if there had not been a net loss in those periods, because the exercise price was greater than the average market price of common stock during the period.

Warrants totaling 0 and 6,902 and restricted stock units totaling 297 and 1,047 would have been excluded from the calculation of diluted earnings per share for the years ended December 31, 2024 and 2023, respectively, even if there had not been a net loss in those periods, because the exercise price was greater than the average market price of common stock during the period.

Accounting Standards Issued

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Many of the amendments will allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements and align the requirements in the FASB accounting standard codification with the SEC’s regulations.

The amendments in ASU 2023-06 will become effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC, and will no longer be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027.

Early adoption is prohibited.

The Company is currently evaluating this ASU and the impact it may have on its consolidated financial statements.

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

Improvements to Reportable Segment Disclosures,” which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources.

This ASU is effective for fiscal periods beginning after December 15, 2023, with early adoption permitted.

The Company is currently evaluating this ASU and the impact it may have on its financial statement disclosures.

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

2 unchanged sentences

This ASU is effective for fiscal periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating this ASU and the impact it may have on its financial statement disclosures.

Accounting Standards Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses.

This ASU is intended to provide financial statement users with more decision-useful information about expected credit losses and is effective for annual periods and interim periods for those annual periods beginning after December 15, 2022, which for us was the first quarter ended March 31, 2023.

We adopted this ASU in the first quarter of 2023 without a material impact on the Company’s condensed consolidated financial statements.

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”).

The standard requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, “Revenue from Contracts with Customers,” as if it had originated the contracts.

The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

The Company is currently evaluating this ASU and the impact it may have on its consolidated financial statements .

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

Disaggregation of Income Statement Expenses”, which requires disclosure in the notes to the financial statements of specified information about certain costs and expenses.

The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The Company adopted this ASU during the second quarter of 2022 and has incorporated this guidance in its evaluation of the accounting for the merger and the HEC Asset Acquisition.

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment,” which eliminates step two from the goodwill impairment test.

Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit.

ASU 2017-04 became effective for accelerated filing companies for annual periods or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

All other entities, including not-for-profit entities, that are adopting the amendments in this ASU should do so for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2022.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

The Company adopted ASU 2017-04 in 2023.

NOTE 3 – BUSINESS COMBINATIONS

On March 28, 2022, the Company and Pineapple Energy consummated the transactions contemplated by the merger agreement.

At the Closing, each member unit of Pineapple Energy that was issued and outstanding immediately prior to the effective time of the merger was cancelled and converted into the right to receive the Company’s common stock.

The Company issued an aggregate of 5,006,245 shares of its common stock, which is inclusive of common shares issued to HEC and E-Gear owners as discussed further below and conversion of certain related party payables and debt outstanding prior to the merger transaction, discussed in Note 11, Commitments and Contingencies.

The purpose of the merger was to provide a path to allow the Company to deliver value to its legacy shareholders through a combination of (i) the opportunity for the legacy CSI shareholders to receive an attractive return from dividends or distributions of the net proceeds from the divestiture of the Company’s pre-merger operating and non-operating assets and properties, and (ii) the opportunity for the legacy CSI shareholders, through ownership of the Company’s common stock following the merger, to participate in the potential growth of the combined company’s residential solar, battery storage, and grid services solutions business.

The Company accounted for the merger as a reverse recapitalization whereby it was determined that Pineapple Energy was the accounting acquirer and CSI was the accounting acquiree.

Refer to Note 2, Summary of Significant Accounting Policies, for further details.

The accompanying consolidated financial statements and related notes reflect the historical results of Pineapple Energy prior to the merger and do not include the historical results of CSI prior to the consummation of the merger.

As a result of the reverse merger, the acquired assets and assumed liabilities of CSI were remeasured and recognized at fair value as of the acquisition date.

The total purchase price represents the fair value of the Company common stock held by legacy CSI shareholders at the time of the merger ( 2,429,341 shares of common stock).

The fair value of this purchase consideration was $ 19,872,009 using the publicly traded Company stock price at the merger date, which is allocated at the merger date between the liability associated with the Company’s obligation to pay legacy CSI shareholders cash as part of the CVRs discussed below and equity based on their respective fair values (Level 3 fair values).

The merger agreement also included the execution of CVR agreements with holders of record of CSI stock at the close of business on March 25, 2022.

Each shareholder of record received one contractual non-transferable CVR per share of common stock held, which entitles the holders of the CVRs to receive a portion of the cash, cash equivalents, investments and net proceeds of any divestiture, assignment, or other disposition of all legacy assets of CSI and/or its legacy subsidiaries, JDL and Ecessa, that are related to CSI’s pre-merger business, assets, and properties, including the sale of JDL and Ecessa, that occur during the period following the closing of the merger and ending initially on March 28, 2024, but was extended through December 31, 2024 by the First Amendment to the Contingent Value Rights Agreement entered into on March 27, 2024.

As of the merger date, the fair value of the CVR liability was estimated at $ 18,277,230 , a Level 3 fair value, which was determined based on the provisional fair value of the tangible and definite-lived intangibles assets of CSI discussed below.

The CVR liability is adjusted to fair value each reporting period.

The Company is required to review the availability of funds for disbursement to CVR holders on a quarterly basis, starting on June 30, 2022.

If the funds available are less than $ 200,000 , then the amount gets aggregated with the next payment.

During the third quarter of 2022, the Company distributed $ 3.60 per CVR, or $ 8,745,628 in total.

Remaining legacy assets to be sold include the Company’s legacy CSI subsidiaries, JDL and Ecessa, which are classified as held for sale as of December 31, 2022 and included within discontinued operations.

The purchase price allocation for the merger is based on the fair value of assets acquired and liabilities assumed and has been allocated as follows:

Cash and cash equivalents

Accounts receivable

Property, plant, and equipment

Current assets held for sale

Intangible assets

Accounts payable

Accrued expenses

Deferred revenue

Total liabilities

Net assets acquired

The identifiable intangible assets from the merger are definite-lived assets.

These assets include trade names, developed te chnology, and customer relationships and have a provisional weighted average amortization period of four years .

Goodwill recorded as part of the purchase price allocation is not tax deductible.

The trade name fair values were determined using the relief-from-royalty method, an income approach, which included the following significant assumptions:

projected revenue by business, royalty rate, income tax rate, and discount rate.

The fair values of the developed technology associated with the Ecessa business and customer relationships associated with the JDL business were determined using the multiple period excess-earnings method, an income approach, which included the following significant assumptions:

projected Ecessa revenues, obsolescence factor, margins, depreciation, contributory asset charges, discount rates, and income tax rates.

The fair value of the customer relationships associated with the Ecessa business was determined using the distributor method, an income approach, which included the following significant assumptions:

projected Ecessa revenue, customer attrition, margins, contributory asset charges, discount rates, and income tax rates.

The merger included the acquisition of current assets held for sale related to CSI’s company headquarters building located in Minnetonka, Minnesota, pursuant to a purchase agreement entered into with Buhl Investors LLC on November 18, 2021.

The agreement was further amended on February 15, 2022, April 11, 2022 and April 26, 2022, to allow for additional time to complete due diligence.

The assets were recorded at the purchase price of $ 6,800,000 less the costs to sell the building as of March 31, 2022.

On May 26, 2022, the purchase agreement was amended to reduce the purchase price to $ 6,500,000 and the building sale closed on June 10, 2022.

The Company received net proceeds of $ 6,281,000 and recorded a loss on the sale of $ 285,000 during the second quarter of 2022.

The consolidated financial statements include results of operations of CSI following the consummation of the merger for the years ended December 31, 2023 and 2022 as follows:

Year Ended December 31

Revenue from discontinued operations

Net loss from discontinued operations

( 1,192,275 )

( 7,074,184 )

HEC Asset Acquisition

On March 28, 2022, immediately prior to the closing of the merger, Pineapple Energy completed its acquisition of substantially all of the assets of HEC and E-Gear and assumed certain liabilities of HEC and E-Gear pursuant to the Asset Purchase Agreement dated March 1, 2021, as amended by Amendment No.

1 to Asset Purchase Agreement dated December 16, 2021, by and among Pineapple Energy as Buyer, HEC and E-Gear as Sellers, and Steve P.

Godmere, as representative for the Sellers.

This acquisition was an expansion in the residential solar market and is a strategic start to the Company’s overall acquisition growth plan as it looks to expand further through the acquisition of regional residential solar companies and energy technology solution providers.

At the closing of this acquisition, Pineapple Energy issued 6,250,000 Class B units, which upon the closing of the merger were converted into 1,562,498 shares of the Company’s common stock, with a fair value of $ 12,781,234 using

the publicly traded stock price at the merger date.

The sellers received $ 12,500,000 in initial cash consideration, less $ 164,888 in working capital adjustments, bringing the aggregate purchase price to $ 25,116,346 , with cash acquired totaling $ 215,684 .

The assets and liabilities of HEC and E-Gear were recorded as of the merger date at their respective fair values.

The purchase price allocation is based on the fair value of assets acquired and liabilities assumed and has been allocated as follows:

Cash and cash equivalents

Accounts receivable

Property, plant, and equipment

Intangible assets

Total liabilities

( 1,471,348 )

Net assets acquired

The identifiable intangible assets from the HEC Asset Acquisition are definite-lived assets.

These assets include a trade name and developed technology and have a weighted average amortization period of seven years .

Goodwill recorded as part of the purchase price allocation is tax deductible.

The developed technology fair values were determined using the relief-from-royalty method, an income approach, which included the following significant assumptions:

projected revenue, obsolescence, royalty rate, income tax rate, and discount rate.

The fair values of the trade names were determined using the multiple period excess-earnings method, an income approach, which included the following significant assumptions:

projected revenues, estimated probability of continued used of tradenames, margins, depreciation, contributory asset charges, discount rates, and income tax rates.

The consolidated financial statements include results of operations of HEC and E-Gear following the consummation of the HEC Asset Acquisition for the year ended December 31, 2023 and 2022 as follows:

Year Ended December 31

Net income (loss)

SUNation Acquisition

On November 9, 2022, the Company completed the SUNation Acquisition as contemplated under the Transaction Agreement.

T his acquisition was a further expansion in the residential and commercial solar markets and fits into the Company’s overall acquisition growth plan as it looks to expand further through the acquisition of regional residential solar companies and energy technology solution providers.

The Company acquired the equity of SUNation from Sellers for an aggregate purchase price of $ 18,440,533 , comprised of (a) $ 2,390,000 in cash consideration paid at closing, (b) the issuance at closing of a $ 5,000,000 Short-Term Limited Recourse Secured Promissory Note (the “Short-Term Note”), (c) the issuance at closing of a $ 5,486,000 Long-Term Promissory Note (the “Long-Term Note”), with a fair value of $ 4,830,533 at the acquisition date, (d) the issuance at closing of an aggregate of 1,480,000 shares (the “Shares”) of Company common stock pursuant to the Plan of Merger, with a fair value of $ 4,070,000 at the acquisition date and (e) potential earn-out payments of up to $ 5,000,000 million based on the percentage of year-over-year EBITDA growth of the SUNation in 2023 and 2024, as set forth in the Transaction Agreement (the “Earnout”), with a fair value of $ 2,150,000 at the acquisition date.

The Company utilized a Monte Carlo simulation to determine the fair value of the earnout liability, which included the following significant assumptions:

the expected probability and timing of achievement of milestone events.

As of December 31, 2022, the fair value of the earnout liability was $ 2,150,000 .

See further discussion regarding the Short-Term Note and Long-Term Note within Note 11, Commitments and Contingencies.

The assets and liabilities of SUNation were recorded as of the merger date at their respective fair values.

The purchase price allocation is based on the fair value of assets acquired and liabilities assumed and has been allocated as follows:

Accounts receivable

Employee retention credit receivable

Right of use asset

Intangible assets

Accounts Payable

Other current liabilities

Related party payables

Operating lease liability

Loans payable

Customer deposits

Deferred revenue

Total liabilities

Net assets acquired

The identifiable intangible assets from the SUNation Acquisition are definite-lived assets.

These assets include a trade name and backlog and have a weighted average amortization period of eight years .

Goodwill recorded as part of the purchase price allocation is not tax deductible.

The trade name fair values were determined an income approach under an estimate developed from the relief-from-royalty method and the projected cash savings over an estimated period of time that would otherwise be required to license this asset.

The backlog amount was determined using an income approach under a multi-period excess earnings approach whereby cash flows in excess of those needed to operate contributory assets over a period of time are otherwise attributed to the fair value of the asset .

The consolidated financial statements include results of operations of SUNation following the consummation of the SUNation Acquisition for the years ended December 31, 2023 and 2022 as follows:

Year Ended December 31

Net income (loss)

Transaction costs related to the merger, the HEC Asset Acquisition and the SUNation Acquisition totaled $ 2,020 and $ 1,947,425 incurred during the years ended December 31, 2023 and 2022, respectively, and were recorded in operating expenses within the consolidated statements of operations and comprehensive loss.

Pro Forma Information

The following unaudited pro forma information represents the results of operations as if the Company had completed the merger, the HEC Asset Acquisition and the SUNation Acquisition as of January 1, 2021.

The unaudited pro forma financial information below includes adjustments to amortization expense for intangible assets totaling $ 0 and $ 1,706,086 and excludes transaction costs totaling $ 2,020 and $ 4,208,063 for the years ended December 31, 2023 and 2022, respectively.

The unaudited pro forma financial information below is not necessarily indicative of consolidated results of operations of the combined business had the acquisition occurred at the beginning of the respective period, nor is it necessarily indicative of future results of operations of the combined company.

( 6,937,872 )

Earnout Shares

As part of the merger, the Company agreed to issue up to 3.25 million shares of the Company common stock to the holders of pre-merger Pineapple Energy units, subject to meeting certain milestone events (collectively, the “Merger Earnout Shares”).

The Merger Earnout Shares are issuable in three tranches.

The milestone for the issuance of the first tranche of the Merger Earnout Shares involves repayment of certain of pre-merger Pineapple Energy’s debt obligations within three months of the merger closing, which would result in the issuance of 750,000 shares of the Company’s common stock.

This milestone was met at the merger closing and the 750,000 shares of the Company’s common stock were issued and are reflected in the Company’s consolidated statement of stockholders’ equity as of December 31, 2023.

The milestone for the second tranche of the Merger Earnout Shares is triggered upon the volume weighted average price (“VWAP”) of the Company’s common stock equaling or exceeding $ 24.00 for 30 consecutive trading days within 24 -months of the merger closing.

The milestone for the third tranche of the Merger Earnout Shares is triggered upon the VWAP of the Company’s common stock equaling or exceeding $ 32.00 for 30 consecutive trading days within 24 -months of the merger closing.

Under the second or third tranches, the number of shares of Company common stock to be issued is also affected by whether the Company has disposed or sold certain assets of its business within 24 months of the merger closing date, which could ultimately impact whether 1.0 million or 1.25 million shares of the Company’s common stock are issued under each tranche.

The first tranche of 750,000 shares issued of the Company’s common stock is accounted for as permanent equity in accordance with ASC 815-40, and no subsequent remeasurement is required as long as the shares continue to be classified in equity.

The shares of the Company’s common stock contingently issuable under the second and third tranches, up to an additional 2.5 million shares of the Company’s common stock are classified as a liability, similar to the accounting for written equity options, which requires an initial measurement of the liability at fair value with subsequent remeasurements to fair value at each reporting date and changes in the fair value recognized in the consolidated statement of operations.

As of March 28, 2022, the fair value of the Merger Earnout Shares for the second and third tranches was approximately $ 4.7 million.

The Company utilized a Monte Carlo simulation to determine the fair value of the liability, which included the following significant assumptions:

the expected probability and timing of achievement of milestone events.

As of December 31, 2023 and 2022 the fair value of the Merger Earnout Shares was $ 0 .

The Company recognized a gain of $ 0 and $ 4,684,000 on the fair value remeasurement of in the years ended December 31, 2023 and 2022, respectively.

The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements.

The Company is currently evaluating this ASU and the impact it may have on its consolidated financial statements .

In November 2024, the FASB issued ASU 2024-04, “Debt with Conversion and Other Options,” which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

This ASU is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual report periods.

Early adoption is permitted for all entities that have adopted the amendments in ASU Update 2020-06.

Adoption can be on a prospective or retrospective basis.

The Company is currently evaluating this ASU and the impact it may have on its consolidated financial statements.

Accounting Standards Adopted

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

This ASU is effective for fiscal periods beginning after December 15, 2023, with early adoption permitted.

The Company adopted this ASU effective December 31, 2024.

See further discussion within Note 14, Segment Information.

NOTE 3 – REVENUE RECOGNITION

In accordance with Accounting Standards Codification (“ASC”) 606, revenue is recognized when a customer obtains control of promised goods or services.

The amount of revenue recognized reflects the consideration that the Company expects to receive in exchange for these goods or services.

Disaggregation of revenue

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NOTE 5 – LEASES

In accordance with ASC Topic 842, the Company recognizes assets and liabilities for the rights and obligations created by leases that extend more than twelve months from the date of the balance sheet.

The Company recognizes assets and liabilities for the rights and obligations created by leases that extend more than twelve months from the date of the balance sheet.

Right of use (“ ROU”) assets represent our right to use an underlying asset for the lease term, while lease liabilities represent our obligation to make lease payments arising from the lease.

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In 2022, the Company entered into operating leases for two office locations, including one in Hawaii in April 2022 and one in New York in November 2022 upon the acquisition of SUNation.

In 2022, the Company had also entered into an operating lease

for its corporate offices in Minnesota that commenced on January 1, 2023.

In 2022, the Company had also entered into an operating lease for its corporate offices in Minnesota that commenced on January 1, 2023.

In March 2023, the Company entered into an operating lease for an additional office location in Florida.

These leases have remaining lease terms of 2 to 12 years.

One lease includes a 3 % rent adjustment on each anniversary of the lease, another includes a fixed annual rent adjustment of $ 6,840 , another includes an annual 3 % rent adjustment after two year s and the other a 4 % annual rent adjustment.

Effective September 30, 2024, the Company entered into a lease termination agreement with our Minnesota office landlord, pursuant to which the Company will pay a termination fee totaling $ 189,000 to be paid at $ 13,500 per month for a period of fourteen (14) months from entry into this lease termination, as well as the Company waiving its right to its original security deposit provided at entry into the original lease in the amount of $ 35,434 .

The lease termination resulted is a decrease to the Company’s operating lease right of uses assets totaling $ 415,674 and operating lease liabilities totaling $ 424,694 , which along with the termination fee and write off the security deposit resulted in a loss on the termination of the lease totaling $ 215,415 recorded in operating expenses in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2024.

The $ 148,500 remaining liability for the termination fee is recorded within other accrued liabilities in the consolidated balance sheets at December 31, 2024.

These remaining leases have remaining lease terms of 2 to 11 years.

One lease includes a 3 % rent adjustment on each anniversary of the lease, another includes a fixed annual rent adjustment of $ 6,840 , and the other a 4 % annual rent adjustment.

As of December 31, 2024, total ROU assets and operating lease liabilities were $ 3,686,747 and $ 3,793,483 , respectively.

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Weighted-average discount rate

(1) Includes $ 1,687,334 for operating leases entered into in 2022 and $ 2,602,024 for operating leases acquired as part of the SUNation Acquisition.

Maturities of lease liabilities as of December 31, 2024 were as follows:

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The Company received net initial proceeds of $ 1,106,616 , consisting of $ 1,175,000 in initial consideration less $ 68,384 in adjustments.

An additional $ 125,000 in consideration is being held in escrow until July 1, 2024 for potential indemnification claims that may arise under the asset purchase agreement.

The amount in escrow represents a consideration receivable that is included in other current assets within the condensed consolidated balance sheet as it is currently considered to be probable that the amount will be received in full at the conclusion of the escrow period.

The amount of escrow proceeds that will be received will depend on whether any indemnification obligations arise under the asset purchase agreement and the receivable will be monitored for potential impairment.

An additional $ 125,000 in consideration previously held in escrow was paid in 2024.

The Company recorded a loss on sale of $ 1,190,002 during the second quarter of 2023.

The presentation of discontinued operations with respect to this transaction has been retrospectively applied to all prior periods presented.

The assets and liabilities of the discontinued operations that are classified as held for sale are as follows:

December 31, 2023

December 31, 2022

Trade accounts receivable, net

Inventories, net

Other current assets

Total current assets

Property, plant, and equipment, net

Right of use asset

Intangible assets

Total noncurrent assets

Total assets held for sale

Accounts payable

Accrued compensation and benefits

Operating lease liability

Other accrued liabilities

Deferred revenue

Total current liabilities

Deferred revenue

Total noncurrent liabilities

Total liabilities held for sale

The financial results of the discontinued operations are as follows:

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( 1,207,260 )

( 7,070,858 )

Income tax (benefit) expense

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( 1,192,275 )

( 7,074,184 )

During the year ended December 31, 2023, the Company recorded $ 56,717 in restructuring expenses, which consisted of severance and related benefits costs.

The Company paid $ 56,717 in restructuring charges in 2023 and had no restructuring accruals recorded at December 31, 2023.

NOTE 8 –RESTRICTED CASH EQUIVALENTS AND INVESTMENTS

The following tables show the Company’s restricted cash equivalents and available-for-sale securities’ amortized cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category recorded as cash equivalents or short and long-term investments as of December 31, 2023 and 2022.

December 31, 2023

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Restricted Cash Equivalents

Short-Term Investments

Long-Term Investments

Cash equivalents:

Money Market funds

December 31, 2022

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Cash Equivalents

Short-Term Investments

Long-Term Investments

Cash equivalents:

Money Market funds

Corporate Notes/Bonds

The Company recognized $ 38,419 and $ 0 in gross realized gains during the years ended December 31, 2023 and 2022, respectively.

As part of the merger, the Company acquired an investment totaling $ 250,000 in preferred shares of Kogniz, Inc., a privately owned artificial intelligence company based in Silicon Valley, CA.

The Company’s investment represented less than 10 % of the outstanding equity of Kogniz.

The Company uses the cost method to account for investments in common stock of entities such as Kogniz if the Company does not have the ability to exercise significant influence over the operating and financial matters of the entity.

The Company also uses the cost method to account for its investments that are not in the form of common stock or in-substance common stock in entities if the Company does not have the ability to exercise significant influence over the entity’s operating and financial matters.

Based on Kogniz’s 2022 performance and overall financial outlook, the Company recognized an impairment loss of $ 250,000 within operating expenses in the accompanying consolidated statement of operations and comprehensive loss.

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT

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NOTE 8 – GOODWILL AND INTANGIBLE ASSETS

As of October 1, 2024, we conducted our annual goodwill impairment test and concluded that the fair value of our reporting units exceeded its carrying value.

However, during the fourth quarter of fiscal 2024, we performed an interim quantitative assessment as of December 31, 2024 related to the recoverability of our goodwill for our two reporting units as a result of a material decline in our stock price and forecasted revenues and operating results.

The Company estimated the fair value of the reporting units using an equally weighted combination of an income approach and market approach.

Under the income approach, the Company discounted the estimated future cash flows of each reporting unit using a rate of return commensurate with the reporting unit’s risk.

Under the market approach, the Company utilized the Guideline Public Company Method based on market revenue multiples of comparable publicly traded companies.

The Company concluded that the fair value of the HEC reporting unit did not exceed its carrying value as of December 31, 2024 and recorded an impairment loss of $ 3,101,981 in its consolidated statement of operations.

The changes in the carrying amount of goodwill for the years ended December 31, 2024 and 2023 by reporting unit are as follows:

January 1, 2022

December 31, 2023

Goodwill impairment loss

( 3,101,981 )

December 31, 2024

Gross goodwill

Accumulated impairment loss

( 3,101,981 )

Balance at December 31, 2024

During the year ended December 31, 2024, the Company performed an impairment test for the asset group associated with the developed technology intangible asset.

The test included comparing the sum of the estimated undiscounted future cash flow attributable to this asset and its carrying amounts, and recognizing an impairment for the amount to which the carrying amount exceeds the fair value of the asset.

The Company recognized an impairment charge of $ 750,000 on its developed technology intangible asset as the Company determined in the fourth quarter of 2024 as this asset is no longer relevant for the Company’s continued and future operations.

The Company’s policy is to remove intangible assets once they are fully amortized.

The Company’s identifiable intangible assets with finite lives are being amortized over their estimated useful lives and were as follows:

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Accumulated Amortization

Impairment Loss

Tradenames & trademarks

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Accumulated Amortization

Impairment Loss

Tradenames & trademarks

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( 1,050,000 )

Amortization expense on these identifiable intangible assets was $ 4,738,477 and $ 3,133,460 for the years ended December 31, 2023 and 2022, respectively.

( 9,379,549 )

Amortization expense on these identifiable intangible assets was $ 2,837,500 and $ 4,738,477 in 2024 and 2023, respectively.

The weighted average remaining useful life at December 31, 2024 was 5.5 years.

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NOTE 9 – COMMITMENTS AND CONTINGENCIES

Pineapple Energy has a loan in an original amount of $ 7,500,000 payable to Hercules Capital, Inc.

Pineapple Energy LLC has a loan in an original amount of $ 7,500,000 payable to Hercules Capital, Inc.

(“Hercules”) under a loan and security agreement (the “Term Loan Agreement”).

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The Second Amendment represented a modification under ASC 470-50 as the original loan agreement and the amended agreement are not substantially different.

On July 22, 2024, the Term Loan Agreement was further amended (the “Third Amendment”), primarily for the purpose of obtaining consent for the bridge loan financing from Conduit Capital U.S.

Holdings LLC and MBB Energy, LLC.

The Third Amendment represented a modification under ASC 470-50 as the original loan agreement and the amended agreement were not substantially different.

The Company also entered into a Joinder and Amendment to Subordination Agreement (the “Joinder Agreement”) with Decathlon, Hercules Capital, Inc., Conduit and MBB.

Pursuant thereto, Conduit and MBB became parties to the Subordination Agreement dated June 21, 2023, among the Company, Decathlon, and Hercules Capital, Inc.

In accordance with the Joinder Agreement, Conduit and MBB agreed to subordinate their respective security interests in the Company’s assets, to the first priority security interest of Decathlon and the second security priority interest of Hercules.

On September 20, 2024, the Term Loan Agreement was further amended (the “Fourth Amendment”), whereby Hercules waived the October 2024 amortization payment.

The Company made payment of monthly interest on October 1, 2024 and resumed making monthly payment of principal on November 1, 2024 pursuant to the loan agreement.

The Fourth Amendment represented a modification as both the original loan agreement and the amendment are not substantially different.

On March 3, 2025, the Company repaid the remaining balance of this loan in full.

See further discussion within Note 17, Subsequent Events.

At December 31, 2024 and 2023, the combined loan and accrued interest balance was $ 680,513 and $ 497,052 , respectively.

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Interest and accretion expense was $ 721,061 and $ 853,809 for the years ended December 31, 2024 and 2023 respectively.

The loan is collateralized by all of Pineapple Energy’s personal property and assets.

Working Capital Note

On January 8, 2021, Pineapple Energy and Hercules, as agent for itself and the lenders, entered into a Working Capital Loan and Security Agreement (the “ Working Capital Agreement”) for a working capital loan in the maximum principal amount of $ 500,000 .

The lenders, Hercules and Northern Pacific Growth Investment Advisors, LLC, made working capital loan commitments of $ 400,000 and $ 100,000 , respectively.

Northern Pacific Growth Investment Advisors, LLC is an affiliate of Northern Pacific Group, which controls Lake Street Solar, LLC, a then-member of Pineapple Energy.

Borrowings under the Working Capital Agreement bore interest at 10.00 % per annum with interest compounded daily and payable monthly.

The working capital loan had an initial maturity date of January 7, 2022 and was collateralized by all of Pineapple Energy’s assets.

The Working Capital Agreement included provisions relating to the mandatory and optional conversion of the underlying loan amount into equity of the Company under certain circumstances.

In the case of either a mandatory or optional conversion of the Hercules working capital loan, the working capital loan of Northern Pacific Growth Investment Advisors, LLC, including all accrued and unpaid interest, would be immediately due and payable.

On December 16, 2021, an amendment to the Working Capital Agreement was executed that extended the maturity date to December 31, 2022 and added an additional mandatory conversion provision.

In the event that, on or before the maturity date, Pineapple Energy consummated the merger, then immediately prior to the consummation of the merger, the working capital loan and all accrued and unpaid interest and expenses thereon would automatically convert into Class C Units of Pineapple Energy calculated based on one Class C Unit being issued for every $ 2.00 to be converted.

The conversion option under the amendment was considered clearly and closely related to the host contract.

During the first three months of 2022, Pineapple Energy borrowed an additional $ 150,000 and had $ 500,000 outstanding prior to the merger on March 28, 2022.

Immediately prior to the merger on March 28, 2022, the $ 500,000 outstanding loan balance was converted to 250,000 Class C Units, which upon close of the merger were converted into 62,500 shares of Company common stock .

Interest expense was $ 0 and $ 13,977 for the years ended December 31, 2023 and 2022, respectively.

Related Party Payables

During December 2020, Pineapple Energy incurred acquisition-related costs and accrued a payable totaling $ 2,350,000 , with $ 2,000,000 due to one then-member and $ 350,000 to another then-member.

Under the Term Loan Agreement, this $ 2,350,000 in related party payables was subordinate to the payment to Hercules of the amounts due under the Term Loan Agreement and could only be repaid under certain conditions, including the requirement that no obligations were outstanding under the Term Loan Agreement and Pineapple Energy or its subsidiaries had closed on an equity transaction generating at least $ 30 million in proceeds.

On December 16, 2021, the then-members signed subscription agreements where the then-members agreed, in consideration for the full cancellation of the accrued payables, to convert the accrued payables into convertible promissory notes of Pineapple Energy, effective immediately prior to the consummation of the merger.

The convertible promissory notes automatically converted into 1,175,000 Class C Units of Pineapple Energy after issuance of the convertible note to the then-members and immediately prior to the consummation of the merger.

This conversion option was considered clearly and closely related to the host contract and the payables were converted to 1,175,000 Class C Units of Pineapple Energy immediately prior to the merger, which upon close of the merger were converted into 293,750 shares of the Company’s common stock.

The loan is collateralized by all of Pineapple Energy LLC’s personal property and assets.

SUNation Short-Term and Long-Term Notes

As discussed in Note 3, Business Combinations, the Company entered into Short-Term and Long-Term Notes in connection with the SUNation Acquisition on November 9, 2022.

In connection with the SUNation acquisition, on November 9, 2022, the Company issued a $ 5,000,000 Short-Term Limited Recourse Secured Promissory Note (the “Short-Term Note”) and a $ 5,486,000 Long-Term Promissory Note (the “Long-Term Note”).

The $ 5,000,000 Short-Term Note was secured by a pledge by the Company and Merger Sub of the equity of SUNation purchased under the Transaction Agreement and was scheduled to mature on August 9, 2023.

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It carries an annual interest rate of 4 % until the first anniversary of issuance, then 8 % thereafter until the Long-Term Note is paid in full.

The Company will be required to make a principal payment of $ 2.74 million on the second anniversary of the Long-Term Note.

Interest is due annually on each December 31 st .

The Company was unable to make the second and third interest payments totaling $ 250,703 and $ 460,194 due on December 31, 2023 and 2024, respectively.

The Company was required to make a principal payment of $ 2,740,000 on November 9, 2024.

The Company is not permitted to make any payments under the Long-Term Note unless Decathlon (defined below) has provided prior written consent to such payment pursuant to the Loan Agreement.

Pursuant to that certain subordination letter dated May 31, 2023, each holder of the Long-Term Note has subordinated all payments under the Long-Term Note to the obligations owed to Decathlon under the Loan Agreement (the “Decathlon Obligations”) and has agreed that, until the Decathlon Obligations have been paid in full, any payment under the Long-Term Note is subject to Decathlon’s prior written consent.

As the debt was part of the SUNation purchase price allocation, the Company assessed the fair market value of the debt instrument at $ 4,830,533 at the asset acquisition date (a non-recurring Level 3 fair value input).

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The Long-Term Note may be prepaid at the Company’s option at any time without penalty.

On March 13, 2025, the Company paid the aforementioned unpaid interest totaling $ 710,897 .

See further discussion within Note 14, Subsequent Events.

The balance of the Long-Term Note recorded at December 31, 2024 and 2023 was $ 6,076,978 and $ 5,499,716 , respectively.

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The advances are secured by all present and hereafter acquired property of the Company.

At issuance of the Loan Agreement, the Company concluded that the potential acceleration of amounts outstanding under the Loan Agreement upon an event of default included a substantial premium and met the requirement to be bifurcated and recorded as a derivative liability at fair value at inception and at the end of each quarterly reporting period.

However, based on management’s estimates of the likelihood of certain events, the embedded derivative liability had no fair value at issuance and at the end of December 31, 2023.

As of December 31, 2024, the fair value of this embedded derivative liability was estimated to be $ 24,800 and was recorded within current liabilities.

For the year ended December 31, 2024, the Company recorded a loss

of $ 24,800 from the change in fair value of the derivative liability, which is included in Other (expense) income, net in the consolidated statements of operations and comprehensive loss.

The Decathlon Fixed Loan is repayable in fixed monthly payments, which generally aggregate to $ 960,000 that was paid in 2023, $ 2,220,000 payable in 2024, $ 2,580,000 payable in 2025, $ 2,760,000 payable in 2026 and $ 3,480,000 payable in 2027 to the maturity date.

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and 0.60 times if after 36 months after the Effective Date.

The Company may at its option

prepay the advance(s) and accrued but unpaid interest from time to time without penalty or premium (other than payment of the Minimum Interest).

The Company may at its option prepay the advance(s) and accrued but unpaid interest from time to time without penalty or premium (other than payment of the Minimum Interest).

On March 3, 2025, the Company repaid the remaining balance of this loan in full.

See further discussion within Note 17, Subsequent Events.

The Company incurred an aggregate of $ 348,065 in debt issuance costs that are recorded as a discount and are amortized using the effective interest method over the life of the Decathlon Fixed Loan using an effective interest rate of 21 %.

At December 31, 2023, the combined loan and accrued interest balance was $ 7,408,925 and the unamortized debt issuance costs balance was $ 280,856 .

The Company recorded interest expense of $ 936,135 for the year ended December 31, 2023.

At December 31, 2024 and 2023, the combined loan and accrued interest balance was $ 6,586,325 and $ 7,408,925 , respectively, and the unamortized debt issuance costs balance was $ 173,193 and $ 280,856 , respectively.

The Company recorded interest expense of $ 1,505,063 and $ 936,135 for the years ended December 31, 2024 and 2023, respectively.

Conduit Capital Bridge Loan

On July 22, 2024, the Company obtained bridge loan financing for working capital purposes from Conduit Capital U.S.

Holdings LLC (“Conduit”), an unaffiliated lender (the “Original Conduit Note”).

On such date, Conduit loaned the principal sum of $ 500,000 to the Company on an original issue (“OID”) basis of 20 % and accordingly, Conduit advanced $ 400,000 to the Company (the “Initial Conduit Loan”).

The loans due to Conduit will accrue interest on the unpaid principal amount, without deduction for the OID, at an annual rate of 20 %;

provided that payment in full on the Conduit Maturity Date (as defined below) satisfies the interest accrual on the loans from initial issuance to the Conduit Maturity Date.

The Initial Conduit Loan provided the Company with an option to request from Conduit additional advances for working capital on identical terms, conditions and interest rate as the Initial Conduit Loan on an OID basis, up to an aggregate principal sum of $ 500,000 , and Conduit shall have the right, without commitment or obligation, to make such requested loan(s) by advancing 80 % percent of the principal thereof.

All such loans are secured by a pledge of all of the Company’s assets.

As a condition to such loan(s), the Company agreed to cause the nomination of a designee of Conduit for election to its Board of Directors.

The loans due to Conduit will become due on July 21, 2025 (the “Conduit Maturity Date”).

In accordance with the terms of the loan agreements with Conduit, if the Company consummates one or more equity offerings prior to the Conduit Maturity Date in which it derives aggregate gross proceeds of at least $ 3.15 million, it will be required to repay the unpaid principal balance of the Initial Conduit Loan, including the OID, simultaneous with the closing(s) of such offering(s).

Further, if the Company consummates one or more equity offerings prior to the Conduit Maturity Date in which it derives aggregate gross proceeds of at least $ 4.4 million, the Company will be required to repay the entire unpaid principal amount of all loans due to Conduit, including the OID, simultaneous with the closing(s) of such offering(s).

At issuance of the Original Conduit Note, the Company concluded that the potential acceleration of amounts outstanding under the loan agreements with Conduit upon an event of default or if the Company consummates one or more equity offerings meeting certain criteria (as noted above) included a substantial premium and met the requirement to be bifurcated and recorded as a derivative liability at fair value at inception and revalued at the end of each quarterly reporting period.

The Company determined the initial fair value of this embedded derivative liability to be $ 8,080 and recorded a corresponding debt discount.

As of December 31, 2024, the fair value of this embedded derivative liability was estimated to be $ 28,360 and was recorded within current liabilities.

For the year ended December 31, 2024, the Company recorded a loss of $ 19,776 from the change in fair value of the derivative liability, which is included in “Other (expense) income, net" in the consolidated statements of operations and comprehensive loss.

The Company incurred $ 18,150 in debt issuance costs in connection with the Initial Conduit Loan that were recorded as a discount and initially amortized using the effective interest method over the life of the Initial Conduit Loan along with the OID of $ 100,000 and initial fair value of the embedded derivative liability using an effective interest rate of approximately 29.1% .

On September 9, 2024, the Company and Conduit entered into an Amended and Restated Convertible Secured Note (the “First Amended Conduit Note”) which amended the Original Conduit Note, which provided for an additional principal advance of $ 120,000 (the “Second Conduit Advance”).

The First Amended Conduit Note also provides that Conduit may convert all or any portion of the Second Conduit Advance and all accrued but unpaid interest thereon into a number of shares (the “Conduit Note Conversion Shares”) of the Company’s common stock calculated as the total dollar amount to be converted divided by $ 22.50 ($ 0.45 prior to the Reverse Stock Splits) (the “Conversion Price”).

The Company analyzed the changes made in the First Amended Conduit Note under ASC 470-50 to determine if extinguishment accounting was applicable.

Under ASC 470-50-40-10, a modification or an exchange that adds or eliminates a substantive conversion option as of the conversion date is always considered substantial and requires extinguishment accounting.

Since the First Amended Conduit Note added a substantive conversion option, extinguishment accounting is applicable.

In accordance with the extinguishment accounting guidance, the Company recorded a loss on extinguishment of $ 35,657 which represents the difference between (a) the fair value of the modified loans due to Conduit less the net cash proceeds received from the Second Conduit Advance and (b) the carrying amount of the loans due to Conduit immediately prior to the Second Conduit Advance.

On September 23, 2024, the Company and Conduit entered into a further amended and restated convertible secured credit note (the “Second Amended Conduit Note”), which amends and restates the First Amended Conduit Note.

Under the terms of the Second Amended Conduit Note, Conduit loaned an additional principal sum of $ 380,000 to the Company (the “Third Conduit Advance”) on an OID basis of 20 %.

Additionally, pursuant to the Second Amended Conduit Note, Conduit was granted a demand registration right, which is in addition to the piggyback registration rights set forth in the First Amended Conduit Note, which registration rights are inclusive of all convertible shares issuable for the Second Conduit Advance and Third Conduit Advance, if converted;

however, all out of pocket costs and expenses incurred in connection with this demand registration right shall borne by Conduit.

The Third Conduit Advance, together with all accrued but unpaid interest thereon, are convertible into shares of common stock at the Conversion Price.

The Second Amended Conduit Note represented a modification under ASC 470-50 as the First Amended Conduit Note and the Second Amended Conduit Note are not substantially different.

A new effective interest rate of approximately 22.9 % was established following the Third Conduit Advance based on the carrying value of the revised cash flows.

Notwithstanding anything to the contrary as set forth in the Conduit Note or any tranche or amendment related thereto, in no event shall the OID, together with interest payable under the Conduit Note or such other documents related thereto, exceed an aggregate of twenty percent on the then outstanding principal sum, except in the event of a default, which shall include an additional 5 % on the then outstanding principal sum.

On February 28, 2025, the Company paid the $ 1,000,000 total loan balance to Conduit as the Company had gross proceeds from equity offerings in excess of $ 4.4 million.

See further discussion in Note 17, Subsequent Events.

At December 31, 2024 and 2023, the loan balance was $ 1,000,000 and $ 0 , respectively, and the unamortized debt issuance costs balance was $ 119,389 and $ 0 , respectively.

The Company recorded interest and accretion expense of $ 73,689 for the year ended December 31, 2024.

MBB Energy Bridge Loan

On July 22, 2024, the Company obtained bridge loan financing for working capital purposes from MBB Energy, LLC (“MBB”), an affiliate and related party of the Company (the “Original MBB Note”).

On such date, MBB loaned the principal sum of $ 500,000 to the Company on an OID basis of 20 % and accordingly, MBB advanced the sum of $ 400,000 to the Company (the “Initial MBB Loan”).

The loans due to MBB will accrue interest on the unpaid principal amount, without deduction for the OID, at an annual rate of 20 %;

provided that payment in full on the MBB Maturity Date (as defined below) satisfies the interest accrual on the loans from initial issuance to the MBB Maturity Date.

The Company may request that MBB provide additional advances for working capital on identical terms, conditions and interest rate as the Initial MBB Loan on an OID basis, up to an aggregate principal sum of $ 500,000 , and MBB shall have the right, without commitment or obligation, to make such requested loan(s) by advancing 80 % percent of the principal thereof.

All such loans are secured by a pledge of all of the Company’s assets.

MBB has granted Conduit the exclusive right to enforce MBB’s loans on MBB’s behalf.

The loans due to MBB will become due on July 21, 2025 (the “MBB Maturity Date”).

In accordance with the terms of the loan agreements with MBB, if the Company consummates one or more equity offerings prior to the MBB Maturity Date in which it derives aggregate gross proceeds of at least $ 3.15 million, it will be required to repay the unpaid principal balance of the Initial MBB Loan, including the OID, simultaneous with the closing(s) of such offering(s).

Further, if the Company consummates one or more equity offerings prior to the MBB Maturity Date in which the Company derives aggregate gross proceeds of at least $ 4.4 million, the Company will be required to repay the entire unpaid principal amount of all loans due to MBB, including the OID, simultaneous with the closing(s) of such offering(s).

At issuance of the Original MBB Note, the Company concluded that the potential acceleration of amounts outstanding under the loan agreements with MBB upon an event of default or if the Company consummates one or more equity offerings meeting certain criteria (as noted above) included a substantial premium and met the requirement to be bifurcated and recorded as a derivative liability at fair value at inception and at the end of each quarterly reporting period.

The Company determined the initial fair value of this embedded derivative liability to be $ 8,080 and recorded a corresponding debt discount.

As of December 31, 2024, the fair value of this embedded derivative liability was estimated to be $ 29,121 and was recorded within current liabilities.

For the year ended December 31, 2024, the Company recorded a loss of $ 21,041 from the change in fair value of the derivative liability, which is included in “Other (expense) income, net" in the consolidated statements of operations and comprehensive loss.

The OID of $ 100,000 was recorded as a discount and initially amortized using the effective interest method over the life of the Initial MBB Loan along with the initial fair value of the embedded derivative liability using an effective interest rate of approximately 24.3% .

On August 16, 2024, MBB provided an additional principal advance of $ 500,000 (the “Second MBB Advance”).

The Second MBB Advance represented a modification under ASC 470-50.

A new effective interest rate of approximately 24.1 % was established following the Second MBB Advance based on the carrying value of the revised cash flows.

Notwithstanding anything to the contrary as set forth in the MBB Note or any tranche or amendment related thereto, in no event shall the OID, together with interest payable under the MBB Note or such other documents related thereto, exceed an aggregate of twenty percent on the then outstanding principal sum, except in the event of a default, which shall include an additional 5 % on the then outstanding principal sum.

On February 28, 2025, the Company paid the $ 1,000,000 loan balance to MBB as the Company had gross proceeds from equity offerings in excess of $ 4.4 million.

See further discussion in Note 17, Subsequent Events.

At December 31, 2024 and 2023, the loan balance was $ 1,000,000 and $ 0 , respectively, and the unamortized debt issuance costs balance was $ 125,391 and $ 0 , respectively.

The Company recorded interest and accretion expense of $ 82,689 for the year ended December 31, 2024.

Equipment Loans

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Future Minimum Principal Payments

Future minimum principal payments under the aforementioned loans and notes for the next five years are as follows:

Future minimum principal payments under the aforementioned loans and notes for the next five years as of December 31, 2024 are as follows:

The above table does not reflect the debt payoffs that took place subsequent to year end.

See Note 17, Subsequent Events, for further discussion.

Other Contingencies

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Company management is not aware of any outstanding or pending legal actions or claims that could materially affect the Company’s financial position or results of operations.

We have accrued $ 1,300,000 for loss contingencies related to the PIPE Warrants that are payable in cash and stock in 2025.

This liability is recorded within accrued loss contingencies in the Consolidated Balance Sheets at December 31, 2024.

See Note 17, Subsequent Events related to the satisfaction of the liability through the payment of cash and issuance of stock subsequent to December 31, 2024.

NOTE 10 – RELATED PARTY TRANSACTIONS

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The Company has provided advances to employees resulting in a balance as of December 31, 2024 and 2023 of $ 23,471 and $ 46,448 , respectively.

Related party payables

As part of the SUNation Acquisition, the Company agreed to reimburse the sellers for proceeds received related to SUNation’s employee retention credit (a refundable tax credit against certain employment taxes incurred during the first nine months of 2021), totaling $ 1,584,541 as of December 31, 2022.

The full amount of this credit was received by the Company and subsequently remitted to the sellers during the three months ended March 31, 2023.

The Company also agreed to reimburse the sellers approximately $ 597,219 for tax payments due related to the period prior to acquisition, of which the full amount was paid during 2023, leaving no remaining balance at December 31, 2023.

The Company leases its offices in Hawaii and New York from companies owned by the prior owners of HEC and SUNation, respectively, most of whom are still employees and one who is a current director of the Company.

The Company leases its offices in Hawaii from a company owned by the prior owner of HEC, of whom is still an employee.

The Company leased its New York office from a company owned by the prior owners of SUNation, one of whom is an officer and another the Chief Executive Officer and director of the Company, until September 12, 2024, when the building and related lease was sold to a third-party.

See further information regarding these leases within Note 5, Leases.

Th Company has outstanding related party debt under the SUNation Long-Term Note and MBB Bridge Loan.

See further information regarding this debt within Note 9, Commitments and Contingencies.

NOTE 11 – SHARE BASED COMPENSATION

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The 2022 Plan authorizes incentive awards to officers, key employees, non-employee directors, and consultants in the form of options (incentive and non-qualified), stock appreciation rights, restricted stock awards, stock unit awards, and other stock-based awards.

On December 7, 2022, the Company’s shareholders approved an amendment to the 2022 Plan, which authorizes issuance of up to 1,250,000 shares of common stock.

Following amendments approved on December 7, 2022 and July 19, 2024, the 2022 Plan authorizes the issuance of up to 13,333 shares of common stock ( 10,000,000 prior to the Reverse Stock Splits).

At December 31, 2024, 614 shares had been issued under the 2022 Plan, 237 shares were subject to currently outstanding unvested restricted stock units (“RSUs”), and 12,482 shares were available for future awards.

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Outstanding – December 31, 2024

All RSUs and weighted average grant date fair value per share values have been adjusted to reflect the impact of the Reverse Stock Splits of the common stock at ratios of 1-for-50 that became effective on October 17, 2024 and 1-for-15 that became effective on June 12, 2024.

See Note 1, "Nature of Operations," for further details.

The grant date fair value is calculated based on the Company’s closing stock price as of the grant date.

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On December 7, 2022, the Company’s shareholders approved an Employee Stock Purchase Plan (“ESPP”), pursuant to which eligible employees are able to acquire shares of common stock at a purchase price determined by the board of directors or compensation committee prior to the start of each six-month plan phase, which price may not be less than 85 % of the fair market value of the lower of the value on the first day or the last day of the phase, or the value on the last day of the phase .

ESPP is considered compensatory under current Internal Revenue Service rules.

The ESPP is considered compensatory under current Internal Revenue Service rules.

At December 31, 2024, 400 shares remained available for purchase under the ESPP.

The first plan phase commenced on January 1, 2023 and 84,995 shares were purchased during 2023.

Employee Stock Ownership Plan (ESOP)

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Under the conditions of the merger, this plan has been suspended for future contributions.

At December 31, 2023, the ESOP held 126,904 shares of the Company’s common stock, all of which have been allocated to the accounts of eligible employees.

At December 31, 2024, the ESOP held no shares of the Company’s common stock as the plan is in the process of being terminated.

NOTE 12 – EQUITY

Convertible Preferred Stock and Warrants

On June 28, 2021, the Company entered into a securities purchase agreement (“SPA”) in which, subsequent to the closing of the merger, the Company would authorize the issuance and sale of 25,000 restricted shares of Series A Preferred Stock, par value $ 1.00 per share (“Convertible Preferred Stock”), to certain investors in a private offering (“PIPE Investors”).

On September 15, 2021, the Company amended the SPA to issue 32,000 restricted shares of Convertible Preferred Stock, to the PIPE Investors for $ 32.0 million in cash.

This Convertible Preferred Stock is convertible into underlying shares of the Company’s common stock at any time after the issuance date at the option of the PIPE Investors, subject to certain restrictions, and has a liquidation preference over the Company’s common stock.

The Convertible Preferred Stock may be converted by the Company to common stock upon meeting certain market conditions, of which none had been met as of December 31, 2022, and may be redeemed by the Company for cash upon delivery of written notice for a redemption price as defined in the SPA.

The PIPE Investors in the Convertible Preferred Stock were granted certain registration rights as set forth in the SPA.

Holders of the Convertible Preferred Stock have no voting rights and while the Convertible Preferred Stock has no dividend preference over common stock, it does participate in the dividend with the common stock.

Concurrent with the amendment, the Company entered into warrant agreements with the PIPE Investors to purchase common stock (the “Warrant Agreement”), whereby the Company would issue 2,352,936 warrants (“PIPE Warrants”) to purchase restricted shares of the Company’s common stock for cash or in a cashless exercise.

These PIPE Warrants have an exercise price of $ 13.60 ($ 4.00 for half of the warrants after the November 2022 amendment as further discussed below) with a five-year term, commencing on the date of issuance.

These Convertible Preferred Stock and PIPE Warrants were issued on March 28, 2022 upon the consummation of the merger.

As of December 31, 2022, there were 3,000,000 shares of Convertible Preferred Stock authorized and 28,000 shares of Convertible Preferred Stock issued and outstanding.

No PIPE Warrants were exercised prior to December 31, 2023.

All PIPE Warrants remained outstanding as of December 31, 2023.

The proceeds from the issuance of Convertible Preferred Stock were allocated between the Convertible Preferred Stock and PIPE Warrants using a relative fair value method.

As of March 28, 2022, the fair value of the Convertible Preferred Stock was estimated at $ 756.06 per share with a total fair value recognized in the consolidated financial statements of approximately $ 24.2 million.

The fair value of the PIPE Warrants was estimated at $ 3.32 per share with a total fair value of approximately $ 7.8 million.

The Company utilized a Monte Carlo simulation to determine the fair value of these instruments, which included the following significant assumptions:

the expected volatility, risk-free rate, expected annual dividend yield, and expected conversion dates.

The Convertible Preferred Stock is reported as part of permanent equity in the consolidated balance sheet and consolidated statement of stockholders’ equity as of December 31, 2023 and 2022.

The PIPE Warrants were determined to be equity-classified and the fair value of $ 7.8 million was recognized in additional paid-in capital as of December 31, 2022.

In addition, approximately $ 2.0 million and $ 0.7 million of offering costs were recorded as a reduction to the carrying values of the Convertible Preferred Stock and PIPE Warrants, respectively.

As a result of certain Convertible Preferred Stock modifications, an increase of $ 13.2 million in the Convertible Preferred Shares was recognized as a deemed dividend (see “Preferred Stock Modifications” below) as of December 31, 2023.

As a result of certain PIPE Warrant modifications, an increase of $ 3.6 million in the PIPE Warrants was recognized as a deemed dividend (see “Warrant Modifications” below) as of December 31, 2023.

Warrant Modifications

Series A Preferred Stock

In June 2021, the Company entered into a stock purchase agreement to issue Series A Preferred Stock.

The Company’s outstanding Series A Preferred Stock contained anti-dilution provisions that would increase the number of shares issuable upon conversion, and lower the conversion price of the Series A Preferred Stock if the Company issues equity securities at a price less than the current conversion price of the Series A Preferred Stock at the time of such issuance.

In February 2024, the Company entered into a Limited Waiver and Amendment (“Waiver”) and the investors agreed to a floor of $ 105.00 ($ 0.14 prior to the Reverse Stock Splits) with respect to the adjustment set forth for the conversion price and to waive future anti-dilution protection with respect to 50 % of the shares of Preferred Stock held by such purchasers as of the date of the Waiver.

The Company is required to analyze amendments to preferred stock terms to determine the appropriate method of accounting to be applied.

The Company determined that the Waiver resulted in an extinguishment of the Series A Preferred Stock.

As a result, the Series A Preferred Stock was revalued immediately after the Waiver in February 2024.

The difference between the previous carrying amount and the fair value of $ 751,125 was recognized as a deemed dividend in the three months ended March 31, 2024 that reduced additional paid-in-capital (“APIC”) and income available to common shareholders in calculating earnings per share.

In addition, management evaluated the Series A Preferred Stock after the modifications and determined that they should be reclassified to mezzanine equity under ASC 480-10-S99 as a result of the Company not having sufficient authorized and unissued shares to settle a conversion to Common Stock.

On July 19, 2024, the shareholders of the Company approved an amendment to the Company’s Fourth Amended and Restated Articles of Incorporation (the “Articles of Incorporation”) to increase the number of authorized shares of common stock and as a result the Company had sufficient authorized and unissued shares to settle a conversion to common stock.

Accordingly, the Series A Preferred Stock was reclassified to permanent equity at the date of the event that caused the reclassification.

See description of Series C Preferred Stock issued in exchange for the then outstanding Series A Preferred Stock and PIPE Warrants.

On September 9, 2024, as a result of the issuance of the First Amended Conduit Note (see Note 9, “Commitments and Contingencies,” for further details), the adjustment provisions in the Series A Preferred Stock were triggered and caused certain adjustments in the currently effective conversion price of the Series A Preferred Stock.

The Company recognized the effect of the down round feature triggered on September 9, 2024 as the difference between:

(1) the fair value of the Series A Preferred Stock using the pre-trigger conversion price, and (2) the fair value of the Series A Preferred Stock using the reduced conversion price.

The value of the effect of the down round feature of $ 3,464,426 was recognized as a deemed dividend in the year ended December 31, 2024 that reduced APIC and income available to common shareholders in calculating earnings per share.

In September 2021, the Company entered into transactions with holders of its outstanding Series A Preferred Stock to issue PIPE Warrants to purchase the Company's common stock.

At such time, the PIPE Warrants contained certain anti-dilution provisions.

In November 2022, the Company amended and restated the agreement under which PIPE Warrant holders agreed to waive such provisions in exchange for certain concessions from the Company.

Management evaluated the warrants after the modifications and determined that they continued to be equity-classified under the derivative scope exception of ASC 815-40.

The Company’s outstanding PIPE Warrants have anti-dilution provisions that would increase the number of shares issuable upon exercise and lower the exercise price of the PIPE Warrants if the Company issues equity securities at a price less than the current exercise price of the PIPE Warrants at the time of such issuance.

Pursuant to the Waiver, investors agreed to a floor of $ 22.50 ($ 0.14 prior to the Reverse Stock Splits) with respect to the anti-dilution adjustments in the warrants and extend the term of the warrants until March 28, 2029.

The PIPE Warrants were valued immediately before and immediately after the modifications to calculate the $ 10.6 million incremental value of the modified PIPE Warrants.

The Company considers this incremental value to be a deemed dividend that reduces retained earnings and earnings per share.

As the Company does not have any retained earnings, the Company has the option of recording the deemed dividend by reducing additional paid-in capital (“APIC”) or increasing accumulated deficit.

Therefore, in the consolidated statement of stockholders’ equity as of December 31, 2022, management recorded the deemed dividend by reducing APIC.

Preferred Stock Modifications

In June 2021, the Company entered into a stock purchase agreement to issue Series A Preferred Stock.

At such time, the Series A Preferred Stock contained certain anti-dilution provisions.

In November 2022, the Company amended and restated the agreement under which Series A Preferred stockholders agreed to waive such provisions in exchange for certain concessions from the Company.

Management evaluated the Series A Preferred Shares after the modifications and determined that they continued to be permanent equity-classified under ASC 480-10-S99-3A(3)(f).

The Company is required to analyze amendment to preferred stock terms to determine the appropriate method of accounting to be applied.

While guidance exists in ASC 470-50 to address the accounting for debt modifications, including preferred stock that is accounted for as a liability, there is no comparable guidance to address the accounting for modifications to preferred stock instruments that are accounted for as equity or temporary equity, which necessitates the subjective determination of whether a modification or exchange represents an extinguishment.

Current accounting guidance permits the analysis of preferred stock modifications by using either the qualitative approach, the fair value approach or the cash flow approach.

Due to the nature of amendment made to the preferred stock terms, the Company determined that the fair value approach was the most appropriate methodology.

The Company determined that the amendments resulted in an extinguishment of the Preferred Stock.

The Preferred Stock was revalued immediately after the amendment in November 2022 and would recognize the $ 13.2 million incremental value above the carrying value as a deemed dividend that reduces retained earnings and earnings per share.

As the Company does not have any retained earnings, the Company has the option of recording the deemed dividend by reducing APIC or increasing accumulated deficit.

Therefore, in the consolidated statement of stockholders’ equity as of December 31, 2022, management recorded the deemed dividend by reducing APIC.

The Company considered this incremental value to be a deemed dividend that reduced income available to common shareholders in calculating earnings per share.

Management evaluated the warrants after the modifications made in February 2024 and determined that they should be reclassified from equity to liability based on the guidance in ASC 815-40 and the Company failing to have enough authorized and unissued shares available to settle an exercise of the contract.

In accordance with ASC 815-40, the carrying value of the warrants were adjusted to fair value through an adjustment in stockholders’ equity immediately prior to the reclassification.

Subsequent to the reclassification, management remeasured the warrant liability to fair value and recorded the change in fair value to other income (expense) in the consolidated statement of operations.

On July 19, 2024, the shareholders of the Company approved an amendment to the Articles of Incorporation to increase the number of authorized shares of common stock and as a result the Company had sufficient authorized and unissued shares to settle an exercise of the contract.

Accordingly, management determined that the warrants should be reclassified to equity.

In accordance with the guidance in ASC 815-40-35-10, management remeasured the warrant liability to fair value immediately before the reclassification and recorded the change in fair value to other income (expense) in the consolidated statement of operations.

On September 9, 2024, as a result of the issuance of the First Amended Conduit Note (see Note 9, “Commitments and Contingencies,” for further details), the adjustment provisions in the warrants were triggered and caused certain adjustments in the currently effective exercise price of the warrants and a proportional increase in the amount of shares of common stock issuable under the warrants.

The Company recognized the effect of the down round feature triggered on September 9, 2024 as the difference between:

(1) the fair value of the warrants using the pre-trigger conversion price, and (2) the fair value of the warrants using the reduced conversion price.

The value of the effect of the down round feature of $ 875,737 was recognized as a deemed dividend in the year ended December 31, 2024 that reduced income available to common shareholders in calculating earnings per share.

On September 9, 2024, the Company entered into a Securities Exchange Agreement with the holders of the Series A Preferred Stock and PIPE Warrants to cancel and retire the Series A Preferred Stock and PIPE Warrants in exchange for shares of Series C Convertible Preferred Stock of the Company (the “Series C Preferred Stock”).

The Company determined that the exchange of the Series A Preferred Stock and warrants for the Series C Preferred Stock resulted in the extinguishment of the Series A

Preferred Stock and warrants.

As a result, the difference between the carrying amount of the Series A Preferred Stock and warrants and the fair value of the Series C Preferred Stock of $ 4,075,681 was recognized as a deemed contribution in the year ended December 31, 2024 that increased APIC and income available to common shareholders in calculating earnings per share.

Series C Preferred Stock

On September 9, 2024, the Company’s board of directors authorized the issuance of up to 35,000 shares of Series C Preferred Stock.

As a result of the exchange noted above, the Company issued 28,041 shares of Series C Preferred Stock.

Each share of Series C Preferred Stock is convertible, at any time after issuance and at the option of the holder subject to certain beneficial ownership limitations, into a number of shares of common stock determined by dividing the Stated Value of such share by the Conversion Price.

The Stated Value per share of Series C Preferred Stock is $ 1,000.00 and the Conversion Price per share of Series C Preferred Stock is $ 22.50 ($ 0.45 prior to the October Reverse Stock Split).

The Series C Preferred Stock does not contain any of the price resets set forth in the Series A Preferred Stock, except in the case of stock splits, recapitalizations and similar transactions by the Company.

During 2024, all 28,041 shares of Series C Preferred Stock were converted into 1,246,262 shares of common stock.

As of December 31, 2024, there were no shares of Series C Preferred Stock outstanding.

The holders of Series C Preferred Stock were entitled to vote exclusively with respect to a proposal submitted to the Company’s shareholders at a meeting of shareholders to be held by the Company to approve the changing of the Company’s state of incorporation from the State of Minnesota to the State of Delaware together as a single class with the common stock on an as-converted basis, subject to the beneficial ownership limitations, as follows:

each share of Series C Preferred Stock shall be entitled to such number of votes equal to the quotient obtained by dividing:

(i) the Stated Value by (ii) $ 39.573 ($ 0.79146 prior to the Reverse Stock Splits).

As long as any shares of Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of Series C Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series C Preferred Stock or alter or amend the Certificate of Designation, (b) authorize or create any class of stock ranking as to redemption senior to the Series C Preferred Stock, (c) amend its articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of the Series C Preferred Stock, (d) increase the number of authorized shares of the Company’s preferred stock, or (e) enter into any agreement with respect to any of the foregoing.

The holders of Series C Preferred Stock are not entitled to voting rights except for the foregoing and to the extent required by law.

Series B Preferred Stock

On May 13, 2024, the Company entered into a Subscription and Investment Representation Agreement pursuant to which the Company agreed to issue and sell one share of the Company’s Series B Preferred Stock, par value $ 1.00 per share (“Series B Preferred Stock”), for $ 15 .

The sale closed on May 14, 2024.

On May 13, 2024, the Company filed a certificate of designation (the “Certificate of Designation”) with the Secretary of State of Minnesota, effective as of May 13, 2024, designating the rights, preferences, privileges and restrictions of the share of the Series B Preferred Stock.

The Certificate of Designation provides that the share of Series B Preferred Stock has 5,000,000,000 votes and will vote together with the outstanding shares of the Company’s common stock as a single class exclusively with respect to (i) any proposal to amend the Company’s Articles to effect a reverse stock split of the Company’s common stock (the “Reverse Stock Split Proposal”) and (ii) any proposal to adopt an amendment to the Articles, or any other proposal to otherwise approve or ratify, to increase the authorized number of shares of common stock, either by increasing the total number of authorized shares or by effecting a reverse stock split without a corresponding decrease in the number of authorized shares (the “Authorized Shares Increase Proposal”).

The Series B Preferred Stock will also be entitled to vote in the election of directors, but will only have one vote to cast with respect to each director nominee.

Under the Certificate of Designation, the outstanding share of Series B Preferred Stock will be cancelled in whole, but not in part, at any time (i) if such cancellation is ordered by the Company’s board of directors in its sole discretion or (ii) automatically upon the approval by the Company’s shareholders of the Reverse Stock Split Proposal and Authorized Shares Increase Proposal at any meeting of shareholders.

The holder of the share of Series B Preferred Stock was not entitled to any consideration upon such cancellation.

The shareholders approved the Reverse Stock Split Proposal and Authorized Shares Increase Proposal on July 19, 2024 and, as a result, the share of Series B Preferred Stock was automatically cancelled at that time.

Registered Direct Offering

On February 5, 2024, the Company entered into a securities purchase agreement with certain institutional investors for the sale by the Company of 3,604 shares ( 2,702,703 prior to the Reverse Stock Splits) of the Company’s common stock in a registered direct offering.

The purchasers in this offering purchased, and the Company sold, the shares at a purchase price per share of

$ 277.50 ($ 0.37 prior to the Reverse Stock Splits).

The sale closed on February 7, 2024 for aggregate gross proceeds of $ 1.0 million, before deducting the placement agent fees and related offering expenses.

At the Market Offering

On October 21, 2024, the Company entered into an At the Market (“ATM”) Offering Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (the “Sales Agent”).

The Company has authorized the sale, at its discretion, of common stock shares in an aggregate offering amount up to $ 10,000,000 under the Sales Agreement pursuant to the Company’s effective Registration Statement on Form S-3 (File No.

333-267066), as supplemented by a prospectus supplement.

Through December 31, 2024, the Company sold an aggregate of 448,216 shares of common stock for gross proceeds of $ 2,457,354 under the ATM facility, before deducting the placement agent fees and related offering expenses.

NOTE 13 - INCOME TAXES

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Income tax expense

The Company’s Austin Taylor Communications, Ltd.

unit operated in the United Kingdom (U.K.) and is subject to U.K.

rather than U.S.

income taxes.

Austin Taylor had no activity in 2023 and 2022.

At the end of 2023, Austin Taylor’s net operating loss carry-forward was $ 7,462,000 .

The Company remains uncertain whether it will be able to generate the future income needed to realize the tax benefit of the carry-forward.

Accordingly, the Company has continued to maintain its deferred tax valuation allowance against any potential carry-forward benefit from Austin Taylor.

The provision for income taxes for continuing operations varied from the federal statutory tax rate as follows:

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Federal and state credits

Business interest limitation carryforward

Gross deferred tax assets

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( 1,165,327 )

( 1,051,007 )

Net deferred tax liability

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The Company continues to reassess the ability to realize the valuation allowance and if future evidence allows for a partial or full release of the valuation allowance, a tax benefit will be recorded accordingly.

As of December 31, 2023, the Company had approximately $ 19,300,602 of federal net operating loss carryforwards available to reduce future taxable income.

Of the federal total net operating loss carryforwards, $ 5,852,041 begins to expire in 2035 and $ 13,448,561 may be carried forward indefinitely.

The Company also had state and local net operating loss carryforwards that will begin to expire in 2035 .

As of December 31, 2024, the Company had had gross federal, state and foreign net operating loss carryforwards of $ 25,403,581 , $ 15,332,443 and $ 7,642,027 , respectively.

The federal net operating loss carryforwards have carryforward periods of twenty years, or that are indefinite, and begin to expire in 2029.

The state net operating loss carryforwards have carryforward periods of 12 - 20 years, or that are indefinite and begin to expire in 2027.

The foreign net operating loss carryforwards are indefinite.

Section 382 of the Internal Revenue Code limits the utilization of U.S.

net operating loss carryforwards and other tax attributes following a change of ownership or failure of continuity of business.

analysis under Section 382, we believe that certain tax attributes will be subject to a limitation and will not be available for future periods.

Based on our analysis under Section 382, we believe that certain tax attributes will be subject to a limitation and will not be available for future periods.

Management will continue to evaluate the limitation under Section 382 and does not expect a material impact because of the valuation allowance against the net deferred tax asset.

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The utilization of these credits may be limited under the provisions of Section 383 of the Internal Revenue Code and similar state statutes.

Section 383 governs the utilization of tax attribute carryforwards such as the research and development credit in the event of a change in control of the Company, such as that which occurred as of March 28, 2022.

Section 383 governs the utilization of tax attribute carryforwards such as the research and development credit in the event of a change in

control of the Company, such as that which occurred as of March 28, 2022.

Credits not used to reduce taxes are available to be carried forward.

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Uncertain tax positions – January 1

Opening balance sheet

Gross decreases - current period tax positions

Expiration of statute of limitations

Uncertain tax positions – December 31

6 unchanged sentences

In general, the Company’s tax years 2019 through 2023 remain open to assessment.

NOTE 14 – SEGMENT INFORMATION

The Company’s segment structure reflects how management makes financial decisions and allocates resources.

The Company manages its operations based on the combined results of the residential and commercial businesses with a geographical focus.

The SUNation segment provides solar power, battery storage, and related services to customers primarily in New York and Florida.

The Hawaii Energy Connection (“HEC”) segment provides the same products and services to residential and commercial customers in Hawaii.

The Company’s CODM is represented by a committee that includes the Company’s CEO, CFO, and COO.

The CODM regularly reviews discrete financial information for SUNation and HEC in deciding how to allocate resources and in assessing performance.

Corporate and other represents the unallocated corporate business activities and corporate shared services, which support the Company’s operating segments, along with operating and other expenses related to legacy CSI assets.

During 2024 management determined that their two operating segments no longer met the criteria to be aggregated into one reportable segment due to changes in economic forecasts and the Company’s plans for integrating SUNation and HEC.

As a result, management determined HEC and SUNation to be distinct reportable segments.

Prior period amounts have been recast for comparative purposes to reflect this change, which had no impact on the Company’s consolidated financial position, results of operations, and cash flows.

The accounting policies of the segments are the same as those applied in the consolidated financial statements as disclosed in Note 2, Summary of Significant Accounting Policies.

The CODM committee evaluates performance for both reportable segments based on segment revenue, gross profit, and operating (loss) income before income taxes.

When using these metrics, the CODM committee considers forecast-to-actual variances on a quarterly basis when making decisions about the allocation of operating and capital resources to each segment.

The CODM committee also uses these metrics for evaluating pricing strategy to assess the performance of each segment by comparing the results of each segment with one another and in determining the compensation of certain employees.

The Company had no customers that comprised more than 10% of the Company's consolidated revenues during either of the years ended December 31, 2024 and 2023.

Summarized financial information for the Company’s reportable segments are presented and reconciled to consolidated financial information in the following tables, including a reconciliation of segment earnings to income before income taxes.

This reconciliation also represents the significant expense categories reviewed by the CODM.

Year ended December 31, 2024

Corporate and

Cost of sales

Operating expenses:

Selling, general and administrative expenses

Amortization expense

Fair value remeasurement of SUNation earnout consideration

( 1,000,000 )

Goodwill impairment loss

Intangible asset impairment loss

Total operating expenses

Operating (loss) income

( 5,075,283 )

( 6,257,844 )

( 12,317,403 )

Other income (expenses):

Investment and other income

(Loss) gain on sale of assets

Fair value remeasurement of warrant liability

Fair value remeasurement of embedded derivative liability

Fair value remeasurement of contingent value rights

Interest expense

( 3,012,943 )

( 3,087,450 )

Loss on debt extinguishment

Other expense, net

( 3,472,856 )

( 3,497,583 )

Operating loss from continuing operations before income taxes

( 1,032,863 )

( 5,051,423 )

( 9,730,700 )

( 15,814,986 )

Depreciation and amortization

Capital expenditures

Year ended December 31, 2023

Corporate and

Cost of sales

Operating expenses:

Selling, general and administrative expenses

Amortization expense

Fair value remeasurement of SUNation earnout consideration

Total operating expenses

Operating (loss) income

( 10,149,044 )

( 7,466,865 )

Other income (expenses):

Investment and other income

(Loss) gain on sale of assets

Fair value remeasurement of contingent value rights

Interest expense

( 2,583,440 )

( 2,657,517 )

Other expense, net

Operating loss from continuing operations before income taxes

( 9,468,945 )

( 6,820,716 )

Depreciation and amortization

Capital expenditures

NOTE 15 – FAIR VALUE MEASUREMENTS

12 unchanged sentences

Contingent value rights

( 1,691,072 )

Embedded derivative liability

Earnout consideration

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Money Market funds

Short-term investments:

Corporate Notes/Bonds

Contingent value rights

8 unchanged sentences

( 3,391,715 )

The following tables present reconciliations of recurring fair value remeasurements that use significant unobservable inputs (Level 3):

Year Ended December 31, 2024

Contingent value rights

Warrant liability

Embedded derivative liability

Earnout consideration

December 31, 2023

( 1,691,072 )

( 3,500,000 )

( 5,191,072 )

Reclassification from equity

( 10,592,220 )

Warrant exercise

Fair value adjustments

Reclassification to Level 2

Reclassification to equity

December 31, 2024

Year Ended December 31, 2023

Contingent value rights

Earnout consideration

December 31, 2022

( 7,402,715 )

( 2,150,000 )

( 9,552,715 )

Fair value adjustments

( 1,350,000 )

December 31, 2023

( 1,691,072 )

( 3,500,000 )

( 5,191,072 )

The estimated fair value of the CVRs as of December 31, 2024 and 2023 was $ 312,080 and $ 1,691,072 , respectively, as noted above.

The Company recorded a net $ 2,674,966 gain on the fair value remeasurement of the CVRs in 2023 related to the loss on the sale of the JDL and Ecessa assets offset with a $ 250,000 gain on an earnout payment realized in the first quarter of 2023 related to legacy CSI’s sale of its Electronics and Software segment in 2021.

The Company paid $ 3,036,676 in CVR distributions during the fourth quarter of 2023.

The Company recorded a net $ 2,125,949 gain on the fair value remeasurement of the CVRs in 2022 related to a decrease in the fair value of the JDL and Ecessa assets and a loss on held for sale assets sold in the second quarter of 2022, offset by a gain on an earnout payment realized in the second quarter of 2022 related to legacy CSI’s sale of its Electronics and Software segment in 2021.

The Company paid $ 8,745,628 in CVR distributions during the third quarter of 2022.

The estimated fair value of all earnout consideration as of December 31, 2023 and 2022 was $ 3,500,000 and $ 2,150,000 , respectively, all attributed to the earnout consideration related to the SUNation Acquisition.

Included in the $ 3,500,000 at December 31, 2023 is $ 2,500,000 related to the first earnout period recorded in current liabilities and $ 1,000,000 related to the second earnout period, which is recorded in long-term liabilities.

As noted in Note 3, Business Combinations, the Company recorded a liability of $ 4,684,000 for earnout shares to holders of certain pre-merger Pineapple Energy shareholders and a liability of $ 2,150,000 in earnout consideration related to the SUNation Acquisition in the respective opening balance sheets.

As described in Note 3, Business Combinations, the estimated fair value is considered a Level 3 measurement.

In order to update the fair value of the earnout consideration, the Company utilized a Monte Carlo simulation, which included the following significant assumptions:

The Company recorded a $ 522,257 gain on the fair value remeasurement of the CVRs in 2024 and a $ 2,674,966 gain on the fair value remeasurement of the CVRs in 2023.

The Company paid $ 856,736 and $ 3,036,676 in CVR distributions during the 2024 and 2023, respectively.

The estimated fair value of earnout consideration related to the acquisition of SUNation as of December 31, 2024 and 2023 was $ 2,500,000 and $ 3,500,000 , respectively.

The $ 2,500,000 balance at December 31, 2024 is related to the first earnout period recorded in current liabilities.

See further discussion within Note 17, Subsequent Events on the subsequent payment of this liability.

The estimated fair value is now considered a Level 2 measurement now that the earnout amounts have been established and there is no longer a reliance on unobservable inputs.

The fair value was considered a Level 3 measurement at December 31, 2023 and in order to update the fair value of the earnout consideration, the Company utilized a Monte Carlo simulation, which included the following significant assumptions:

the expected probability and timing of achievement of milestone events.

As a result of the fair value remeasurement, the Company recorded a remeasurement gain of $ 0 and $ 4,684,000 during the years ended December 31, 2023 and 2022, respectively, related to the remeasurement of the value of the liability for the earnout shares.

The Company recorded a remeasurement loss of $ 1,350,000 related to the remeasurement of the value of the liability for SUNation

Acquisition earnout consideration during 2023.

There was no remeasurement adjustment to the SUNation Acquisition earnout consideration during 2022.

As a result of the fair value remeasurement, the Company recorded a remeasurement gain of $ 1,000,000 and a remeasurement loss of $ 1,350,000 during the years ended December 31, 2024 and 2023, respectively.

The estimated fair value of the PIPE warrants was $ 0 as of both December 31, 2024 and 2023, respectively.

As noted in Note 12, the warrants were classified as a liability during the first quarter of 2024, resulting in a $ 10,592,202 reclassification from equity.

During the third quarter of 2024, the warrants met equity classification requirements upon the shareholder approval of an increase in authorized outstanding shares and reclassified the fair value liability totaling $ 11,242,254 back to equity.

The estimated fair value is considered a Level 3 measurement and the fair value of the warrant liability is determined using a Monte Carlo simulation to model future movement of the stock price.

As a result of the fair value remeasurement, the Company recorded a remeasurement loss of $ 974,823 and $ 0 during the years ended December 31, 2024 and 2023, respectively.

The estimated fair value of the embedded derivative liability was $ 82,281 and $ 0 as of December 31, 2024 and 2023, respectively.

As a result of the fair value remeasurement, the Company recorded a remeasurement loss of $ 65,617 and $ 0 during the years ended December 31, 2024 and 2023, respectively.

The estimated fair value is considered a Level 3 measurement and the fair value of the embedded derivative liability is determined based on a comparison of the present value of cash flows with and without the embedded derivative.

This analysis includes management estimates of the likelihood of events of prepayment and default on the Decathlon, MBB and Conduit loans.

The fair value remeasurement related to the SUNation earnout was recorded within operating expenses.

The other fair value remeasurements noted above were recorded within other income (expense) in the condensed consolidated statements of operations.

The other fair value remeasurements noted above were recorded within other income (expense) in the consolidated statements of operations.

We record transfers between levels of the fair value hierarchy, if necessary, at the end of the reporting period.

There were no transfers between levels during the year ended December 31, 2023.

There were no transfers between levels during the year ended December 31, 2024, other than the earnout consideration that was transferred from Level 3 to Level 2.

NOTE 16 – GOING CONCERN

The Company’s financial statements as of December 31, 2024 have been prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.

Based on the Company’s current financial position, which includes approximately $ 1.8 million of restricted cash, cash equivalents and investments that are restricted under the CVR agreement and cannot be used by the Company for its own working capital needs, the Company’s forecasted future cash flows for twelve months beyond the date of issuance of these financial statements indicate that the Company will not have sufficient cash to make the first SUNation earnout payment in the second quarter of 2024 or the first principal payment of the Long-Term Note due on November 9, 2024, factors which raise substantial doubt about the Company’s ability to continue as a going concern.

Based on the Company’s current financial position, which includes approximately $ 0.3 million of restricted cash, cash equivalents and investments that are restricted under the CVR agreement and cannot be used by the Company for its own working capital needs, and the Company’s forecasted future cash flows for twelve months beyond the date of issuance of these financial statements, substantial doubt exists around the Company’s ability to continue as a going concern for a reasonable period of time .

As noted in Note 17, Subsequent Events, the Company raised capital and satisfied certain outstanding debt

obligations subsequent to year end, however there remains uncertainty related to our future cash flows as it relies on the ability to generate enough cash flow from its operating segments to cover the Company’s corporate overhead costs.

In order to continue as a going concern, the Company will need additional capital resources.

3 unchanged sentences

NOTE 17 – SUBSEQUENT EVENTS

On February 5, 2024, we entered into a securities purchase agreement with certain institutional investors (the “Purchasers”) for the sale by the Company of 2,702,703 shares of our common stock, in a registered direct offering (the “Direct Offering”).

The Purchasers in this offering agreed to purchase, and the Company agreed to sell, such shares at a purchase price per share of $ 0.37 .

The sale closed on February 7, 2024 for an aggregate gross proceeds of $ 1.0 million.

In connection with the Direct Offering, the Company also entered into a Limited Waiver and Amendment (the “Waiver”), dated February 5, 2024, with the Purchasers with respect to up to 50 % of the shares of Series A convertible preferred stock issued pursuant to the Certificate of Designation of Preferences, Rights and Limitations of our Series A convertible preferred stock, previously filed with the State of Minnesota on March 25, 2022 (the “Certificate of Designation”).

The Certificate of Designation and the Company’s outstanding common stock purchase warrants, dated March 22, 2022, have anti-dilution provisions that would increase the number of shares issuable upon conversion or exercise, and lower the conversion or exercise price of our Series A convertible preferred stock and our common stock purchase warrants, respectively, if the Company issues equity securities at a price less than the current conversion or exercise price of our Series A convertible preferred stock and our common stock purchase warrants, respectively, at the time of such issuance.

The anti-dilution provisions of the Certificate of Designation and our common stock purchase warrants reset (a) the conversion price of our Series A convertible preferred stock to the lower of the effective price per share of the subsequent equity sale or the lowest volume weighted average price of the common stock during the five consecutive trading days immediately following the public announcement of the execution of the dilutive issuance and (b) the exercise price of our common stock purchase warrants to the lower of the effective price per share of the subsequent equity sale or the lowest volume weighted average price of the common stock during the five consecutive trading days immediately following the public announcement of the execution of the dilutive issuance with the number of shares of the common stock issuable under our common stock purchase warrants increasing such that the aggregate exercise price payable under our common stock purchase warrants, after taking into account the decrease in the exercise price, is equal to the aggregate exercise price prior to the anti-dilution adjustment.

As a result of the Direct Offering and in accordance the anti-dilution provisions of the Certificate of Designation and our common stock purchase warrants, the conversion price of our Series A convertible preferred stock and the exercise price of our common stock purchase warrants would adjust to the lower of (i) $ 0.37 or (ii) the lowest volume weighted average price of our common stock during the five consecutive trading days immediately following the public announcement of the Direct Offering and the number of shares of the Common Stock issuable under our common stock purchase warrants would increase proportionally.

In connection with the Waiver, the Purchasers agreed to a floor of $ 0.14 with respect to the adjustment set forth in clause (ii) above.

In connection with the Waiver, the Purchasers also agreed to waive future anti-dilution protection with

respect to 50 % of the shares of our Series A convertible preferred stock held by such Purchaser as of the date of the Waiver and the Company agreed to extend the term of our common stock purchase warrants until March 28, 2029.

On October 27, 2023, Pineapple Energy Inc.

(the "Company") received a notice from the Listing Qualifications Department (the "Staff") of the Nasdaq Stock Market ("Nasdaq") informing the Company that because the closing bid price for the Company's common stock listed on Nasdaq was below $ 1.00 per share for the last 31 consecutive business days, the Company did not comply with the minimum closing bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Marketplace Rule 5550(a)(2) (the "Minimum Bid Price Rule").

In accordance with Nasdaq's Listing Rules, the Company has a period of 180 calendar days, or until April 24, 2024, to regain compliance with the Minimum Bid Price Rule.

On February 27, 2024, the Staff issued another notice (the "February Notice") notifying the Company that the Company's common stock had a closing bid price of $ 0.10 or less for 10 consecutive trading days (February 12, 2024 to February 26, 2024).

Accordingly, the Company is subject to the provisions contemplated under Nasdaq Listing Rule 5810(c)(3)(A)(iii) (the "Low Priced Stock Rule").

As a result, the Staff had determined to delist the Company's securities from Nasdaq effective as of the opening of business on March 7, 2024, unless the Company requests an appeal before the Nasdaq Hearings Panel (the "Panel") of the Staff's determination by March 5, 2024, pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series.

The Company requested a hearing before the Panel to appeal the February Notice, and Nasdaq has scheduled the hearing for April 30, 2024.

Accordingly, the delisting action has been stayed, pending a final written decision by the Panel.

There can be no assurance that the hearing will occur, that a favorable decision will be obtained if the hearing is held, that the Panel will grant any request for an extension period within which to regain compliance, or that the Company will be able meet the continued listing requirements during any compliance period or in the future.

On March 27, 2024, the Company, Equiniti Trust Company, as Rights Agent and the CVR holders’ representative entered into the First Amendment to the Contingent Value Rights Agreement which extends the term of the CVR agreement from March 28, 2024 to December 31, 2024.

The Company has evaluated subsequent events through the date of this filing.

Series D Preferred Stock

On February 26, 2025, the Company entered into a consent and waiver agreement to the loan agreement with Conduit.

In accordance therewith, the Company issued one (1) share of Series D Preferred Stock to Conduit as further collateral security for the Conduit Loan.

The Series D Preferred Stock was issued in accordance with a Certificate of Designation of Preferences, Rights, and Limitations filed with the State of Delaware on February 27, 2025.

In connection with the issuance of the share of Series D Preferred Stock, Conduit granted an irrevocable proxy to the Company to vote such share on an as-converted basis as a single class with the holders of the Company’s common stock.

Such share was held in escrow by legal counsel to the Company, and upon full payment of the Conduit Loan and following the April 2025 special meeting of shareholders, the Series D Preferred Stock share has been returned to the Company and will be cancelled.

February 2025 Offering

On February 27, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional investors in which Roth Capital Partners LLC (“Roth”) acted as the placement agent pursuant to the terms of a Placement Agent Agreement (“PAA”) of same date, for the purchase and sale of an aggregate of $ 15 million in securities pursuant to a registration statement on Form S-3 (File No.

333-267066) in a first closing consisting of (i) 1,965,000 shares of common stock (the “Shares”), and (ii) pre-funded warrants to purchase up to 11,078,480 shares of common stock (the “Pre-Funded Warrants), and an aggregate of $ 5 million in securities in a second closing consisting of (x) 4,347,826 Shares or Pre-Funded Warrants, (y) series A warrants to purchase up to 17,391,306 shares of common stock (the “Series A Warrants”), and (z) series B warrants to purchase up to 17,391,306 shares of common stock (the “Series B Warrants”) in a registered direct offering (the “Offering”) at a purchase price of $ 1.15 per Share and accompanying warrants or $ 1.1490 per Pre-Funded Warrant and accompanying warrants.

The Series A warrants will have an exercise price of $ 1.725 per share subject to standard adjustments for dividends, splits and similar events;

a one-time adjustment on the date of issuance (as described in the warrants), subject to a floor price described therein;

and also subject to adjustment upon a Dilutive Issuance (as described in the warrants), subject to a floor price described therein.

The Series B warrants will have an exercise price of $ 2.875 per share subject to standard adjustments for dividends, splits and similar events;

a one-time adjustment on the date of issuance (as described in the warrants), subject to a floor price described therein;

and also subject to adjustment upon a Dilutive Issuance (as described in the warrants), subject to a floor price described therein.

The Series B warrants may also be exercised on an alternative cashless basis pursuant to which the holder may exchange each warrant for 3 shares of common stock.

The Series A Warrants and Series B Warrants will be issued at the second closing and will be exercisable immediately after issuance and have a term of exercise equal to 5 years from the date of issuance.

The Pre-Funded Warrants will be exercisable commencing upon issuance and expiring upon the exercise of the Pre-Funded Warrants in full, at an exercise price of $ 0.001 per share, subject to certain adjustments set forth therein.

A holder (together with its affiliates) may not exercise any portion of the Series A Warrant, Series B Warrant or Pre-Funded Warrant to the extent that the holder would own more than 4.99 % (or, at the holder’s option upon issuance, 9.99 %) of the Company’s outstanding common stock immediately after exercise.

However, upon at least 61 days’ prior notice from the holder to the Company, a holder with a 4.99 % ownership blocker may increase the amount of ownership of outstanding common stock after exercising the holder’s Series A Warrant, Series B Warrant or Pre-Funded Warrant up to 9.99 % of the number of the Company’s common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Series A Warrant, Series B Warrant or Pre-Funded Warrant.

The Purchase Agreement contains customary representations and warranties and agreements of the Company and the Purchaser and customary indemnification rights and obligations of the parties.

The first closing of the Offering occurred on February 27, 2025.

On April 3, 2025, the Company received the necessary approval by the Company’s stockholders in a specially called stockholder meeting to approve the issuance of the Series A Warrants, Series B Warrants and the shares of Common Stock underlying such Warrants, in addition to other matters.

The second closing of the Offering occurred on April 7, 2025.

Company received gross proceeds of approximately $ 20 million in connection with the Offering, before deducting placement agent fees and related offering expenses.

On February 27, 2025, pursuant to the Purchase Agreement, the Company entered into lock-up agreements (the “Lock-up Agreements”) with its directors, officers and certain principal shareholders, pursuant to which they will not offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of any of the Company’s equity securities for a period of 90 days following the each closing of the Offering, subject to certain exceptions.

Pursuant to the PAA between the Company and Roth, the Company engaged Roth to act as the Company’s exclusive placement agent in connection with the Offering.

The Company agreed to pay the placement agent a cash fee of 7.5 % of the gross proceeds the Company receives under the Purchase Agreement.

Loan and Earnout Repayments

Conduit and MBB

The Company consummated the first tranche of a securities offering for gross proceeds of $ 15 million (the “Equity Financing”).

In accordance with the terms of the Conduit and MBB loan agreements (see Note 9, Commitments and Contingencies, for further information), if the Company were to consummate one or more equity offerings prior to the maturity date of July 21, 2025 in which it derives aggregate gross proceeds of at least $ 4.4 million, the Company will be required to repay the entire unpaid principal amount of all loans due to Conduit and MBB, simultaneous with the closing(s) of such offering(s).

As of February 28, 2025, the aggregate Conduit loan balance was $ 1,000,000 and the aggregate MBB loan balance was $ 1,000,000 , which were both repaid in full from a portion of the net proceeds of the Equity Financing following the consummation thereof.

As a result of this complete repayment, both the Conduit and MBB notes have been terminated and no further principal, interest or accrual thereunder remain following the repayment and related termination of the Conduit and MBB loan agreement(s).

As noted in Note 9, Commitments and Contingencies, the Company entered into a Revenue Loan and Security Agreement (the “Loan Agreement”) with Decathlon for $ 7.5 million with an original maturity date of June 1, 2027.

As of March 3, 2025, the remaining aggregate balance, together with accrued principal and interest, remaining under the Loan Agreement was $ 6,740,516 ;

however, the parties to the Loan Agreement recently agreed to a reduced aggregate repayment amount of $ 6,229,875 if voluntarily repaid early in full.

Using a portion of the proceeds from the Equity Financing, the Company voluntarily repaid in full all of the accrued principal and interest due to Decathlon in the reduced aggregate noted above.

As a result of this complete repayment, the Decathlon Loan Agreement has been terminated (together with other agreements and instruments related thereto), and no further monthly or other payments or remuneration of any kind shall be paid or be payable following the termination of this Loan Agreement, and no early termination penalties or prepayment premium were incurred by the Company in connection with the termination of this Loan Agreement.

As noted in Note 9, Commitments and Contingencies, the Company entered into a loan agreement on December 11, 2020 in an original amount of $ 7,500,000 payable to Hercules under a loan and security agreement (the “Term Loan Agreement”), with an amended Maturity Date of June 2, 2027.

As of March 3, 2025, the loan and accrued interest balance was $ 1,230,555 ;

however, the parties to the Term Loan Agreement recently agreed to a reduced aggregate repayment amount of $ 1,138,263 if voluntarily repaid early in full.

Following the consummation of the Equity Financing, the Company used a portion of the proceeds therefrom to voluntarily repay in full all of the accrued principal and interest due to Hercules in the (reduced) aggregate noted above.

As a result of this complete repayment, the Term Loan Agreement has been terminated (together with other agreements and instruments related thereto), and no further monthly or other payments or remuneration of any kind shall be paid or be payable following the termination of this Term Loan Agreement, and no early termination penalties or prepayment premium were incurred by the Company in connection with the termination of this Loan Agreement.

SUNation Long-Term Note and Earnout

As noted in Note 9, Commitments and Contingencies, on November 9, 2022, in connection with the SUNation acquisition, the Company entered into a $ 5,486,000 Long-Term Promissory Note (the “Long-Term Note”).

The Company was unable to make its second and third interest payments totaling $ 250,703 and $ 460,194 due on December 31, 2023 and 2024, respectively as it was not permitted to make any payments under the Long-Term Note unless Decathlon had provided prior written consent to such payment pursuant to the Loan Agreement.

As noted above, the Company paid the Decathlon debt in full and no longer

had to receive written consent to make these payments.

On March 13, 2025, the Company paid the unpaid interest totaling $ 710,897 .

As noted in Note 15, Fair Value Measurements, the Company recorded a $ 2,500,000 earnout consideration accrual at December 31, 2025 related to the SUNation acquisition.

On March 13, 2025, the Company paid $ 389,103 and on April 7 2025, paid the remaining $ 2,110,897 to satisfy the outstanding liability in full.

Subsequent to making the March 13, 2025 interest payment, the original Long-Term Note was amended and restated on April 10, 2025 as follows:

The principal amount of $ 5,486,000 previously due and payable under the original Long Term Note, together with all accrued and unpaid interest owing thereunder, shall be due and payable on May 1, 2028 (the “Maturity Date”), and such amended note shall become a senior secured instrument.

Principal and interest payments under the amended Long-Term Note shall be payable monthly on the first day of each month commencing with June 1, 2025 for thirty-six (36) consecutive months thereafter pursuant to the terms thereunder.

Additionally, pursuant to the terms of that certain Senior Secured Contingent Note Instrument, entered into on April 10, 2025, the unearned 2024 earnout was rescheduled and shall be based on the earnout terms set forth therein pursuant to the financial conditions and terms covering each of fiscal years 2024 and 2025 and, if attained, shall be payable in fiscal year 2026, which payment is further conditioned on the continued employment of the note holders at the time of such earnout payment trigger date.

Previously Issued Warrant Settlement Exchange

As disclosed in Note 9, Commitments and Contingencies, we have accrued $ 1,300,000 for loss contingencies related to the PIPE Warrants that are payable in cash and stock.

During the first quarter of 2025, we settled this obligation by issuing 1,213,656 shares of common stock, with all such issuances at the market value (with no anti-dilution or price reset features), and to paying a total of $ 432,330 in cash.

Nasdaq Delisting Notice

On April 11, 2025 the Company received a letter (the “Minimum Bid Price Deficiency Letter”) from the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market (“Nasdaq”) notifying the Company that, for the 30 consecutive business day period immediately preceding deficiency letter, the Company’s common stock had not maintained a minimum closing bid price of $ 1.00 per share (the “Minimum Bid Price Requirement”) and, as a result, does not comply with Listing Rule 5550(a)(2) (the “Rule”).

Normally, a company would be afforded a 180-calendar day period to demonstrate compliance with the Rule (“Cure Period”);

however, pursuant to Listing Rule 5810(c)(3)(A)(iv), the Company is not eligible for a customary Cure Period specified in Rule 5810(c)(3)(A) due to the fact that the Company has effected a reverse stock split over the prior one-year period or has effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one.

Instead, the Company is offered an opportunity to appeal any deficiency related to a delisting determination to Nasdaq by seven days from receipt of the non-compliance notice.

Accordingly, unless the Company timely requests a hearing before a Hearings Panel, the Company’s securities would be subject to suspension/delisting.

The Company intends to timely request a hearing before the Hearing Panel.

The hearing request will automatically stay any suspension or delisting action pending the hearing and the expiration of any additional extension period if granted by the Panel following the hearing.

There can be no assurance that the Panel will grant the Company an additional extension period or that the Company will ultimately regain compliance with all applicable requirements for continued listing on The Nasdaq Capital Market.

In the event that the Company regains compliance with the Minimum Bid Price Requirement prior to any scheduled hearing date, then a hearing may not be necessary, as the Company may be mooted out of the hearings process.

Additionally, to this end, the stockholders of the Company had approved a share consolidation on April 3, 2025 that can be utilized within the discretion of the board of directors of the Company and, if and when effectuated, such action may resolve the above noted Nasdaq listing compliance deficiency prior to such hearing date.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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