SUNation Energy, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS REPORT OF MANAGEMENT 45 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID: 1195 ) 46 CONSOLIDATED BALANCE SHEETS 50 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 52 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY 54 CONSOLIDATED STATEMENTS OF CASH FLOWS 57 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 59 ‎ 44 REPORT OF MANAGEM ENT 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. The financial statements and related information were prepared in accordance with accounting principles generally accepted in the United States of America and include amounts that are based on management’s informed judgments and estimates. In fulfilling its responsibilities for the integrity of financial information, management maintains accounting systems and related controls. These controls provide reasonable assurance, at appropriate costs, that assets are safeguarded against losses and that financial records are reliable for use in preparing financial statements. Management recognizes its responsibility for conducting the Company’s affairs according to the highest standards of personal and corporate conduct. The Audit and Finance Committee of the Board of Directors, comprised solely of independent, non-employee directors, meets with the independent auditors and management periodically to review accounting, auditing, financial reporting and internal control matters. 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/ Scott Maskin /s/ James Brennan Scott Maskin James Brennan Chief Executive Officer Chief Financial Officer ‎ 45 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and ‎ Stockholders of SUNation Energy, Inc. Opinion on the Consolidated Financial Statements 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 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. 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 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 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 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 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 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, 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, 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 46 value. Management engaged a third-party valuation specialist to assist with the analysis. 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 rate applied. These significant assumptions are affected by expectations about future market and economic conditions. 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 Our audit procedures performed to evaluate the reasonableness of management’s estimates and assumptions included assessing the methodologies used by the Company and testing the significant assumptions used in the quantitative models. To test the fair value of the Company’s reporting units, we performed audit procedures that included the following:  Compared the projected revenue growth rates to the Company’s historical results and industry and economic data, and compared projected EBITDA margins to historical results and industry data. 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 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.  Tested management’s fair value calculations for clerical accuracy.  Performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in these assumptions.  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. 47 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. /s/ UHY LLP We have served as the Company’s auditor since 2023. 48 Melville, New York April 15, 2025 ‎ 49 Click or tap here to enter text. SUNATION ENERGY, INC. CONSOLIDATED BALANCE SHEETS ASSETS December 31 December 31 2024 2023 CURRENT ASSETS: Cash and cash equivalents $ 839,268 $ 3,575,283 Restricted cash and cash equivalents 312,080 1,821,060 Trade accounts receivable, less allowance for credit losses of $ 240,817 and $ 94,085 , respectively 4,881,094 5,010,818 Inventories, net 2,707,643 3,578,668 Related party receivables 23,471 46,448 Prepaid expenses 1,587,464 1,313,082 Costs and estimated earnings in excess of billings 560,648 57,241 Other current assets 198,717 376,048 TOTAL CURRENT ASSETS 11,110,385 15,778,648 PROPERTY, PLANT AND EQUIPMENT, net 1,238,898 1,511,878 OTHER ASSETS: Goodwill 17,443,869 20,545,850 Right of use assets 3,686,747 4,516,102 Intangible assets, net 12,220,833 15,808,333 Other assets 12,000 12,000 TOTAL OTHER ASSETS 33,363,449 40,882,285 TOTAL ASSETS $ 45,712,732 $ 58,172,811 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 8,032,769 $ 7,677,261 Accrued compensation and benefits 796,815 1,360,148 Operating lease liabilities 321,860 394,042 Accrued warranty 350,013 268,004 Other current liabilities 1,055,995 867,727 Accrued loss contingencies 1,300,000 — Income taxes payable 5,071 5,373 Refundable customer deposits 1,870,173 2,112,363 Billings in excess of costs and estimated earnings 444,310 440,089 Contingent value rights 312,080 1,691,072 Earnout consideration 2,500,000 2,500,000 Current portion of loans payable 3,139,113 1,654,881 Current portion of loans payable - related party 6,951,563 3,402,522 Embedded derivative liability 82,281 — TOTAL CURRENT LIABILITIES 27,162,043 22,373,482 LONG TERM LIABILITIES: Loans payable and related interest 6,531,650 8,030,562 Loans payable and related interest - related party — 2,097,194 Deferred income taxes — 41,579 Operating lease liabilities 3,471,623 4,193,205 Earnout consideration — 1,000,000 TOTAL LONG-TERM LIABILITIES 10,003,273 15,362,540 COMMITMENTS AND CONTINGENCIES (Note 9) STOCKHOLDERS' EQUITY Series A Convertible preferred stock, par value $ 1.00 per share; 3,000,000 shares authorized; no and 28,000 shares issued and outstanding, respectively — 28,000 50 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; 25,000,000 shares authorized; 1,868,638 and 13,663 shares issued and outstanding, respectively (1) 93,432 683 Additional paid-in capital (1) 51,353,030 47,489,517 Accumulated deficit ( 42,899,046 ) ( 27,081,411 ) TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 8,547,416 20,436,789 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 45,712,732 $ 58,172,811 (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. ‎ 51 ` SUNATION ENERGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Year Ended December 31 2024 2023 Sales $ 56,861,753 $ 79,632,709 Cost of sales 36,435,509 51,936,519 Gross profit 20,426,244 27,696,190 Operating expenses: Selling, general and administrative expenses 27,054,166 29,074,578 Amortization expense 2,837,500 4,738,477 Fair value remeasurement of SUNation earnout consideration ( 1,000,000 ) 1,350,000 Goodwill impairment loss 3,101,981 — Intangible asset impairment loss 750,000 — Total operating expenses 32,743,647 35,163,055 Operating loss from continuing operations ( 12,317,403 ) ( 7,466,865 ) Other (expense) income: Investment and other income 144,529 191,584 (Loss) gain on sale of assets ( 822 ) 437,116 Fair value remeasurement of warrant liability ( 974,823 ) — Fair value remeasurement of embedded derivative liability ( 65,617 ) — Fair value remeasurement of contingent value rights 522,257 2,674,966 Interest expense ( 3,087,450 ) ( 2,657,517 ) Loss on debt extinguishment ( 35,657 ) — Other (expense) income, net ( 3,497,583 ) 646,149 Operating loss from continuing operations before income taxes ( 15,814,986 ) ( 6,820,716 ) Income tax expense 34,819 119,176 Net loss from continuing operations ( 15,849,805 ) ( 6,939,892 ) Net loss from discontinued operations, net of tax — ( 1,192,275 ) Net loss ( 15,849,805 ) ( 8,132,167 ) Other comprehensive income (loss), net of tax: Unrealized gains (losses) on available-for-sale securities — 10,422 Total other comprehensive income (loss) — 10,422 Comprehensive loss $ ( 15,849,805 ) $ ( 8,121,745 ) Less: Deemed dividend on extinguishment of Convertible Preferred Stock ( 4,215,551 ) — Less: Deemed dividend on modification of PIPE Warrants ( 11,447,251 ) — Less: Deemed contribution on exchange of equity instruments 4,075,681 — Net loss attributable to common shareholders $ ( 27,436,926 ) $ ( 8,132,167 ) Basic net loss per share (1) : Continuing operations $ ( 50.58 ) $ ( 521.89 ) Discontinued operations — ( 89.66 ) $ ( 50.58 ) $ ( 611.55 ) Diluted net loss per share (1) : Continuing operations $ ( 50.58 ) $ ( 521.89 ) Discontinued operations — ( 89.66 ) $ ( 50.58 ) $ ( 611.55 ) Weighted Average Basic Shares Outstanding (1) 542,454 13,298 Weighted Average Dilutive Shares Outstanding (1) 542,454 13,298 52 (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. ‎ 53 SUNATION ENERGY, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Accumulated Redeemable Convertible Series A Convertible Series B Series C Additional Other Preferred Stock Preferred Stock Preferred Stock Preferred Stock Common Stock Paid-in Accumulated Comprehensive Shares Amount Shares Amount Shares Amount Shares Amount Shares (1) Amount (1) Capital (1) Deficit Income (Loss) Total BALANCE AT DECEMBER 31, 2022 — $ — 28,000 $ 28,000 — $ — — $ — 13,221 $ 661 $ 46,293,187 $ ( 19,089,134 ) $ ( 10,422 ) $ 27,222,292 Net loss — — — — — — — — — — — ( 8,132,167 ) — ( 8,132,167 ) Issuance of common stock under Employee Stock Purchase Plan — — — — — — — — 113 6 125,392 — — 125,398 Issuance of common stock under Equity Incentive Plan — — — — — — — — 380 19 ( 19 ) — — — Gain on extinguishment of related party debt — — — — — — — — — — 36,291 — — 36,291 Share based compensation — — — — — — — — — — 1,212,956 — — 1,212,956 Other share retirements — — — — — — — — ( 51 ) ( 3 ) ( 178,290 ) 139,890 — ( 38,403 ) Other comprehensive loss — — — — — — — — — — — — 10,422 10,422 BALANCE AT DECEMBER 31, 2023 — $ — 28,000 $ 28,000 — $ — — $ — 13,663 $ 683 $ 47,489,517 $ ( 27,081,411 ) $ — 20,436,789 Net loss — — — — — — — — — — — ( 15,849,805 ) — ( 15,849,805 ) Issuance of common stock under Employee Stock Purchase Plan — — — — — — — — 153 8 9,764 — — 9,772 Issuance of common stock under Equity Incentive Plan — — — — — — — — 391 20 ( 20 ) — — — 54 Issuance of common stock under registered direct offering, net of issuance costs — — — — — — — — 3,604 180 918,808 — — 918,988 Issuance of Series B Preferred Stock — — — — 1 1 — — — — 14 — — 15 Cancellation of Series B Preferred Stock — — — — ( 1 ) ( 1 ) — — — — — — — ( 1 ) Issuance of common stock under PIPE Warrant exercise — — — — — — — — 16,545 827 323,963 324,790 Reclassification of Series A Preferred Stock to temporary equity 28,000 30,968,875 ( 28,000 ) ( 28,000 ) — — — — — — ( 30,940,875 ) — — ( 30,968,875 ) Deemed dividend on extinguishment of Convertible Preferred Stock — 751,125 — — — — — — — — ( 751,125 ) — — ( 751,125 ) Reclassification of PIPE Warrants to liabilities — — — — — — — — — — ( 10,592,220 ) — — ( 10,592,220 ) Conversion of Redeemable Convertible Preferred Stock to Common Stock ( 13,485 ) ( 15,277,055 ) — — — — — — 126,098 6,305 15,270,750 — — 15,277,055 Conversion of Series A Convertible Preferred Stock to Common Stock — — ( 1,490 ) ( 1,490 ) — — — — 14,195 710 780 — — — Reclassification of temporary equity to Series A Preferred Stock ( 14,515 ) ( 16,442,945 ) 14,515 14,515 — — — — — — — — 16,428,430 — — 16,442,945 Reclassification of PIPE Warrants to equity — — — — — — — — — — — — 11,242,257 — — 11,242,257 55 Exchange of Series A Preferred Stock and PIPE Warrants to Series C Preferred Stock — — ( 13,025 ) ( 13,025 ) — — 28,041 28,041 — — ( 15,016 ) — — — Issuance costs on exchange of Series A Preferred Stock and PIPE Warrants to Series C Preferred Stock — — — — — — — — — — ( 156,524 ) — — ( 156,524 ) Conversion of Series C Preferred Stock to Common Stock — — — — — — ( 28,041 ) ( 28,041 ) 1,246,262 62,313 ( 34,272 ) — — — Issuance of Common Stock on At-the-Market sales, net of issuance costs — — — — — — — — 448,216 22,410 2,171,063 2,193,473 Cash in lieu payment on fractional shares under reverse stock split — — — — — — — — ( 387 ) ( 19 ) ( 3,003 ) — — ( 3,022 ) Share based compensation — — — — — — — — — — 29,002 — — 29,002 Other share retirements — — — — — — — — ( 102 ) ( 5 ) ( 38,263 ) 32,170 — ( 6,098 ) BALANCE AT DECEMBER 31, 2024 — $ — — $ — — $ — — $ — 1,868,638 $ 93,432 $ 51,353,030 $ ( 42,899,046 ) $ — $ 8,547,416 (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. ‎ 56 SUNATION ENERGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 15,849,805 ) $ ( 8,132,167 ) Net loss from discontinued operations, net of tax — ( 1,192,275 ) Net loss from continuing operations ( 15,849,805 ) ( 6,939,892 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 3,153,832 5,136,420 Share based compensation 29,002 1,212,956 Deferred taxes ( 41,579 ) 41,579 Goodwill impairment loss 3,101,981 — Intangible asset impairment loss 750,000 — Credit loss provision 146,732 — Fair value remeasurement of earnout consideration ( 1,000,000 ) 1,350,000 Fair value remeasurement of warrant liability 974,823 — Fair value remeasurement of embedded derivative liability 65,617 — Fair value remeasurement of contingent value rights ( 522,257 ) ( 2,674,966 ) Loss on extinguishment of debt 35,657 — Gain on sale of assets 822 ( 437,116 ) Loss on lease termination 215,415 — Interest and accretion expense 3,087,449 2,657,517 Changes in assets and liabilities: Trade and related party accounts receivables 5,969 623,975 Inventories, net 853,518 2,475,825 Prepaid income taxes ( 302 ) 3,723 Other assets ( 635,892 ) 3,333,146 Accounts payable 355,508 83,081 Accrued compensation and benefits ( 563,333 ) 500,373 Customer deposits ( 242,190 ) ( 2,172,766 ) Other accrued liabilities 1,430,109 ( 4,494,247 ) Accrued interest ( 1,653,762 ) ( 1,085,174 ) Net cash used in operating activities - continuing operations ( 6,302,686 ) ( 385,566 ) Net cash used in operating activities - discontinued operations — ( 281,611 ) Net cash used in operating activities ( 6,302,686 ) ( 667,177 ) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 32,785 ) ( 655,691 ) Proceeds from the sale of fixed assets 6,118 450 Proceeds from the sale of investments — 2,869,584 Proceeds from earnout consideration payments — 250,000 Net cash provided by (used in) investing activities - continuing operations ( 26,667 ) 2,464,343 Net cash provided by investing activities - discontinued operations — 1,102,935 Net cash (used in) provided by investing activities ( 26,667 ) 3,567,278 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from loans payable 1,604,000 7,814,844 Payments against loans payable ( 1,595,364 ) ( 7,277,334 ) Payments related to debt issuance costs ( 24,150 ) ( 348,065 ) Payments related to equity issuance costs ( 501,414 ) — Proceeds from the issuance of common stock under registered direct offering 1,000,000 — Proceeds from the issuance of common stock under at-the-market offering 2,457,352 — Proceeds from the issuance of Series B preferred stock 15 — Payments for contingent value rights distributions ( 856,736 ) ( 3,036,676 ) 57 Proceeds from issuance of common stock, net of shares withheld 9,775 125,398 Cash in lieu payment on fractional shares under reverse stock split ( 3,022 ) — Purchase of common stock ( 6,098 ) ( 38,403 ) Net cash provided by (used in) financing activities 2,084,358 ( 2,760,236 ) NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 4,244,995 ) 139,865 CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR 5,396,343 5,256,478 CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR $ 1,151,348 $ 5,396,343 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Income taxes paid $ 76,700 $ 58,858 Interest paid 1,604,100 1,119,480 SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES: Capital contribution on related party debt extinguishment — 36,291 Loss on extinguishment of debt ( 35,657 ) — Deemed dividend on Convertible Preferred Stock and PIPE Warrants 11,587,121 — Conversion of redeemable convertible preferred stock to common stock 15,277,055 — Operating right of use assets obtained in exchange for lease obligations — 753,972 The accompanying notes are an integral part of the consolidated financial statements. 58 SUNATION ENERGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2024 and 2023 NOTE 1 – NATURE OF OPERATIONS Description of Business 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. 1 to Merger Agreement dated December 16, 2021 (collectively the “merger agreement”), by and among the Company, Helios Merger Co., a Delaware corporation and a wholly-owned subsidiary of the Company (the “Merger Sub”), Pineapple Energy LLC, a Delaware limited liability company, Lake Street Solar LLC as the Members’ Representative, and Randall D. Sampson as the Shareholders’ Representative, pursuant to which Merger Sub merged with and into Pineapple Energy, with Pineapple Energy surviving the merger as a wholly-owned subsidiary of the Company (the “merger”). Following the closing of the merger (the “Closing”) the Company changed its name from Communications Systems, Inc. to Pineapple Holdings, Inc. and commenced doing business using the Pineapple name, and subsequently, on April 13, 2022, changed its name to Pineapple Energy Inc. 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. 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 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. 59 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: 60 December 31, 2022 December 31, 2023 As Previously Reported Impact of Reverse Stock Split As Adjusted As Previously Reported Impact of Reverse Stock Split As Adjusted Common Stock shares 9,915,586 ( 9,902,365 ) 13,221 10,246,605 ( 10,232,942 ) 13,663 Common Stock amount $ 495,779 $ ( 495,118 ) $ 661 $ 512,330 $ ( 511,647 ) $ 683 Additional Paid-in-Capital $ 45,798,069 $ 495,118 $ 46,293,187 $ 46,977,870 $ 511,647 $ 47,489,517 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 As Adjusted Weighted average shares outstanding - basic and diluted 10,035,970 ( 10,022,672 ) 13,298 Loss per share from continuing operations - basic and diluted $ ( 0.69 ) $ ( 521.20 ) $ ( 521.89 ) Loss per share from discontinued operations - basic and diluted $ ( 0.12 ) $ ( 89.54 ) $ ( 89.66 ) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned operating subsidiaries. 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”). Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and accounts have been eliminated. Use of Estimates The presentation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company uses estimates based on the best information available in recording transactions and balances resulting from operations. 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, 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. 61 Restricted Cash and Cash Equivalents For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. The Company may invest in short-term money market funds that are not considered to be bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Company (“FDIC”) or other government agency. These money market funds seek to preserve the value of the investment at $ 1.00 per share; however, it is possible to lose money investing in these funds. 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 Accounts receivable are recorded at their net realizable value and are not collateralized. Accounts receivable include amounts earned less payments received and allowances for credit losses. Management continually monitors and adjusts its allowances associated with the Company’s receivables to address any credit risks associated with the accounts receivable and periodically writes off receivables when collection is not considered probable. The Company does not charge interest on past due accounts. 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 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 for the years ended December 31, 2024 and 2023: Year Ended December 31 2024 2023 Beginning balance $ 94,085 $ 108,636 Provision for credit losses 153,088 1,069,196 Write off of uncollectible amounts ( 6,356 ) ( 1,083,747 ) Recoveries — — Ending balance $ 240,817 $ 94,085 Inventories, Net Inventories, which consist primarily of materials and supplies used in the installation of solar systems, are stated at the lower of cost or net realizable value, with costs computed on a weighted average cost basis. The Company periodically reviews its inventories for excess and obsolete items and adjusts carrying costs to estimated net realizable values when they are determined to be less than cost. The inventory reserve was $ 226,439 and $ 126,990 at December 31, 2024 and 2023, respectively. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation is computed using the straight-line method. Depreciation included in cost of sales and selling, general and administrative expenses for continuing operations was $ 316,332 and $ 397,943 for 2024 and 2023, respectively. Maintenance and repairs are charged to operations and additions or improvements are capitalized. Items of property sold, retired or otherwise disposed of are removed from the asset and accumulated depreciation accounts and any gains or losses on disposal are reflected in the statements of operations. Goodwill and Other Intangible Assets Goodwill represents the amount by which the purchase prices (including liabilities assumed) of acquired businesses exceed the estimated fair value of the net tangible assets and separately identifiable intangible assets of these businesses. Definite lived intangible assets, consisting primarily of trade names, technology, and backlog are amortized on a straight-line basis over the estimated useful life of the asset. Goodwill is not amortized but is tested at least annually for impairment. 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. 62 Recoverability of Long-Lived Assets and Intangible Assets The Company reviews its long-lived assets and definite lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If indicators of impairment exist, management identifies the asset group that includes the potentially impaired long-lived asset, at the lowest level at which there are separate, identifiable cash flows. 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. Warrants 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 Revenue is recognized when there is a transfer of control of promised goods or services to customers in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those goods or services. The Company sells solar power systems under construction and development agreements to residential and commercial customers. The completed system is sold as a single performance obligation. For residential contracts, revenue is recognized at the point-in-time when the systems are placed into service. Any advance payments received in the form of customer deposits are recorded as contract liabilities. Commercial contracts are generally completed within three to twelve months from commencement of construction. Construction on large projects may be completed within eighteen to twenty-four months , depending on the size and location of the project. Revenue from commercial contracts are recognized under a percentage of completion method, measured by the percentage of hours incurred to date against estimated total hours budgeted for each contract. Because of inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near future. Contract costs include all direct material, labor costs and those indirect costs related to contract performance, such as indirect labor and other supplies. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability may result in revisions to costs and revenues which are recognized in which the revisions are determined. Changes in estimated job profitability resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements, are accounted for as changes in estimates in the current period. See Note 3, Revenue Recognition, for further discussion regarding revenue recognition. 63 Gross Excise Tax The State of Hawaii imposes a gross receipts tax on all business operations done in Hawaii. The Company records the tax revenue and expense on a gross basis. Cost of Sales Cost of sales consist of direct and indirect material and labor costs for solar energy system installations as well as warranty costs, permitting fees, financing fees and overhead including costs related to procurement, warehousing and inventory management. Employee Retirement Benefits The Company has an Employee Savings Plan (401(k)) and matches a percentage of employee contributions up to six percent of compensation. Employer contributions to the plan in 2024 and 2023 were $ 303,878 and $ 140,652 , respectively. Additionally, as part of the November 9, 2022 SUNation Acquisition, the Company also acquired the SUNation Solar Systems, Inc. 401(k) Plan. 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 The Company accounts for share-based compensation awards on a fair value basis. The estimated grant date fair value of each stock-based award is recognized in the statement of operations over the requisite service period (generally the vesting period). The Company recognizes forfeitures as they occur. Warranty SUNation warrants its products for various periods against defects in material or installation workmanship. The manufacturers of the solar panels and the inverters provide a warranty period of generally 25 years and 10 years , respectively. SUNation will assist its customers in the event that the manufacturers' warranty needs to be used to replace a defective solar panel or inverter. SUNation provides for warranty up to the lifetime of the system on the installation of a system and all equipment and incidental supplies other than solar panels and inverters that are recovered under the manufacturers' warranty. SUNation provides extended workmanship warranties to the customer for up to 25 years for the service of inverters, which is reimbursed by the manufacturer. The Company estimates its warranty obligations upon installation, an expense included in cost of sales, based on management’s best estimate of the probable cost to be incurred in honoring its warranty commitment. Advertising Advertising costs are expensed as they are incurred. Advertising expense was $ 746,805 and $ 946,379 for the years ended December 31, 2024 and 2023, respectively. Segment Information 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 (“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 Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The associated risk of concentration for cash is mitigated by banking with institutions with high credit ratings. At certain times amounts on deposit exceed FDIC insurance limits. The Company has limited credit risk in accounts receivable as most contracts are paid through outside customer financing. The Company is not dependent on any single customer and the loss of any customer would not adversely impact the Company’s operating results or financial position. The Company depends on a limited number of suppliers for its solar panels and other system components. During the years ended 64 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 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 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 In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative,” which is intended to clarify or improve disclosure and presentation requirements of a variety of topics. 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 December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. 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 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 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): 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 adopted this ASU effective December 31, 2024. See further discussion within Note 14, Segment Information. 65 NOTE 3 – REVENUE RECOGNITION Disaggregation of revenue Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that best reflects the consideration we expect to receive in exchange for those goods or services. The following table disaggregates revenue based on type for the years ended December 31, 2024 and 2023: Revenue by Type SUNation HEC 2024 2023 2024 2023 Residential contracts $ 30,715,255 $ 39,326,408 $ 15,984,618 $ 24,855,946 Commercial contracts 6,700,469 9,903,437 429,259 1,380,466 Service revenue 2,317,638 3,133,865 714,514 673,544 Software revenue — — — 347,550 Other — — — 11,493 $ 39,733,362 $ 52,363,710 $ 17,128,391 $ 27,268,999 The following table disaggregates revenue based on the timing of satisfaction of the performance obligations for the years ended December 31, 2024 and 2023: SUNation HEC 2024 2023 2024 2023 Performance obligations satisfied at a point in time $ 33,032,893 $ 42,460,273 $ 16,699,132 $ 25,888,533 Performance obligations satisfied over time 6,700,469 9,903,437 429,259 1,380,466 $ 39,733,362 $ 52,363,710 $ 17,128,391 $ 27,268,999 Contract Balances Contract assets represent costs and earnings in excess of amounts billed and direct costs, including commissions, financing and permitting fees paid prior to recording revenue. Contract liabilities represent amounts billed to clients in excess of revenue recognized to date and billings in excess of costs and earnings. Contract assets were $ 560,648 and $ 57,241 at December 31, 2024 and 2023, respectively. Contract liabilities were $ 2,314,483 and $ 2,552,452 at December 31, 2024 and 2023, respectively. Due to the shorter-term nature of our contracts, the balances within contract assets and liabilities as of December 31, 2023 has been recognized within cash and revenue, respectively, during the year ended December 31, 2024. NOTE 4 – CONTRACTS IN PROGRESS Billings in excess of costs and estimated earnings as of December 31, 2024 and 2023 are as follows: Year Ended December 31 2024 2023 Billings to date $ 3,055,354 $ 2,131,579 Costs incurred on uncompleted contracts 1,120,213 1,208,444 Estimated earnings 1,490,831 483,046 Cost plus estimated earnings 2,611,044 1,691,490 Billings in excess of costs plus estimated earnings on uncompleted contracts $ 444,310 $ 440,089 66 Costs and estimated earnings in excess of billings as of December 31, 2024 and 2023 are as follows: Year Ended December 31 2024 2023 Costs incurred on uncompleted contracts $ 1,233,151 $ 119,782 Estimated earnings 1,219,234 396,174 2,452,385 515,956 Billings to date 1,891,737 458,715 Costs and estimated earnings in excess of billings on uncompleted contracts $ 560,648 $ 57,241 NOTE 5 – LEASES 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. Lease ROU assets and liabilities are recognized at the commencement date of a lease based on the present value of lease payments over the lease term. Because the rate implicit in each individual lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. 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 March 2023, the Company entered into an operating lease for an additional office location in Florida. 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. All operating lease expense is recognized on a straight-line basis over the lease term. In the years ended December 31, 2024 and 2023, the Company recognized $ 696,141 and $ 718,441 in lease expense, respectively. Information related to the Company’s ROU assets and related lease liabilities were as follows: Year Ended December 31 2024 2023 Cash paid for operating leases $ 651,531 $ 662,561 Right-of-use assets obtained in exchange for new operating lease obligations $ — $ 753,972 As of December 31 2024 2023 Weighted-average remaining lease term 9.4 years 9.6 years Weighted-average discount rate 6.8 % 7.0 % Maturities of lease liabilities as of December 31, 2024 were as follows: 67 2025 $ 556,623 2026 526,557 2027 515,801 2028 525,127 2029 534,527 Thereafter 2,516,013 Total lease payments 5,174,648 Less imputed interest ( 1,381,165 ) Total operating lease liabilities $ 3,793,483 NOTE 6 – DISCONTINUED OPERATIONS On June 30, 2023, the Company sold substantially all of the assets of its legacy non-core subsidiaries, JDL and Ecessa, to TheIPGuys.net LLC doing business as OneNet Global for total net proceeds of $ 1,231,616 . 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 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 financial results of the discontinued operations are as follows: Year Ended December 31 2024 2023 Sales $ — $ 3,414,810 Cost of sales — 2,444,014 Selling, general and administrative expenses — 916,911 Amortization expense — — Transaction costs — 14,426 Goodwill impairment loss — — Restructuring expenses — 56,717 Loss on sale of assets — 1,190,002 Operating loss before income taxes — ( 1,207,260 ) Income tax (benefit) expense — ( 14,985 ) Net loss from discontinued operations $ — $ ( 1,192,275 ) 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 7 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment and the estimated useful lives are as follows: Estimated December 31 useful life 2024 2023 Leasehold improvements 3 - 12 years 741,650 751,025 Machinery and equipment 3 - 15 years 1,229,921 1,182,664 Furniture and fixtures 3 - 10 years 66,289 93,013 2,037,860 2,026,702 Less accumulated depreciation ( 798,962 ) ( 514,824 ) $ 1,238,898 $ 1,511,878 68 NOTE 8 – GOODWILL AND INTANGIBLE ASSETS 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. 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: HEC SUNation Total December 31, 2023 $ 9,829,212 $ 10,716,638 $ 20,545,850 Goodwill impairment loss ( 3,101,981 ) — ( 3,101,981 ) December 31, 2024 $ 6,727,231 $ 10,716,638 $ 17,443,869 Gross goodwill 9,829,212 10,716,638 20,545,850 Accumulated impairment loss ( 3,101,981 ) — ( 3,101,981 ) Balance at December 31, 2024 $ 6,727,231 $ 10,716,638 $ 17,443,869 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: December 31, 2024 Estimated Useful Life Gross Carrying Amount Accumulated Amortization Impairment Loss Net Tradenames & trademarks 8 years $ 17,900,000 $ ( 5,679,167 ) $ — $ 12,220,833 Developed technology 4 years 2,400,000 ( 1,650,000 ) ( 750,000 ) — $ 20,300,000 $ ( 7,329,167 ) $ ( 750,000 ) $ 12,220,833 December 31, 2023 Estimated Useful Life Gross Carrying Amount Accumulated Amortization Impairment Loss Net Tradenames & trademarks 3 - 8 years $ 22,187,882 $ ( 7,729,549 ) $ — $ 14,458,333 Developed technology 4 years 2,400,000 ( 1,050,000 ) — 1,350,000 Backlog 1 year 600,000 ( 600,000 ) — — $ 25,187,882 $ ( 9,379,549 ) $ — $ 15,808,333 69 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. The estimated future amortization expense for identifiable intangible assets during the next five fiscal years is as follows: Year Ending December 31: 2025 $ 2,237,500 2026 2,237,500 2027 2,237,500 2028 2,237,500 2029 2,237,500 Thereafter 1,033,333 Total $ 12,220,833 NOTE 9 – COMMITMENTS AND CONTINGENCIES Loan Payable 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”). This loan accrues interest at 10 %, payable-in-kind (“PIK”) and was initially due and payable on December 10, 2023. There are no financial covenants associated with this loan. This loan was used to acquire fixed assets, inventory, and intangible assets of Sungevity in an asset acquisition in December 2020. As the transaction did not involve the exchange of monetary consideration, the assets were valued at the Company’s most reliable indication of fair value, which was debt issued in consideration for the assets. Accordingly, Pineapple Energy assessed the fair market value of the debt instrument at $ 4,768,000 at the asset acquisition date (a non-recurring Level 3 fair value input). The Company initially accreted the value of the debt over its life at a discount rate of approximately 25 %. On December 16, 2021, the Term Loan Agreement was amended, whereby the maturity date was extended to December 31, 2024, subject to various prepayment criteria. In addition, the amendment provided that $ 4,500,000 plus all accrued and unpaid interest and expenses were to be repaid upon closing of the merger and receipt of the PIPE funds, with the remaining principal to be paid upon the loan maturity date. The amendment represented a modification to the loan agreement with the existing lender as both the original loan agreement and the amendment allow for immediate prepayment and the Company passed the cash flow test. On May 31, 2023, the Term Loan Agreement was further amended (the “Second Amendment”), primarily for the purpose of obtaining consent for the senior financing from Decathlon Specialty Finance, LLC (the “Decathlon Financing”), the proceeds of which were partially applied to repay $ 1,500,000 of the principal amount of the Hercules Term Loan. At the time of the Second Amendment and prior to the repayment, the aggregate remaining balance of the Term Loan, including principal and interest, was $ 3,375,742 . The Second Amendment also extended t he maturity date of the Term Loan to June 2, 2027 and set the interest rate at ten percent ( 10.0 %) payable monthly and removing the PIK interest. The aggregate remaining principal balance of $ 1,875,742 along with interest is payable in equal monthly installments of principal and interest beginning on July 3, 2023 and continuing on the first business day of each month thereafter. 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. 70 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. A new effective interest rate of approximately 48.6 % was established during the second quarter of 2023 based on the carrying value of the revised cash flows. 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 LLC’s personal property and assets. SUNation Short-Term and Long-Term Notes 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. It carried an annual interest rate of 4 % until the three-month anniversary of issuance, 8 % thereafter until the six-month anniversary of issuance, then 12 % thereafter until the Short-Term Note was paid in full. On June 1, 2023 the Company used funds from the Decathlon Financing to repay the Short-Term Note in full. The repayment of Short-Term Note has been recorded as a debt extinguishment as the Company is relieved of its obligation under the Short-Term Note and the related pledge by the Company of the equity of SUNation to secure the repayment of the Short-Term Note has been terminated. Since the Short-Term Note was with a related party, the Company recorded a capital contribution of $ 36,291 based on the difference between the carrying amount and reacquisition price of the Short-Term Note. The $ 5,486,000 Long-Term Note is unsecured and matures on November 9, 2025. 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. 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). The Company accretes the value of the debt over its life at a discount rate of approximately 11.2 %. 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. Interest and accretion expense related to the notes totaled $ 577,262 and $ 779,489 for the years ended December 31, 2024 and 2023, respectively. Decathlon Fixed Loan On June 1, 2023, the Company entered into a Revenue Loan and Security Agreement (the “Loan Agreement”) with Decathlon Specialty Finance, LLC (“Decathlon”). The Loan Agreement provides for a loan facility for the Company in the maximum amount of $ 7.5 million with a maturity date of June 1, 2027 (the “Decathlon Fixed Loan”), with the full amount being advanced to the Company upon execution of the Loan Agreement. The Decathlon Fixed Loan contains customary conditions, representations and warranties, affirmative and negative covenants, mandatory prepayment provisions and events of default. 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 71 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. All outstanding advances and interest under the Loan Agreement are due at maturity on June 1, 2027 (unless accelerated upon a change of control or the occurrence of other events of default) . Interest accrues on the amounts advanced pursuant to the Loan Agreement at such rate as is necessary to generate an amount equal to the Minimum Interest, which is defined in the Loan Agreement as the following multiple of the advanced amount depending on the period during which all amounts due under the Loan Agreement are paid: (i) 0.25 times if on or before 12 months after the Effective Date; (ii) 0.35 times if after 12 months and on or before 24 months after the Effective Date; (iii) 0.50 times if after 24 months and on or before 36 months after the Effective Date; 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). 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, 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% . 72 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). 73 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 The Company obtains various equipment loan agreements through SUNation. These loans are secured by machinery and equipment and expire at various dates through August 2029 with interest rates ranging from 4.5 to 9.7 % per annum. The balance for the equipment loans recorded at December 31, 2024 and 2023 was $ 238,266 and $ 333,717 , respectively. Interest expense was $ 24,332 and $ 16,047 for the years ended December 31, 2024 and 2023, respectively. Promissory Note Through the SUNation Acquisition, the Company acquired a promissory note with a former shareholder and member of SUNation through a buyout agreement. The promissory note includes monthly payments of principal and interest at an annual rate of 3.25 %. The promissory note matures on March 1, 2031. The balance for the promissory note recorded at December 31, 2024 and 2023 was $ 1,409,313 and $ 1,656,416 , respectively. Interest expense was $ 50,174 and $ 58,030 for the years ended December 31, 2024 and 2023, respectively. Future Minimum Principal Payments Future minimum principal payments under the aforementioned loans and notes for the next five years as of December 31, 2024 are as follows: 2025 $ 9,691,455 2026 2,776,929 2027 3,877,665 2028 318,935 2029 305,149 Thereafter 46,014 74 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 In the ordinary course of business, the Company is exposed to legal actions and claims and incurs costs to defend against these actions and claims. 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 Related party receivables 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. Leases 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. Debt 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 2022 Equity Incentive Plan On January 24, 2022 the board of directors adopted, and on March 16, 2022 the Company’s shareholders approved, the Company’s 2022 Equity Incentive Plan (the “2022 Plan”), which became effective on March 28, 2022. 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. 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. RSUs granted to employees generally vest over three years , with one-third vesting each year and RSUs granted to non-employee directors vest over one year . Inducement Grants On October 10, 2022, the board of directors approved an inducement grant of 110 RSUs in connection with the hiring of a new Chief Financial Officer. On November 6, 2022, the board of directors approved inducement grants totaling 179 RSUs in connection with the hiring of Senior Vice Presidents in connection with the SUNation Acquisition. Restricted Stock Units The following table summarizes the changes in the number of restricted stock units under the 2022 Equity Incentive Plan and inducement awards over the period from December 31, 2022 to December 31, 2024: 75 Weighted Average Grant Date Shares Fair Value Outstanding – December 31, 2022 917 $ 1,932.41 Granted 545 1,040.99 Vested ( 379 ) 1,486.15 Forfeited ( 36 ) 1,500.00 Outstanding – December 31, 2023 1,047 1,513.36 Granted 168 442.50 Vested ( 391 ) 1,428.57 Forfeited ( 527 ) 1,065.74 Outstanding – December 31, 2024 297 1,151.72 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. Compensation Expense Share-based compensation expense is recognized based on the fair value of awards granted over the vesting period of the award. Share-based compensation expense recognized for 2024 and 2023 was $ 29,002 and $ 1,212,956 respectively. Unrecognized compensation expense related to outstanding RSUs was $ 96,694 at December 31, 2024 and is expected to be recognized over a weighted-average period of 1.2 years. Share-based compensation expense is recorded as a part of selling, general and administrative expenses. Employee Stock Purchase Plan 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 . The ESPP is considered compensatory under current Internal Revenue Service rules. At December 31, 2024, 400 shares remained available for purchase under the ESPP. Employee Stock Ownership Plan (ESOP) The Company has an Employee Stock Ownership Plan under Legacy CSI. Under the conditions of the merger, this plan has been suspended for future contributions. 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 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. 76 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. Warrants 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. 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 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 77 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 78 $ 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 Income tax (benefit) expense from continuing operations consists of the following: Year Ended December 31 2024 2023 Current year income taxes : Federal $ — $ 17,622 State 76,398 59,975 76,398 77,597 Deferred income taxes: Federal $ ( 41,579 ) $ 41,579 ( 41,579 ) 41,579 Income tax expense $ 34,819 $ 119,176 The provision for income taxes for continuing operations varied from the federal statutory tax rate as follows: Year Ended December 31 2024 2023 Tax at U.S. statutory rate 21.0 % 21.0 % State income taxes, net of federal benefit ( 3.8 ) 4.4 Other nondeductible items ( 4.3 ) 2.1 Change in valuation allowance ( 8.1 ) ( 30.0 ) Other ( 5.0 ) 0.5 Effective tax rate ( 0.2 )% ( 2.0 %) 79 Deferred tax assets and liabilities as of December 31 related to the following: 2024 2023 Deferred tax assets: Allowance for doubtful accounts $ 62,747 $ 24,266 Inventory 98,271 32,768 Accrued and prepaid expenses 287,495 131,692 Lease liability 988,437 1,183,679 Domestic net operating loss carry-forward 6,018,361 5,308,336 Other stock compensation 72,613 214,248 Intangible assets — 214,600 Foreign net operating loss carry-forwards and credits 1,910,507 1,451,985 Federal and state credits 369,839 357,430 Business interest limitation carryforward 1,696,118 914,917 Other 15,961 464,019 Gross deferred tax assets 11,520,349 10,297,940 Valuation allowance ( 10,248,132 ) ( 8,970,982 ) Net deferred tax assets 1,272,217 1,326,958 Deferred tax liabilities Depreciation ( 109,390 ) ( 203,210 ) Intangible assets ( 202,202 ) — Lease right-of-use asset ( 960,625 ) ( 1,165,327 ) Net deferred tax liability ( 1,272,217 ) ( 1,368,537 ) Total net deferred tax liability $ — $ ( 41,579 ) The Company assesses available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three -year period ended December 31, 2024. This objective evidence limits the ability to consider other subjective evidence such as the projections for future growth. On the basis of this evaluation, as of December 31, 2024, a valuation allowance of $ 10,248,132 has been recorded to reflect the portion of the deferred tax asset that is more likely to not be realized. The valuation allowance increased by $ 1,277,150 from December 31, 2023 to December 31, 2024. 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, 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. 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. At December 31, 2024, the Company has an estimated federal research and development credit carryforward of approximately $ 220,000 and a state research and development credit carryforward of approximately $ 193,000 . 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 80 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. The Company assesses uncertain tax positions in accordance with ASC 740. Under this method, the Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from these uncertain tax positions are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense. Changes in the Company’s uncertain tax positions are summarized as follows: 2024 2023 Uncertain tax positions – January 1 $ 43,028 $ 75,347 Expiration of statute of limitations ( 7,560 ) ( 32,319 ) Uncertain tax positions – December 31 $ 35,468 $ 43,028 Included in the balance of uncertain tax positions at December 31, 2024 are $ 35,468 of tax benefits that if recognized would affect the tax rate. The Company’s unrecognized tax benefits will be reduced by $ 2,803 in the next twelve months as a result of the statute of limitations. There are no other expected significant changes in the Company’s uncertain tax positions in the next twelve months. The Company’s income tax liability accounts included accruals for interest and penalties of $ 0 at December 31, 2024. The Company’s 2024 income tax expense decreased by $ 0 due to net decreases for accrued interest and penalties. The Company is subject to taxation by the United States, foreign and state and local jurisdictions. 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. 81 Year ended December 31, 2024 Corporate and SUNation HEC Other Total Sales $ 39,733,362 $ 17,128,391 $ — $ 56,861,753 Cost of sales 24,639,695 11,795,814 — 36,435,509 Gross profit 15,093,667 5,332,577 — 20,426,244 Operating expenses: Selling, general and administrative expenses 15,265,443 4,530,879 7,257,844 27,054,166 Amortization expense 812,500 2,025,000 — 2,837,500 Fair value remeasurement of SUNation earnout consideration — — ( 1,000,000 ) ( 1,000,000 ) Goodwill impairment loss 3,101,981 3,101,981 Intangible asset impairment loss — 750,000 — 750,000 Total operating expenses 16,077,943 10,407,860 6,257,844 32,743,647 Operating (loss) income ( 984,276 ) ( 5,075,283 ) ( 6,257,844 ) ( 12,317,403 ) Other income (expenses): Investment and other income 25,920 17,742 100,867 144,529 (Loss) gain on sale of assets — 6,118 ( 6,940 ) ( 822 ) Fair value remeasurement of warrant liability — — ( 974,823 ) ( 974,823 ) Fair value remeasurement of embedded derivative liability — — ( 65,617 ) ( 65,617 ) Fair value remeasurement of contingent value rights — — 522,257 522,257 Interest expense ( 74,507 ) — ( 3,012,943 ) ( 3,087,450 ) Loss on debt extinguishment — — ( 35,657 ) ( 35,657 ) Other expense, net ( 48,587 ) 23,860 ( 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 $ 1,031,418 $ 2,120,364 $ 2,050 $ 3,153,832 Capital expenditures $ 24,155 $ 8,630 $ — $ 32,785 Assets $ 26,127,816 $ 18,150,306 $ 1,434,610 $ 45,712,732 82 Year ended December 31, 2023 Corporate and SUNation HEC Other Total Sales $ 52,363,710 $ 27,268,999 $ — $ 79,632,709 Cost of sales 32,992,901 18,943,618 — 51,936,519 Gross profit 19,370,809 8,325,381 — 27,696,190 Operating expenses: Selling, general and administrative expenses 16,178,126 5,448,385 7,448,067 29,074,578 Amortization expense 1,362,500 2,025,000 1,350,977 4,738,477 Fair value remeasurement of SUNation earnout consideration — — 1,350,000 1,350,000 Total operating expenses 17,540,626 7,473,385 10,149,044 35,163,055 Operating (loss) income 1,830,183 851,996 ( 10,149,044 ) ( 7,466,865 ) Other income (expenses): Investment and other income 35,633 9,773 146,178 191,584 (Loss) gain on sale of assets — ( 5,279 ) 442,395 437,116 Fair value remeasurement of contingent value rights — — 2,674,966 2,674,966 Interest expense ( 74,077 ) — ( 2,583,440 ) ( 2,657,517 ) Other expense, net ( 38,443 ) 4,494 680,099 646,149 Operating loss from continuing operations before income taxes $ 1,791,740 $ 856,490 $ ( 9,468,945 ) $ ( 6,820,716 ) Depreciation and amortization $ 1,676,842 $ 2,105,685 $ 1,353,893 $ 5,136,420 Capital expenditures $ 473,236 $ 173,080 $ 9,375 $ 655,691 Assets $ 28,738,285 $ 26,097,414 $ 3,337,112 $ 58,172,811 NOTE 15 – FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date: Level 1 – Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. Level 2 – Observable inputs such as quoted prices for similar instruments and quoted prices in markets that are not active, and inputs that are directly observable or can be corroborated by observable market data. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, such as treasury securities with pricing interpolated from recent trades of similar securities, or priced with models using highly observable inputs, such as commodity options priced using observable forward prices and volatilities. Level 3 – Significant inputs to pricing that have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as the complex and subjective models and forecasts used to determine the fair value of financial instruments. 83 Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 and 2023 are summarized below. December 31, 2024 Level 1 Level 2 Level 3 Total Fair Value Cash equivalents: Money Market funds $ 368,138 $ — $ — $ 368,138 Subtotal 368,138 — — 368,138 Liabilities: Contingent value rights — — ( 312,080 ) ( 312,080 ) Embedded derivative liability — — ( 82,281 ) ( 82,281 ) Earnout consideration — ( 2,500,000 ) — ( 2,500,000 ) Subtotal — ( 2,500,000 ) ( 394,361 ) ( 2,894,361 ) Total $ 368,138 $ ( 2,500,000 ) $ ( 394,361 ) $ ( 2,526,223 ) December 31, 2023 Level 1 Level 2 Level 3 Total Fair Value Cash equivalents: Money Market funds $ 1,799,357 $ — $ — $ 1,799,357 Subtotal 1,799,357 — — 1,799,357 Liabilities: Contingent value rights — — ( 1,691,072 ) ( 1,691,072 ) Earnout consideration — — ( 3,500,000 ) ( 3,500,000 ) Subtotal — — ( 5,191,072 ) ( 5,191,072 ) Total $ 1,799,357 $ — $ ( 5,191,072 ) $ ( 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 Total December 31, 2023 $ ( 1,691,072 ) $ — $ — $ ( 3,500,000 ) $ ( 5,191,072 ) Reclassification from equity — ( 10,592,220 ) — — ( 10,592,220 ) Additions — — ( 16,664 ) — ( 16,664 ) Warrant exercise — 324,789 — — 324,789 Distribution 856,735 — — — 856,735 Fair value adjustments 522,257 ( 974,823 ) ( 65,617 ) 1,000,000 481,817 Reclassification to Level 2 2,500,000 2,500,000 Reclassification to equity — 11,242,254 — — 11,242,254 December 31, 2024 $ ( 312,080 ) $ — $ ( 82,281 ) $ — $ ( 394,361 ) 84 Year Ended December 31, 2023 Contingent value rights Earnout consideration Total December 31, 2022 $ ( 7,402,715 ) $ ( 2,150,000 ) $ ( 9,552,715 ) Distribution 3,036,677 — 3,036,677 Fair value adjustments 2,674,966 ( 1,350,000 ) 1,324,966 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 $ 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 $ 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 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, 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 $ 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 85 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. Management plans to raise capital through sources that may include public or private equity offerings, debt financings and/or strategic alliances. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern . NOTE 17 – SUBSEQUENT EVENTS 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. The 86 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). Decathlon 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. Hercules 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 87 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. 88 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.