What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-03-23 compared with 2025-04-15 · 469 added, 448 removed, 892 unchanged (51% of the section changed)

3 unchanged sentences

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID:

CONSOLIDATED BALANCE SHEETS

18 unchanged sentences

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

To the Stockholders and Board of Directors of

SUNation Energy, Inc.

Opinion on the Financial Statements

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

(the “Company”) as of December 31, 2025, the related consolidated statements of operations, comprehensive income (if required), stockholders’ equity and cash flows for the year ended December 31, 2025 , and the related notes (collectively referred to as the “financial statements”).

In our opinion, based on our audit, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 , and the results of its operations and its cash flows for the year ended December 31, 2025 , in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

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

As 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.

As more fully described in Note 15, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 15.

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

Explanatory Paragraph – Retrospective Adjustment for Reverse Stock Splits

As discussed in Note 1 to the consolidated financial statements, the Company effected a reverse stock split on April 21, 2025, which has been retrospectively applied to all periods presented.

The financial statements for the years ended December 31, 2024, before the retrospective adjustment for the reverse stock split described in Note 1, were audited by other auditors whose report dated April 15, 2025 expressed an unmodified opinion on those statements.

We audited the adjustments described in Note 1 that were applied to retrospectively recast the financial statements.

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

We were not engaged to audit, review, or apply any procedures to the 2024 consolidated financial statements of the Company other than with respect to these retrospective adjustments for the reverse stock splits and, accordingly, we do not express an opinion or any other form of assurance on the 2024 consolidated financial statements taken as a whole.

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.

These financial statements are the responsibility of the Company's management.

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

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

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

As part of our 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.

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

Accordingly, we express no such opinion.

Our 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.

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

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our 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.

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

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

Critical Audit Matters

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

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

(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

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.

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.

At December 31, 2025, the Company’s goodwill totaled $17,443,869, allocated between the HEC ($6,727,231) and SUNation ($10,716,638) reporting units.

As described in Notes 2 and 7 to the consolidated financial statements, management evaluates goodwill impairment at the reporting unit level annually or when events indicate possible impairment.

A quantitative analysis was conducted as of September 30, 2025, using a combination of income and market approaches to estimate fair value, assisted by a third-party specialist.

Management concluded that the fair values of both reporting units exceeded their carrying values and no impairment charge was recognized.

The principal considerations for the CAM conclusion was that auditing the goodwill impairment assessment involved significant judgment due to the use of complex valuation models and subjective assumptions, including projected revenue growth, EBITDA margins, terminal growth, discount rates, and selection of comparable companies.

These assumptions are sensitive to expectations of future market and economic conditions.

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.

Our audit procedures related to the Company’s goodwill impairment evaluation included, among others:

 Assessing the inputs to the valuation model for significance

 Engaging our valuation specialist to assess the methodology used by management to estimate the fair value of the reporting units, as well as to assist in evaluating the discount rates, implied control discount and the selection of comparable market participants for reasonableness.

 Testing the significant assumptions used by management, including comparing projected financial information to historical performance and external industry data.

 Testing the completeness and accuracy of data used by management in the impairment analysis.

 Testing the mathematical accuracy of managements fair value calculations.

 Evaluating the sensitivity of management’s estimates to changes in significant assumptions.

 Assessing the adequacy of the Company’s disclosures related to goodwill impairment

Critical Audit Matter – Derivative Liabilities

As described in Notes 2 and 11 to the consolidated financial statements, the Company entered into a securities purchase agreement in the first quarter of 2025 involving common stock, pre-funded warrants, and, contingent on shareholder approval, additional common stock or warrants and Series A and B warrants.

The contingent forward contract for the second closing and the Series A and B warrants were accounted for as derivative liabilities at fair value, with changes in fair value recognized through earnings.

Upon shareholder approval in the second quarter of 2025, the contingent forward contract was derecognized, and the Series B warrants were derecognized upon exercise.

The fair value measurement of these instruments required significant management judgment, use of complex models, and involved unobservable inputs and the selection of comparable companies to estimate expected stock price volatility.

The Company engaged a third-party specialist to assist with the fair value analysis.

The principal considerations for the Critical Audit Matter conclusion is that auditing the accounting and valuation of these derivative liabilities involved complex evaluation of applicable accounting guidance (ASC 480 and ASC 815), involvement of our valuation specialists and assessment of management’s estimates including volatility, guideline public companies, and adjustment to stock price for dilutionary effective of the warrant issuances.

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.

 Assessing the reasonableness of management's position as it relates to the accounting for the registered direct raise transaction and the treatment of the contingent forward contract and underlying warrants.

 Testing the exercise of the warrants and the shares issued in settlement of the series B warrants.

 Determining the significant inputs to the warrant valuation model

 Engaging valuation specialists to perform procedures over the discount rate utilized, the volatility, and reperformance of the Monte Carlo simulation.

 Testing that the valuation model accurately reflects key terms of the agreements and assumptions regarding the approval dates, stock price reflecting market value, etc.

 Recalculating the number of warrants to be issued under the alternative cashless exercise option.

 Calculating the number of shares to be issued upon exercise per the terms of the agreements.

 Recalculating the dilutive price per share

 Recalculating the common stock, APIC and gain/loss impact upon settlement of the warrants and accurate presentation in the statement of equity, statement of operations and footnote disclosures.

‎ /s/ CBIZ CPAs P.C .

CBIZ CPAs P.C.

We have served as the Company’s auditor since 2025.

‎ March 20, 2026

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, before the effects of the adjustments to retrospectively apply the impact of the April 2025 reverse stock split described in Note 1, the accompanying consolidated balance sheet of SUNation Energy, Inc.

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

In our opinion, the 2024 consolidated financial statements, before the effects of the adjustments to retrospectively apply the impact of the April 2025 reverse stock split described in Note 1, present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the impact of the April 2025 reverse stock split described in Note 1 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied.

Those adjustments were audited by CBIZ CPAs P.C.

The 2024 consolidated financial statements before the effects of the adjustments discussed in Note 1 are not presented herein.

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 15 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 15.

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

Basis for Opinion

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

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

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

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

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

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

We served as the Company’s auditor from 2023 to 2025.

Melville, New York

8 unchanged sentences

credit losses of $ 308,629 and $ 240,817 , respectively

Inventories, net

Prepaid income taxes

Related party receivables

28 unchanged sentences

Loans payable and related interest - related party

Deferred income taxes

Operating lease liabilities

Earnout consideration

Accrued compensation and benefits

TOTAL LONG-TERM LIABILITIES

3 unchanged sentences

3,000,000 shares authorized;

no and 28,000 shares issued and outstanding, respectively

no shares issued and outstanding, respectively

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

4 unchanged sentences

no shares issued and outstanding, respectively

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

3,000,000 shares authorized;

1 and no shares issued and outstanding, respectively

Common stock, par value $ 0.05 per share;

7 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

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

(1) Prior period results have been adjusted to reflect the reverse stock split of the common stock at a ratio of 1-for-200 that became effective April 21, 2025.

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

1 unchanged sentence

SUNATION ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31

3 unchanged sentences

Amortization expense

Fair value remeasurement of SUNation earnout consideration

Fair value remeasurement of SUNation NY earnout consideration

( 1,000,000 )

7 unchanged sentences

Investment and other income

(Loss) gain on sale of assets

Loss on sale of assets

Fair value remeasurement of warrant liability

( 7,531,044 )

Fair value remeasurement of embedded derivative liability

Fair value remeasurement of contingent forward contract

Fair value remeasurement of contingent value rights

Financing fees

( 1,294,090 )

Interest expense

2 unchanged sentences

Loss on debt extinguishment

Other (expense) income, net

( 3,497,583 )

Operating loss from continuing operations before income taxes

( 15,814,986 )

( 6,820,716 )

Income tax expense

Net loss from continuing operations

( 15,849,805 )

Other expense, net

( 9,168,656 )

Net loss from discontinued operations, net of tax

( 3,497,583 )

Net loss before income taxes

( 10,841,693 )

( 15,814,986 )

Other comprehensive income (loss), net of tax:

Unrealized gains (losses) on available-for-sale securities

Total other comprehensive income (loss)

Comprehensive loss

Income tax expense

( 10,892,833 )

9 unchanged sentences

Basic net loss per share (1)

Continuing operations

Discontinued operations

( 10,110.93 )

Diluted net loss per share (1)

Continuing operations

Discontinued operations

( 10,110.93 )

Weighted Average Basic Shares Outstanding (1)

Weighted Average Dilutive Shares Outstanding (1)

(1) Prior period results have been adjusted to reflect the reverse stock split of the common stock at a ratio of 1-for-200 that became effective April 21, 2025.

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

8 unchanged sentences

Preferred Stock

Comprehensive

Income (Loss)

BALANCE AT DECEMBER 31, 2022

( 19,089,134 )

( 8,132,167 )

Issuance of common stock under Employee Stock Purchase Plan

Issuance of common stock under Equity Incentive Plan

Gain on extinguishment of related party debt

Share based compensation

Other share retirements

Other comprehensive loss

Preferred Stock

BALANCE AT DECEMBER 31, 2023

30 unchanged sentences

( 42,899,046 )

( 10,892,833 )

Issuance of common stock under Equity Incentive Plan

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

Issuance of common stock under pre-funded warrant exercises

Issuance of common stock under Series B warrant exercises

Issuance of Series D Preferred Stock

Cancellation of Series D Preferred Stock

Issuance of common stock on At-the-Market sales, net of issuance costs

Issuance of common stock on settlement of loss contingencies

Effect of reverse stock splits

Share based compensation

BALANCE AT DECEMBER 31, 2025

( 53,791,879 )

(1) Prior period results have been adjusted to reflect the reverse stock split of the common stock at a ratio of 1-for-200 that became effective April 21, 2025.

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

6 unchanged sentences

( 15,849,805 )

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:

net cash provided by (used in) operating activities:

Depreciation and amortization

4 unchanged sentences

Credit loss provision

Provision to write down inventories to net realizable value

Amortization of right of use asset

Fair value remeasurement of earnout consideration

2 unchanged sentences

Fair value remeasurement of embedded derivative liability

Fair value remeasurement of contingent forward contract

Fair value remeasurement of contingent value rights

( 2,674,966 )

Loss on extinguishment of debt

9 unchanged sentences

Customer deposits

( 2,172,766 )

Other accrued liabilities

( 4,494,247 )

Accrued interest

( 1,653,762 )

( 1,085,174 )

Net cash used in operating activities - continuing operations

( 6,302,686 )

Net cash used in operating activities - discontinued operations

Net cash used in operating activities

Net cash provided by (used in) operating activities

( 6,302,686 )

2 unchanged sentences

Proceeds from the sale of fixed assets

Proceeds from the sale of investments

Proceeds from earnout consideration payments

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

Net cash provided by investing activities - discontinued operations

Net cash (used in) provided by investing activities

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

3 unchanged sentences

( 1,595,364 )

Payments against related party loans payable

( 1,377,280 )

Payments related to debt issuance costs

Payments related to equity issuance costs

Proceeds from the issuance of common stock under registered direct offering

( 2,128,038 )

Proceeds from the issuance of common stock and pre-funded warrants under registered direct offering

Proceeds from the issuance of common stock on the exercise of pre-funded warrants

Proceeds from the issuance of Series A and Series B warrants

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

Proceeds from the issuance of Series B preferred stock

Payments for the termination of Series A warrants

Payments for contingent value rights distributions

( 3,036,676 )

Proceeds from issuance of common stock, net of shares withheld

Cash in lieu payment on fractional shares under reverse stock split

Purchase of common stock

Net cash provided by (used in) financing activities

Payment of contingent consideration related to acquisition

( 2,500,000 )

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

Purchase of common stock

Net cash provided by financing activities

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

( 4,244,995 )

5 unchanged sentences

SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:

Capital contribution on related party debt extinguishment

Loss on extinguishment of debt

Issuance of common stock for the settlement of loss contingencies

Deemed dividend on Convertible Preferred Stock and PIPE Warrants

Conversion of redeemable convertible preferred stock to common stock

Operating right of use assets obtained in exchange for lease obligations

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

5 unchanged sentences

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.

(“SUNE”, “SUNation Energy”, “we” or the “Company”) is a Delaware corporation, whose shares of Common Stock are listing on the Nasdaq Stock Market under its trading symbol “SUNE”.

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

2 unchanged sentences

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

21 unchanged sentences

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.

April 2025 Reverse Stock Split

On April 3, 2025, 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 1,000,000,000 shares.

On April 9, 2025, the Company’s board of directors determined to effect the reverse stock split of the common stock at a 1-for-200 ratio (the “April Reverse Stock Split”) and approved an amendment (“April Reverse Stock Split Amendment”) to its Certificate of Incorporation to effect the April Reverse Stock Split.

On April 16, 2025, the Company amended its Certificate of Incorporation to implement the April Reverse Stock Split.

The Company's common stock began trading on a split-adjusted basis when the market opened on April 21, 2025 (the "April Effective Date").

As a result of the April Reverse Stock Split on the April Effective Date, every 200 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 April Reverse Stock Split, and any fractional shares that would have resulted from the April Reverse Stock Split were rounded up to the nearest whole share.

The number of shares of common stock outstanding was reduced from 672,799,910 to 3,406,614 .

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

11 unchanged sentences

( 1,859,295 )

( 10,232,942 )

Common Stock amount

5 unchanged sentences

Weighted average shares outstanding - basic and diluted

( 10,022,672 )

Loss per share from continuing operations - basic and diluted

Loss per share from discontinued operations - basic and diluted

( 10,060.35 )

( 10,110.93 )

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.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) 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”).

6 unchanged sentences

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.

Restricted Cash and Cash Equivalents

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 net realizable value 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.

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.

2 unchanged sentences

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.

Accounts receivable includes 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.

1 unchanged sentence

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.

4 unchanged sentences

Write off of uncollectible amounts

( 1,083,747 )

Ending balance

6 unchanged sentences

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.

Depreciation included in cost of sales and selling, general and administrative expenses was $ 265,615 and $ 316,332 for 2025 and 2024, respectively.

Maintenance and repairs are charged to operations and additions or improvements are capitalized.

21 unchanged sentences

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.

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

Derivative Liabilities

The Company evaluates its contracts to determine if those contracts qualify as derivatives under ASC 815.

For derivative financial instruments that are accounted for as liabilities, including the Company’s contingent forward contract, the derivative instrument is initially recorded at its fair value and is then subsequently remeasured to fair value on each balance sheet date thereafter.

Any changes in fair value are recorded in other income (expense) in the consolidated statements of operations in the period of change.

Revenue Recognition

13 unchanged sentences

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.

Gross Excise Tax

1 unchanged sentence

The Company records the tax revenue and expense on a gross basis.

Gross excise tax revenue was $ 1,002,557 and $ 744,570 and gross excise tax expense was $ 1,004,490 and $ 763,370 for the years ended December 31, 2025 and 2024, respectively.

Cost of Sales

3 unchanged sentences

Employer contributions to the plan in 2025 and 2024 were $ 331,715 and $ 303,878 , respectively.

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

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

Share Based Compensation

2 unchanged sentences

The Company recognizes forfeitures as they occur.

SUNation warrants its products for various periods against defects in material or installation workmanship.

SUNation NY 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.

SUNation NY will assist its customers in the event that the manufacturers' warranty needs to be used to replace a defective solar panel or inverter.

SUNation NY 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 NY 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.

6 unchanged sentences

See Note 13, Segment Information, for further discussion.

Reclassification

Certain prior period amounts within operating activities in the statement of cash flows have been reclassified to conform to the current period presentation.

These reclassifications had no effect on previously reported net loss, total assets, total liabilities, or stockholders’ equity.

Concentrations of Risk

5 unchanged sentences

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

During the years ended

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

During the years ended December 31, 2025 and 2024, the top five suppliers collectively accounted for approximately 47 % and 40 % of the Company’s

total accounts payables, respectively.

There were no customers greater than 10 % of revenue or accounts receivable during the years ended December 31, 2025 and 2024.

Net Loss Per Share

5 unchanged sentences

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, 2025 and 2024.

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.

Restricted stock units totaling 3 and 9 would have been excluded from the calculation of diluted earnings per share for the years ended December 31, 2025 and 2024, 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

5 unchanged sentences

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):

9 unchanged sentences

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

In July 2025, the FASB issued ASU 2025-05, “Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets”.

ASU 2025-05 provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, “Revenue from Contracts with Customers” .

Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets.

ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim reporting periods in those years.

Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively.

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

In September 2025, the FASB issued ASU 2025-06, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software”, which removes all references to software development project stages and requires that an entity capitalize software costs when both (1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended (referred to as the “probable-to-complete recognition threshold”).

The ASU is effective for

fiscal years beginning after December 15, 2027, and interim periods within those fiscal years.

Early adoption is permitted.

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

In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270):

Narrow-Scope Improvements”, which clarifies interim disclosure requirements by improving the navigability of the required interim disclosures and clarifying when that guidance is applicable.

The standard is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027.

Early adoption is permitted.

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.

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 adopted this ASU effective December 31, 2024.

See further discussion within Note 14, Segment Information.

The Company adopted this ASU effective January 1, 2025 and applied the new disclosure requirements prospectively as of the adoption date.

See further information within Note 12, Income Taxes.

NOTE 3 – REVENUE RECOGNITION

6 unchanged sentences

Service revenue

Software revenue

The following table disaggregates revenue based on the timing of satisfaction of the performance obligations for the years ended December 31, 2025 and 2024:

4 unchanged sentences

Contract liabilities represent amounts billed to clients in excess of revenue recognized to date and billings in excess of costs and earnings.

Retainage on commercial revenue contracts is included within accounts receivable and totaled $ 455,660 and $ 189,880 at December 31, 2025 and 2024, respectively.

Contract assets were $ 658,177 , $ 560,648 and $ 57,241 at December 31, 2025, 2024, and 2023, respectively.

Contract liabilities were $ 2,737,151 , $ 2,314,483 and $ 2,552,452 at December 31, 2025, 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.

During 2024, $ 2,552,452 within contract liabilities as of December 31, 2023 was recognized within revenue.

During 2025, $ 2,186,702 within contract liabilities as of December 31, 2024 has been recognized within revenue.

NOTE 4 – CONTRACTS IN PROGRESS

17 unchanged sentences

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 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 NY.

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.

Effective September 30, 2024, the Company entered into a lease termination agreement with our Minnesota office landlord, pursuant to which the Company paid a termination fee totaling $ 189,000 to be paid at $ 13,500 per month for a period of fourteen (14) months from entry into the 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 use 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 for the year ended December 31, 2024.

There is no remaining liability as December 31, 2025.

During the third quarter of 2025, the Company terminated its Florida office operating lease and incurred $ 12,873 in additional expense related to a termination fee, forfeiture of the security deposit, and other fees.

The lease termination resulted in a decrease to the Company’s operating lease right of use assets totaling $ 37,544 and operating lease liabilities totaling $ 39,104 , which along with the additional expenses, resulted in a loss on the termination of the lease totaling $ 11,313 , recorded in operating expenses in the consolidated statements of operations for the year ended December 31, 2025.

These remaining leases have remaining lease terms of 6 to 10 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.

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

As of December 31, 2025, total ROU assets and operating lease liabilities were $ 3,315,411 and $ 3,450,718 , respectively.

4 unchanged sentences

Cash paid for operating leases

Right-of-use assets obtained in exchange for new operating lease obligations

As of December 31

6 unchanged sentences

Total operating lease liabilities

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

Cost of sales

Selling, general and administrative expenses

Amortization expense

Transaction costs

Goodwill impairment loss

Restructuring expenses

Loss on sale of assets

Operating loss before income taxes

( 1,207,260 )

Income tax (benefit) expense

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 6 - PROPERTY, PLANT AND EQUIPMENT

4 unchanged sentences

Less accumulated depreciation

( 1,064,576 )

NOTE 7 – 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.

On July 4, 2025, the President signed H.R.

1, the “One Big Beautiful Bill Act,” or “OBBBA”, into law, which accelerates the phase-outs and terminations of various eligible tax credits enacted as part of the Inflation Reduction Act and places restrictions on continued receipt of tax credits by specified foreign entities and foreign influenced entities.

The OBBBA terminates several consumer-facing tax credits, including the Residential Clean Energy Credit (Section 25D) and the Energy Efficient Home

Improvement Credit (Section 25C), effective at the end of 2025.

The Section 25D credit previously allowed homeowners to claim a 30% credit for installing rooftop solar panels and related equipment.

The OBBBA also has an accelerated phaseout of the Clean Electricity Investment Tax Credit (Section 48E) and the Clean Electricity Production Tax Credit (45Y).

In this accelerated phase out, projects must begin construction by July 4, 2026, or be placed in service by December 31, 2027, to qualify for these credits.

The Company performed a quantitative assessment related to the recoverability of our goodwill for our two reporting units as a result of the material decline in our 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.

1 unchanged sentence

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 values of the SUNation NY and HEC reporting units exceeded its carrying value as of September 30, 2025 and October 1, 2025 and no impairment charge was necessary.

As a result of the implications of the OBBBA as noted above, the Company performed an impairment test on the tradenames and trademarks intangible assets associated with both the HEC and SUNation NY reporting units as of September 30, 2025.

The Company performed the analysis under ASC 360 and no impairment charge was realized.

At December 31, 2024, we performed an interim quantitative assessment 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, 2025 and 2024 by reporting unit are as follows:

December 31, 2023

January 1, 2024

Goodwill impairment loss

2 unchanged sentences

December 31, 2024

December 31, 2025

Gross goodwill

33 unchanged sentences

NOTE 8 – COMMITMENTS AND CONTINGENCIES

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

Revolving Line of Credit

On April 14, 2025, the Company entered into a Secured Revolving Line of Credit Agreement (the “Revolving Credit Agreement”) with MBB Energy, LLC (“MBB”), an affiliate of the Company, as lender, providing for a $ 1.0 million revolving credit facility (the “Revolver”).

The Revolver matures on April 14, 2026 , unless earlier terminated or extended pursuant to its terms.

Borrowings, if any, under the Revolver will bear interest at a fixed annual rate of 8 %, payable monthly in arrears on the first day of each calendar month.

The Revolving Credit Agreement includes customary affirmative and negative covenants, as well as standard events of default, which, if triggered, may permit the lender to accelerate all outstanding obligations under the facility.

The Company may repay outstanding borrowings at any time without penalty.

As of December 31, 2025, no amounts have been drawn on the Revolver.

As of December 31, 2025, the Company was in compliance with all covenants and other requirements of the Revolving Credit Agreement.

See Note 16, Subsequent Events, for drawdowns made under this facility in January 2026.

Pineapple Energy LLC had 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”).

7 unchanged sentences

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.

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.

12 unchanged sentences

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

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

See further discussion within Note 17, Subsequent Events.

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

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

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.

As of March 3, 2025, the combined loan and accrued interest balance, net of unamortized debt discount and debt issuance costs, was $ 682,955 and the aggregate remaining balance of the Term Loan, including principal and interest, was $ 1,230,555 ;

however, the parties to the Term Loan Agreement agreed to a reduced aggregate repayment amount of $ 1,138,263 , if voluntarily repaid early in full.

On March 3, 2025, the Company repaid the remaining balance of this loan in full using a portion of the proceeds from the first tranche of the securities offering which occurred on February 27, 2025 (see Note 11, Equity, for further details).

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.

The Company recorded a loss on extinguishment of debt of $ 455,308 in connection with the repayment of the loan, which represents the difference between (a) the reduced aggregate repayment amount and (b) the carrying amount of the loan at the repayment date, which included the outstanding principal and interest balance, less unamortized debt discount and debt issuance costs.

Interest and accretion expense was $ 100,450 and $ 721,061 for the years ended December 31, 2025 and 2024 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.

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

Decathlon Fixed Loan

4 unchanged sentences

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

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

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

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

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

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

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;

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.

The Decathlon Fixed Loan was 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 were scheduled to be due at maturity on June 1, 2027 (unless accelerated upon a change of control or the occurrence of other events of default) .

Interest accrued 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 was 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 were paid:

(i) 0.25 times if on or before 12 months after the Effective Date (as defined in the Loan Agreement);

(ii) 0.35 times if after 12 months and on or before 24 months after the Effective Date;

1 unchanged sentence

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 could 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 (as defined in the Loan Agreement)).

The Company incurred an aggregate of $ 348,065 in debt issuance costs that were recorded as a discount and were 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, the combined loan and accrued interest balance was $ 6,586,325 , and the unamortized debt issuance costs balance was $ 173,193 .

As of March 3, 2025, the combined loan and accrued interest balance, net of unamortized debt issuance costs, was $ 6,435,999 and the aggregate balance, together with accrued principal and interest, remaining under the Loan Agreement was $ 6,740,516 ;

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

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.

The Company recorded a gain on extinguishment of debt of $ 230,924 in connection with the repayment of the loan, which represents the difference between (a) the reduced aggregate repayment amount and (b) the carrying amount of the loan at the repayment date, which included the outstanding principal and interest balance, plus the fair value of the embedded derivative liability, and less unamortized debt issuance costs.

The Company recorded interest expense of $ 232,866 and $ 1,505,063 for the years ended December 31, 2025 and 2024, respectively.

SUNation NY Long-Term Note and Earnout

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

The Long-Term Note was unsecured and matured on November 9, 2025.

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

Interest was 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 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.

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

As the debt was part of the SUNation NY 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 previously unpaid interest totaling $ 710,897 , after the Decathlon debt was paid in full.

As noted above, the Company paid the Decathlon debt in full on March 3, 2025 and no longer had to receive written consent to make these payments.

On April 10, 2025 the Long-Term Note was amended and restated 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 (“Amended Long-Term Note”) is now a senior secured instrument.

The total balance of the Amended Long-Term Note on April 10, 2025 was $ 5,605,436 and interest accrues

at 8 % per annum.

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.

The Amended Long-Term Note represented a modification under ASC 470-50 as the original loan agreement and amended loan agreement are not substantially different.

The Company applied modification accounting to the amendment of the Long-Term Note and recorded $ 38,613 of debt issuance costs as part of the discount on the Amended Long-Term Note.

The Amended Long-Term Note includes optional and mandatory prepayment provisions, including required partial or full repayment in connection with specified capital raises.

The Amended Long-Term Note is a senior secured instrument pursuant to a pledge agreement and includes customary default provisions and acceleration clauses.

The balance of the Long-Term Note, net of discount, recorded at December 31, 2025 and 2024 was $ 5,221,288 and $ 6,076,978 , respectively.

Interest and accretion expense related to the notes totaled $ 533,879 and $ 577,262 for the years ended December 31, 2025 and 2024, respectively.

On April 10, 2025, the Company agreed to amend the terms of the unearned 2024 earnout by entering into the Senior Secured Contingent Note Instrument (“Contingent Note”).

Pursuant to the terms of the Contingent Note, 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 holders at the time of such earnout payment trigger date.

The maximum amount due under the earnout liability is $ 2,500,000 payable to the holders in the form of the Contingent Note, issuable on the earnout payment trigger date.

Interest accrues on the Contingent Note commencing the month after issuance at a rate of 8 % per annum, payable in arears, and repayments of principal are due in 24 equal monthly installments commencing the month after issuance.

The earnout liability is accounted for under ASC 710 as a deferred compensation arrangement and is accreted to $ 2,303,182 over the requisite service period as it is probable the financial conditions will be attained.

The earnout liability represents the present value of the expected future cash flows as of the eligibility date of May 5, 2026.

The balance of the earnout liability at December 31, 2025 was $ 1,535,454 .

Compensation expense related to the earnout liability during 2025 totaled $ 1,535,454 , and is recorded in selling, general and administrative expenses.

As noted in Note 14, Fair Value Measurements, the Company had a remaining earnout consideration accrual balance of $ 2,500,000 at December 31, 2024 related to the SUNation NY acquisition earned 2023 earnout.

During 2025, the Company paid the balance to satisfy the outstanding liability of the earned 2023 earnout in full.

Conduit Capital Bridge Loan

2 unchanged sentences

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.

The loans due to Conduit accrued 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) would satisfy the interest accrual on the loans from initial issuance to the Conduit Maturity Date.

All such loans were 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.

5 unchanged sentences

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.

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.

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% .

13 unchanged sentences

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.

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

As of February 28, 2025, the loan balance, net of unamortized debt issuance costs, was $ 913,924 , and the aggregate loan balance was $ 1,000,000 .

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 Note 11, Equity, for further details) .

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

The Company recorded a loss on extinguishment of debt of $ 57,716 in connection with the repayment of the loan, which represents the difference between (a) the aggregate repayment amount and (b) the carrying amount of the loan at the repayment date, which included the outstanding principal balance, plus the fair value of the embedded derivative liability, and less unamortized debt issuance costs.

The Company recorded interest and accretion expense of $ 33,312 and $ 73,689 for the years ended December 31, 2025 and 2024, respectively.

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 July 22, 2024, the Company obtained bridge loan financing for working capital purposes from MBB, an affiliate 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.

The loans due to MBB accrued 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) satisfied the interest accrual on the loans from initial

issuance to the Conduit Maturity Date.

All such loans were 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.

10 unchanged sentences

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.

Notwithstanding anything to the contrary as set forth in the MBB Note or any tranche or amendment related thereto, in no event could 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.

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

As of February 28, 2025, the loan balance, net of unamortized debt issuance costs, was $ 909,509 , and the aggregate loan balance was $ 1,000,000 .

On February 28, 2025, the Company repaid the $ 1,000,000 total loan balance to MBB as the Company had gross proceeds from equity offerings in excess of $ 4.4 million (see Note 11, Equity, for further details).

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

The Company recorded a loss on extinguishment of debt of $ 61,370 in connection with the repayment of the loan, which represents the difference between (a) the aggregate repayment amount and (b) the carrying amount of the loan at the repayment date, which included the outstanding principal balance, plus the fair value of the embedded derivative liability, and less unamortized debt issuance costs.

The Company recorded interest and accretion expense of $ 34,900 and $ 82,689 for the years ended December 31, 2025 and 2024, respectively.

Equipment Loans

The Company obtains various equipment loan agreements through SUNation.

The Company obtains various equipment loan agreements through SUNation NY.

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.

2 unchanged sentences

Promissory Note

Through the SUNation Acquisition, the Company acquired a promissory note with a former shareholder and member of SUNation through a buyout agreement.

Through the SUNation NY Acquisition, the Company acquired a promissory note with a former shareholder and member of SUNation NY 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.

On January 30, 2026, the Company settled the outstanding debt for $ 800,000 .

See further discussion within Note 16, Subsequent Events.

The balance for the promissory note recorded at December 31, 2025 and 2024 was $ 1,154,059 and $ 1,409,313 , respectively.

2 unchanged sentences

Future minimum principal payments under the aforementioned loans and notes for the next five years as of December 31, 2025 are as follows:

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

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

See Note 16, Subsequent Events, for further discussion.

2 unchanged sentences

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.

At December 31, 2024, the Company accrued $ 1,300,000 for loss contingencies related to certain prior securities issuances.

During 2025, the Company settled this obligation by issuing 6,068 shares ( 1,213,656 shares prior to the April Reverse Stock Split) of common stock and payment of $ 398,529 in cash.

There was no remaining accrual balance at December 31, 2025.

NOTE 9 – RELATED PARTY TRANSACTIONS

2 unchanged sentences

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.

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

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

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

As of December 31, 2025, the Company only has outstanding related party debt under the SUNation NY Long-Term Note and the Revolving Credit Agreement.

The MBB Note was paid in full during the first quarter of 2025.

See further information regarding this debt within Note 8, Commitments and Contingencies.

6 unchanged sentences

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

1 unchanged sentence

Weighted Average

Outstanding – December 31, 2022

Outstanding – January 1, 2024

Outstanding – December 31, 2024

Outstanding – December 31, 2025

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.

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-200 that became effective on April 21, 2025, 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

7 unchanged sentences

At December 31, 2025, 2 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 11 – EQUITY

3 unchanged sentences

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.

19 unchanged sentences

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.

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.

2 unchanged sentences

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

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

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

Preferred Stock and warrants.

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 all of the Series A Preferred Stock and PIPE Warrants in exchange for shares of Series C Convertible Preferred Stock of the Company (the “Series C Preferred Stock”).

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

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

7 unchanged sentences

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

9 unchanged sentences

On February 5, 2024, the Company entered into a securities purchase agreement with certain institutional investors for the sale by the Company of 18 shares ( 2,702,703 prior to the Reverse Stock Splits) of the Company’s common stock in a registered direct offering.

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

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

The purchasers in this offering purchased, and the Company sold, the shares at a purchase price per share of $ 55,500.00 ($ 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.

3 unchanged sentences

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.

During 2024, the Company sold an aggregate of 2,241 shares ( 448,216 shares prior to the April Reverse Stock Split) of common stock for gross proceeds of $ 2,457,354 under the ATM facility, before deducting the placement agent fees and related offering expenses.

During 2025, the Company sold an aggregate of 762 shares ( 152,250 shares prior to the April Reverse Stock Split) of common stock, respectively, for gross proceeds of $ 362,269 under the ATM facility, before deducting the related offering expenses.

On August 11, 2025, the Company provided written notice of termination of the Sales Agreement to the Sales Agent pursuant to the terms thereunder.

On August 18, 2025, the Company entered into a Sales Agreement (the “ Needham Sales Agreement”) with Needham & Company, LLC (“Needham” or the “Needham Sales Agent”) with respect to an offering and sale, at any time and from time to time, of the Company’s common stock (the “Shares”) in an aggregate offering amount up to $ 30,000,000 under the Needham Sales Agreement.

Sales of the Shares, if any, will solely be made in “at the market offerings”.

On November 4, 2025, the Company provided formal written notice to Needham of the termination of the Sales Agreement entered into with Needham.

No sales or offering of shares were made thereunder since entry into this Sales Agreement.

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 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.

Upon full payment of the Conduit Loan and following the April 2025 special meeting of shareholders, the Series D Preferred Stock share was returned to the Company and was cancelled.

February 2025 Offering

On February 27, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional investors in a registered direct offering (the “Offering”) for a multi tranche offering 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.

The first tranche closing involved the purchase and sale of an aggregate of $ 15 million in securities in a first closing consisting of (i) 9,825 shares ( 1,965,000 shares prior to the April Reverse Stock Split) of common stock, and (ii) pre-funded warrants to purchase up to 55,392 shares ( 11,078,480 shares prior to the April Reverse Stock Split) of common stock (the “Pre-Funded Warrants), and, subject to shareholder approval, an aggregate of $ 5 million in securities in a second closing consisting of (x) 21,739 shares ( 4,347,826 shares prior to the April Reverse Stock Split) of common stock or Pre-Funded Warrants, (y) series A warrants to purchase up to 86,957 shares ( 17,391,306 shares prior to the April Reverse Stock Split) of common stock (the “Series A Warrants”), and (z) series B warrants to purchase up to 86,957 shares ( 17,391,306 shares prior to the April Reverse Stock Split) of common stock (the “Series B Warrants”) at a purchase price of $ 230.00 per share ($ 1.15 prior to the April Reverse Stock Split) and accompanying warrants or $ 229.80 per Pre-Funded Warrant ($ 1.1490 prior to the April Reverse Stock Split) and accompanying warrants.

The Series A Warrants had an exercise price of $ 345.00 per share ($ 1.725 per share prior to the April Reverse Stock Split) 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 had an exercise price of $ 575.00 per share ($ 2.875 per share prior to the April Reverse Stock Split) subject to standard adjustments for dividends, splits and similar events;

a one-time adjustment on the date of issuance (as described in the warrants), all of which were 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 could 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 were issuable at the second tranche closing and were exercisable immediately after issuance and carried a term of exercise equal to five years from the date of issuance.

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

The Company determined that the second closing of the Offering represents a firm commitment and a contingent forward contract to issue and sell additional shares of common stock or Pre-Funded Warrants and the Series A Warrants and Series B Warrants conditioned following receipt of approval by the Company’s stockholders for the issuance of the Series A Warrants, Series B Warrants and the shares of common stock underlying such warrants.

The Company determined that the contingent forward contract is a freestanding financial instrument that does not meet the requirements for equity classification due to certain settlement provisions that fail the indexation guidance in ASC 815-40 and meets the definition of a derivative.

As a result, the contingent forward contract was recorded as a liability initially at its fair value on the date of issuance and will be subsequently remeasured to fair value on each balance sheet date until the underlying instruments are issued and sold in the second tranche closing of the Offering.

The Company determined the initial fair value of the contingent forward contract to be $ 5,515,525 .

The shares of common stock and Pre-Funded Warrants issued and sold in the first closing of the Offering were classified as a component of permanent equity and recorded at the issuance date using a relative fair value allocation method of the remaining proceeds of the Offering after recording the contingent forward contract at its fair value on the date of issuance.

The Pre-Funded Warrants were equity classified because they were freestanding financial instruments that were legally detachable and separately exercisable from the equity instruments, were immediately exercisable, did not embody an obligation for the Company to repurchase its shares, and permitted the holders to receive a fixed number of shares of common stock upon exercise.

In addition, such Pre-Funded Warrants did not provide any guarantee of value or return.

As of March 31, 2025, all 55,392 Pre-Funded Warrants ( 11,078,480 prior to the April Reverse Stock Split) issued and sold in the first closing of the Offering had been exercised in exchange for the issuance of 55,392 shares ( 11,078,480 shares prior to the April Reverse Stock Split) of the Company's common stock.

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.

On April 7, 2025, the Company closed the second tranche of its previously announced securities purchase agreement, dated February 27, 2025, with certain institutional investors for the purchase and sale of 21,720 shares ( 4,347,826 shares prior to the April 2025 Reverse Stock Split) of the Company’s common stock (or common stock equivalents in lieu thereof), Series A warrants to purchase up to an aggregate 86,957 shares ( 17,391,306 shares prior to the April 2025 Reverse Stock Split) of the Company’s common stock and Series B warrants to purchase up to an aggregate 86,957 shares ( 17,391,306 shares prior to the April 2025 Reverse Stock Split) of the Company’s common stock at an effective purchase price of $ 230.00 per share ($ 1.15 per share prior to the April 2025 Reverse Stock Split) (or common stock equivalents in lieu thereof) and associated warrants in a registered direct offering, which was priced at-the-market under applicable Nasdaq rules, for the second tranche gross proceeds of $ 5,000,000 .

Together with the approximately $ 15,000,000 in gross proceeds from the previously announced first tranche closing completed on February 27, 2025, the Company raised approximately $ 20.0 million in aggregate gross proceeds from the offering before deducting placement agent fees and other offering expenses payable by the Company.

The Company derecognized the contingent forward contract liability representing the firm commitment for the second closing on April 7, 2025, the date of the second closing.

The Company determined the fair value of the contingent forward contract liability to be $ 4,399,054 immediately prior to the second closing.

During 2025, the Company recorded a gain of $ 899,080 from the change in fair value of the contingent forward contract, which is included in Other (expense) income, net in the consolidated statements of operations.

The Series A warrants and Series B warrants did not meet the requirements for equity classification due to certain settlement provisions that fail the indexation guidance in ASC 815-40.

As a result, the Series A warrants and Series B warrants were recorded as a liability initially at fair value on the date of issuance and were subsequently remeasured to fair value at each balance sheet date until exercised.

During the second quarter for 2025, the Series B warrants to purchase the Company’s common stock were fully exercised in exchange for the issuance of 3,260,870 shares ( 652,173,983 shares prior to the April Reverse Stock Split) of the Company’s common stock and are no longer outstanding.

The Company determined the fair value of the Series B warrants to be $ 8,637,203 immediately prior to exercise and recorded a loss of $ 8,025,504 from the change in fair value of the Series B warrants, which is included in Other (expense) income, net in the consolidated statements of operations.

On June 26, 2025, the Company and holders of Series A warrants to purchase the Company’s common stock, mutually agreed to terminate and cancel the Series A warrants for an aggregate payment of to the Series A warrant holders of $ 267,391 .

The Company determined the fair value of the Series A warrants to be $ 761,851 immediately prior to exercise and recorded a gain of $ 494,460 from the change in fair value of the Series A warrants, which is included in “Other (expense) income, net” in the condensed consolidated statements of operations.

The shares of common stock issued and sold in the second closing and upon exercise of the Series B warrants are classified as a component of permanent equity and recorded at the issuance date fair value.

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.

As of December 31, 2025, the Company had incurred an aggregate of $ 2,128,038 in placement agent fees and related offering expenses, of which $ 1,136,532 were allocated to the contingent forward contract and Series A and Series B warrants and expensed in Financing Fees, and $ 991,506 were allocated to the shares of common stock and Pre-Funded Warrants issued and sold in the first closing of the Offering and recorded as a reduction to APIC in stockholders’ equity.

NOTE 12 - INCOME TAXES

Income tax (benefit) expense from continuing operations consists of the following:

Income tax expense from continuing operations consists of the following:

Year Ended December 31

2 unchanged sentences

Income tax expense

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

The Company has elected to prospectively adopt the guidance in ASU No, 2023-09, Income Taxes (Topic 740):

Improvements to Income Taxes Disclosures.

The reconciliation of the federal statutory income tax rate to the Company's provision for income taxes for the year ended December 31, 2025 in accordance with the guidance in ASU No.

2023-09 is as follows:

Year Ended December 31, 2025

Federal Statutory Tax Rate

( 2,276,756 )

State and Local Income Taxes, Net of Federal Income Tax Effect (1)

Nontaxable or Nondeductible Items:

Financing Fees

Fair value remeasurement of warrant liability

Fair value remeasurement of contingent forward contract

Changes in Valuation Allowances

Changes in Unrecognized Tax Benefits

Other Adjustments

(1) State taxes in New York made up the majority (greater than 50 %) of the tax effect in this category.

The reconciliation of the federal statutory income tax rate to the Company’s provision for income taxes for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 is as follows:

Year Ended December 31

statutory rate

3 unchanged sentences

Effective tax rate

The income taxes paid for the year ended December 31, 2025 consisted of the following:

State and Local Income Taxes

Massachusetts

Deferred tax assets and liabilities as of December 31 related to the following:

17 unchanged sentences

Lease right-of-use asset

( 1,165,327 )

Net deferred tax liability

( 1,272,217 )

( 1,368,537 )

Total net deferred tax liability

12 unchanged sentences

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.

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 assets.

At December 31, 2025, 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 .

12 unchanged sentences

Included in the balance of uncertain tax positions at December 31, 2025 are $ 32,665 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, 2025.

2 unchanged sentences

In general, the Company’s tax years 2019 through 2025 remain open to assessment.

On July 4, 2025, the “One Big Beautiful Bill Act” was enacted into law.

The legislation includes several changes to federal tax law including permanent extension of certain expiring Tax Cuts and Jobs Act provisions and modifications to US taxation of foreign activity.

Certain provisions were effective for 2025, while others will be effective for tax years beginning after December 31, 2025.

The Company has evaluated the impact of the legislation and incorporated the applicable tax provisions into its consolidated financial statements for the current reporting period.

NOTE 13 – SEGMENT INFORMATION

1 unchanged sentence

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

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.

The CODM regularly reviews discrete financial information for SUNation NY 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.

10 unchanged sentences

Amortization expense

Fair value remeasurement of SUNation earnout consideration

( 1,000,000 )

Goodwill impairment loss

Intangible asset impairment loss

Total operating expenses

2 unchanged sentences

( 1,673,037 )

( 12,317,403 )

Other income (expenses):

Investment and other income

(Loss) gain on sale of assets

Fair value remeasurement of warrant liability

Fair value remeasurement of embedded derivative liability

( 7,531,044 )

Fair value remeasurement of contingent forward contract

Fair value remeasurement of contingent value rights

Interest expense

Financing fees

( 1,294,090 )

Interest expense

( 1,041,835 )

Loss on debt extinguishment

5 unchanged sentences

( 10,841,693 )

( 9,730,700 )

( 15,814,986 )

Depreciation and amortization

7 unchanged sentences

Fair value remeasurement of SUNation earnout consideration

( 1,000,000 )

Goodwill impairment loss

Intangible asset impairment loss

Total operating expenses

2 unchanged sentences

( 6,257,844 )

( 12,317,403 )

Other income (expenses):

1 unchanged sentence

(Loss) gain on sale of assets

Fair value remeasurement of warrant liability

Fair value remeasurement of embedded derivative liability

Fair value remeasurement of contingent value rights

2 unchanged sentences

( 3,087,450 )

Loss on debt extinguishment

Other expense, net

( 3,472,856 )

( 3,497,583 )

Operating loss from continuing operations before income taxes

1 unchanged sentence

( 5,051,423 )

( 9,730,700 )

( 15,814,986 )

Depreciation and amortization

13 unchanged sentences

Money Market funds

Contingent value rights

Embedded derivative liability

Earnout consideration

( 2,500,000 )

( 2,894,361 )

( 2,500,000 )

( 2,526,223 )

December 31, 2024

3 unchanged sentences

Contingent value rights

( 1,691,072 )

Embedded derivative liability

Earnout consideration

10 unchanged sentences

Embedded derivative liability

Earnout consideration

Contingent forward contract

December 31, 2024

2 unchanged sentences

( 14,914,579 )

Reclassification from equity

( 10,592,220 )

Extinguishment of debt

Warrant exercise

Fair value adjustments

Reclassification to Level 2

Reclassification to equity

( 7,531,044 )

( 6,595,885 )

December 31, 2025

1 unchanged sentence

Contingent value rights

Warrant liability

Embedded derivative liability

Earnout consideration

3 unchanged sentences

( 5,191,072 )

Fair value adjustments

( 1,350,000 )

December 31, 2023

( 1,691,072 )

Reclassification from equity

( 10,592,220 )

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.

Warrant exercise

Fair value adjustments

Reclassification to Level 2

Reclassification to equity

December 31, 2024

The estimated fair value of the Contingent Value Rights (“CVR”) as of December 31, 2025 and 2024 was $ 0 and $ 312,080 , respectively, as noted above.

The Company recorded a $ 36,079 gain on the fair value remeasurement of the CVRs in 2025 and a $ 522,257 gain on the fair value remeasurement of the CVRs in 2024.

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 Company paid $ 276,001 and $ 856,736 in CVR distributions during 2025 and 2024, respectively.

The estimated fair value of the contingent forward contract was $ 0 as of December 31, 2025.

The estimated fair value was considered a Level 3 measurement and the fair value of the contingent forward contract is determined using a Monte Carlo simulation.

As a result of the fair value remeasurement, the Company recorded a remeasurement gain of $ 899,080 in 2025.

See Note 11, Equity, for further information.

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

The Company paid $ 2,500,000 against the earnout consideration during 2025 related to the first earnout period.

The estimated fair value was considered a Level 2 measurement at December 31, 2024 because the earnout amounts had been established and there was no longer a reliance on unobservable inputs.

As a result of the fair value remeasurement, the Company recorded a remeasurement gain of $ 1,000,000 during the year ended December 31, 2024.

As noted in Note 11, the PIPE 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 PIPE 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.

As discussed in Note 11, Equity, during the second quarter of 2025, the Company issued Series A and Series B warrants.

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 $ 7,531,044 and $ 974,823 during the years ended December 31, 2025 and 2024, 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 of the embedded derivative liability was $ 82,281 as of December 31, 2024.

As noted in Note 8, Commitments and Contingencies, the Company repaid the debt associated with the embedded derivative liabilities and the embedded derivative balance was included within the debt extinguishment.

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 fair value remeasurement related to the SUNation NY 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.

There were no transfers between levels during the year ended December 31, 2025.

NOTE 15 – GOING CONCERN

The Company’s financial statements as of December 31, 2025 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

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.

Based on 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, substantial doubt exists around the Company’s ability to continue as a going concern for a reasonable period of time .

As noted in Note 11, Equity, and Note 8, Commitments and Contingencies, the Company raised capital and satisfied certain outstanding debt obligations during 2025, 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.

4 unchanged sentences

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.

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

February 2025 Offering

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Loan and Earnout Repayments

Conduit and MBB

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

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

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

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

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

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

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

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

As 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.

SUNation Long-Term Note and Earnout

As noted in Note 9, Commitments and Contingencies, on November 9, 2022, in connection with the SUNation acquisition, the Company entered into a $ 5,486,000 Long-Term Promissory Note (the “Long-Term Note”).

The Company was unable to make its second and third interest payments totaling $ 250,703 and $ 460,194 due on December 31, 2023 and 2024, respectively as it was not permitted to make any payments under the Long-Term Note unless Decathlon had provided prior written consent to such payment pursuant to the Loan Agreement.

As noted above, the Company paid the Decathlon debt in full and no longer

had to receive written consent to make these payments.

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

As noted in Note 15, Fair Value Measurements, the Company recorded a $ 2,500,000 earnout consideration accrual at December 31, 2025 related to the SUNation acquisition.

On March 13, 2025, the Company paid $ 389,103 and on April 7 2025, paid the remaining $ 2,110,897 to satisfy the outstanding liability in full.

Subsequent to making the March 13, 2025 interest payment, the original Long-Term Note was amended and restated on April 10, 2025 as follows:

The principal amount of $ 5,486,000 previously due and payable under the original Long Term Note, together with all accrued and unpaid interest owing thereunder, shall be due and payable on May 1, 2028 (the “Maturity Date”), and such amended note shall become a senior secured instrument.

Principal and interest payments under the amended Long-Term Note shall be payable monthly on the first day of each month commencing with June 1, 2025 for thirty-six (36) consecutive months thereafter pursuant to the terms thereunder.

Additionally, pursuant to the terms of that certain Senior Secured Contingent Note Instrument, entered into on April 10, 2025, the unearned 2024 earnout was rescheduled and shall be based on the earnout terms set forth therein pursuant to the financial conditions and terms covering each of fiscal years 2024 and 2025 and, if attained, shall be payable in fiscal year 2026, which payment is further conditioned on the continued employment of the note holders at the time of such earnout payment trigger date.

Previously Issued Warrant Settlement Exchange

As disclosed in Note 9, Commitments and Contingencies, we have accrued $ 1,300,000 for loss contingencies related to the PIPE Warrants that are payable in cash and stock.

During the first quarter of 2025, we settled this obligation by issuing 1,213,656 shares of common stock, with all such issuances at the market value (with no anti-dilution or price reset features), and to paying a total of $ 432,330 in cash.

Nasdaq Delisting Notice

On April 11, 2025 the Company received a letter (the “Minimum Bid Price Deficiency Letter”) from the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market (“Nasdaq”) notifying the Company that, for the 30 consecutive business day period immediately preceding deficiency letter, the Company’s common stock had not maintained a minimum closing bid price of $ 1.00 per share (the “Minimum Bid Price Requirement”) and, as a result, does not comply with Listing Rule 5550(a)(2) (the “Rule”).

Normally, a company would be afforded a 180-calendar day period to demonstrate compliance with the Rule (“Cure Period”);

however, pursuant to Listing Rule 5810(c)(3)(A)(iv), the Company is not eligible for a customary Cure Period specified in Rule 5810(c)(3)(A) due to the fact that the Company has effected a reverse stock split over the prior one-year period or has effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one.

Instead, the Company is offered an opportunity to appeal any deficiency related to a delisting determination to Nasdaq by seven days from receipt of the non-compliance notice.

Accordingly, unless the Company timely requests a hearing before a Hearings Panel, the Company’s securities would be subject to suspension/delisting.

The Company intends to timely request a hearing before the Hearing Panel.

The hearing request will automatically stay any suspension or delisting action pending the hearing and the expiration of any additional extension period if granted by the Panel following the hearing.

There can be no assurance that the Panel will grant the Company an additional extension period or that the Company will ultimately regain compliance with all applicable requirements for continued listing on The Nasdaq Capital Market.

In the event that the Company regains compliance with the Minimum Bid Price Requirement prior to any scheduled hearing date, then a hearing may not be necessary, as the Company may be mooted out of the hearings process.

Additionally, to this end, the stockholders of the Company had approved a share consolidation on April 3, 2025 that can be utilized within the discretion of the board of directors of the Company and, if and when effectuated, such action may resolve the above noted Nasdaq listing compliance deficiency prior to such hearing date.

As discussed in Note 8, Commitments and Contingencies, the Company acquired a promissory note with a former shareholder and member of SUNation NY.

On January 30, 2026, the Company reached agreement to eliminate this promissory note.

Prior to reaching this settlement, the promissory note carried remaining principal balance of approximately $ 1.1 million.

To eliminate the long-term promissory note, significantly reduce this remaining multi-year obligation and improve financial flexibility, the Company negotiated a one-time lump-sum settlement payment of $ 800,000 , which payment was made on January 30, 2026.

In connection with the elimination of the long-term promissory note, the Company utilized its existing $ 1 million Revolver with MBB.

Prior to drawing on this facility in January 2026, no amounts had been drawn on the Revolver.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data