SUNE 10-K & 10-Q changes, risk factors and insider trading

Our shares of common stock are listed on the Nasdaq Capital Market, or Nasdaq. Nasdaq has rules for continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to maintain our listing, or de-listing from Nasdaq, would make it more difficult for shareholders to dispose of our common stock and more difficult to obtain accurate price quotations on our common stock. This could have an adverse effect on the price of our common stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock is not traded on a national securities exchange. In the past, from time to time, we have received certain notices from Nasdaq of non-compliance items.

For example, as previously reported, the Company had received respective Nasdaq non-compliance letters regarding: (i) a Minimum Bid Price Deficiency notice from the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market notifying the Company that, for the 30 consecutive business day period immediately preceding April 11, 2025 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, did not comply with Listing Rule 5550(a)(2); and (ii) the Staff’s additional delisting notice pursuant to its discretionary authority under Listing Rule 5101 based on public interest concerns related to the Company’s securities offering announced on February 27, 2025.

Following receipt of the April 2025 deficiency notice, the Company timely requested a hearing before the Nasdaq Hearing Panel. The hearing request automatically stayed any suspension or delisting action pending the outcome of the hearing. The Company appeared before the Nasdaq Hearing Panel on May 27, 2025 to address the above-noted compliance matters. As of the hearing date, the Company had been in Compliance with the Minimum Bid Price for not less than twenty-five (25) consecutive trading days, and has since maintained Minimum Bid Price compliance to date.

On June 10, 2025, the Company received the Nasdaq Hearing Panel’s decision in which it notified the Company that it did not find the Company to be in violation of Listing Rules 5100 and 5550(a)(2), the “Public Interest Concern” and “Bid Price Rule”, respectively. Accordingly, the June 10, 2025 letter further provided that the Company is deemed to be in full compliance with the applicable Nasdaq Listing Rules, and that the above-referenced matter was closed. While we are currently in compliance with Nasdaq’s listing rules, there is no guarantee that we may not become subject to future non-compliance or delisting notices, any of which could have a serious negative effect on our stock price, volatility, ability to remain listed, liquidity, among other similar adverse effects on our stock and shareholders.

Despite the Company’s current compliance with Nasdaq’s existing listing standards, the Nasdaq Stock Market has implemented and proposed additional new rules that require existing Nasdaq listed companies to comply with more stringent continued listing rules. For example, proposed Nasdaq rule changes significantly increase delisting risks by removing grace periods for compliance, targeting low-priced stocks, and raising market value requirements. Key changes include immediate suspension for falling below a $5 million market value of listed securities (MVLS) and for stocks trading at or below $0.10. Key risks include the elimination of cure periods: previously, companies had an initial automatic 180-day grace period to regain compliance with certain listing standards. The proposed changes allow for immediate suspension and delisting, particularly when a company's MVLS falls below $5 million for 10 consecutive trading days. Nasdaq is implementing accelerated delisting for stocks trading at or below $0.10 per share for ten consecutive trading days, ultimately targeting companies in severe financial distress. Additionally, Nasdaq has proposed limited appeal rights, including the ability to stay a delisting during an appeal process is being restricted, leaving companies with little to no time to fix deficiencies. Should we fall subject to any of these or other non-compliance matters, we could be delisted, resulting in a variety of serious negative consequences, including, but not limited to the loss of liquidity, and a significant decrease or total loss in shareholder value.

U.S. trade and tariff policy regarding solar energy equipment has experienced a high level of activity in recent years, under both the current and previous Administrations. Most recently, on July 1, 2025, the U.S. Commerce Department launched an investigation under Section 232 of the Trade Expansion Act of 1962 into imported polysilicon, a key component in solar panels. A decision is expected in 2026. If the investigation finds that imported polysilicon poses a national security threat to the United States, the Administration could impose new tariffs on those imports, potentially increasing the price of some of the equipment we procure.

In addition, on April 21, 2025, the U.S. Commerce Department issued final anti-dumping (“AD”) and countervailing duty (“CVD”) rates on crystalline solar cells and modules imported from Vietnam, Malaysia, Thailand and Cambodia. These countries have supplied the majority of imported solar cells and modules to the United States in recent years, and now face new country-wide final AD or CVD tariff rates ranging from 1.92% to 534.67%. The Commerce Department also imposed new tariffs on individual cell and module manufacturers in those countries. The imposition of tariffs generally has an inflationary effect on module prices for solar energy equipment installers, including us.

In addition, U.S. laws and regulations intended to prevent the importation of goods manufactured with forced labor have and could continue to affect our business operations and supply chain, including ongoing enforcement of the Uyghur Forced Labor Prevention Act (“UFLPA”) and the withhold release order (“WRO”) that U.S. Customs and Border Protection (“CBP”) issued on June 24, 2021, applicable to certain silica-based products manufactured in the Xinjiang Uyghur Autonomous Region of China. Intensive examinations, withhold release orders, and related governmental procedures have resulted in supply chain and operational delays throughout the industry, and we have implemented policies and procedures to maintain compliance and minimize delays. These and similar trade restrictions that may be imposed in the future could cause delivery and installation delays, and restrict the global supply of polysilicon and solar products. This could result in near-term demand for available energy systems despite higher costs, increased costs of polysilicon and the overall cost of energy systems, and equipment shortages, potentially reducing overall demand for and limiting the supply of our products and services.

In recent years, we have faced substantial trade policy volatility, marked by escalating tariffs and trade investigations that create substantial uncertainty in our supply chain and cost structure. In April 2025, the Administration implemented broad "reciprocal" tariffs, including a 10% baseline tariff on most imports. Following a 90-day pause to allow for bilateral negotiations, country-specific reciprocal tariffs took effect on August 7, 2025, with rates now ranging from 10% to 50% depending on the country of origin. Existing tariffs on steel, copper and aluminum were notably already increased to 50% for most countries, with specific exemptions for the UK. On February 20, 2026, the U.S. Supreme Court held that the International Emergency Economic Powers Act does not authorize the President to impose tariffs, invalidating some but not all of the recently imposed tariffs. The Trump Administration responded by announcing new tariffs pursuant to another statute, but significant uncertainty remains regarding the legality and effect of such tariffs. In response to such U.S. tariffs, some foreign governments have threatened or instituted retaliatory tariffs on certain U.S. goods and have indicated a willingness to impose additional tariffs on U.S. products, which could increase tensions and create greater uncertainty and instability in our business dealings and negatively affect our business operations. The legal standing of some reciprocal tariffs is currently under federal court review, though these rulings are stayed pending appeal, meaning the announced tariffs remain in effect.

The trade relationship with China has seen particularly aggressive and fluctuating tariff escalations. While final tariff rates have yet to be determined, other pre-existing U.S. tariffs on Chinese goods generally persist, can change more frequently than previously, and are additive. For example, the current U.S. presidential administration has announced a formal investigation process to consider new national security-based tariffs on imports of semiconductors and semiconductor manufacturing equipment, which are necessary components of our solar panels. The highly fluid situation with China is potentially subject to further changes as this 90-day pause period concludes and with the ongoing sector-specific investigations into polysilicon and semiconductors.

These developments compound existing trade measures, including the previously discussed AD/CVD tariffs on solar cells and modules and the 50% Section 232 tariffs on steel and aluminum. The cumulative effect impacts both our direct equipment procurement costs and the expenses faced by our U.S.-based component suppliers, whose manufacturing inputs are subject to these tariffs.

The unpredictable nature of these policy changes, including their scale, scope, and implementation timeline, creates significant challenges for cost forecasting and supply chain management. While we are actively collaborating with suppliers to establish alternative, less impacted supply chains, these transitions require substantial time for development and scaling. We cannot guarantee that these mitigation efforts will fully offset the adverse effects of these tariff increases on our business operations, financial condition, and results of operations We cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and other countries, which products may be subject to such actions, or what actions may be taken by other countries in retaliation. The tariffs described above, the adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs, trade agreements or related policies have the potential to adversely impact our supply chain and access to equipment, and our costs and ability to economically serve certain markets. Any such cost increases or decreases in availability could slow our growth and cause our financial results and operational metrics to suffer. We cannot predict whether, and to what extent, U.S. trade policies will change in the future and cannot ensure that additional tariffs or other restrictive measures will not continue or increase.

We periodically receive proposals to consider expansion, diversification and other forms of strategic transactions, and any such transactions that we may consider or consummate in the future could have negative consequences.

We have in the past and continue to receive inquiries related to a range of strategic transactions and strategic alternatives, ranging from offers to acquire assets to grow our existing business to expansions to diversify our business and more. Strategic alternatives, if consummated, could take the form of mergers, acquisitions, partnerships, joint ventures, licensing arrangements or other strategic transactions.

We expect to continue to devote time and resources to exploring legitimate strategic options that we believe will increase shareholder value. There can be no assurance that any of these proposals will result in a successful consummation, if pursued, or that they will be completed on attractive terms or at all. Additionally, there can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will lead to increased shareholder value or that it will ultimately result in a successful expansion or diversified business.

The process of evaluating these strategic options may be very costly, including such as legal and accounting fees, expenses and other related charges that would otherwise be committed to operations. In addition, any strategic business combination or other transactions that we may consummate in the future could have a variety of negative consequences and we may implement a course of action or consummate a transaction that yields unexpected results that adversely affect our business and decreases the remaining cash available for use in our business.

Additionally, a number of the foregoing and other significant factors may be beyond our control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction with us, obtaining shareholder approval and the availability of financing to third parties in a potential transaction with us on reasonable terms. Any failure of such potential transaction to achieve the anticipated results could significantly impair our ability to enter into any future strategic transactions and may significantly diminish or delay any future distributions to our shareholders.

If we are not successful in identifying a successful strategic alternative, expansion or diversification or if our plans are not executed in a timely fashion, this may cause reputational harm with our shareholders and the value of our common stock shares may be materially adversely impacted. In addition, speculation regarding any developments related to the review of strategic alternatives and/or perceived uncertainties related to the future of our business could cause our share price to fluctuate significantly or result in the total loss of your investment.

Even if we successfully consummate a strategic transaction, we may fail to realize all of the anticipated benefits of the transaction, those benefits may take longer to realize than expected, or we may encounter integration difficulties.

Our ability to realize the anticipated benefits of any potential expansion, diversification or business combination or any other result in this regard are highly uncertain. Any anticipated benefits will depend on a number of factors, including our ability to realize what is believed to be higher value of targeted assets due to the ability to integrate with any future business partner and our ability to generate future shareholder value. Such process may also be disruptive to our business, and the expected benefits may not be achieved within the anticipated time frame, or at all. The failure to meet the challenges involved and to realize the anticipated benefits of any potential transaction could adversely affect our business and financial condition.

Any executed strategic transaction may not maximize or even enhance stockholder value, could result in total costs and expenses that are greater than expected, and could make it more difficult to attract and retain qualified personnel, each of which could have a material adverse effect on our business. In addition, a potential strategic alternative may require stockholder approval and stockholder approval may not be obtained (including if any significant or activist shareholder may not vote for such transaction or it/they may attempt to actively work against the approval of such strategic or other transaction) and, therefore, we may not successfully consummate the strategic alternative.

In addition, the market price of our common stock may reflect a market assumption that a strategic alternative will occur, and a failure to complete a strategic alternative could result in negative investor perceptions and could cause a decline in the market price of our common stock, which could adversely affect our ability to access the equity and financial markets, as well as our ability to explore and enter into different strategic alternatives.

We need to obtain substantial additional financing arrangements to provide working capital, expansion and growth capital. If financing is not available to us on acceptable terms when needed, our ability to continue to fund our operations and grow our business would be materially adversely impacted.

Distributed solar power is a capital-intensive business that relies heavily on the availability of debt and equity financing sources to fund solar energy system purchase, design, engineering and other capital and operational expenditures. Our future success depends in part on our ability to raise capital from third-party investors and commercial sources, such as banks and other lenders, on competitive terms to help finance the deployment of our solar energy systems. We seek to minimize our cost of capital in order to improve profitability and maintain the price competitiveness of the electricity produced by the payments for and the cost of our solar energy systems; however, as a result of the passage of the One Big Beautiful Bill Act, which was passed in congress and signed into law in July 2025, we will be required to seek new sources of revenue, funding and financing, the affects and results of which are too early to fully ascertain, adding additional complexity to our operating and finance costs, in addition to the loss of certain tax credits to our residential customers, the latter of which is not yet in effect, and therefore, not fully determinable, adding further uncertainty to certain of our operational costs. These changes could materially impact our finance costs, timing and ultimately our revenues and operations. We rely on access to capital, including through equity financing, convertible notes, revenue loans and other forms of debt facilities, asset-backed securities and loan-backed securities, to cover the costs related to bringing our solar energy systems in service.

To meet the capital and liquidity needs of our business, as well as any potential strategic acquisitions, expansions or business diversifications, we will need to obtain additional debt or equity financing from current and new investors. We have limited cash resources with which to operate our business and we may have difficulty in accessing financing on a timely basis or at all. The contract terms in certain of our existing investment and securities documents contain various conditions, penalty and liquidated damages clauses. If we are not able to satisfy such conditions due to events related to our business, a specific investment fund, developments in our industry, including tax or regulatory changes, or otherwise, and as a result, we are unable to draw on existing funding commitments or raise capital through equity, equity derivative or debt instruments, we could experience a material adverse effect on our business, liquidity, financial condition, results of operations and prospects. Any delays in accessing financing could have an adverse effect on our ability to pay our operational expenses, make capital expenditures, repay loans and fund other general corporate purposes. Further, our flexibility in planning for and reacting to changes in our business may be limited and our vulnerability to adverse changes in general economic, industry, regulatory and competitive conditions may be increased.

If any of our previous or current debt or equity investors decide not to invest in us in the future for any reason or decide to invest at levels inadequate to support our anticipated needs or materially change the terms under which they are willing to provide future financing, we will need to identify new investors and financial institutions to provide financing and negotiate new financing terms. In addition, our ability to obtain additional financing through the asset-backed securities market, loan-backed securities market or other secured debt markets is subject to our having sufficient assets eligible for securitization as well as our ability to obtain appropriate credit ratings. If we are unable to raise additional capital in a timely manner, our ability to meet our capital needs and fund future growth and profitability may be limited.

Delays in obtaining financing could cause delays in expansion in existing markets or entering into new markets and hiring additional personnel, as well as with respect to any such potential business expansions, diversifications or acquisitions. Such financings could also result in significant dilution to our existing shareholders Any future delays in capital raising could similarly cause us to delay deployment of a substantial number of solar energy systems for which we have signed solar service agreements with customers, or to execute upon any potential acquisitions, expansions or business diversification efforts. Our future ability to obtain additional financing depends on banks’ and other financing sources’ continued confidence in our business model and the renewable energy industry as a whole. It could also be impacted by the liquidity needs of such financing sources themselves. We face intense competition from a variety of other companies, technologies and financing structures for such limited investment capital. If we are unable to continue to offer a competitive investment profile, we may lose access to these funds or they may only be available to us on terms less favorable than those received by our competitors. Any inability to secure financing could lead us to cancel planned installations, potential business diversification, expansions, impair our ability to accept new customers or increase our borrowing costs, any of which could have a material adverse effect on our business, financial condition and results of operations.

Federal tax policy impacts the competitiveness of our service offerings to customers and our market.

At the federal level, tax policy and associated regulations have a direct impact on our business. The most notable recent tax legislation affecting our business is the OBBBA that President Trump signed into law on July 4, 2025. The new law adjusts federal energy tax policies that we rely upon, including the Section 48E Clean Electricity Investment Credit and its associated “bonus” credits. For example, the law maintains the Section 48E credit for energy storage through 2033, it shortens the availability of the 48E credit for solar facilities to the end of 2027. The law also applies new “Foreign Entity of Concern” restrictions to the Section 48E credit, which could potentially deny tax credits to projects that use certain components or receive “material assistance” from FEOC entities, thereby potentially increasing costs and potentially reducing demand. The law ends the customer-claimed Section 25D Residential Clean Energy Credit starting in 2026. Changes in the law to the Section 45X Advanced Manufacturing Production Credit could also affect us indirectly, through our suppliers. The implementation of the law through the federal regulatory process could also directly and materially affect our business, revenues, residential installation viability, profitability, margins, among other negative serious implications. If our revenues decline significantly, we may be required to pause, suspend or significantly reduce our operations, lay-off employees and may become no longer be a viable going concern business. While it is too soon to definitively determine the long-term effects of the OBBBA on the solar industry, there are potential significant negative effects that may result therefrom to our business operations.

SUNation Energy Inc. (herein referred to as “SUNation Energy,” “SUNE,” “our,” “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”.

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.

During the fourth quarter of 2024, as a result of a material decline in our stock price and forecasted revenues and operating results, we performed an interim quantitative analysis as of December 31, 2024. Based on the results of this analysis, we concluded that the fair value of our HEC reporting unit did not exceed its carrying value as of December 31, 2024 and recorded an impairment loss of $3.1 million in our consolidated statements of operations, reducing our HEC goodwill balance to $6.7 million and our consolidated goodwill balance to $17.4 million. There was no impairment indication within our SUNation NY reporting unit.

Recoverability of Long-Lived Assets and Intangible Assets: The Company reviews its long-lived assets and definite lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If indicators of impairment exist, management identifies the asset group that includes the potentially impaired long-lived asset, at the lowest level at which there are separate, identifiable cash flows. If the fair value for the asset is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset.

During the third quarter of 2025, as a result of the OBBBA, 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.

Consolidated sales increased 26% to $71,905,527 in 2025 from $56,861,753 in 2024, with a 31% increase within residential contract revenue and a 19% increase in service revenue, partially offset by a 1% decrease in commercial revenue. On a consolidated basis, overall kilowatts installed on residential projects increased 31% and revenue per residential installation increased 31% in 2025 as compared to 2024. The overall increase in residential revenue is driven by increased customer demand to install solar systems prior to the expiration of federal tax credits at December 31, 2025 under the passing of the One Big Beautiful Bill Act.

Residential contract sales increased $9,500,242, or 31%, due to a 25% increase in systems installed and a 40% increase in kilowatts installed. The overall increase in residential revenue is driven by increased customer demand to install solar systems prior to the expiration of federal tax credits at December 31, 2025 under the passing of the One Big Beautiful Bill Act. Commercial contract sales increased $194,454, or 3%, due primarily to the timing of commercial projects.

The Company had working capital of $1,066,408, consisting of current assets of approximately $16,473,979 and current liabilities of $15,407,571 at December 31, 2025 compared to a working capital deficit of $(16,051,658), consisting of current assets of $11,110,385 and current liabilities of $27,162,043 at December 31, 2024.

Cash used in investing activities was $48,594 in 2025 compared to $26,667 used in 2024 primarily related to capital expenditures.

Risks Relating to the Consummation of the Proposed Suniva Merger and such transactions related thereto

Failure to complete the proposed Suniva Merger and such transactions related thereto could negatively impact the Company.

If the Merger and such other transactions related thereto are not completed for any reason, there may be various adverse consequences, and the Company may experience negative reactions from the financial markets, as well as from its investors, customers and employees. For example, the Company’s business may have been adversely impacted by the failure to pursue other beneficial opportunities due to management’s focus on the proposed Merger and such other transactions related thereto, without realizing any of the anticipated benefits of completing the proposed Merger and such other transactions related thereto. Additionally, the market price of the Company’s Common Stock could decline to the extent that current market prices reflect a market assumption that the proposed Merger and such other transactions related thereto will be completed. The Company could also be subject to litigation related to the failure to consummate the proposed Merger and such other transactions related thereto or to proceedings commenced against the Company to perform its obligations pursuant to the Merger Agreement.

Additionally, the Company has incurred and may continue to incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement, as well as the costs and expenses of preparing, filing, printing, and mailing any necessary joint proxy statement/prospectus, and all filing and other fees paid in connection with the proposed Merger and such other transactions related thereto. If the proposed Merger and such other transactions related thereto are not consummated, the Company would have paid these expenses without realizing the expected benefits of the proposed Merger and such other transactions related thereto.

The Company may not be able to satisfy the requirements for the Closing under the Merger Agreement, which may cause material adverse consequences due to the consequent failure to complete the proposed Merger and such other transactions related thereto.

Consummation of the proposed Merger is subject to certain closing conditions, including, among other things, (a) approval by the Company’s stockholders of the matters being put to their vote, (b) approval by the requisite Suniva stockholders of the adoption and approval of the Merger Agreement and the transactions contemplated thereby, (c) Nasdaq’s approval of the listing of the shares of the Company’s common stock to be issued in connection with the Merger, (d) the effectiveness of the Registration Statement, and (e) the Company’s net cash not being less than negative $1,500,000. Each party’s obligation to consummate the Merger is also subject to other specified customary conditions, including regarding the accuracy of the representations and warranties of the other party, subject to the applicable materiality standard, and the performance in all material respects by the other party of its obligations under the Merger Agreement required to be performed on or prior to the date of the closing of the proposed Merger.

The Merger Agreement also contains customary termination rights of each of the Company and Suniva. Upon termination of the Merger Agreement under specified circumstances, the Company may be required to pay Suniva a termination fee of $1,000,000, and Suniva may be required to pay the Company a termination fee of $1,000,000. The Merger Agreement may be terminated if the proposed Merger has not been consummated on or before January 30, 2027, subject to a potential sixty (60)-day extension in certain circumstances, as set forth in the Merger Agreement.

The failure to meet the material conditions requisite to the closing of the proposed Merger may prevent the consummation of the Merger, and the consequent negative effects of such failure to meet these conditions and successfully close the transaction related thereto.

Failure to obtain the Stockholder Approval could result in significant disruption of business operations.

If the Company does not obtain the necessary stockholder approval for the proposals related to the proposed Merger as set forth in the Merger Agreement or as otherwise related thereto, then the Company will be required to unwind the proposed Merger transactions. Any such unwinding of the proposed Merger transactions may have significant and adverse effects on the Company’s business operations and could result in the loss of key assets and personnel, the threat of litigation over disagreements between the parties on how to implement the unwinding, and many or all of the negative consequences discussed throughout this document that would apply to the Company if it is unable to successfully consummate the proposed Merger and the transactions contemplated thereunder or that may apply regardless of whether the Company is able to successfully consummate the proposed Merger and the transactions contemplated thereby. The inability to secure the requisite stockholder approval could also undermine investor confidence, which may further negatively influence the Company’s stock price and market reputation.

The Company and Suniva will incur substantial costs related to the proposed Merger and integration of their businesses.

The Company and Suniva have incurred and expect to incur a number of non-recurring costs in furtherance of the consummation of the proposed Merger and transactions related thereto, including legal, financial advisory, accounting, consulting, and other advisory fees; regulatory filing fees; financial printing and other transaction-related costs. Some of these costs are payable by either the Company or Suniva whether the proposed Merger or the transactions related thereto are completed or not. Additionally, the integration costs following the proposed Merger’s completion may be substantial, and may include expenses related to facilities and systems consolidation, employment-related obligations, and efforts to maintain employee morale and retain key personnel. These costs may stem from the complex integration of numerous processes, policies, operations, technologies, and systems across areas such as purchasing, accounting, finance, payroll, compliance, treasury and vendor management, risk management, business operations, pricing, and employee benefits.

While the Company and Suniva estimate a certain level of integration costs, many factors beyond their control could increase the total amount and timing of these expenses. Additionally, many of these costs are inherently difficult to estimate with precision. As a result, assuming that the proposed Merger and related transactions are consummated, the combined company may need to take charges against earnings following the Merger’s consummation, and the amount and timing of such charges are uncertain. There can be no assurance that the transaction and integration costs will not outweigh any benefits of the consummation of the proposed Merger and related transactions, assuming that they occur.

The Company and Suniva may fail to realize the anticipated benefits of the proposed Merger and any related transactions.

Assuming that the consummation of the proposed Merger occurs, the result will be the combination of companies of significantly differing sizes, geographic bases, and operations. The success of the proposed Merger will depend, in part, on the ability to realize the anticipated benefits from integrating the businesses of the Company and Suniva. To achieve these benefits, the Company and Suniva must effectively merge and align their operations in a manner that permits the realization of those benefits and cost savings without adversely affecting current revenues and future growth. If the Company and Suniva do not successfully integrate their operations, the anticipated benefits of the consummation of the Merger may not be realized fully or at all, or they may take longer to realize than expected. In addition, the actual cost savings achieved could be less than anticipated, and integration may result in additional or unforeseen expenses. An inability to realize the full extent of the anticipated benefits, or any delays in integrating the businesses, could adversely affect the revenues, expense levels, and operating results of the combined company, which may negatively impact the value of the Company’s common stock.

It is also possible that combining the two businesses could result in the disruption of ongoing operations or inconsistencies in standards, controls, procedures, and policies that adversely affect the ability to maintain relationships with customers, clients, and employees, or to achieve the anticipated benefits and cost savings of the proposed Merger. Moreover, integration efforts may divert management’s attention and resources, further impacting the combined company’s performance both during and after the integration period.

Furthermore, the board of directors and executive leadership of the combined company will consist of individuals from Suniva or at its section, which could require reconciling differing priorities and philosophies from those anticipated or which the Company’s employees, key personnel or shareholders are accustomed to. Any difficulties in effectively unifying these teams may also delay or prevent realization of the anticipated benefits of the Merger and any related transactions.

The Proposed Merger transaction is subject to review, clearance and approval of both the Securities and Exchange Commission, as well as the Nasdaq Stock Market.

The completion of the Company’s proposed Merger transaction with Suniva is subject to the receipt of necessary consents, clearance, and/or review by the SEC and approval of our application for listing on the Nasdaq Stock Market. We cannot assure you that the SEC will timely clear the Company’s filings, including the Registration statement on Form S-4 relating to the Merger, or at all, including the financial statements related thereto and incorporated therein, or that Nasdaq will approve our listing application on a timely basis, or at all.

Upon the Consummation of the proposed Merger, existing holders of the Company’s Common Stock will experience substantial dilution of their ownership interest in the Company, which could materially reduce or be perceived to reduce the value of their Company shareholdings.

Assuming that the proposed Merger closing occurs, the Company will issue the shares of its Common Stock at the Exchange Ratio, which involves a) each then-outstanding share of Suniva capital stock (including shares of Suniva common stock and shares of Suniva preferred stock) will be converted into the right to receive a number of shares of the Company’s common stock calculated in accordance with the Merger Agreement; (b) each then-outstanding Suniva warrant will be cancelled at the Effective Time, with each warrantholder entitled to receive for each warrant share a number of shares of the Company’s common stock equal to the Exchange Ratio, the per share exercise price of the warrant; and (c) each then-outstanding Suniva restricted stock unit will be fully vested and converted into shares of the Company’s common stock at the Exchange Ratio.

Under the Exchange Ratio in the Merger Agreement, upon the closing of the proposed Merger, on a pro forma basis and based upon the number of shares of the Company’s common stock expected to be issued in the proposed Merger, pre-Merger Suniva stockholders are expected to own approximately 98.2% of the combined company and pre-Merger SUNation stockholders are expected to own approximately 1.8% of the combined company. Therefore, the Exchange Ratio is anticipated to result in an immediate and substantial increase in the number of outstanding shares of Company Common Stock, and substantial dilution of existing Company stockholders’ ownership of and voting power in the Company. As such, existing Company stockholders should assume that their ownership stake and influence will be severely reduced upon the closing of the proposed Merger based on the Exchange Ratio.

Additionally, if the Company successfully registers the resale of the Company Common Stock issuable pursuant to any existing restricted shares or such future financing involving registration rights or pursuant to an exemption from registration and satisfaction of applicable holding periods related thereto, a substantial number of additional shares may become freely tradable. The presence of these newly registered or tradeable shares, as wel as the perception that they may be sold, could create an “overhang” in the market. Specifically, if the trading volume of the Company’s common stock cannot absorb the sales of these newly registered or tradeable shares, the price per share may decline.

The future results of the combined company following the consummation of the proposed Merger and such related transactions may suffer if it cannot effectively manage its expanded operations, and the potential need to obtain sufficient capital for the expansion of the combined company’s operations.

Assuming that the consummation of the proposed Merger and such related transactions occur, the size of the combined company’s business is expected to be significantly greater than the current size of the Company’s existing business. The combined company’s future success will depend, in part, on its ability to manage these expanded operations, which may pose challenges for management, including challenges related to oversight of new operations and the associated increase in capital financing needs, expenditures and complexity. The combined company may also face heightened scrutiny from governmental and regulatory authorities as a result of its larger scale. However, there can be no assurance that the combined company will be successful or that it will realize the operating efficiencies, revenue enhancements, or other benefits currently anticipated from the consummation of the Merger and such related transactions.

The combined company may be unable to retain the Company’s and/or Suniva’s personnel after the consummation of the proposed Merger and such related transactions.

Assuming that the consummation of the proposed Merger and such related transactions occurs, their eventual success will depend in-part on the combined company’s ability to retain the talents and dedication of key employees currently employed by the Company and Suniva. It is possible that these employees may decide not to remain with the Company or Suniva, as applicable, while the proposed Merger and such related transactions are pending or with the combined company after the propsosed Merger and such related transactions are consummated. If the Company and Suniva are unable to retain key employees, including management, who are critical to the successful integration and future operations of the respective companies, the lines of business conducted by the Company and Suniva prior to the consummation of the proposed Merger and such related transactions could face disruptions in their operations, loss of existing customers, loss of key information, expertise, or know-how, and unanticipated recruitment costs. In addition, if key employees terminate their employment following the consummation of the proposed Merger and such related transactions, the combined company’s business activities may be adversely affected, and management’s attention may be diverted from successfully hiring suitable replacements, all of which may cause the combined company’s business to suffer. The combined company may be unable to locate or retain suitable replacements for any key employees who leave either company.

The anticipated pro formas of the combined consolidated financial information of the Company and Suniva is preliminary and the actual consideration to be issued in the proposed Merger and such related transactions, as well as the actual financial condition and results of operations of the combined company after the proposed Merger, may differ materially.

The anticipated pro formas of the combined consolidated financial information of the Company and Suniva are currently preliminary and indicative and may not necessarily and ultimately prove to be what the combined company’s actual financial conditions or results of operations will be in the future. The pro forma combined consolidated financial information will reflect potential adjustments, which are based upon preliminary estimates. Among other things, the actual value of the consideration that the Company receives upon the consummation of the proposed Merger, assuming that it occurs, may vary significantly from the value used in preparing the unaudited pro forma combined consolidated financial information provided in tandem with these risk factors and the SEC filings of which they form a part. Accordingly, the final acquisition accounting adjustments may differ materially from the pro formas and any adjustments which may be reflected in the pro formas combined consolidated financial information.

Suniva’s directors, executive officers and principal stockholders will have substantial control over the Company after the consummation of the proposed Merger, which could limit other stockholders’ ability to influence the outcome of corporate matters and key transactions, including a change of control.

Upon (and assuming) the consummation of the proposed Merger, the Company’s executive officers, directors and principal stockholders and their affiliates will own less than 1% of the outstanding shares of the Company Common Stock, after giving effect to the Exchange Ratio related to the proposed Merger, with the Company’s existing stockholders owning approximately 1.8% of the outstanding shares of the Company common stock. This significant concentration of ownership may have a negative impact on the trading price of the Company’s common stock because investors often perceive disadvantages in owning stock in companies with controlling stockholders. In addition, these stockholders will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. They may also have interests that differ from other stockholders of the Company and may vote in a way with which other stockholders of the Company disagree, and which may be adverse to the Company’s interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of the Company, could deprive the Company’s stockholders of an opportunity to receive a premium for their common stock as part of a sale of the Company and might ultimately affect the market price of the Company Common Stock.

The Company will be subject to business uncertainties and contractual restrictions while the proposed Merger and related transactions are pending.

Uncertainty about the success of consummation and the effect of consummation of the proposed Merger and such related transactions on employees and customers may have an adverse effect on the Company and Suniva. These uncertainties may impair the Company’s or Suniva’s ability to attract, retain, and motivate key personnel until the proposed Merger and such related transactions are completed, and could cause suppliers, business partners, and other parties that deal with the Company or Suniva to seek to change existing business relationships with the Company or Suniva. In addition, subject to certain exceptions, the Company and Suniva have each agreed to operate their businesses in the ordinary course in all material respects and to refrain from taking certain actions that may adversely affect their ability to consummate the proposed Merger and such related transactions on a timely basis without the consent of the other party. These restrictions may prevent the Company and Suniva from pursuing attractive business opportunities that may arise prior to the completion of the proposed Merger and such related transactions. If any of the aforementioned risks were to materialize, they could lead to significant costs which may negatively impact each party’s results of operations and financial condition if the parties are not successful in consummating the proposed Merger and such related transactions, and which may also cause material adverse effects on the Company if the Merger and such related transactions are not consummated.

The market price of the Company Common Stock may be affected by factors different from those currently affecting the shares of the Company Common Stock assuming the consummation of the proposed Merger and such related transactions.

The Company’s business differs from that of Suniva, and certain adjustments will be made to the Company’s operations assuming that the consummation of the proposed Merger and such related transactions occur. Accordingly, the results of operations of the combined company and the market price of the Company’s common stock after the assumed consummation of the proposed Merger and such related transactions may be affected by factors different from those currently affecting the independent results of operations of the Company.

The Company’s stockholders will not have appraisal rights or dissenters’ rights in the Merger.

Appraisal rights (also known as dissenters’ rights) are statutory rights that, if applicable under law, enable stockholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction.

Under Section 262 of the Delaware General Corporation Law, the Company’s stockholders will not be entitled to appraisal rights in connection with the Merger. If the Merger is completed, the Company’s stockholders will not receive any consideration, and their shares of the Company Common Stock will remain outstanding and will constitute shares of the Company following the completion of the Merger. Accordingly, the Company’s stockholders are not entitled to any appraisal rights in connection with the Merger.

The absence of appraisal or dissenters’ rights poses several risks to the stockholders of the Company with respect to the Merger. Specifically, stockholders dissatisfied with the terms of the Merger cannot seek a judicial determination of fair value for their shares, limiting their ability to contest valuation. Without these rights, minority stockholders have fewer legal tools to challenge transactions they perceive as unfair, reducing their recourse in potentially inequitable situations. Additionally, stockholders unable to exercise appraisal or dissenters’ rights may be forced to sell their shares on the open market, exposing them to potential losses due to market fluctuations.

Recent Development: Proposed Merger with Suniva

On April 9, 2026, the Company announced that its Board of Directors, including the approval of the Board’s “Transaction Committee”, had authorized the formal review of a full range of strategic alternatives aimed at increasing shareholder value and best positioning the Company for long-term success. The Transaction Committee is comprised of independent members of the Board. In connection with the strategic review, the Company had engaged Maxim Group, LLC to serve as its M&A and financial advisor to assist in this strategic process. The review included the consideration of a broad spectrum of possible actions, including, but not limited to, a potential sale of the Company, strategic merger or other business combinations, acquisitions, divestitures of assets, further optimization of the corporate structure, or other strategic or financial transactions that could enhance shareholder value and further optimize capital resources.

On June 5, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SUNation Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (the “Merger Sub”), and Suniva, Inc., a Delaware corporate (“Suniva”), pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Suniva with Suniva surviving the merger as a wholly owned subsidiary of the Company (the “Suniva Merger”).

Concurently with the execution of the Merger Agreement, certain key stockholders of the Company (solely in their respective capacities as SUNation stockholders) holding approximately 10.4% of the outstanding shares of the Company’s capital stock entered into voting agreements with the Company and Suniva to vote all of their shares of the Company’s capital stock in favor of the adoption and approval of the Merger Agreement and the transactions contemplated thereby (the “Voting Agreements”).

Subject to the terms and conditions of the Merger Agreement, assuming consummation thereof, at the effective time of the Merger (the “Effective Time”): (a) each then-outstanding share of Suniva capital stock (including shares of Suniva common stock and shares of Suniva preferred stock) will be converted into the right to receive a number of shares of the Company’s common stock calculated in accordance with the Merger Agreement (the “Exchange Ratio”); (b) each then-outstanding Suniva warrant will be cancelled at the Effective Time, with each warrantholder entitled to receive for each warrant share a number of shares of the Company’s common stock equal to the Exchange Ratio, the per share exercise price of the warrant; and (c) each then-outstanding Suniva restricted stock unit will be fully vested and converted into shares of the Company’s common stock at the Exchange Ratio. Additionally, pursuant to the terms of the Merger Agreement, in addition to the conversion of 50% of the remaining secured long-term debt obligations of the Company into shares of common stock, the terms of which conversion to equity shall be subject to approval of the Company’s stockholders at the special meeting which shall be called to approve the proposed Merger and related matters, Suniva shall also pay to the Company at the closing of the proposed Merger approximately $3.75 million in cash in satisfaction of the current secured long-term debt of the Company.

Under the Exchange Ratio in the Merger Agreement, upon the closing of the Merger, on a pro forma basis and based upon the number of shares of the Company’s common stock expected to be issued in the Merger, pre-Merger Suniva stockholders are expected to own approximately 98.2% of the combined company and pre-Merger SUNation stockholders are expected to own approximately 1.8% of the combined company. The percentage of the combined company that each party’s stockholders will own following the closing is subject to adjustments as described in the Merger Agreement for the amount of the Company’s net cash at closing relative to a specified target.

For purposes of calculating the Merger Consideration, (a) shares of the Company’s common stock underlying the Company’s stock options, warrants and other rights to receive shares outstanding as of immediately prior to the closing of the Merger will be deemed to be outstanding, (b) shares of the Company’s common stock issuable upon the settlement of our restricted stock units (excluding performance-based restricted stock units for which the performance condition has not been met) will be deemed to be outstanding, and (c) all shares of Suniva common stock underlying outstanding Suniva stock options, Suniva restricted stock units and Suniva warrants will be deemed to be outstanding.

In connection with the Merger, the Company will seek the approval of its stockholders of, among other things, (a) the issuance of shares of the Company’s common stock in connection with the Merger on the terms and conditions set forth in the Merger Agreement, (b) if Suniva deems it advisable, an amendment and restatement of the Company’s amended certificate of incorporation, (c) if deemed necessary by the Company and Suniva, an amendment to the Company’s amended certificate of incorporation to effect a reverse stock split of all outstanding Company shares of common stock, (d) the conversion of certain secured insider/ related party debt to the Company’s common stock, and (e) an increase in the number of shares of the Company’s common stock reserved for issuance under the existing Company equity incentive plan of no less than 5% of the projected total post-Merger number of outstanding shares of the Company’s common stock. To the extent necessary or deemed appropriate, additional proposals may be added by the Company’s board of directors, which will be included in any prospectus/proxy statement relating to the special meeting of stockholders.

Each of the Company and Suniva has agreed to customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants relating to (a) using commercially reasonable efforts to obtain the requisite approval of its stockholders, (b) non-solicitation of alternative acquisition proposals, (c) the conduct of their respective businesses during the period between the date of signing the Merger Agreement and the closing of the Merger, (d) the Company using commercially reasonable efforts to maintain the existing listing of the Company’s common stock on The Nasdaq Capital Market and cause the shares of the Company’s common stock to be issued in connection with the Merger to be approved for listing on The Nasdaq Capital Market prior to the closing of the Merger and (e) the Company’s filing with the U.S. Securities and Exchange Commission (the “SEC”) and causing to become effective a registration statement to register the shares of the Company’s common stock to be issued in connection with the Merger (the “Registration Statement”).

Consummation of the proposed Merger is subject to certain closing conditions, including, among other things, (a) approval by the Company’s stockholders of the matters being put to their vote, (b) approval by the requisite Suniva stockholders of the adoption and approval of the Merger Agreement and the transactions contemplated thereby, (c) Nasdaq’s approval of the listing of the shares of the Company’s common stock to be issued in connection with the Merger, (d) the effectiveness of the Registration Statement, and (e) the Company’s net cash not being less than negative $1,500,000. Each party’s obligation to consummate the Merger is also subject to other specified customary conditions, including regarding the accuracy of the representations and warranties of the other party, subject to the applicable materiality standard, and the performance in all material respects by the other party of its obligations under the Merger Agreement required to be performed on or prior to the date of the closing of the Merger.

The Merger Agreement also contains customary termination rights of each of the Company and Suniva. Upon termination of the Merger Agreement under specified circumstances, the Company may be required to pay Suniva a termination fee of $1,000,000, and Suniva may be required to pay the Company a termination fee of $1,000,000. The Merger Agreement may be terminated if the Merger has not been consummated on or before January 30, 2027, subject to a potential sixty (60)-day extension in certain circumstances as set forth in the Merger Agreement. At the Effective Time, assuming consummation of the proposed Merger, the Board of Directors of SUNation is expected to consist of five members, all of whom will be designated by Suniva.

In connection with the proposed Merger between the Company and Suniva, the Company intends to file relevant materials with the SEC, including a registration statement on Form S-4 that will contain a proxy statement/prospectus of relating to the proposed Merger and containing the proposals to be voted upon by the shareholders of record as the date to be set forth therein.

Following submission of our SEC filings related to the proposed Merger, SUNATION ENERGY URGES INVESTORS AND STOCKHOLDERS TO READ THE REGISTRATION STATEMENT, PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT MAY BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS, SUPPLEMENTS OR DOCUMENTS INCORPORATED BY REFERENCE IN OR TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT SUNATION, SUNIVA, THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and stockholders will be able to obtain free copies of the proxy statement/prospectus and other documents filed by SUNation Energy with the SEC (when they become available) through the website maintained by the SEC at www.sec.gov. In addition, investors and stockholders should note that SUNation Energy communicates with investors and the public using its website (www.sunation.com) and the investor relations website (ir.sunation.com) where anyone will be able to obtain free copies of the proxy statement/prospectus and other documents filed by SUNation with the SEC and stockholders are urged to read the proxy statement/prospectus and the other relevant materials when they become available before making any voting or investment decision with respect to the proposed transaction.

Comparison of the Six Months Ended June 30, 2026 and 2025

Consolidated Results

The following table summarizes our consolidated results for the six months ended June 30, 2026 and 2025:

Consolidated sales decreased $10,344,456, or 40.2% to $15,356,436 in the first six months of 2026 from $25,700,892 in the first six months of 2025, with a 51% decrease within residential contract revenue and a 3% decrease in service revenue, partially offset by a 19% increase in commercial revenue. On a consolidated basis, overall kilowatts installed on residential projects decreased 49%, revenue per residential installation decreased 3% and the overall price per watt on residential projects decreased 6% in the first six months of 2026 as compared to the first six months of 2025. The overall decrease in residential revenue is driven by decreased customer demand due to the expiration of federal tax credits at December 31, 2025 under the passing of the One Big Beautiful Bill Act.

Consolidated gross profit decreased to $3,720,770 in the first six months of 2026 as compared to gross profit of $9,270,842 in the first six months of 2025 due primarily to the decrease in revenue. Gross margin decreased to 24% during the first six months of 2026 as compared to 36% in the first six months of 2025 due to fixed costs in cost of sales not declining with the revenue decrease.

Consolidated operating expenses decreased 17% to $11,233,785 in the first six months of 2026 as compared to $13,601,777 in the first six months of 2025. Consolidated selling, general and administrative expenses decreased $2,938,508, or 24%, to $9,544,519 in the first six months of 2026 from $12,483,027 in the first six months of 2025, due primarily to lower selling and marketing expenses on lower revenue and lower personnel costs on headcount reductions during the first half of 2026. Amortization expense remained flat at $1,118,750 in the first six months of 2026 as compared to the same period of the prior year. The Company incurred $570,516 in transaction costs during the first six months of 2026 related to the proposed Suniva Merger.

Consolidated other income (expense) increased by $8,850,386 to income of $106,325 in the first six months of 2026 as compared to $8,744,061 of expense in the first six months of 2025. The decrease was primarily related to a $7,531,044 fair value remeasurement loss of the warranty liability in the prior year, a decrease of $1,136,532 in financing fees, a $675,883 increase in gain on debt extinguishment, a $441,446 decrease in interest expense, partially offset by a $899,080 decrease in gain on fair value remeasurement of contingent forward contract.

Consolidated operating loss in the first six months of 2026 was $7,513,015 as compared to $4,330,935 in the first six months of 2025. Net loss in the first six months of 2026 was $7,429,441, or $(1.86) per diluted share, compared to net loss of $13,103,847, or $ (8.42) per diluted share, in the first six months of 2025.

SUNation NY Operating Results

SUNation NY revenue decreased 46% or $8,836,895, to $10,528,508 in the first six months of 2026 as compared to $19,365,403 in first six months of 2025. Revenue in the first six monthss of 2026 and 2025 by type were as follows:

Residential contract revenue decreased $9,494,831, or 60%, due to a 59% decrease in number of systems installed, 55% decrease in kilowatts installed and an 8% decrease in revenue per install. This overall decrease is due partially to the decreased customer demand with the expiration of federal tax credits at December 31, 2025 under the passage of the One Big Beautiful Bill Act, along with a decrease in available install days due to weather-related events during the first half of the year. The weather-related events during the first six months of 2026 resulted in 17 less available days to complete installations as compared to the same period of the prior year. Commercial contract revenue increased $476,791, or 19%. Service revenue increased $181,145, or 20%, due primarily to an increase in remove and reinstall projects and battery installations.

Gross profit decreased 65% to $2,683,130 in the first six months of 2026 as compared to gross profit of $7,633,604 in the first six months of 2025 due primarily to the decrease in revenue and additional decrease in gross margin. Gross margin decreased to 25.5% in 2026 compared to 39.4% in 2025 due primarily to fixed labor and overhead costs that did not decrease at the same rate as the revenue decline.

Selling, general and administrative expenses decreased 32% or $2,445,308 to $5,148,696 in 2026 (49% as a percentage of sales) as compared to $7,594,004 in 2025 (39% as a percentage of sales), due primarily to a decrease in selling and marketing expenses on lower residential contract revenue and lower personnel costs on headcount reductions during the first half of 2026. Amortization expense remained flat at $406,250 in 2026 as compared to 2025.

HEC Operating Results

HEC sales decreased 24%, or $1,507,561, to $4,827,928 in the first six months of 2026 as compared to $6,335,489 in the first six months of 2025. Sales in 2026 and 2025 by type were as follows:

Residential contract sales decreased $1,315,803, or 24%, due to a 28% decrease in kilowatts installed and a 36% decrease in installations, partially offset by a 38% increase in battery attachment rates, which is driving a 15% increase in average revenue per system installed. In May 2025, Hawaii implemented a new Bring Your Own Device Plus (“BYOD Plus”) program. Under this program, customers were paid a cash incentive and provided energy bill credits to add energy storage to an existing or new rooftop solar system. The overall decrease in residential installations is due to the expiration of federal tax credits at December 31, 2025 under the passage of the One Big Beautiful Bill Act. Service revenue decreased $228,633, or 31%, due to a decrease in repair and replacement installations.

Gross profit decreased 37% to $1,037,640 in the first six months of 2026 as compared to gross profit of $1,637,238 in the first six months of 2025 due primarily to the decrease in revenue and decrease in gross margin. Gross margin decreased to 21.5% in the first six months of 2026 compared to 25.8% in the first six months of 2025, driven by an increase in labor and overhead costs as a percentage of revenue.

Selling, general and administrative expenses decreased 19% to $1,613,546 in the first six months of 2026 (33% as a percentage of sales) as compared to $1,997,994 in the first six months of 2025 (32% as a percentage of sales), due primarily to a decrease in general excise tax on lower revenue and personnel expenses on headcount reductions. Amortization expense remained flat at $712,500 in 2026 as compared to 2025.

If the Company is unable to raise additional funds, or further restructure remaining debt obligations, it would have a negative impact on the Company’s business, results of operations and financial condition. To the extent that additional funds are raised through the sale of equity or securities convertible into or exercisable for equity securities, the issuance of securities will result in dilution to the Company’s shareholders.