SolarMax Q2 loss widens to $4.66M; going-concern doubt
A separate $35.0 million Nasdaq market-value compliance period expires December 21, 2026.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
SolarMax Technology, Inc. reported second-quarter 2026 revenue of $10,243,612, compared with $6,883,004 a year earlier, while net loss was $4,655,699 versus $1,898,777. For the six months ended June 30, 2026, operating cash flow was negative $5,156,405, compared with negative $380,432 in 2025.
At June 30, 2026, cash and cash equivalents were $2,158,233, the working capital deficit was approximately $1.2 million, and $13.7 million of convertible notes were in default. SolarMax said recurring operating losses, negative operating cash flow and other factors raise substantial doubt about its ability to continue as a going concern. Management believes cash, receivable collections and anticipated operating cash flow will cover working-capital needs for at least one year, excluding approximately $20.7 million of debt due in the next 12 months.
A one-for-12 reverse split became effective August 13, 2026, reducing outstanding common shares from 56,906,572 to 4,742,167. The common stock’s closing bid was at least $1.00 for ten consecutive business days before August 31, 2026; a separate $35.0 million Nasdaq market-value requirement has a December 21, 2026 compliance deadline.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointSecond-quarter revenue was $10,243,612, compared with $6,883,004 a year earlier.
- Moderate pointSolarMax received approximately $4.9 million related to SGIP receivables in August and September 2026. 24% of market cap
Negative
- Major pointGoing-concern doubt cites $13.7 million of convertible notes in default. 66% of market cap
- Major pointSecond-quarter net loss was $4,655,699, versus $1,898,777 in 2025.
- Moderate pointFirst-half operating cash use was $5,156,405, versus $380,432 in 2025.
Key Figures
Key Terms
going concern financial
contract assets financial
cost-to-cost method financial
significant financing component financial
Self-Generation Incentive Program regulatory
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
Why did SMXT complete a 1-for-12 reverse stock split?
How much SGIP money did SolarMax collect after June 30, 2026?
How much contract value remained on SolarMax’s Longfellow BESS project?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM
_________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number
_________________________
(Exact name of registrant as specified in its charter) |
_________________________
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
|
|
|
| ||
(Address of Principal Executive Offices) |
| (Zip Code) |
(
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
|
| The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
|
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes ☐ No ☐
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
The number of the registrant’s common stock outstanding as of September 30, 2026, was
Table of Contents
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| Page |
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Part I. Financial Information |
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Item 1. | Index to Consolidated Financial Statements |
| 4 |
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| Condensed Consolidated Balance Sheets as of June 30, 2026 (Unaudited) and December 31, 2025 |
| 4 |
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| Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2026 and 2025 |
| 5 |
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| Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2026 and 2025 |
| 6 |
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| Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2026 and 2025 |
| 7 |
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| Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and 2025 |
| 9 |
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Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
| 46 |
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
| 64 |
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Item 4. | Controls and Procedures |
| 64 |
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Part II. Other Information |
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Item 1. | Legal Proceedings |
| 65 |
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
| 65 |
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Item 5. | Other Information |
| 65 |
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Item 6. | Exhibits |
| 66 |
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Signatures |
| 67 |
| |
| 2 |
| Table of Contents |
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Forward-Looking Statements,” “Item 1A. Risks Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 31, 2025, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and in other reports that we file with the SEC. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.
We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
REVERSE COMMON STOCK SPLIT
On August 13, 2026, we affected a one-for-12 reverse split of our common stock. See Note 1 of Notes to Condensed Consolidated Financial Statements. All references to shares of common stock and per share prices in this Form 10-Q give retroactive effect to the reverse split.
| 3 |
| Table of Contents |
Part I - Financial Information
Item 1. Unaudited Financial Statements
SolarMax Technology, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
As of June 30, 2026 and December 31, 2025
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| June 30, 2026 |
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| December 31, 2025 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
| $ |
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| $ |
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Accounts receivable, net |
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Held to maturity debt investments |
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Contract assets, net |
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Receivable from SPIC, net |
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Customer loans receivable, current, net |
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Inventories, net |
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Deferred project costs |
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Other receivables and current assets, net |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Investments in unconsolidated companies |
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Customer loans receivable, noncurrent, net |
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Restricted cash, noncurrent |
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Contract assets, noncurrent, net |
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Other assets |
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Total assets |
| $ |
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Liabilities and stockholders' deficit |
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Current liabilities: |
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Accounts payable |
| $ |
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| $ |
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Operating lease liabilities, current |
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Secured loans from related parties, current |
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Secured convertible notes, current |
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Accrued expenses and other payables |
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Total current liabilities |
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Operating lease liabilities, noncurrent |
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Secured loans from related parties, noncurrent, net of debt discount and issuance costs |
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Secured convertible notes, noncurrent, net of debt discount and issuance costs |
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Deferred tax liability |
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Large-scale EPC payable, noncurrent |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies (Note 19) |
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Stockholders’ deficit: |
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Preferred stock, par value $ |
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Common stock, par value $ |
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Additional paid-in capital |
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Treasury stock, at cost, |
|
| ( | ) |
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| ( | ) |
Accumulated deficit |
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| ( | ) |
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| ( | ) |
Accumulated other comprehensive loss |
|
| ( | ) |
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| ( | ) |
Total stockholders’ deficit |
|
| ( | ) |
|
| ( | ) |
Total liabilities and stockholders’ deficit |
| $ |
|
| $ |
| ||
See accompanying notes to condensed consolidated financial statements.
| 4 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2026 and 2025
|
| Three Months Ended June 30, 2026 |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2026 |
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| 2025 |
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| 2026 |
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| 2025 |
| ||||
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| (Unaudited) |
|
| (Unaudited) |
| ||||||||||
Revenues |
| $ |
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| $ |
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| $ |
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| $ |
| ||||
Cost of revenues |
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Gross profit |
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Operating expenses: |
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General and administrative |
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Selling and marketing |
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China legal judgment (Note 15) |
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Total operating expense |
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Operating income (loss) |
|
| ( | ) |
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| ( | ) |
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| ( | ) |
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| ( | ) |
Other income (expense): |
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Interest income |
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Interest expense |
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| ( | ) |
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| ( | ) |
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| ( | ) |
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Equity in income (loss) of Chinese solar project companies |
|
| ( | ) |
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| ( | ) |
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Gain (loss) on debt extinguishment |
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| ( | ) |
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| ( | ) | ||
Other income (expense), net |
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Total other income (expense) |
|
| ( | ) |
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| ( | ) |
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| ( | ) |
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| ( | ) |
Income (loss) before income taxes |
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| ( | ) |
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| ( | ) |
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| ( | ) |
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| ( | ) |
Income tax provision (benefit) |
|
| ( | ) |
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| ( | ) |
|
| ( | ) |
|
| ( | ) |
Net income (loss) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Net income (loss) per share |
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Basic |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Weighted average shares used to compute net income (loss) per share |
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Basic |
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Diluted |
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| ||||
See accompanying notes to condensed consolidated financial statements.
| 5 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
For the Three and Six Months Ended June 30, 2026 and 2025
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2026 |
|
| 2025 |
|
| 2026 |
|
| 2025 |
| ||||
|
| (Unaudited) |
|
| (Unaudited) |
| ||||||||||
Net income (loss) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Other comprehensive income (loss) |
|
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Foreign currency translation adjustments |
|
| ( | ) |
|
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|
| ( | ) |
|
|
| ||
Total comprehensive income (loss) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
See accompanying notes to condensed consolidated financial statements.
| 6 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit
For the Three Months Ended June 30, 2026 and 2025
|
| Preferred Stock |
|
| Common Stock |
|
| Additional Paid-In |
|
| Treasury Stock |
|
| Accumulated |
|
| Accumulated Other Comprehensive |
|
|
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| |||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Shares |
|
| Amount |
|
| Deficit |
|
| Loss |
|
| Total |
| ||||||||||
Balance at March 31, 2026 |
|
| - |
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
|
| ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||
Reverse split rounding |
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| |
| ||||||
Net income (loss) |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | |||||
Currency translation adjustments |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||||
Balance at June 30, 2026 |
|
| - |
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
|
| ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||
|
| Preferred Stock |
|
| Common Stock |
|
| Additional Paid-In |
|
| Treasury Stock |
|
| Accumulated |
|
| Accumulated Other Comprehensive |
|
|
|
| |||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Shares |
|
| Amount |
|
| Deficit |
|
| Loss |
|
| Total |
| ||||||||||
Balance at March 31, 2025 |
|
| - |
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
|
| ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||
Shares issued from private placement |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net income (loss) |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | |||||
Currency translation adjustments |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance at June 30, 2025 |
|
| - |
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
|
| ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||
| 7 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit
For the Six Months Ended June 30, 2026 and 2025
|
|
Preferred Stock |
|
|
Common Stock |
|
| Additional Paid-In |
|
|
Treasury Stock |
|
| Accumulated |
|
| Accumulated Other Comprehensive |
|
|
|
| |||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Shares |
|
| Amount |
|
| Deficit |
|
| Loss |
|
| Total |
| ||||||||||
Balance at December 31, 2025 |
|
| - |
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
|
| ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||
Shares issued in private placement |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Reverse split rounding |
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| |
| ||||||
Net income (loss) |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | |||||
Currency translation adjustments |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||||
Balance at June 30, 2026 |
|
| - |
|
| $ |
|
|
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| $ |
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| $ |
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|
| ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||
|
| Preferred Stock |
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| Common Stock |
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| Additional Paid-In |
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| Treasury Stock |
|
| Accumulated |
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| Accumulated Other Comprehensive |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Capital |
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| Shares |
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| Amount |
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| Deficit |
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| Loss |
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| Total |
| ||||||||||
Balance at December 31, 2024 |
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| - |
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| $ |
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| $ |
|
| $ |
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|
| ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||
Shares issued in private placement |
|
| - |
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| - |
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Net income (loss) |
|
| - |
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| - |
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|
|
|
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|
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| - |
|
|
|
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|
| ( | ) |
|
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|
| ( | ) | |||||
Currency translation adjustments |
|
| - |
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| - |
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|
|
|
|
|
| - |
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| |||||||
Balance at June 30, 2025 |
|
| - |
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
|
| ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||
See accompanying notes to condensed consolidated financial statements.
| 8 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2026 and 2025
|
| Six Months Ended June 30, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
|
|
|
|
| ||||
Operating activities |
|
|
|
|
|
| ||
Net income (loss) |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
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|
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|
| ||
Amortization of convertible note discount and debt issuance costs |
|
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| ||
Amortization of operating lease right-of-use assets |
|
|
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| ||
Provision for (recovery of) credit losses and loan losses |
|
| ( | ) |
|
| ( | ) |
Provision for excess and obsolete inventories |
|
|
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|
| ||
Provision for warranty and production guaranty |
|
|
|
|
|
| ||
Equity in loss (income) of investment in excess of distribution received |
|
|
|
|
| ( | ) | |
Deferred income tax provision |
|
| ( | ) |
|
| ( | ) |
(Gain) loss on disposal of property and equipment |
|
|
|
|
|
| ||
(Gain) loss on debt extinguishment |
|
| ( | ) |
|
|
| |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts Receivable |
|
| ( | ) |
|
|
| |
Contract Assets |
|
| ( | ) |
|
| ( | ) |
Receivables from SPIC and project companies |
|
|
|
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|
| ||
Customer loans receivable |
|
|
|
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|
| ||
Inventories |
|
|
|
|
| ( | ) | |
Other receivables and current assets |
|
| ( | ) |
|
| ( | ) |
Other assets |
|
| ( | ) |
|
|
| |
Accounts payable |
|
|
|
|
| |||
Operating lease liabilities |
|
| ( | ) |
|
| ( | ) |
Accrued expenses and other payables |
|
|
|
|
|
| ||
Other liabilities |
|
| ( | ) |
|
| ( | ) |
Net cash provided by (used in) operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Investing activities |
|
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|
|
Principal repayment on debt investments |
|
|
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|
| ||
Issuance of short-term advances |
|
| ( | ) |
|
| |
|
Principal repayment on short-term advances |
|
| |
|
|
| |
|
Net cash provided by (used in) investing activities |
|
| ( | ) |
|
|
| |
Financing activities |
|
|
|
|
|
|
|
|
Accrued legal settlement |
|
|
|
|
| ( | ) | |
Proceeds from private placement sale of common stock |
|
|
|
|
|
| ||
Principal payment on convertible notes |
|
| ( | ) |
|
| ( | ) |
Repayment on equipment capital lease |
|
| ( | ) |
|
| ( | ) |
Net cash provided by (used in) financing activities |
|
| ( | ) |
|
|
| |
Effect of exchange rate |
|
| ( | ) |
|
| ( | ) |
Net increase (decrease) in cash, cash equivalents, and restricted cash |
|
| ( | ) |
|
|
| |
Cash, cash equivalents, and restricted cash, beginning of period |
|
|
|
|
|
| ||
Cash, cash equivalents, and restricted cash, end of period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
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Interest paid in cash |
| $ |
|
| $ |
| ||
Income taxes paid in cash |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Non-cash activities for investing and financing activities: |
|
|
|
|
|
|
|
|
Right-of-use asset obtained in exchange for operating lease liability |
| $ | |
|
| $ | |
|
Exchange of unsecured loan for common stock |
| $ | |
|
| $ |
| |
Convertible notes issued to non-related parties in connection with cancellation of EB-5 loans |
| $ |
|
| $ |
| ||
See accompanying notes to condensed consolidated financial statements.
| 9 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2026 and 2025
|
| As of June 30, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
|
|
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| ||||
Cash balance at the beginning of the period: |
|
|
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|
|
| ||
Cash and cash equivalents |
| $ |
|
| $ |
| ||
Restricted cash, noncurrent |
|
|
|
|
|
| ||
|
| $ | 8,246,813 |
|
| $ | 1,063,077 |
|
|
|
|
|
|
|
|
|
|
Cash balance at the end of the period: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ |
|
| $ |
| ||
Restricted cash, noncurrent |
|
|
|
|
|
| ||
|
| $ | 2,439,231 |
|
| $ | 2,194,206 |
|
See accompanying notes to condensed consolidated financial statements.
| 10 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
1. Description of Business
SolarMax Technology, Inc. and subsidiary companies (the “Company”) is an integrated solar and renewable energy company. A solar energy system retains the direct current (DC) electricity from the sun and converts it to alternating current (AC) electricity that can be used to power residential homes and commercial businesses. The solar business is based on the ability of the users of solar energy systems to save on energy costs and reduce their carbon imprint as compared with power purchased from the local electricity utility company. The Company was founded in 2008 to engage in the solar business in the United States.
Since the third quarter of 2025, the Company’s primary business has been negotiating contracts and performing engineering, procurement and construction (“EPC”) services for solar-based battery energy storage systems (“BESS”) commercial systems. As of December 31, 2025, the Company had commenced EPC services on a 430 MWh battery storage project in Texas pursuant to an agreement dated July 31, 2025 with Longfellow BESS I, LLC, Texas limited liability company (“Longfellow”), which agreement is referred to as the Longfellow Contract. On December 31, 2025, the Company entered into three EPC contracts for large-scale BESS systems, two in Puerto Rico and one in Corpus Christi, Texas, although as of the date of these financial statements, work has not commenced on any of these projects.
Prior to the third quarter of 2025, the Company’s primary business was the sale and installation of photovoltaic and battery backup systems for residential and commercial customers, sales of LED systems and services to government and commercial users. The Company is continuing to develop this business but, because of changes in California law, this part of the Company’s business is developing more slowly. The Company also generates revenue from financing the sale of photovoltaic and battery backup systems. Since 2022, the Company ceased making loans to solar customers, and the Company does not anticipate engaging in such activities. The Company’s finance revenue reflects revenue earned on its current portfolio, with no new loans having been added since 2022.
In 2015, the Company commenced operations in China, and the Company engaged in business in China through 2021. Substantially all of the Company’s China revenues for 2021 and 2020 were generated from four projects for State Power Investment Corporation Guizhou Jinyuan Weining Energy Co., Ltd (“SPIC”), which is a large state-owned enterprise under the administration of the Chinese government. Subsequent to December 31, 2021 through the date of this quarterly report, the Company did not generate revenues from China, and the Company is not engaged in any negotiations with SPIC or any other potential customer, and it is not engaged in any marketing activities. In the event that the Company does not seek to recommence operations in China, it may discontinue its China operations.
Reverse Stock Split
On August 4, 2026, the Company amended its Amended and Restated Articles of Incorporation by filing a Certificate of Change with the Secretary of State of Nevada to effect a
| 11 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
The reverse split supported the Company’s effort to regain compliance with the minimum bid price requirement for maintaining the listing of its common stock on the Nasdaq Capital Market. On March 3, 2026, the Company received a notice from Nasdaq that the Company does not meet Nasdaq’s continued listing requirement that
The accompanying unaudited condensed consolidated financial statements and accompanying notes have been retroactively revised to reflect such reverse stock split and the reduced authorized stock as if such changes had occurred on January 1, 2025. All shares and per share amounts have been revised accordingly.
Nasdaq Notice
On June 22, 2026, the Company received a notice from Nasdaq that the Company does not meet the continued listing requirement that the Company maintain a minimum market value of listed securities of $
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Accounting
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such SEC rules and regulations. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2025. The unaudited condensed consolidated financial statements were prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments (all of which were considered of normal recurring nature) considered necessary to present fairly the Company’s financial results. The results of the three and six months ended June 30, 2026 are not necessarily indicative of the results to be expected for the year ending December 31, 2026 or for any other interim period or other future year.
Principles of Consolidation
The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All intercompany transactions and balances between the Company and its subsidiaries are eliminated upon consolidation. Amounts reported in the condensed consolidated financial statements are stated in U.S. dollars, unless stated otherwise. The functional currency of the Company’s subsidiaries in the People’s Republic of China (“PRC”) is the Chinese renminbi (“RMB”). These transactions are translated from the local currency into U.S. dollars at exchange rates during or at the end of the reporting period.
Reclassification
Certain amounts in the prior period financial statements may be reclassified to conform to the presentation of the current period financial statements. If these reclassifications were made in the prior period they would have no effect on the previously reported net loss. During the six months ended June 30, 2026, no such reclassifications occurred.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates reflected in the Company’s condensed consolidated financial statements include the cost-based inputs to estimate revenues on construction contracts, the collectability of accounts receivable, the receivable from SPIC and loans receivable, the value of investments in unconsolidated solar project companies, the useful lives and impairment of property and equipment, the fair value of stock options granted and stock-based compensation expense, warranty and customer care reserve, the valuation of deferred tax assets, inventories and provisions for income taxes. Actual results could differ materially from those estimates.
| 12 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
Liquidity and Going Concern
The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate the continuation of the Company as a going concern. The Company’s history of net losses and negative cash flow from operating activities, including its net loss for the three and six months ended June 30, 2026, along with its increased accumulated deficit and stockholders’ deficit, its default on payments of principal and interest since 2023 on convertible notes in the principal amount of $
At June 30, 2026, the Company reported a working capital deficit of approximately $
In 2024, the California Public Utilities Commission (CPUC) launched a $
As of June 30, 2026, the Company’s principal sources of liquidity consisted of approximately $
| 13 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
As a result of the above, there is substantial doubt regarding the Company’s ability to continue as a going concern within one year from the date of issuance of these financial statements. The Company cannot give assurance that it will be able to pay or refinance its current debt, including convertible notes in the principal amount of $
Cash and Cash Equivalents
Cash and cash equivalents consist of deposit accounts and highly liquid investments purchased with an original maturity of three months or less. The standard insurance coverage for non-interest bearing transaction accounts in the U.S. is $
Held to Maturity Debt Investments
Held to maturity debt investments at December 31, 2025 consisted of notes receivables with original maturities of 12 months or less and were accounted for at amortized cost. The held to maturity debt had been paid as of June 30, 2026.
Restricted Cash
Restricted cash includes cash held to collateralize ACH transactions and outstanding credit card borrowing facilities.
Restricted cash at June 30, 2026 and December 31, 2025 consisted of:
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||
|
|
|
|
|
|
| ||
Deposit held by a US financial institution as collateral for ACH transactions and business credit cards – U.S. |
| $ |
|
| $ |
| ||
| 14 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
Accounts Receivable
Accounts receivable are reported at the outstanding principal balance due from customers. In the U.S., accounts receivable substantially include customer billings for large-scale EPC projects, customer billings for residential solar and battery system projects contracted under the SGIP, and for the sales of LED products and services. In the Company’s PRC operations, accounts receivable represents the amounts billed under the contracts with SPIC but uncollected on construction contracts that were completed prior to 2022. Accounts receivable are recorded at net realizable value.
The Company maintains allowances for the applicable portion of receivables, including accounts receivable, government rebate receivables and other receivables, that represent the Company’s estimate of the current expected loss inherent in accounts receivable as of the balance sheet date. The adequacy of the allowance for credit losses is assessed quarterly and the assumptions and models used in establishing the allowance are evaluated regularly. Because credit losses can vary substantially over time, estimating credit losses requires a number of assumptions about matters that are uncertain. Once a receivable is deemed to be uncollectible, it is written off against the allowance. The expense related to rebates receivable is recorded as a reduction to revenues.
Contract Balances
The contract assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date, primarily for the solar energy system sales. The contract assets are transferred to receivables when the rights become unconditional (i.e., when the permission to operate is issued). For large-scale EPC contracts, contract assets represent costs and estimated earnings in excess of billings on uncompleted contracts. Contract assets are classified as either current or noncurrent. Current contract assets are those expected to be collected within one year of the report date. Noncurrent contract assets are those expected to be collected after one year of the report date.
The contract liabilities primarily relate to the advance consideration received from customers related to the solar energy system sales in the U.S., for which the transfer of ownership has not occurred. For large-scale EPC contracts, contract liabilities represent billings in excess of costs and estimated earnings on uncompleted contracts.
Applying the practical expedient in ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), paragraph 340‑40-25-4, the Company recognizes the incremental costs of obtaining contracts (i.e., commission fees) in cost of revenue when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in cost of revenues.
Deferred Project Costs
Deferred project costs relate to costs incurred by the Company on projects which the corresponding revenue is not recognized. Deferred project costs are presented as a current asset on the balance sheet, and are recognized as cost of revenue when revenue is recognized on the corresponding project.
Customer Loans Receivable
Prior to 2021, the Company offered its customers who meet the Company’s credit eligibility standards the option to finance the purchase of solar energy systems through installment loans underwritten through its wholly-owned subsidiary, SolarMax Financial, Inc. All loans are secured by the solar energy systems or other projects being financed. The outstanding customer loan receivable balance is presented net of an allowance for loan losses. Provisions for loan losses are charged to operations in amounts sufficient to maintain the allowance for loan losses at levels considered adequate to cover expected credit losses on the customer loans. In determining expected credit losses, the Company considers its historical level of credit losses, current economic trends, and reasonable and supportable forecasts that affect the collectability of the future cash flows. Loans offered at the promotional interest rate below the market interest rate are accounted for as loan discounts and are amortized on an effective interest method to interest income over the terms of the loans. The Company has not entered into any new loan agreements since 2022, and its revenues from financing related to its existing loan portfolio, and the Company does not have any present intention to resume financing the sale of its systems internally.
| 15 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
Inventories
Inventories consist of (a) work in progress on solar systems on housing developments and projects not sold; and (b) components principally consisting of photovoltaic modules, inverters, construction and other materials, and LED products, all of which are stated at the lower of cost or net realizable value under the first-in first-out method. The Company reviews its inventories periodically for possible excess and obsolescence to determine if any reserves are necessary.
The estimate for excess and obsolete inventories is based on historical sales and usage experience together with a review of the current status of existing inventories.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. The costs of additions and betterments are capitalized and expenditures for repairs and maintenance are charged to operations as incurred. Depreciation is calculated using the straight-line method over the estimated useful life of the asset. Leasehold improvements and solar systems leased to customers are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset.
The estimated useful lives of the major classification of property and equipment are as follows:
Automobiles |
| |
Furniture and equipment |
| |
Leasehold improvements |
| |
Solar systems leased to customers |
| Lease term, |
Impairment of Long-Lived Assets
The Company’s long-lived assets include property and equipment which include solar energy systems leased to customers.
In accordance with ASC Topic 360, Property, Plant, and Equipment, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of a long-lived asset, or group of assets, as appropriate, may not be recoverable. If the aggregate undiscounted future net cash flows expected to result from the use and the eventual disposition of a long-lived asset is less than its carrying value, then the Company would recognize an impairment loss based on the excess of the carrying value over the fair value.
There was no impairment loss on the Company’s property and equipment for the three and six months ended June 30, 2026 and 2025.
Leases
The Company determines whether an arrangement is a lease at inception under ASC 842. Operating leases are included in operating lease right-of-use (“ROU”) assets, accrued liabilities, and long-term operating lease liabilities in the consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.
| 16 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
As the rate implicit in the lease is generally not readily determinable, the Company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments. The lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.
Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease payments are recognized as lease expense in the period in which the obligation for those payments is incurred.
The Company has elected not to recognize leases with an initial term of 12 months or less on the consolidated balance sheets. Short-term lease expense is recognized on a straight-line basis over the lease term.
The Company combines lease and non-lease components for certain classes of underlying assets.
Investments in Unconsolidated Companies
The Company’s unconsolidated investments in the U.S. are held directly by the Company as well as through its subsidiary, SMX Capital, and consist of investments in U.S.-based solar limited liability companies: Alliance Solar Capital 1, LLC (“A#1”), Alliance Solar Capital 2, LLC (“A#2”), and Alliance Solar Capital 3, LLC (“A#3”). The Company also has a minority investment in a PRC-based panel manufacturer, Changzhou Hongyi New Energy Technology Co., Ltd (“Changzhou”).
At June 30, 2026 and December 31, 2025, the Company has three unconsolidated investments in the PRC representing its
For these investments, the Company does not have the controlling interests and has the contractual ability to exercise significant influence over the operations and the financial decisions of the investees under the respective operating agreements. In each of the investments, the investee also maintains a separate capital account for each of its investors and accordingly, the Company has a separate capital account at each of the investees. Because the Company has the ability to exercise significant influence over the investees, the Company accounts for each of these investments using the equity method of accounting, under which the Company records its proportionate share of the investee’s profit or loss based on the specified profit and loss percentage. Distributions received from equity method investees are accounted for as returns on investment and classified as cash inflows from operating activities, unless the Company’s cumulative distributions received less distributions received in prior periods that were determined to be returns of investment exceed cumulative equity in earnings recognized by the Company. When such an excess occurs, the current year distribution up to this excess would be considered a return of investment and classified as cash inflows from investing activities.
Because the Company’s investments include privately-held companies where quoted market prices are not available and as a result, the cost method, combined with other intrinsic information, is used to assess the fair value of the investment. If the carrying value is above the fair value of an investment at the end of any reporting period, the investment is reviewed to determine if the impairment is other than temporary. Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. The Company monitors its investments in unconsolidated entities periodically for impairment. No impairment indicators were identified and no impairment losses were recorded during the six months ended June 30, 2026 and 2025.
| 17 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
Warranties
Workmanship Warranty
For the sale of solar and battery systems in the U.S., the Company provides a workmanship warranty for 25 years to cover the quality of the Company’s installation. The warranty is designed to cover installation defects and damages to customer properties caused by the Company’s installation of the solar energy systems and battery storage systems which generally are uncovered within 2-3 years after the installation. The 25-year warranty is consistent with the term provided by competitors and is provided by the Company to remain market competitive. The workmanship warranty does not include the warranties on components, such as panels and inverters which are covered directly by the manufacturers and are, generally provided for
Warranty for EPC Services
For the Company’s former PRC operations, the Company provided construction quality warranty on EPC services generally for one year after completion. The customer typically retains 3-5% of the contract price which will not be paid to the Company until the expiration of the warranty period which is accounted by the Company as retainage receivable. The Company currently provides a reserve for such potential liabilities based on a nominal percentage of project revenues for its PRC operations in the approximate amount of $
For the U.S. operations, the Company provides a three-year workmanship warranty after the project is completed. The equipment is covered by the manufacturer warranty for ten years. The Company currently provides a reserve for warranty based on a nominal percentage of project revenues recognized for the period and is included in other liabilities.
Production Guaranty
For solar systems sold in the U.S., the Company also warrants that modules installed in accordance with agreed-upon specifications will produce at least
LED Warranty
The Company’s warranty for LED products and services ranges from one year for labor and up to seven years for certain products sold to governmental municipalities. The Company currently provides a warranty reserve for LED sales based on
Fair Value Measurements
Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), defines a framework for determining fair value, establishes a hierarchy of information used in measuring fair value, and enhances the disclosure information about fair value measurements. ASC 820 provides that the “exit price” should be used to value an asset or liability, which is the price at which an asset could be sold or a liability could be transferred in an orderly process that is not a forced liquidation or distressed sale at the measurement date. ASC 820 also provides that relevant market data, to the extent available and not internally generated or entity specific information, should be used to determine fair value.
| 18 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
ASC 820 requires the Company to estimate and disclose fair values on the following three-level hierarchy that prioritizes market inputs.
Level 1: | Quoted prices in active markets for identical assets or liabilities. |
Level 2: | Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
Level 3: | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The carrying amount of cash and cash equivalents, accounts receivable, inventories, other current assets, accounts payable, deposits, taxes payable, warranty liability and accrued payroll and expenses approximates fair value because of the short maturity of these instruments.
The following table presents the fair value and carrying value of the Company’s cash equivalents, loans receivable and borrowings as of June 30, 2026:
|
| Fair Value |
|
| Carrying |
| ||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash equivalents |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Customer loans receivable |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured loans from related parties |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Secured convertible debt |
|
|
|
|
|
|
|
|
|
|
|
| ||||
The following table presents the fair value and carrying value of the Company’s cash equivalents, loans receivable and borrowings as of December 31, 2025:
|
| Fair Value |
|
| Carrying |
| ||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash equivalents |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Customer loans receivable |
|
|
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|
|
|
|
|
|
| ||||
Held to maturity debt investments |
|
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|
| ||||
Liabilities |
|
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|
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|
|
|
|
|
Secured loans from related parties |
|
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|
|
| ||||
Secured convertible debt |
|
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|
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|
|
|
| ||||
Cash equivalents – Cash equivalents consist of money market accounts and are carried at their fair value.
Customer loans receivable – The fair value of customer loans receivable is calculated based on the carrying value and unobservable inputs which include the credit risks of the customers, the market interest rates and the contractual terms. The Company’s underwriting policies for the customer loans receivable have not changed significantly since the origination of these loans. The overall credit risk of the portfolio also has not significantly fluctuated as evidenced by the minimal historical write-offs, and lastly the market interest rates have remained relatively consistent since the origination of the loans.
| 19 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
Held to maturity debt investments - Held to maturity debt investments consist of short-term note receivables with maturities of 12 months or less. Accordingly, their carrying values approximate their fair value. At June 30, 2026, all held to maturity debt instruments had been paid.
Bank and other loans – The fair value of such loans payable had been determined based on the variable nature of the interest rates and the proximity to the issuance date.
Secured loans from related parties – The related party loans were issued at the fixed annual interest rates of
Secured convertible debt – The secured convertible debt was issued at the fixed annual interest rates of
Revenue Recognition
The Company recognizes revenue from EPC contracts in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers.
Revenue from Large-scale EPC Contracts
The Company’s EPC contracts generally require the Company to provide a combination of engineering, design, procurement, equipment supply, construction, installation, testing, start-up and commissioning services that are highly interrelated and collectively comprise a single integrated output. For the Longfellow Contract, the Company is responsible for the turnkey design, engineering, procurement, installation, construction, testing, start-up and commissioning of a fully integrated battery energy storage system and related substation. These activities are highly interdependent and are performed to produce a single integrated BESS for the customer. Accordingly, because the promised goods and services are not separately identifiable within the context of the Longfellow Contract, the Company has determined that the EPC services represent a single performance obligation.
The Company recognizes revenue over time when the criteria for over-time recognition under ASC 606 are met. For the Longfellow Contract, the Company has determined that its performance obligation is satisfied over time because the Company’s performance creates or enhances an asset that is controlled by the customer as the asset is constructed and/or the Company does not create an asset with an alternative use and has an enforceable right to payment for performance completed to date.
Revenue recognized over time is measured using an input method based on the ratio of costs incurred to date to the Company’s estimate of total costs required to satisfy the performance obligation. The Company believes that the cost-to-cost method faithfully depicts the transfer of control of the BESS to the customer because the Company's engineering, procurement, equipment, construction, installation and commissioning activities are performed continuously and the costs incurred are generally representative of the Company's progress toward satisfying the performance obligation.
Under the cost-to-cost method, revenue recognized through a reporting date is generally determined by multiplying the contract transaction price by the ratio of cumulative costs, excluding the cost of inventory, incurred to date to total estimated costs, excluding the cost of inventory, at completion, subject to adjustments for changes in transaction price and other applicable provisions of ASC 606. Costs included in the measure of progress generally include labor, subcontractor costs and other costs directly attributable to satisfying the performance obligation. For inventory, the Company recognizes revenue equal to the cost of the inventory delivered to the job site but not yet installed.
Based on the current progress of the Longfellow EPC project which comprises substantially of uninstalled materials which were delivered but not yet installed, the Company recognizes revenue, but not gross profit, on uninstalled materials on Longfellow EPC project. The revenue and cost of revenue on uninstalled materials are recognized when the control is transferred.
| 20 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
The contractual payment milestones are not, in themselves, used as the measure of progress for revenue recognition. Under the Longfellow Contract, invoices are generally triggered upon achievement of specified progress milestones; therefore, amounts billed may differ from revenue recognized based on the Company's measure of progress. Amounts recognized as revenue in excess of amounts billed are recorded as contract assets, while amounts billed in excess of revenue recognized are recorded as contract liabilities, as applicable. The Agreement requires payment upon achievement of specified Progress Milestones and provides for additional payments following Final Completion.
The Company updates its estimates of total contract revenue, total costs to complete and expected contract profitability throughout the performance period. Changes in estimates are reflected in the period in which the estimates are revised. When a change in estimate affects progress toward completion, the cumulative effect of the change is recognized as a cumulative catch-up adjustment to revenue in the period of the change.
If estimates indicate that the total costs expected to be incurred on an unsatisfied performance obligation will exceed the related transaction price, the Company recognizes the estimated loss in full in the period in which the loss becomes probable and reasonably estimable.
The Company also evaluates contract modifications, claims, change orders, liquidated damages, performance incentives and other forms of variable consideration to determine whether they should be included in the transaction price and, if so, when inclusion is appropriate under ASC 606.
Certain of the Company’s EPC contracts contain payment terms that result in a significant financing component when consideration is deferred beyond the period in which the related performance obligations are substantially satisfied. The Longfellow Contract provides for payment of the remaining unpaid portion of the contract price in installments following the Company's billing of Longfellow on the first, second and third anniversaries of commercial operation. Accordingly, the Company determined that the Agreement contains a significant financing component and adjusts the transaction price to reflect the effects of financing in accordance with ASC 606. The portion of the contractual consideration attributable to financing is excluded from revenue and is recognized separately as interest income over the financing period using the effective interest method. In determining the financing component, the Company considers the timing and amount of payments relative to the transfer of goods and services, prevailing market interest rates and other relevant factors, and reassesses the estimate as appropriate based on changes in the expected timing of performance and payment.
| 21 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
Solar Energy and Battery Storage Systems and Components Sales
Revenue recognition associated with sales of solar energy systems, battery storage systems, and other products is recognized over time as the Company’s performance creates or enhances the property controlled by the customer, i.e., the asset is being constructed on a customer’s premises that the customer controls.
The Company’s principal performance obligation is to design and install a solar energy system that is interconnected to the local power grid and for which permission to operate has been granted by a utility company to the customer. The Company recognizes revenue over time as control of the solar energy system transfers to the customer which begins at installation and concludes when the utility company has granted the permission to operate.
All costs to obtain and fulfil contracts associated with system sales and other product sales are expensed to cost of revenue when the corresponding revenue is recognized.
For solar energy and battery storage system sales, the Company recognizes revenue using a cost-based input method that recognizes revenue and gross profit as work is performed based on the relationship between actual costs incurred compared to the total estimated cost of the contract. In applying cost-based input methods of revenue recognition, the Company uses the actual costs incurred for installation and obtaining the permission to operate, each relative to the total estimated cost of the solar energy and battery storage system, to determine the Company’s progress towards contract completion and to calculate the corresponding amount of revenue and gross profit to recognize. Cost‑based input methods of revenue recognition are considered a faithful depiction of the Company’s efforts to satisfy solar energy and battery system contracts and therefore reflect the transfer of goods to a customer under such contracts. Costs incurred towards contract completion may include costs associated with solar modules, battery components, direct materials, labor, subcontractors, and other indirect costs related to contract performance.
The Company sells solar energy and battery storage systems to residential and commercial customers and recognizes revenue net of sales taxes. Cash sales include direct payments from the customer (including financing obtained directly by the customer), third-party financing arranged by the Company for the customer, and leasing arranged by the Company for the customer through a third party leasing company.
Direct payments are made by the customer as stipulated in the underlying home improvement or commercial contract which generally includes an upfront down payment at contract signing,
For third-party financing arranged by the Company for the customer, direct payments are made by the financing company to the Company based on an agreement between the financing company and the Company, with the majority of the payments made by the time of completion of installation but not later than the date on which the permission to operate the solar system is granted by the utility company.
For a lease through the third party leasing company, direct payments are made by the leasing company to the Company based on an agreement between the leasing company and the Company, which is generally 80% upon the completion of installation and 20% when permission to operate is granted.
LED Product Sales and Service Sales
For product sales, the Company recognizes revenue at a point in time following the transfer of control of the products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. For contracts involving both products and services (i.e., multiple performance obligations), the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product is transferred to the customer, in satisfaction of the corresponding performance obligations. Revenue from services is recognized when services are completed which is upon acceptance by the customer. The standalone selling price of the warranty is not material and, therefore, the Company has not allocated any portion of the transaction price to any performance obligation associated with the warranty.
| 22 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
Payment for products is generally made upon delivery or with a 30-day term. Extended payment terms are provided on a limited basis not to exceed twelve months. Payment for services is due when the services are completed and accepted by the customer. For certain LED product sales, the Company provides the customers with a right of return subject to restocking fees. The Company assessed such rights of return as variable consideration and recognizes revenue based on the amount of consideration the Company expects to receive after returns are made. Based on the Company’s historical experience, the Company has determined the likelihood and magnitude of a future returns to be immaterial and currently has not provided for a liability for such returns on the LED product sales.
For contracts where the Company agreed to provide the customer with rooftop solar energy systems (including design, materials, and installation of the system) in addition to providing LED products and LED installation, these agreements may contain multiple performance obligations: 1) the combined performance obligation to design and install rooftop solar energy system; 2) the performance obligation to deliver the LED products; and 3) the performance obligation to install the LED products. Topic 606 permits goods and services that are deemed to be immaterial in the context of a contract to be disregarded when considering performance obligations within an agreement. The Company will compare the standalone selling price of the installations and products to the total contract value to determine whether the value of these installations and products is quantitatively immaterial within the context of the contract. Similarly, these services may be qualitatively immaterial in the eyes of the customer. While the customer ordered these products and has received a separate quote for them, they may not be a material driving factor within the agreement for a solar energy system. Further, a reasonable person may not consider providing and installing LED products to be a material part of the arrangement to design and construct a large solar facility. If these products and services are determined to be immaterial within the context of the contract, they will be combined with the performance obligation to design and install the rooftop solar energy system. If management determines that the products and services are determined to be material to the overall project, they would represent a separate performance obligation.
Solar Leases and Solar Power Purchase Agreements (PPAs) in the U.S.
The Company has entered into long-term solar leases as well as the sale of energy generated by PV solar power systems under PPAs that do not meet the criteria for recognition under ASC 842, either because the agreements are not deemed to contain a lease, or the agreements qualify for the short-term lease exemption. These systems were installed on the customers’ properties but are owned by the Company.
Loan Interest Income
In the past, the Company provided installment financing to qualified customers in the U.S. to purchase residential or commercial photovoltaic systems, energy storage systems, as well as LED products and services, and some of these loans remain outstanding. The Company has not entered into new loans since 2022, and its revenues are from financing related to its existing loan portfolio. Customer loans receivable are classified as held-for-investment based on management’s intent and ability to hold the loans for the foreseeable future or to maturity. Loans held-for-investment are carried at amortized cost and are reduced by an allowance for estimated credit losses as necessary. The Company recognizes interest income on loans, including the amortization of discounts and premiums, using the interest method. The interest method is applied on a loan-by-loan basis when collectability of the future payments is reasonably assured. Interest on loans generally continues to accrue until the loans are charged off. Premiums and discounts are recognized as yield adjustments over the term of the related loans. Loans are transferred from held-for-investment to held-for-sale when management’s intent is not to hold the loans for the foreseeable future. Loans held-for-sale are recorded at the lower of cost or fair value. There were no loans held-for-sale at June 30, 2026 and December 31, 2025.
Advertising Costs
The Company charges advertising and marketing costs related to radio, internet and print advertising to operations as incurred. Advertising and marketing costs for the three months ended June 30, 2026 and 2025 were approximately $
| 23 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
Income Taxes
The Company accounts for income taxes pursuant to the FASB ASC Topic 740, Income Taxes (“ASC 740”). The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. The Company accounts for the investment tax credits under the flow-through method which treats the credits as a reduction of federal income taxes of the year in which the credit arises or is utilized. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. The Company has determined it is more likely than not that its deferred tax assets will not be realizable and has recorded a full valuation allowance against its deferred tax assets. In the event the Company is able to realize such deferred income tax assets in the future in excess of the net recorded amount, the Company would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.
Topic 740-10 clarifies the accounting for uncertainty in income taxes recognized in the Company’s condensed consolidated financial statements in accordance with U.S. GAAP. The calculation of the Company’s tax provision involves the application of complex tax rules and regulations within multiple jurisdictions. The Company’s tax liabilities include estimates for all income-related taxes that the Company believes are probable and that can be reasonably estimated. To the extent that the Company’s estimates are understated, additional charges to the provision for income taxes would be recorded in the period in which the Company determines such understatement. If the Company’s income tax estimates are overstated, income tax benefits will be recognized when realized.
The Company recognizes interest and penalties related to unrecognized tax positions as income tax expense. For the six months ended June 30, 2026 and 2025, the Company did not incur any related interest and penalties.
The Company does not record U.S. income taxes on the undistributed earnings of its foreign subsidiaries based upon the Company’s intention to permanently reinvest undistributed earnings to ensure sufficient working capital and further expansion of existing operations outside the U.S. As of June 30, 2026 and December 31, 2025, the Company’s foreign subsidiaries operated at a cumulative deficit for U.S. earnings and profit purposes.
The Company determined that the annual effective tax rate (“AETR”) method is not appropriate for interim tax reporting because it is unable to reliably estimate annual pretax income for its China operations. The China operations represent a significant component of the Company's foreign income, and the inherent difficulty in forecasting that jurisdiction's full-year results cause the estimated AETR to be highly sensitive to changes in assumptions. Accordingly, the Company applied the cutoff method, treating each interim period as a discrete annual period for purposes of computing the tax provision.
Comprehensive Income (Loss)
The Company accounts for comprehensive income (loss) in accordance with ASC 220, Income Statement – Reporting Comprehensive Income (“ASC 220”). Under ASC 220, the Company is required to report comprehensive income (loss), which includes net income (loss) as well as other comprehensive income (loss). The only significant component of accumulated other comprehensive income (loss) as of June 30, 2026 and December 31, 2025 is the currency translation adjustment.
| 24 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
Net Income (Loss) Per Share
The Company calculates net income (loss) per share by dividing income or losses by the weighted average number of shares of common stock outstanding for the period. Diluted weighted average shares is computed using basic weighted average shares plus any potentially dilutive securities outstanding during the period using the treasury-stock-type method and the if-converted method, except when their effect is anti-dilutive. Potentially dilutive securities are excluded from the computation of diluted earnings per share for the three and six months ended June 30, 2026 and 2025 because the effect would be antidilutive.
Stock-Based Compensation
The Company accounts for stock-based compensation costs under the provisions of ASC Topic 718, Compensation – Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest for both employees and non-employees. Stock-based compensation expense includes the compensation cost for all share-based payments granted to employees and non-employees, net of estimated forfeitures, over the employee requisite service period or the non-employee performance period based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, extended, repurchased, or cancelled during the periods reported.
Foreign Currency
Amounts reported in the condensed consolidated financial statements are stated in U.S. dollars. The Company’s subsidiaries in the PRC use the Chinese RMB as their functional currency and all other subsidiaries use the U.S. dollar as their functional currency.
In accordance with ASC 830, Foreign Currency Matters (“ASC 830”), the Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from RMB into U.S. dollar are recorded in stockholders’ equity (deficit) as part of accumulated other comprehensive income (loss). Further, foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency. Income (loss) on those foreign currency transactions of approximately $
Segment Information
Operating segments are defined as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the chief executive officer. Based on the financial information presented to and reviewed by the chief operating decision maker in deciding how to allocate the resources and in assessing the performance of the Company, the Company has determined that since January 1, 2024, it has one operating segment which is the operations in the United States. Prior to January 1, 2024, the Company considered its operation in China a reporting segment. However, because the operation in China has had no significant revenues since 2022, the Company no longer considers its operations in China to be either a reporting segment or an operating segment.
| 25 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
Recently Issued Accounting Pronouncements
As an emerging growth company, the Company has elected to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Securities and Exchange Act of 1934.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This update requires that at each interim and annual reporting period public entities disclose (1) the amounts of purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions; (2) certain amounts that are already required to be disclosed under current GAAP in the same disclosure as the other disaggregation requirements; (3) a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively; and (4) the total amount of selling expenses and, in annual reporting periods, the definition of selling expenses. In January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This update clarifies that ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact on its financial statements of adopting this guidance.
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 is intended to improve the estimation of expected credit losses for contracts arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers. The amendments in this ASU were adopted effectively January 1, 2026 and were applied prospectively, and they do not have a material effect on the Company's financial statements.
The Company has reviewed all other recently issued accounting pronouncements and concluded they were either not applicable or not expected to have a material impact on the Company’s consolidated financial statements.
3. Disaggregation of Revenue
The following table summarizes the Company’s revenue by product line for the three and six months ended June 30, 2026 and 2025:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2026 |
|
| 2025 |
|
| 2026 |
|
| 2025 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Solar energy and battery storage systems |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Large-scale EPC contracts |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Sales on non-installment basis |
|
|
|
|
|
|
|
|
|
|
| |||||
Third-party leasing arrangements |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Solar lease revenues |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Solar power purchase agreement revenues |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total solar energy and battery storage systems |
|
|
|
|
|
|
|
|
|
|
|
| ||||
LED projects |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Financing revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
| 26 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
4. Cash, Cash Equivalents and Restricted Cash
As of June 30, 2026 and December 31, 2025, insured and uninsured cash including the balance classified as restricted cash were as follows:
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||
|
|
|
|
|
|
| ||
U.S. |
|
|
|
|
|
| ||
Insured cash |
| $ |
|
| $ |
| ||
Uninsured cash |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
China |
|
|
|
|
|
|
|
|
Insured cash |
|
|
|
|
|
| ||
Uninsured cash |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Total cash and cash equivalents and restricted cash |
|
|
|
|
|
| ||
Less: Cash and cash equivalents |
|
|
|
|
|
| ||
Restricted cash |
| $ |
|
| $ |
| ||
5. Accounts Receivable, Net
The activity of the allowance for credit losses for accounts receivable for the six months ended June 30, 2026 and 2025 is as follows:
|
| Six Months Ended June 30, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
|
|
|
|
| ||||
Balance – beginning of period |
| $ |
|
| $ |
| ||
Provision for credit losses |
|
|
|
|
|
| ||
Balance – end of period |
| $ |
|
| $ |
| ||
At June 30, 2026, based on its qualitative and quantitative analysis of Longfellow and its members, the Company determined that credit loss exposure is insignificant and did not provide for an allowance for credit losses related to the $
At June 30, 2026, the Company did not provide for an allowance for credit losses related to the $
| 27 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
6. Held to maturity debt investments
In March 2024, the Company made an investment of RMB 5.0 million (approximately $
7. Receivable from SPIC, Net
The Company had previously initiated arbitration proceedings against SPIC, related to the receivable balances of several photovoltaic EPC projects that the Company completed in 2020 and 2021. In April 2025, the arbitration tribunal issued awards in favor of the Company and subsequently the Company collected approximately RMB 42.5 million ($
8. Large-scale EPC Contracts
On July 31, 2025, SREP, entered into the Longfellow Contract for an industrial project to develop a BESS facility. Based on the initial terms of the contract, the contract is expected to generate revenues of approximately $
The Company has committed to make a $
The Longfellow Contract is a fixed-price contract consisting of battery inventories of $
On December 31, 2025, the Company entered into three EPC contracts for large-scale BESS systems, two in Puerto Rico and one in Corpus Christi, Texas. Pursuant to an EPC contract with Naguabo BESS, LLC, a Texas limited liability company (“Naguabo”), the Company will develop a BESS facility in Ceiba Municipality, Puerto Rico. The contract value is approximately $
| 28 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
9. Customer Loans Receivable
Prior to 2023, the Company provided financing to qualified customers to purchase residential or commercial photovoltaic systems, as well as other products the Company offered in the U.S. Depending on the credit rating of customers, the interest rate generally ranges from
The customer gives the Company a security interest in the photovoltaic systems and other products financed.
The following tables summarize the Company’s customer loan receivables by credit rating, determined at origination, for each vintage of the customer loan receivable portfolio at June 30, 2026:
|
|
|
|
|
|
|
|
|
| June 30, 2026 |
| |||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
|
| Prior |
|
| Total |
|
| % |
| ||||||
Prime - FICO score 680 and greater |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
|
| % | ||||||
Near-prime - FICO score 620 to 679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| % | ||||||
Sub-prime - FICO score less than 620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| % | ||||||
Business entity — FICO not available |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| % | |||||||
Total Customer Loan Receivables, gross |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
|
| % | ||||||
The following tables summarize the Company’s customer loan receivables by credit rating, determined at origination, for each vintage of the customer loan receivable portfolio at December 31, 2025:
|
|
|
|
|
|
|
| December 31, 2025 |
| |||||||||||
|
| 2022 |
|
| 2021 |
|
| Prior |
|
| Total |
|
| % |
| |||||
Prime - FICO score 680 and greater |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
|
| % | |||||
Near-prime - FICO score 620 to 679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| % | |||||
Sub-prime - FICO score less than 620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| % | |||||
Business entity — FICO not available |
|
|
|
|
|
|
|
|
|
|
|
|
|
| % | |||||
Total Customer Loan Receivables, gross |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
|
| % | |||||
Customer loans receivable consist of the following as of June 30, 2026 and December 31, 2025:
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||
|
|
|
|
|
|
| ||
Customer loans receivable, gross |
| $ |
|
| $ |
| ||
Allowance for loan losses |
|
| ( | ) |
|
| ( | ) |
Customer loans receivable, net |
|
|
|
|
|
| ||
Less: Current portion |
|
|
|
|
|
| ||
Non-current portion |
| $ |
|
| $ |
| ||
| 29 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
Principal maturities of the customer loans receivable at June 30, 2026 are summarized as follows:
For the year ending December 31, |
| Amount |
| |
2026 (remainder of) |
| $ |
| |
2027 |
|
|
| |
2028 |
|
|
| |
2029 |
|
|
| |
2030 |
|
|
| |
Thereafter |
|
|
| |
Total customer loans receivable |
| $ |
| |
The Company is exposed to credit risk on the customer loans receivable. Credit risk is the risk of loss arising from the failure of customers to meet the terms of their contracts with the Company or otherwise fail to perform as agreed.
The activity in the allowance for loan losses for customer loans receivable for the six months ended June 30, 2026 and 2025 is as follows:
|
| Six Months Ended June 30, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
|
|
|
|
| ||||
Balance – beginning of period |
| $ |
|
| $ |
| ||
Provision (recovery) for loan losses |
|
| ( | ) |
|
| ( | ) |
Adjustments |
|
|
|
|
|
| ||
Balance – end of period |
| $ |
|
| $ |
| ||
Total interest income on the customer loans receivable included in revenues was approximately $
10. Inventories, Net
The activity in the reserve for excess and obsolete inventories for the six months ended June 30, 2026 and 2025 is as follows:
|
| Six Months Ended June 30, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
|
|
|
|
| ||||
Balance – beginning of period |
| $ |
|
| $ |
| ||
Provision for excess and obsolete inventories |
|
|
|
|
|
| ||
Balance – end of period |
| $ |
|
| $ |
| ||
| 30 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
Inventories consisted of the following as of June 30, 2026 and December 31, 2025:
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||
|
|
|
|
|
|
| ||
Solar panels, inverters, battery storage and components |
| $ |
|
| $ |
| ||
LED lights |
|
|
|
|
|
| ||
Total inventories, gross |
|
|
|
|
|
| ||
Less: reserve for excess and obsolete inventories |
|
| ( | ) |
|
| ( | ) |
Total inventories, net |
| $ |
|
| $ |
| ||
11. Other Receivables and Current Assets, Net
Other receivables and current assets, net consisted of the following at June 30, 2026 and December 31, 2025:
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||
|
|
|
|
|
|
| ||
Receivable from seller (Uonone Group - Note 17) |
| $ |
|
| $ |
| ||
Prepaid expenses and other current assets |
|
|
|
|
|
| ||
Other receivable |
|
|
|
|
|
| ||
Advances to suppliers |
|
|
|
|
|
| ||
Accrued interest on held to maturity debt investment |
|
|
|
|
|
| ||
Accrued interest on customer loans receivable |
|
|
|
|
|
| ||
Total other receivables and current assets |
| $ |
|
| $ |
| ||
At June 30, 2026 and December 31, 2025 advances to suppliers include advances for material costs related to the Longfellow project of approximately $
Other receivable at June 30, 2026 relates to amounts the Company advanced to one of its suppliers in RMB during the three months ended June 30, 2026, for which the supplier will repay the Company in U.S. dollars. The advances are short-term in nature and typically collected in 180 days. The supplier has made $
| 31 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
12. Property and Equipment, Net
Components of property and equipment, net are as follows:
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||
|
|
|
|
|
|
| ||
Automobiles |
| $ |
|
| $ |
| ||
Furniture and equipment |
|
|
|
|
|
| ||
Solar systems leased to customers |
|
|
|
|
|
| ||
Leasehold improvements |
|
|
|
|
|
| ||
Total property and equipment, gross |
|
|
|
|
|
| ||
Less: accumulated depreciation and amortization |
|
| ( | ) |
|
| ( | ) |
Total property and equipment, net |
| $ |
|
| $ |
| ||
Depreciation expense for the three months ended June 30, 2026 and 2025 were approximately $
13. Investments in Unconsolidated Companies
At June 30, 2026 and December 31, 2025, the Company has a
Investee |
| Investment Balance at December 31, 2025 |
|
| Share of Investee’s Net Income (Loss) |
|
| Effect of Exchange Rate |
|
| Investment Balance at June 30, 2026 |
| ||||
Yilong #2 |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||
Xingren |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Ancha |
|
|
|
|
| ( | ) |
|
|
|
|
|
| |||
Total |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||
Investee |
| Investment Balance at December 31, 2024 |
|
| Share of Investee’s Net Income (Loss) |
|
| Effect of Exchange Rate |
|
| Investment Balance at June 30, 2025 |
| ||||
Yilong #2 |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Xingren |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Ancha |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
| 32 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
The following tables present the summary of the unaudited combined financial statements of the three solar project companies in which the Company has a
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||
|
|
|
|
|
|
| ||
Current assets |
| $ |
|
| $ |
| ||
Non-current assets |
|
|
|
|
|
| ||
Total assets |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Current liabilities |
| $ |
|
| $ |
| ||
Noncurrent liabilities |
|
|
|
|
|
| ||
Members’ capital |
|
|
|
|
|
| ||
Total liabilities and members’ capital |
| $ |
|
| $ |
| ||
|
| Six Months Ended June 30, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
|
|
|
|
| ||||
Revenue |
| $ |
|
| $ |
| ||
Gross profit (loss) |
| $ | ( | ) |
| $ |
| |
Net income (loss) |
| $ | ( | ) |
| $ |
| |
Revenue of these project companies is generated from the power purchase agreements with the PRC utility companies as well as government subsidies.
On April 29, 2025, Longfellow was formed as a Texas limited liability company and commenced its business on the same date. Longfellow is a special purpose company created to own and operate a new battery storage system located in Pecos County, Texas. Pursuant to the LLC agreement, the Company owns an
The Company has determined that Longfellow is a variable interest entity (“VIE”) in which the Company has an
Although Longfellow is a VIE, the Company has determined that it is not the primary beneficiary of Longfellow because it does not have both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. Accordingly, the Company does not consolidate Longfellow in its consolidated financial statements.
The carrying amount of the Company’s equity interest in Longfellow was zero as of June 30, 2026. As of June 30, 2026, the Company had accounts receivable of $
The Company’s maximum exposure to loss related to its involvement with Longfellow was approximately $
As of June 30, 2026, approximately $
The following table presents the carrying amounts of the Company’s assets related to Longfellow and the Company’s maximum exposure to loss:
|
| Carrying value at June 30, 2026 |
| |
|
|
|
| |
Assets |
|
|
| |
Accounts receivable |
| $ |
| |
Contract assets |
|
|
| |
Prepaid inventory |
|
|
| |
Total assets related to Longfellow |
| $ |
| |
|
|
|
|
|
Maximum exposure to loss |
| $ |
| |
| 33 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
14. Financing Arrangements
As of June 30, 2026 and December 31, 2025, the Company had the following borrowings:
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||
|
|
|
|
|
|
| ||
Secured convertible notes payable at 4.0% per annum, due various dates through April 2031 |
| $ |
|
| $ |
| ||
EB-5 loans - see details below |
|
|
|
|
|
| ||
Total |
|
|
|
|
|
| ||
Less: debt discount and debt issuance costs |
|
| ( | ) |
|
| ( | ) |
Current portion |
|
| ( | ) |
|
| ( | ) |
Noncurrent portion |
| $ |
|
| $ |
| ||
Related party EB-5 financings
The Company’s borrowings under the EB-5 program from related parties consisted of the following as of June 30, 2026 and December 31, 2025:
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||
|
|
|
|
|
|
| ||
Loan from Clean Energy Funding, LP |
| $ |
|
| $ |
| ||
Loan from Clean Energy Funding II, LP |
|
|
|
|
|
| ||
Total |
|
|
|
|
|
| ||
Less: current portion |
|
| ( | ) |
|
| ( | ) |
Noncurrent portion |
| $ |
|
| $ |
| ||
On January 3, 2012, Clean Energy Fund, LP (“CEF”) entered into a secured loan agreement with SREP, a wholly owned subsidiary of the Company. Under the secured loan agreement, CEF agreed to make loans to SREP in an amount not to exceed $
On August 26, 2014, Clean Energy Funding II, LP (“CEF II”) entered into a secured loan agreement with LED, a wholly-owned subsidiary of the Company, for up to $
The general partner of CEF and CEF II is Inland Empire Renewable Energy Regional Center (“IERE”). The principal owners and managers of IERE consist of the Company’s chief executive officer and its former executive vice president, who is a 5% stockholder.
| 34 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
Convertible Notes
The Company has issued 4% secured subordinated convertible notes to former limited partners of CEF and CEF II, pursuant to exchange agreements with the limited partners. The limited partners accepted the notes in lieu of cash payments of their capital contribution to CEF or CEF II, which resulted in a reduction of SREP’s and LED’s notes to CEF and CEF II, respectively, in the same amount, reducing the outstanding EB-5 loan balance. Payment of the notes is secured by a security interest in SREP’s and LED’s accounts and inventory. The convertible notes are payable in five equal installments on the first, second, third, fourth and fifth anniversaries of the date of issuance. The convertible notes made prior to, or on or about the date of, the Company’s initial public offering are convertible into common stock at a conversion price of $38.40, which is 80% of the $
All convertible notes issued contained redemption put features that allow the holders of the convertible notes the right to receive, for each conversion share that would have been issuable upon conversion immediately prior to the occurrence of an effective change in control event defined as a fundamental transaction, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration receivable as a result of such fundamental transaction by a holder of the number of shares of common stock for which these convertible notes are convertible immediately prior to such fundamental transaction. The Company evaluated the redemption put feature contained in the convertible notes under the guidance of ASC 815 and concluded that the requirements for contingent exercise provisions as well as the settlement provision for scope exception in ASC 815-10-15-74 has been meet. Accordingly, the redemption put features contained in the convertible notes were not bifurcated and are accounted for as freestanding derivative instruments.
During the three months ended June 30, 2026, the Company recognized a gain on debt of extinguishment in the amount of approximately $
During six months ended June 30, 2026, the Company recognized a gain on debt of extinguishment in the amount of approximately $
Event of Default on Convertible Notes
From April 2023 through June 30, 2026, the Company did not pay certain annual principal installment payments and related quarterly interest payments which is an event of default on convertible notes. As of June 30, 2026 and December 31, 2025, the aggregate principal amount of the notes in default was $
| 35 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
The Company accrued interest at the rate of 4% per annum since no noteholder has taken action to accelerate payment of principal and interest. Since the Company has accrued interest at
Interest Expense
For the three months ended June 30, 2026 and 2025, interest expense incurred on the long-term EB‑5 related party loans was approximately $
Total interest expense incurred (including interest on long-term related party EB-5 loans) was approximately $
Principal stated maturities for the financing arrangements as of June 30, 2026 are as follows:
For the year ending December 31, |
| EB-5 Loans - Related Party |
|
| Convertible Notes * |
|
| Total |
| |||
2026 (remainder of) |
| $ |
|
| $ |
|
| $ |
| |||
2027 |
|
|
|
|
|
|
|
|
| |||
2028 |
|
|
|
|
|
|
|
|
| |||
2029 |
|
|
|
|
|
|
|
|
| |||
2030 |
|
|
|
|
|
|
|
|
| |||
2031 |
|
|
|
|
|
|
|
|
| |||
Total |
| $ |
|
| $ |
|
| $ |
| |||
*The principal amount of the convertible notes that are in default are treated as current liabilities, due in 2026.
| 36 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
15. Accrued Expenses and Other Payables
Accrued expenses and other payables consisted of the following as of June 30, 2026 and December 31, 2025:
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||
|
|
|
|
|
|
| ||
Customer deposits |
| $ |
|
| $ |
| ||
Accrued operating and project payables |
|
|
|
|
|
| ||
China legal judgment |
|
|
|
|
|
| ||
Payable to Uonone (See Note 17) |
|
|
|
|
|
| ||
Accrued compensation expenses |
|
|
|
|
|
| ||
Retainage payable to vendors |
|
|
|
|
|
| ||
China preacquisition liability |
|
|
|
|
|
| ||
Accrued warranty expense |
|
|
|
|
|
| ||
VAT taxes payable |
|
|
|
|
|
| ||
Income taxes payable |
|
|
|
|
|
| ||
Refundable vendor bid deposits |
|
|
|
|
|
| ||
Total accrued expenses and other payables |
| $ |
|
| $ |
| ||
Accrued Compensation
Accrued compensation includes compensation to the Company’s chief executive officer in connection with his $
Customer Deposits
Customer deposits represent customer down payments and progress payments received prior to the completion of the Company’s earnings process. The amounts paid by customers are refundable during the period which, under applicable state and federal law, the customer’s order may be cancelled and the deposit refunded. Once the cancellation period has expired, the customer still may cancel the project but the Company is entitled to retain the deposit payments for work that was completed and materials that were delivered.
China Preacquisition Liability
China preacquisition liability relates to liabilities incurred by the Company's PRC subsidiary prior to the Company’s business combination transaction completed in April 2015, which were related to EPC projects completed prior to the business combination. The Company assumed these contingent obligations in connection with the acquisition. To date, the Company has not received any claims related to these liabilities. See Note 17.
| 37 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
China Legal Judgment
As a result of the legal proceeding that began in February 2026 and the court judgments received in June and August 2026, the Company's China subsidiary is responsible for additional farmland occupation taxes on four photovoltaic projects that were completed in 2020 and 2021 totaling RMB 29,274,811 (approximately $
Accrued Warranty Liability
The activity of the warranty liability (included in other liabilities) for the six months ended June 30, 2026 and 2025 is as follows:
|
| Six Months Ended June 30, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
|
|
|
|
| ||||
Balance – beginning of period |
| $ |
|
| $ |
| ||
Provision for warranty liability |
|
|
|
|
|
| ||
Expenditures and adjustments |
|
| ( | ) |
|
| ( | ) |
Effect of exchange rate |
|
|
|
|
|
| ||
Balance – end of period |
|
|
|
|
|
| ||
Less: current portion (accrued expenses and other payables) |
|
| ( | ) |
|
| ( | ) |
Non-current portion (other liabilities) |
| $ |
|
| $ |
| ||
16. Concentrations
Concentration Risks
Major Customers
For the three months ended June 30, 2026 and 2025,
For the six months ended June 30, 2026 one customer, Longfellow, accounted for $
Major Suppliers
During the three months ended June 30, 2026, Supplier A accounted for purchases of $
During the six months ended June 30, 2026, Supplier A accounted for purchases of $
| 38 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
During the three months ended June 30, 2025, Supplier B accounted for purchases of $
During the six months ended June 30, 2025, Supplier B accounted for purchases of $
17. Acquisition Contingencies and Other Payable to Uonone Group
Effective on May 12, 2016, one of the Company’s PRC subsidiaries entered into a debt settlement agreement (the “Debt Settlement Agreement”) with one of the former owners of the subsidiary, Uonone Group Co., Ltd., (“Uonone Group”), pursuant to which the subsidiary and Uonone Group agreed to settle a list of pending business transactions from December 31, 2012 to December 31, 2015,
As of December 31, 2021, Uonone Group had repaid all the amounts agreed to under the debt settlement agreement except for the RMB 3.0 million contingent receivable from Uonone Group discussed above. Uonone Group’s obligation on the contingent receivable does not arise until and unless the Company becomes obligated to pay the contingent liability. At June 30, 2026 and December 31, 2025, the Company had no payment obligations with respect to the assumed contingent liability and accordingly, Uonone Group had no obligation to the Company with respect to the contingent receivable.
Under the debt settlement agreement, any legal settlement proceeds, less fees and expenses, received by the subsidiary related to the projects completed prior to the April 2015 acquisition of the subsidiary would be repaid to the Uonone Group. During the year ended December 31, 2025 and the six months ended June 30, 2026, the Company did not receive any additional legal settlement proceeds, nor did the Company make any payments to Uonone.
At both June 30, 2026 and December 31, 2025, the amount payable to Uonone, was approximately RMB 18.0 million ($
18. Related Party Transactions
See Note 14 for related party financing arrangements and Note 8 for investment in a large-scale EPC customer.
19. Commitments and Contingencies
Purchase Commitment
In June 2026, the Company entered into an amended purchase agreement with D Volt Co., a Texas corporation to purchase equipment and services for approximately $
| 39 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
Operating Leases
The Company leases office space, equipment, and vehicles under non-cancellable operating lease agreements. Lease terms range from one to seven years, with certain leases including options to extend or terminate at the Company’s discretion. These options are included in the lease term when it is reasonably certain that the Company will exercise the option. The Company’s leases do not contain material residual value guarantees or restrictive covenants.
On January 28, 2026, the Company entered into an amendment to the lease for its headquarters facility at 3080 12th Street, Riverside, California. The amendment extends the expiration date of the lease from December 31, 2026 to December 31, 2033.
The Company evaluated the amendments in accordance with ASC 842 and determined the modifications did not result in separate contracts. Accordingly, the Company remeasured the related lease liabilities using an updated incremental borrowing rate as of the modification effective date, with a corresponding adjustment to the related ROU assets.
As a result of the lease modifications, the Company recorded the following adjustments during the six months ended June 30, 2026:
Increase in operating lease ROU assets |
| $ |
| |
Increase in operating lease liabilities |
| $ |
|
The discount rate applied to the modified lease was
Future minimum lease commitments for offices, warehouse facilities and equipment as of June 30, 2026, are as follows:
For the year ending December 31, |
| Total |
| |
2026 (remainder of) |
| $ |
| |
2027 |
|
|
| |
2028 |
|
|
| |
2029 |
|
|
| |
2030 |
|
|
| |
Thereafter |
|
|
| |
Total |
| $ |
| |
Rent expense for offices, warehouse facilities and equipment for the three months ended June 30, 2026 and 2025 was approximately $
| 40 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
As of June 30, 2026, the maturities of the Company’s operating lease liabilities (excluding short-term leases) are as follows:
For the year ending December 31, |
| Total |
| |
2026 (remainder of) |
| $ |
| |
2027 |
|
|
| |
2028 |
|
|
| |
2029 |
|
|
| |
2030 |
|
|
| |
Thereafter |
|
|
| |
Total minimum lease payments |
|
|
| |
Less: Interest |
|
| ( | ) |
Present value of lease obligations |
|
|
| |
Less: current portion |
|
| ( | ) |
Noncurrent portion |
| $ |
| |
Other information related to leases is as follows:
|
| As of June 30, 2026 |
| |
Weighted average remaining lease term (in years) |
|
|
| |
Weighted average discount rate |
|
| % | |
Total sublease income recognized for the three months ended June 30, 2026 and 2025, was approximately $
The following table summarizes the Company’s operating lease cost for the three and six months ended June 30, 2026 and 2025:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2026 |
|
| 2025 |
|
| 2026 |
|
| 2025 |
| ||||
|
|
|
|
|
|
|
|
| ||||||||
Operating lease cost |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Short-term lease cost |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Less: Sublease income |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Operating lease cost, net |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Employment Agreements
On October 7, 2016, the Company entered into an employment agreement with its chief executive officer
| 41 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
Legal Proceedings and Loss Contingency
The Company is involved in various legal proceedings with SPIC in the PRC which includes cases related to additional assessments of farmland occupation taxes associated with four photovoltaic projects completed by a subsidiary of the Company in 2020 and 2021 and owned by SPIC. The matters relate to disputes regarding the additional taxes paid by SPIC on which SPIC sought reimbursement from the Company’s subsidiary and the basis for the assessment by Chinese tax authorities.
In June and August 2026, three adverse judgments were issued by a Chinese court, which determined that the Company's subsidiary is responsible for the additional farmland occupation taxes under its contractual arrangements. As of September 30, 2026, the Company is awaiting the court ruling for the last farmland occupation tax case; however, the Company believes the ruling will be consistent with the other three rulings.
Based on the judgments and other information available as of September 30, 2026, the Company determined that a loss contingency was probable and reasonably estimable at June 30, 2026, and recorded an accrual of RMB 29.3 million for the four cases, or approximately $
The other legal proceedings with SPIC are still underway and the Company does not believe these pending legal proceedings will have a material impact on the Company’s financial position and the results of operations.
Additionally, in the ordinary course of the Company’s business in the United States, the Company is involved in various legal proceedings involving contractual relationships, product liability claims, and a variety of other matters. The Company believes that such legal proceedings are a normal part of its business and does not believe such pending legal proceedings will have a material impact on the Company’s financial position and the results of operations.
20. Stockholders’ Equity (Deficit)
Reverse Stock Split
On August 4, 2026, the Company amended its Amended and Restated Articles of Incorporation by filing a Certificate of Change with the Secretary of State of Nevada to effect a
As a result of the reverse split, the number of outstanding shares of
The reverse split was adopted to support the Company’s effort to regain compliance with the minimum bid price requirement for maintaining the listing of its common stock on the Nasdaq Capital Market. On March 3, 2026, the Company received a notice from Nasdaq that the Company does not meet Nasdaq’s continued listing requirement that
The accompanying unaudited condensed consolidated financial statements and accompanying notes have been retroactively revised to reflect such reverse stock split as if it had occurred on January 1, 2025. All shares and per share amounts have been revised accordingly.
Issuance of Common Stock in Private Placement
In January 2026, the Company issued a total of
Stock Options
From time to time, the Company granted non-qualified stock options to its employees and consultants for their services. Option awards are generally granted with an exercise price equal to the estimated fair value of the Company’s stock at the date of grant; those option awards generally vest between 18 months and 36 months of continuous service and have contractual terms of seven to ten years. The vested options are exercisable for six months after the termination date unless (i) termination is due to optionee’s death or disability, in which case the option shall be exercisable for 12 months after the termination date, or (ii) the optionee is terminated for cause, in which case the option will immediately terminate.
| 42 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
A summary of option activity is as follows:
|
| Number of Options |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual (years) |
|
| Aggregate Intrinsic Value |
| ||||
Outstanding at December 31, 2025 |
|
|
|
| $ |
|
|
|
|
|
|
| ||||
Exercisable as of December 31, 2025 |
|
|
|
| $ |
|
|
|
|
|
|
| ||||
Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exchanged |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Cancelled or forfeited |
|
| ( | ) |
|
|
|
|
|
| - |
|
|
| - |
|
Outstanding at June 30, 2026 |
|
|
|
| $ |
|
|
|
|
|
|
| ||||
Forfeitures are accounted for as actual forfeitures occur.
On August 29, 2025, the Company’s board of directors approved a
21. Income Taxes
The components of the Company’s income (loss) before income taxes and income (loss) from operations for the three and six months ended June 30, 2026 and 2025 are as follows:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2026 |
|
| 2025 |
|
| 2026 |
|
| 2025 |
| ||||
|
|
|
| (Unaudited) |
| |||||||||||
Domestic (U.S.) |
| $ | ( | ) |
| $ | ( | ) |
| $ |
|
| $ | ( | ) | |
Foreign (PRC) |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
| ( | ) | |
Income (loss) before income taxes |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Income tax expense (benefit) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Income (loss) from operations |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Effective tax rate |
|
| % |
|
| % |
|
| % |
|
| % | ||||
The Company is subject to taxation in the U.S. and various states jurisdictions. The Company is also subject to taxation in China. The Company’s effective tax rate is determined quarterly, reflecting actual activities and various tax-related items.
The Company’s effective income tax rate for the three months ended June 30, 2026 and 2025 was
| 43 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
As of June 30, 2026, the Company determined that, based on an evaluation of its history of net losses and all available evidence, both positive and negative, including the Company’s latest forecasts and cumulative losses in recent years, it was more likely than not that all or substantially all of its deferred tax assets would not be realized and, therefore, the Company continued to record a valuation allowance on against U.S. federal and state net deferred tax assets and a partial valuation allowance against foreign deferred tax assets.
22. Net Income (Loss) Per Share
The following table presents the calculation of the Company’s basic and diluted net income (loss) per share for the three and six months ended June 30, 2026 and 2025:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2026 |
|
| 2025 |
|
| 2026 |
|
| 2025 |
| ||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used to compute net loss per share, basic |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares used to compute net loss per share, diluted |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic net income (loss) per share |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Diluted net income (loss) per share |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
For the six months ended June 30, 2026, outstanding options to purchase
For the six months ended June 30, 2025, outstanding options to purchase
23. Segment Reporting
The chief operating decision maker (“CODM”) is the Chief Executive Officer. As of January 1, 2024, the Company has determined that it has one reporting segment which is solar energy systems, which includes BESS systems, and LED lighting in the United States. The Company has not generated any revenue from its China operations since 2021, it does not have any contracts for services in China, it does not have any marketing activities in China and its China operations is no longer considered a reporting segment. The CODM regularly reviews operations and financial performance at the consolidated level and uses net income (loss) to allocate resources (including labor, technology and capital resources) for the single reporting segment to make decisions regarding annual budget, entering new markets, marketing decisions, pursuing new business, and driving the Company’s mission.
| 44 |
| Table of Contents |
SolarMax Technology, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2026 and 2025
The following table shows the operations of the Company’s reporting segment for the three and six months ended June 30, 2026 and 2025:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2026 |
|
| 2025 |
|
| 2026 |
|
| 2025 |
| ||||
Segment revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Large-scale EPC contracts |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Solar energy systems |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Battery only sales |
|
|
|
|
|
|
|
|
|
|
|
| ||||
LED operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Reconciliation of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other non-core revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Less |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct and indirect costs |
|
|
|
|
|
|
|
|
|
|
|
| ||||
China legal judgment |
|
| |
|
|
| |
|
|
| |
|
|
| |
|
Subcontractor costs |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Commissions and lender fees |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Compensation and benefits |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Leasing and rental expense |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Insurance expense |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling and marketing expense |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Professional services |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Reconciliation of segment profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other corporate overhead expense |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Provision for various reserves |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other (gains) and other (income), net |
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||
China other expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Elimination adjustment |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
| |
Income (loss) before income taxes |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
24. Subsequent Events
The Company has evaluated subsequent events through the date of October 7, 2026, the date the condensed consolidated financial statements were issued, and no other events require disclosure in the condensed consolidated financial statements.
See Note 1 with respect to the one-for-12 reverse split of the Company's common stock and the reduction in authorized shares of common stock.
In September 2026, the Company issued a convertible note in the principal amount of $
| 45 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes appearing elsewhere in this report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements.” Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in “Risk Factors” included in our annual report on Form 10-K for the year ended December 31, 2025. All amounts in this report are in U.S. dollars, unless otherwise noted.
Reverse Stock Split
On August 4, 2026, the Company amended its Amended and Restated Articles of Incorporation by filing a Certificate of Change with the Secretary of State of Nevada to effect a one-for-12 reverse stock split of the common stock, which became effective on August 13, 2026 and to effect a proportionate reduction of its authorized common stock from 297,225,000 shares to 24,768,750 shares, which is 1/12 of the number of previously authorized shares.
As a result of the reverse split, the number of outstanding shares of common stock was reduced from 56,906,572 shares to 4,742,167 shares of common stock. The ownership percentage of each stockholder will remain unchanged other than as a result of fractional shares. Proportional adjustments are made to both the number of shares of common stock issuable upon exercise of outstanding options or the conversion of outstanding convertible notes, as well as to the applicable exercise or conversion price.
The reverse split supported the Company’s effort to regain compliance with the minimum bid price requirement for maintaining the listing of its common stock on the Nasdaq Capital Market. On March 3, 2026, the Company received a notice from Nasdaq that the Company does not meet Nasdaq’s continued listing requirement that the Company maintain a minimum bid price of $1.00 per share. The Nasdaq rules provide that the Company has a compliance period of 180 calendar days to regain compliance. This period expired on August 31, 2026. The closing bid price of the Company’s common stock was at least $1.00 per share for ten consecutive business days prior to August 31, 2026.
Share and per share information in this Form 10-Q has been retroactively revised to reflect the reverse stock split as if it had occurred on January 1, 2025.
Nasdaq Notice
On June 22, 2026, the Company received a notice from Nasdaq that the Company does not meet the continued listing requirement that the Company maintain a minimum market value of listed securities of $35.0 million. The Nasdaq rule provides that the Company has a compliance period of 180 calendar days to regain compliance. This period expires on December 21, 2026. Nasdaq calculates the market value of listed securities by multiplying the most recent total shares outstanding by the closing bid price of the common stock. In the event the Company does not regain compliance with this rule prior to the expiration of the compliance period, it will receive written notification that its securities are subject to delisting. The reverse split does not address the minimum market value of listed securities. In the event that the Company does not meet the minimum market value of listed securities, the common stock will be delisted from Nasdaq and it will be traded on the Over-the Counter Market. If the Company’s common stock is traded on the over-the-counter market, as an OTC traded stock, it will be less attractive to investors than a Nasdaq listed security, which means it will be more difficult for the Company to raise money. Many brokerage firms prefer not to deal with OTC traded securities. As a result, it is likely to be more difficult for the Company to enter into major EPC projects, and it may affect the willingness of Companies who have entered into EPC contracts with the Company to proceed with the projects.
Impact of Tariffs and Trade Policy
Recent changes in U.S. trade policy have resulted in the implementation or threatened implementation of tariffs on certain imported goods, particularly those manufactured in China and other countries. These tariffs have increased the cost of certain raw materials and components used in our products. While we have taken steps to mitigate the impact, including working with suppliers and adjusting our pricing strategy, the tariffs are expected to result in higher input costs for our operations for the remainder of 2026. For the six months ended June 30, 2026, the tariffs did not have material effects on our cost of revenue.
| 46 |
| Table of Contents |
To the extent that the United States government imposes tariffs on products imported from China or any other foreign country and we are not able to obtain comparable products at a lower cost from domestic suppliers, our costs of these products may increase, and, depending on the tariff, such increase may be substantial. Such increases may impact both our ability to sell our systems and the price we are able to charge for systems which we sell, which could impair our margins.
We continue to monitor developments in international trade policy and may further seek to adjust our supply chain and sourcing strategies in response to evolving conditions.
Regulatory Changes, Inflation and Supply Chain Issues
The federal residential solar tax credit, officially known as the Residential Clean Energy Credit, expired on December 31, 2025. This means that homeowners who had solar energy systems installed and placed into service by this date will qualify for a 30% federal tax credit on the cost of the system. After December 31, 2025, there is no federal tax credit available for new residential solar installations. This represents a significant change from the previous plan laid out in the Inflation Reduction Act, which would have seen the credit gradually phase out until it expired in 2034. This change in the tax law may significantly reduce the incentive of residential users to install solar systems.
With the recent inflationary pressures combined with the world-wide supply chain issues, which have been accentuated by the war with Iran and the closing of the Strait of Hormuz, which severely reduced the worldwide flow of oil and increased the price of fuel, fertilizer and other products which resulted in inflationary pressures and supply chain issuer, that are affecting many domestic and foreign companies, and we expect that the inflationary pressures and supply chain issues will continue to affect our ability to sell our products, the price at which can sell products and our gross margin. To the extent that we are not able to raise our prices or to the extent that we cannot accurately project our costs when we set our prices, our gross margin and the results of our operations will be impacted.
Polysilicon is an essential raw material in the production of solar power products, principally solar panels. The costs of silicon wafers and other silicon-based raw materials have accounted for a large portion of the costs associated with solar panels. Although the price of silicon had declined in recent years, increases in the price of polysilicon have resulted in increases in the price of wafers, leading to increases in our costs. Due to the volatile market prices, we cannot assure you that the price of polysilicon will remain at its current levels particularly in view of inflationary pressures, especially if the global solar power market gains its growth momentum. Moreover, in the event of an industry-wide shortage of polysilicon, we may experience late or non-delivery from suppliers, and it may be necessary for us to purchase silicon raw materials of lower quality that may result in lower efficiencies and reduce its average selling prices and revenues. We currently are able to obtain the raw material we request, although the prices pay are increasing as a result of the inflationary pressures.
The inflationary pressures that are affecting us are not unique to our industry, and relate to the cost of raw materials, labor costs generally and the price at which we can sell our products. Because solar energy can be seen as a way to provide a homeowner with relief from the increasing utility prices for electricity, the market for solar systems generally, and our business specifically, has enabled us to sell solar systems. Thus, the effects of inflation may also affect the marketability of our solar systems to residential users and potential BESS customers which are also impacted by the effects of NEM 3.0 and the elimination of the federal residential tax credit at December 31, 2025.
Compensation costs per employee, excluding stock-based compensation, for sales, marketing and administrative personnel in our United States operations decreased approximately 6.7% for the six months ended June 30, 2026 compared to the same period in 2025. The decrease in 2026 reflected the lay-off of a portion of our employees resulting from a slowdown after we had completed installation of the increased 2023 backlog resulting orders placed in 2023 in advance of NEM 3.0 becoming effective in April 2023, as discussed below under “Effects of NEM 3.0.” The increase in 2023 also reflected the increased cost of retaining and attracting talent, and such costs may continue to increase as labor costs in California continue to increase as a result of the inflationary pressures. In addition, to the extent that inflationary pressure affects our cost of revenue and general overhead, we may face the choice of raising prices to try and maintain our margins or reduce or maintain our price structure to meet competition which would result in a lower gross margin and a drop in operating income. Supply chain issues have caused us to periodically stock up on components such as solar panels and battery systems to ensure an adequate supply to meet expected demand, putting pressure on our cash flow. We do not believe that the supply chain issues that affected our operations in prior periods are currently affecting us. We cannot assure you that such delays and increased costs will not affect our business in the future.
| 47 |
| Table of Contents |
We are seeking to address the inflationary pressures by seeking to cut overhead expenses where possible and raising prices to levels that we believe are both competitive and attractive to customers in view of the increases in utility prices in California and maintaining an inventory of raw materials to enable us to better price our products and by marketing effort directed at commercial sales. We believe that our available cash and cash equivalents and short-term investments will enable us in dealing with the effects of inflation on our business.
Effects of NEM 3.0
Net metering is a billing mechanism that credits solar energy system owners for the electricity that they add to the electricity grid. If the owner of a solar system generates more electricity than it consumes, the excess electricity is sold back to the grid. The California Public Utilities Commission has adopted the current net metering regulations, known as NEM 3.0, which became effective in April 2023. NEM 3.0 features a 75% reduction in export rates (the value of excess electricity pushed onto the grid by solar systems) from the rate set forth in the previous net metering regulations, NEM 2.0, thereby reducing the overall savings and increasing the payback period of home solar installations. The changes under NEM 3.0, which are likely to result in reduced benefits for most residential solar users, could alter the return on investment for solar customers.
In January 2024, we laid off a portion of our employees associated with the design and installation of residential solar systems in response to a slowdown in demand after NEM 3.0 took effect in April 2023. The layoff represented approximately 25% of our residential solar system design and installation team. Approximately half of the employees who were laid off had been hired in late 2022 to help install our growing backlog of residential solar systems under contract in anticipation of NEM 3.0, and the contracts representing that backlog were completed during 2023. We may need to revise our pricing metrics to reflect the change resulting from NEM 3.0 in order for the purchase of a solar system to be economically attractive to the customer, which may result in lower prices and reduced margins. Although we anticipate the near-term impact of NEM 3.0 on residential solar contracts will be offset by commercial solar contracts for which we use third-party subcontractors to complete the installations, we cannot assure you that our overall business will not be impacted by the effects of NEM 3.0. Our decrease in revenue for solar sales in the year ended December 31, 2024 from the year ended December 31, 2023 reflects both a surge in 2023 revenue in anticipation of the effectiveness of NEM 3.0 in April 2023 and a sharp decline in 2024 revenue resulting from the effectiveness of NEM 3.0.
Overview
We are an integrated solar and renewable energy company. A solar energy system retains the direct current (DC) electricity from the sun and converts it to alternating current (AC) electricity that can be used to power residential homes and commercial businesses. The solar business is based on the ability of the users of solar energy systems to save on energy costs and reduce their carbon imprint as compared with power purchased from the local electricity utility company. We were founded in 2008 to engage in the solar business in the United States, where our business is primarily conducted. Our primary business consists of the sale and installation of photovoltaic and battery backup systems for residential and commercial customers and sales of LED systems and services to government and commercial users.
Since the third quarter of 2025, our principal business was EPC services in connection with the construction of BESS systems. On July 31, 2025, we entered into the Longfellow Contract to develop a BESS facility. Based on the contract terms, the contract is expected to generate revenues of approximately $120.1 million and interest income of $7.2 million from a financing component related to milestone payments that extend beyond the project completion date. Longfellow will own and operate the facility, which will be located in Pecos County, Texas and is expected to have a storage capacity of 430 megawatt-hours. Due to a change order being discussed but still not approved, the BESS facility is expected to be completed by March 2028, although we cannot assure you that this completion date will be met or that the costs will not be greater than we anticipate. The change order, which is being finalized, may affect the price of the project and our costs. To the extent that our costs for the project increase as a result of tariffs, the war with Iran, supply chain issues or other factors, any change in the price of the project would be subject to the approval of Longfellow. To the extent that we cannot adjust our prices to reflect such additional costs, our gross margin on the project will be impacted. We have committed to make a $5.0 million capital contribution to Longfellow, in which we have an 8% equity interest. Our capital contribution for this equity interest is $5.0 million, which was due no later than December 31, 2025. Longfellow agreed to defer our payment obligation, but has not agreed to a specific date by which we must make payment to obtain our equity interest. Our cash flow from the project and the timing of our work on the project is affected by the timing of payments from Longfellow, which is affected by Longfellow’s funding for the project. Accounts receivable from Longfellow were $9.4 million at both June 30, 2026 and December 31, 2025.
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On December 31, 2025, we entered into three EPC contracts for large-scale BESS systems, two in Puerto Rico and one in Corpus Christi, Texas. Pursuant to an EPC contract with Naguabo BESS LLC, a Texas limited liability company (“Naguabo”), we will develop a BESS facility in Ceiba Municipality, Puerto Rico. The contract is expected to generate revenues of approximately $122.3 million. Naguabo will own and operate the facility, which is expected to have a storage capacity of 320 megawatt-hours. We are to have a 9% membership interest in Naguabo. Pursuant to an EPC contract with Yabucoa BESS LLC, a Texas limited liability company (“Yabucoa”), we will develop a BESS facility in Humacao Municipality, Puerto Rico. The contract is expected to generate revenues of approximately $35.9 million. Yabucoa will own and operate the facility, which is expected to have a storage capacity of 80 megawatt-hours. We are to have a 9% membership interest in Yabucoa. Pursuant to an EPC contract with Navboot Holdco, LLC, a Delaware limited liability company (“Navboot”), we will develop a BESS facility in Corpus Christi, Texas. The contract is expected to generate revenues of approximately $258.1 million. Navboot will own and operate the facility, which is expected to have a storage capacity of 600 megawatt-hours. Cash flow from long-term EPC projects is dependent upon the timing of payments from project owners which may be affected by the owners’ debt and equity financing for the project. We have not commenced work on any of these projects and we cannot assure you as to whether or when we will begin to perform these services.
In the fourth quarter of 2023, we began to work with several independent dealers which form our dealer network. Our dealer network is comprised of independent licensed sales companies that sell our products pursuant to non-exclusive agreement. The dealers sell our products as well as products sold by our competitors. The dealer handles the sales process, and once the sales agreement with the customer is signed, we install the solar system pursuant to an installation agreement with customer. The dealers earn a commission which is included in cost of revenue. Our increase in revenues from solar systems for the six months ended June 30, 2026 over the comparable period in 2025 was primarily from sales through our dealer network.
In 2024 and 2025, the California Public Utilities Commission (CPUC) launched a $280 million statewide initiative called the Self-Generation Incentive Program (“SGIP”) to help California’s low-income utility customers install battery storage and solar panel systems. We began participating in SGIP as an installer in 2025. In February 2026, SGIP administrators temporarily paused payments to installers and in May 2026 resumed the payments with a ruling to impose strict cost documentation requirements and review. As a result, we experienced a delay in collecting receivables on SGIP installations during the six months ended June 30, 2026. In the six months ended June 30, 2026, revenues from SGIP projects were approximately $7.1 million, or 47.7% of our solar energy sales and 28.4% of our total revenues. At June 30, 2026, receivables from SGIP installations accounted for approximately $6.7 million, or 37.2%, of our accounts receivable. Our sales for the SGIP were made primarily through our dealer network.
During the six months ended June 30, 2026 and 2025, approximately 75% and 58%, respectively, of our revenues from residential solar and battery contracts, and 45% and 48% of our total revenues were generated through the dealer network program. We believe that our participation in the dealer network enhances our ability to attract residential customers.
In June 2026, we entered into a transformer sale agreement with Longfellow Solar I LLC (“LF Solar”) for the supply, delivery, testing and commissioning of two main power transformers for a solar project owned by LF Solar, and received the initial deposit payment of $602,402. The fixed contract value for equipment and services is approximately $6.0 million, excluding shipping, customs duties, tariffs and other import-related costs. The transformers are custom-manufactured equipment with delivery expected during 2027.
In June 2026, we entered into an amended purchase agreement with D Volt Co., a Texas corporation to purchase equipment and services for approximately $5.3 million. At the execution of the agreement, we paid the initial deposit payment of $602,402. The agreement requires milestone payments through manufacturing, testing, shipment, and commissioning. Title and risk of loss transfer upon delivery to our designated carrier in Shanghai, China.
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We plan to launch an initiative to address the need for commercial solar powered EV charging stations in California. We believe that there is a significant market for EV charging stations in California. As of the date of this quarterly report, we have not taken any steps other than an evaluation of the market for charging stations in California. Before we can commence this business, we will need to obtain financing for the projects. If we do enter this business, we may either construct EV stations for our own account or perform the EPC services for a third party pursuant an agreement with the third party. We cannot give any assurance that we will commence the business of constructing and/or operating EV stations, that, if we seek to enter this business, we will obtain any necessary financing, that we will price any EPC services we may perform in a manner to enable us to generate a gross profit from the services or that we can or will operate this business profitably. If we enter this business and cannot operate it profitably our business will be materially and adversely affected.
Results of Operations
The following tables set forth information relating to our operating results for the three and six months ended June 30, 2026 and 2025 (dollars in thousands) and as a percentage of revenue:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||||||||
|
| 2026 |
|
| 2025 |
|
| 2026 |
|
| 2025 |
| ||||||||||||||||||||
|
| Dollars |
|
| % |
|
| Dollars |
|
| % |
|
| Dollars |
|
| % |
|
| Dollars |
|
| % |
| ||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Large-scale EPC contracts (U.S.) |
| $ | 809 |
|
|
| 7.9 | % |
| $ | - |
|
|
| 0.0 | % |
| $ | 6,010 |
|
|
| 24.0 | % |
| $ | - |
|
| 0.0 | % | |
Solar energy sales |
|
| 7,273 |
|
|
| 71.0 | % |
|
| 5,891 |
|
|
| 85.6 | % |
|
| 15,366 |
|
|
| 61.3 | % |
|
| 11,687 |
|
|
| 84.6 | % |
LED sales |
|
| 2,125 |
|
|
| 20.7 | % |
|
| 911 |
|
|
| 13.2 | % |
|
| 3,608 |
|
|
| 14.4 | % |
|
| 1,970 |
|
|
| 14.3 | % |
Financing |
|
| 37 |
|
|
| 0.4 | % |
|
| 81 |
|
|
| 1.2 | % |
|
| 90 |
|
|
| 0.3 | % |
|
| 153 |
|
|
| 1.1 | % |
Total revenues |
|
| 10,244 |
|
|
| 100.0 | % |
|
| 6,883 |
|
|
| 100.0 | % |
|
| 25,074 |
|
|
| 100.0 | % |
|
| 13,810 |
|
|
| 100.0 | % |
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Large-scale EPC contracts (U.S.) |
|
| 756 |
|
|
| 7.4 | % |
|
| - |
|
|
| 0.0 | % |
|
| 6,007 |
|
|
| 24.0 | % |
|
| - |
|
|
| 0.0 | % |
Solar energy sales |
|
| 5,268 |
|
|
| 51.4 | % |
|
| 5,528 |
|
|
| 80.3 | % |
|
| 10,531 |
|
|
| 41.9 | % |
|
| 10,043 |
|
|
| 72.7 | % |
LED sales |
|
| 1,806 |
|
|
| 17.6 | % |
|
| 750 |
|
|
| 10.9 | % |
|
| 3,076 |
|
|
| 12.3 | % |
|
| 1,744 |
|
|
| 12.6 | % |
Total cost of revenues |
|
| 7,830 |
|
|
| 76.4 | % |
|
| 6,278 |
|
|
| 91.2 | % |
|
| 19,614 |
|
|
| 78.2 | % |
|
| 11,787 |
|
|
| 85.3 | % |
Gross profit |
|
| 2,414 |
|
| 23.6 | % |
|
| 605 |
|
|
| 8.8 | % |
|
| 5,460 |
|
|
| 21.8 | % |
|
| 2,023 |
|
|
| 14.7 | % | |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing (US) |
|
| 50 |
|
|
| 0.5 | % |
|
| 71 |
|
|
| 1.0 | % |
|
| 92 |
|
|
| 0.4 | % |
|
| 150 |
|
|
| 1.1 | % |
General and administrative (US) |
|
| 2,306 |
|
|
| 22.5 | % |
|
| 2,136 |
|
|
| 31.0 | % |
|
| 4,946 |
|
|
| 19.7 | % |
|
| 4,537 |
|
|
| 32.9 | % |
General and administrative (China) |
|
| 253 |
|
|
| 2.5 | % |
|
| 166 |
|
|
| 2.4 | % |
|
| 520 |
|
|
| 2.1 | % |
|
| 261 |
|
|
| 1.9 | % |
China legal judgment |
|
| 4,264 |
|
|
| 41.6 | % |
|
| - |
|
|
| 0.0 | % |
|
| 4,264 |
|
|
| 17.0 | % |
|
| - |
|
|
| 0.0 | % |
Total operating expenses |
|
| 6,873 |
|
|
| 67.1 | % |
|
| 2,373 |
|
|
| 34.4 | % |
|
| 9,822 |
|
|
| 39.2 | % |
|
| 4,948 |
|
|
| 35.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations (US) |
|
| 58 |
|
|
| 0.6 | % |
|
| (1,602 | ) |
|
| (23.3 | )% |
|
| 422 |
|
|
| 1.7 | % |
|
| (2,664 | ) |
|
| (19.3 | )% |
Income (loss) from operations (China) |
|
| (4,517 | ) |
|
| (44.1 | )% |
|
| (166 | ) |
|
| (2.4 | )% |
|
| (4,784 | ) |
|
| (19.1 | )% |
|
| (261 | ) |
|
| (1.9 | )% |
Equity in income (loss) of solar project companies |
|
| (42 | ) |
|
| (0.4 | )% |
|
| 144 |
|
|
| 2.1 | % |
|
| (282 | ) |
|
| (1.1 | )% |
|
| 130 |
|
|
| 0.9 | % |
Gain on debt extinguishment |
|
| 13 |
|
|
| 0.1 | % |
|
| (314 | ) |
|
| (4.6 | )% |
|
| 54 |
|
|
| 0.2 | % |
|
| (314 | ) |
|
| (2.3 | )% |
Interest income |
|
| 9 |
|
|
| 0.1 | % |
|
| 227 |
|
|
| 3.3 | % |
|
| 20 |
|
|
| 0.1 | % |
|
| 347 |
|
|
| 2.5 | % |
Interest expense |
|
| (249 | ) |
|
| (2.5 | )% |
|
| (363 | ) |
|
| (5.3 | )% |
|
| (547 | ) |
|
| (2.2 | )% |
|
| (732 | ) |
|
| (5.3 | )% |
Other income (loss), net |
|
| 46 |
|
|
| 0.5 | % |
|
| 70 |
|
|
| 1.1 | % |
|
| 123 |
|
|
| 0.5 | % |
|
| 129 |
|
|
| 1.0 | % |
Income (loss) before income taxes |
|
| (4,682 | ) |
|
| (45.7 | )% |
|
| (2,004 | ) |
|
| (29.1 | )% |
|
| (4,994 | ) |
|
| (19.9 | )% |
|
| (3,365 | ) |
|
| (24.4 | )% |
Income tax provision (benefit) |
|
| (26 | ) |
|
| (0.3 | )% |
|
| (106 | ) |
|
| (1.5 | )% |
|
| (32 | ) |
|
| (0.1 | )% |
|
| (170 | ) |
|
| (1.2 | )% |
Net income (loss) |
|
| (4,656 | ) |
|
| (45.4 | )% |
|
| (1,898 | ) |
|
| (27.6 | )% |
|
| (4,962 | ) |
|
| (19.8 | )% |
|
| (3,195 | ) |
|
| (23.2 | )% |
Currency translation adjustment |
|
| (34 | ) |
|
| (0.4 | )% |
|
| 3 |
|
|
| 0.1 | % |
|
| (22 | ) |
|
| (0.1 | )% |
|
| 3 |
|
|
| 0.1 | % |
Comprehensive income (loss) |
| $ | (4,690 | ) |
|
| (45.8 | )% |
| $ | (1,895 | ) |
|
| (27.5 | )% |
| $ | (4,984 | ) |
|
| (19.9 | )% |
| $ | (3,192 | ) |
|
| (23.1 | )% |
| 50 |
| Table of Contents |
Three and Six Months Ended June 30, 2026 and 2025
The following table set forth information relating to our revenue and gross profit results for the three and six months ended June 30, 2026 and 2025 (dollars in thousands):
|
| Three Months Ended June 30, |
|
|
|
|
| % |
|
| Six Months Ended June 30, |
|
|
|
|
| % |
| ||||||||||||||
|
| 2026 |
|
| 2025 |
|
| Change |
|
| Change |
|
| 2026 |
|
| 2025 |
|
| Change |
|
| Change |
| ||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Large-scale EPC contracts (U.S.) |
| $ | 809 |
|
| $ | - |
|
| $ | 809 |
|
| - | % |
| $ | 6,010 |
|
| $ | - |
|
| $ | 6,010 |
|
| - | % | ||
Solar energy sales (US) |
|
| 7,273 |
|
|
| 5,891 |
|
| $ | 1,382 |
|
|
| 23.5 | % |
|
| 15,366 |
|
|
| 11,687 |
|
|
| 3,679 |
|
|
| 31.5 | % |
LED sales (US) |
|
| 2,125 |
|
|
| 911 |
|
|
| 1,214 |
|
|
| 133.3 | % |
|
| 3,608 |
|
|
| 1,970 |
|
|
| 1,638 |
|
|
| 83.1 | % |
Financing (US) |
|
| 37 |
|
|
| 81 |
|
|
| (44 | ) |
|
| (54.3 | )% |
|
| 90 |
|
|
| 153 |
|
|
| (63 | ) |
|
| (41.2 | )% |
Total revenues |
|
| 10,244 |
|
|
| 6,883 |
|
|
| 3,361 |
|
|
| 48.8 | % |
|
| 25,074 |
|
|
| 13,810 |
|
|
| 11,264 |
|
|
| 81.6 | % |
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Large-scale EPC contracts (U.S.) |
|
| 756 |
|
|
| - |
|
|
| 756 |
|
| - | % |
|
| 6,007 |
|
|
| - |
|
|
| 6,007 |
|
| - | % | ||
Solar energy sales |
|
| 5,268 |
|
|
| 5,528 |
|
|
| (260 | ) |
|
| (4.7 | )% |
|
| 10,531 |
|
|
| 10,043 |
|
|
| 488 |
|
|
| 4.9 | % |
LED sales |
|
| 1,806 |
|
|
| 750 |
|
|
| 1,056 |
|
|
| 140.8 | % |
|
| 3,076 |
|
|
| 1,744 |
|
|
| 1,332 |
|
|
| 76.4 | % |
Total cost of revenues |
|
| 7,830 |
|
|
| 6,278 |
|
|
| 1,552 |
|
|
| 24.7 | % |
|
| 19,614 |
|
|
| 11,787 |
|
|
| 7,827 |
|
|
| 66.4 | % |
Gross profit |
| $ | 2,414 |
| $ | 605 |
|
| $ | 1,809 |
|
| 299.0 | % |
| $ | 5,460 |
|
| $ | 2,023 |
|
| $ | 3,437 |
|
| 169.9 | % | |||
Revenues
Revenues for the three months ended June 30, 2026 were $10.2 million, an increase of $3.4 million or 48.8% from $6.9 million in the three months ended June 30, 2025. The increase resulted from revenue of $809,000 from the Longfellow Contract to develop a battery energy storage system (“BESS”) facility in Texas, a $1.4 million increase in solar energy and battery sales, a $1.2 million increase in LED sales, offset by a $44,000 decrease in financing revenue. We did not have any large-scale EPC sales prior to the third quarter of 2025. Our revenue from residential and commercial solar energy and battery sales increased from $5.9 million for the three months ended June 30, 2025 to $7.3 million for the three months ended June 30, 2026, a 23.5% increase, primarily as a result of the sales growth related to the SGIP program for low income residential homeowners that began in the latter half of 2025. The increase in the solar energy and battery sales in the three months ended June 30, 2026 reflects a 13.7% increase in the number of systems completed and a 53.8% increase in the wattages deployed. During the three months ended June 30, 2026 and 2025, our battery only sales were $181,000 and $864,000, respectively. Battery sales refer to the sale of batteries sold other than as a part of a solar system.
Revenues for the six months ended June 30, 2026 were $25.1 million, an increase of $11.3 million or 81.6% from $13.8 million in the six months ended June 30, 2025. The increase resulted from revenue of $6.0 million from the large-scale EPC contract with Longfellow to develop a BESS facility in Texas, a $3.7 million increase in solar energy and battery sales, a $1.6 million increase in LED sales, offset by a $63,000 decrease in financing revenue. We did not have any large-scale EPC sales prior to the third quarter of 2025. Our revenue from residential and commercial solar energy and battery sales increased from $11.7 million for the six months ended June 30, 2025 to $15.4 million for the six months ended June 30, 2026, a 31.5% increase, primarily as a result of the sales growth related to the SGIP program for low income residential homeowners that began in the latter half of 2025. The increase in the solar energy and battery sales in the six months ended June 30, 2026 reflects a 29.8% increase in the number of systems completed and a 38.5% increase in the wattages deployed. During the six months ended June 30, 2026 and 2025, our battery only sales were $359,000 and $1.2 million, respectively. Battery sales refer to the sale of batteries sold other than as a part of a solar system.
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As a result of the continued relatively high interest rate environment and the expiration of the federal residential solar tax credit on December 31, 2025, we expect the revenue growth from our residential sales to level off in 2026 compared to the prior period. However, given the launch of the SGIP program for qualifying low-income households that began in June 2025, we were able to offset a significant portion of the decline of revenue growth from our residential sales in 2026 with residential sales that participated in the SGIP program, though we expect this will level off in 2026. We are also looking to offset the potential residential sales decrease with commercial sales and sales of large-scale EPC projects. On July 31, 2025, we entered into an EPC contract with Longfellow to develop a BESS facility. Based on terms of the agreement, the contract is expected to generate revenues and finance income of approximately $127.3 million for us and we expect to complete the work by March 2028. During the three months ended June 30, 2026, we recognized $809,000 in revenues related to this project. Total revenue recognized on the Longfellow Contract from the project inception through June 30, 2026 was $66.2 million, and we expect to recognize approximately $54.0 million of revenue on Longfellow for the remainder of 2026 and 2027.
Our LED revenue increased by $1.2 million or 133.3% to $2.1 million for the three months ended June 30, 2026 from $911,000 for the three months ended June 30, 2025, and increased $1.6 million or 83.1% to $3.6 million for the six months ended June 30, 2026 from $2.0 million for the six months ended June 30, 2025, primarily resulting from the increase in the number of LED projects with a higher average sales price. LED revenues include LED product sales and LED consulting revenues which are expected to continue to fluctuate based on the number of LED projects awarded which is based on the bidding process and specific customer purchase requirements and timing. Revenue from our LED business fluctuates period to period.
We have not originated any loans to our solar customers since 2022. As a result, our finance revenue for the three months ended June 30, 2026 and 2025 was $37,000 and $81,000, respectively, and for the six months ended June 30, 2026 and 2025 was $90,000 and $153,000, respectively, from our portfolio of solar loans. Finance revenue decreases as loans in our portfolio are paid since we are not making any new loans.
Cost of revenue and gross profit
Our cost of revenue for the three months ended June 30, 2026 was $7.8 million, an increase of $1.6 million, or 24.7% from $6.3 million for the three months ended June 30, 2025. Our cost of revenue for the six months ended June 30, 2026 was $19.6 million, an increase of $7.8 million, or 66.4% from $11.8 million for the six months ended June 30, 2025. The increase in cost of revenue was largely driven by the EPC revenue from EPC services pursuant to the Longfellow Contract. The remaining increase in cost of revenue was the result of the increased sales in the residential and commercial solar energy systems and LED sales.
The overall gross margin increased to 23.6% for the three months ended June 30, 2026 from 8.8% for the three months ended June 30, 2025, and increased to 21.8% for the six months ended June 30, 2026 from 14.7% in the six months ended June 30, 2025. During the three months ended June 30, 2026, our gross margin from the sale of residential and commercial solar energy systems as well as from our LED sales improved which offsets the decrease in the gross margin related to the Longfellow Contract. The current lower gross margin from the Longfellow Contract was primarily due to the costs recognized related to the Longfellow project. We recognize revenue, but not profit, on uninstalled materials. The revenue on uninstalled materials is recognized by us when the control is transferred equal to the cost of the uninstalled materials. This decrease in gross margin on the Longfellow Contract was partially offset by an increase in the gross margin from our sales of solar energy systems as well as from LED sales. We have no cost of revenue with respect to interest income on customer loans.
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Operating expenses
Sales and marketing expenses for the three months ended June 30, 2026 decreased to $50,000, a decrease of $21,000 or 29.9% from $71,000 in the comparable period of 2025. Sales and marketing expenses were 0.5% of revenue for the three months ended June 30, 2026 compared to 1.0% for the three months ended June 30, 2025. Sales and marketing expenses for the six months ended June 30, 2026 decreased to $92,000, a decrease of $58,000 or 38.4% from $150,000 in the comparable period of 2025. Sales and marketing expenses were 0.4% of revenue for the six months ended June 30, 2026 compared to 1.1% for the six months ended June 30, 2025. Our sales and marketing expenses fluctuate based on the types of marketing and promotion initiatives we deploy. Our dealer network enables us to reduce our sales and marketing costs. We expect to continue to be selective in our sales and marketing expenses for the remainder of 2026.
General and administration expenses for the United States operations for the three months ended June 30, 2026 increased $170,000 or 8.0%, to $2.3 million compared to $2.1 million for the three months ended June 30, 2025, representing 22.5% of revenue for the three months ended June 30, 2026 compared to 31.0% of revenue for the three months ended June 30, 2025. General and administration expenses for the United States operations for the six months ended June 30, 2026 increased $409,000 or 9.0%, to $4.9 million compared to $4.5 million for the six months ended June 30, 2025, representing 19.7% of revenue for the six months ended June 30, 2026 compared to 32.9% of revenue for the six months ended June 30, 2025. The increase during the six months ended June 30, 2026 is attributed to the increase in rent expense associated with our lease amendment for our Riverside office beginning on January 1, 2026, and the additional expense related to our investor relations advertising campaign. Our general increase, in general and administrative expenses in 2026 reflects the cost of compliance and other regulatory costs associated with being a public reporting company which is expected to continue for us. The decrease in the percentage of both sales and marketing and general and administrative expenses as a percentage of revenue in the six months ended June 30, 2026 reflects revenue of approximately $6.0 million from the Longfellow Contract.
General and administrative expenses relating to the China operations were $253,000 in the three months ended June 30, 2026 compared to $166,000 in the three months ended June 30, 2025, an increase of $86,000 or 51.9%. General and administrative expenses relating to the China operations were $520,000 in the six months ended June 30, 2026 compared to $261,000 in the six months ended June 30, 2025, an increase of 259,000 or 99.2%. Such increase during the three and six months ended June 30, 2026 is attributed to the court costs, travel costs, and legal fees associated with the ongoing litigation with SPIC to enforce the collection of the remaining receivable from SPIC.
China legal judgment
Our expenses in China for the three and six months ended June 30, 2026 reflected a charge of approximately $4.3 million related to farmland occupation tax litigation in the PRC for four photovoltaic projects completed in 2020 and 2021. The charge resulted from three adverse court judgments issued in June and August 2026 that determined that our subsidiary is responsible for the additional farmland occupation taxes.
We recorded the charge of $4.3 million because, as of June 30, 2026, management determined, based on court rulings in June and August 2026, that a loss was probable and reasonably estimable based on the judgments and other information available at that date. See Part II, Item 1. Legal Proceedings for discussion of the litigation.
Income (loss) from operations
As a result of the factors described above, our income from operations in the United States was $58,000 for the three months ended June 30, 2026, compared to a loss from operations of $1.6 million in the three months ended June 30, 2025, and income from operations of $422,000 for the six months ended June 30, 2026, compared to loss from operations of $2.7 million in the six months ended June 30, 2025, which is primarily attributed to the increase in our revenues and the related gross profit. Our loss from operations for our China operations was $4.5 million for the three months ended June 30, 2026, compared to a loss from operations of $166,000 in the three months ended June 30, 2025. Our loss from operations for our China operations was $4.8 million for the six months ended June 30, 2026, compared to a loss from operations of 261,000 in the six months ended June 30, 2025.
Equity in income (loss) from unconsolidated entities
Equity in income (loss) from unconsolidated entities relates to our China operations and comprises the equity in income (loss) from three unconsolidated project companies in which we have a non-controlling 30% interest. The equity in income (loss) for the three months ended June 30, 2026 was a loss of $42,000 compared to an income of $144,000 in the three months ended June 30, 2025. The equity in income (loss) for the six months ended June 30, 2026 was a loss of $282,000 compared to an income of $130,000 in the six months ended June 30, 2025. The change from income in the three and six months ended June 30, 2025 to a loss in the same periods in 2026 results from lower revenue of the unconsolidated entities attributable to a change in electricity rate from a fixed rate to a variable rate.
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Gain (loss) on debt extinguishment
For the three months ended June 30, 2026, our gain on debt extinguishment was $13,000 related to the exchange of $500,000 of secured EB-5 notes payable to a related party for 4% convertible notes in the same principal amount. For the six months ended June 30, 2026, our gain on debt extinguishment was $54,000 related to the exchange of $2.0 million of secured EB-5 notes payable to a related party for 4% convertible notes in the same principal amount.
For the three and six months ended June 30, 2025, our loss on debt extinguishment was $314,000 and relates to the exchange of the $900,000 unsecured loan to shares of our common stock because the purchase price for the shares is less than its fair market value
Interest expense, net
Interest expense, net, for the three months ended June 30, 2026 was $240,000, an increase of $104,000, or 76.8%, from the three months ended June 30, 2025. Interest expense, net, for the six months ended June 30, 2026 was $527,000, an increase of $142,000, or 36.9%, from the six months ended June 30, 2025. For the three months ended June 30, 2026, total interest income declined $218,000 as a result of the payoff of held to maturity debt investments, whereas the total interest expense decreased by $114,000. For the six months ended June 30, 2026, total interest income declined $327,000 as a result of the payoff of held to maturity debt investments, whereas the total interest expense decreased by $185,000. The overall decline in interest expense corresponds to the decline in the two related party EB-5 loan balances as well as the decline in the convertible note balances as scheduled annual principal payments were made. Our interest expense in the six months ended June 30, 2026 primarily includes interest at 3% on two EB-5 loans from related parties in the United States with a total principal balance of $8.5 million at June 30, 2026, interest at 4% on convertible notes issued to former limited partners of CEF and CEF II in transactions in which former limited partners of CEF and CEF II accepted 4% convertible notes issued by SolarMax and the subsidiary that borrowed the funds from CEF with an aggregate principal balance of $16.1 million at June 30, 2026. The convertible notes issued to the former limited partners of CEF were issued as payment of the former limited partner’s capital account in CEF and were issued in connection with cancellation of debt to CEF of an equal amount. The convertible notes are secured by the same collateral as the notes to CEF. Interest was recognized at the stated interest rate of 4%. Because the Company is in default in the payment of principal and interest on convertible notes in the principal amount of $13.7 million at June 30, 2026, if the holders of the notes exercise their rights to demand prepayment, interest at 12% per annum will be due. See the paragraph Event of Default on Convertible Notes in Note 14 to Consolidated Financial Statements.
Other income (expenses), net
During the three months ended June 30, 2026, other income was $46,000 consisting primarily of foreign currency transaction gains for our United States operations intercompany receivable denominated in RMB. During the three months ended June 30, 2025, other income was $70,000 consisting primarily of $131,000 of foreign currency transaction gains for our United States operations intercompany receivable denominated in RMB, offset with a loss on a solar asset disposal in the United States segment of $65,000.
During the six months ended June 30, 2026, other income was $123,000 consisting primarily of foreign currency transaction gains for our United States operations intercompany receivable denominated in RMB. During the six months ended June 30, 2025, other income was $129,000 consisting primarily of $228,000 of foreign currency transaction gains for our United States operations intercompany receivable denominated in RMB, offset with a loss on a solar asset disposal in the United States segment of $65,000 and a foreign currency elimination adjustment of $37,000.
Income tax benefit (provision)
For the three months ended June 30, 2026 and 2025, our United States operations reported an income tax expense of $2,000 and $0, respectively, attributable to the Texas franchise tax and other minimum state tax liabilities.
For the six months ended June 30, 2026 and 2025, our United States operations reported an income tax expense of $19,000 and $6,000, respectively, attributable to the Texas franchise tax and other minimum state tax liabilities.
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For our China operations, an income tax benefit of approximately $29,000 and $106,000 was reported for the three months ended June 30, 2026 and 2025, respectively. For our China operations, an income tax benefit of approximately $52,000 and $176,000 was reported for the six months ended June 30, 2026 and 2025, respectively. The decrease in our income tax benefit for the six months ended June 30, 2026, compared with the corresponding period in 2025, was primarily attributable to a valuation allowance true-up recorded in the prior-year period, with no comparable adjustment in the current-year period. The change in our effective income tax rate also reflects changes in pretax book income (loss) between the periods.
Net income (loss)
As a result of the foregoing, we had a consolidated net loss of $4.7 million, or $(0.98) per share (basic and diluted), for the three months ended June 30, 2026, compared with a consolidated net loss of $1.9 million, or $(0.50) per share (basic and diluted), for the three months ended June 30, 2025.
As a result of the foregoing, we had a consolidated net loss of $5.0 million, or $(1.05) per share (basic and diluted), for the six months ended June 30, 2026, compared with a consolidated net loss of $3.2 million, or $(0.85) per share (basic and diluted), for the six months ended June 30, 2025.
Currency translation adjustment
Although our functional currency is the U.S. dollar, the functional currency of our China subsidiaries is the RMB. The financial statements of our subsidiaries are translated to U.S. dollars using period end exchange rates for assets and liabilities, and average exchange rates for the period for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations and reflects changes in the exchange rates between U.S. dollars and RMB.
As a result of foreign currency translations, we reported net foreign currency translation gains (losses) of $(34,000) and $3,000 for the three months ended June 30, 2026 and 2025, respectively, and $(22,000) and $3,000 for the six months ended June 30, 2026 and 2025, respectively.
Liquidity and Capital Resources
The following tables show consolidated cash flow information for the six months ended June 30, 2026 and 2025 (dollars in thousands):
|
| Six Months Ended June 30, |
|
| $ Increase |
| ||||||
|
| 2026 |
|
| 2025 |
|
| (Decrease) |
| |||
Consolidated cash flow data: |
|
|
|
|
|
|
|
|
| |||
Net cash provided by (used in) operating activities |
| $ | (5,156 | ) |
| $ | (380 | ) |
| $ | (4,776 | ) |
Net cash provided by (used in) investing activities |
|
| (469 | ) |
|
| 138 |
|
|
| (607 | ) |
Net cash provided by (used in) financing activities |
|
| (11 | ) |
|
| 1,553 |
|
|
| (1,564 | ) |
Net increase (decrease) in cash and cash equivalents and restricted cash |
|
| (5,808 | ) |
|
| 1,131 |
|
|
| (6,939 | ) |
Net increase (decrease) in cash and cash equivalents and restricted cash excluding foreign exchange effect |
| $ | (5,637 | ) |
| $ | 1,310 |
|
| $ | (6,947 | ) |
Operating Activities
Net cash used in operating activities for the six months ended June 30, 2026 was $5.2 million, compared to net cash used in operating activities for the six months ended June 30, 2025 of $380,000. The cash used by operations for the six months ended June 30, 2026, resulting from our net loss of $5.0 million, non-cash expense of $974,000, and $1.2 million of cash used in our operating assets and liabilities.
Net cash used by operations for the six months ended June 30, 2025 of $380,000 resulted from net loss of $3.2 million, non-cash expense of $983,000, and $1.8 million of cash provided by our operating assets and liabilities.
We expect the fluctuations of working capital over time to vary based on the project status and the related project billings of the projects in progress.
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Non-cash adjustments changes for the six months ended June 30, 2026 primarily reflected:
| ● | $411,000 net increase resulting from equity in losses from our equity investments. |
|
|
|
| ● | $368,000 net decrease related to the gain on debt extinguishment. |
|
|
|
| ● | $224,000 net decrease in depreciation and amortization expense which includes loan and debt discounts amortization. |
|
|
|
| ● | $133,000 increase in deferred income taxes. |
|
|
|
| ● | $104,000 net increase associated with loss provisions for bad debts, loan losses, inventories, warranty, customer care and production guaranty. |
|
|
|
| ● | $65,000 decrease in loss on disposal of property and equipment |
Changes in operating assets and liabilities for the six months ended June 30, 2026:
| ● | $8.6 million decrease in cash from a net increase contract assets related to projects for which the performance obligations have not been satisfied. |
|
|
|
| ● | $7.5 million decrease in cash from a net increase accounts receivable, other receivables and other current assets |
|
|
|
| ● | $4.0 million increase in cash from a net increase in accrued expenses and other payables and other liabilities. |
|
|
|
| ● | $8.3 million increase in cash from an increase accounts payable. |
|
|
|
| ● | $732,000 increase in cash from a decrease in inventories. |
|
|
|
| ● | $284,000 increase in cash from an increase in operating lease liabilities. |
|
|
|
| ● | $12,000 decrease in cash from an increase in customer loans receivable. |
|
|
|
| ● | $23,000 decrease in cash from an increase in other assets |
Investing Activities
Net cash used by investment activities for the six months ended June 30, 2026 was $469,000 consisting of short-term advances of $2.4 million, proceeds from repayment of principal on short-term advances of $1.4 million, and debt repayments received on our held to maturity debt investments. Net cash used by investing activities for the six months ended June 30, 2025 was approximately $138,000, consisting of debt repayments received on our held to maturity debt investments.
Financing Activities
Net cash used in financing activities for the six months ended June 30, 2026 was $11,000, consisting of $1.1 million of cash proceeds from the issuance of shares of common stock in private offerings, offset by $1.1 million principal payments on convertible notes, and $7,000 payment on equipment leases.
Net cash provided by financing activities for the six months ended June 30, 2025 was $1.6 million, consisting of $2.0 million of cash proceeds from the issuance of shares of common stock in private offerings, offset by $250,000 principal payments on convertible notes, $138,000 payment of accrued legal settlement, and $9,000 payment on equipment leases.
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Cash and Cash Equivalents and Restricted Cash
The following table sets forth, our cash and cash equivalents and restricted cash held by our United States and China operations at June 30, 2026 and December 31, 2025 (dollars in thousands):
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||
|
|
|
|
|
|
| ||
U.S. Operations |
|
|
|
|
|
| ||
Insured cash |
| $ | 404 |
|
| $ | 909 |
|
Uninsured cash |
|
| 302 |
|
|
| 1,899 |
|
|
|
| 706 |
|
|
| 2,808 |
|
China Operations |
|
|
|
|
|
|
|
|
Insured cash |
|
| 233 |
|
|
| 309 |
|
Uninsured cash |
|
| 1,500 |
|
|
| 5,130 |
|
|
|
| 1,733 |
|
|
| 5,439 |
|
Total cash and cash equivalents and restricted cash |
|
| 2,439 |
|
|
| 8,247 |
|
Less: Cash and cash equivalents |
|
| 2,158 |
|
|
| 7,967 |
|
Restricted cash |
| $ | 281 |
|
| $ | 280 |
|
We currently do not plan to repatriate any cash or earnings from any of our non-United States operations because we presently intend to utilize such funds within China as well as to pay China suppliers from whom we acquire materials we require for our U.S. operations. Therefore, we do not accrue any China exit taxes related to the repatriation. However, in the event that we terminate our China operations and repatriate the cash to the United States, we will owe such taxes.
Under applicable PRC law and regulations, our PRC subsidiaries are required to set aside at least 10% of their respective accumulated after-tax profits, if any, each year, to fund certain reserve funds, until the aggregate amount of such fund reaches 50% of its registered capital before they may pay dividends. We do not believe that this restriction will impair our operations since we do not anticipate that we will use the cash generated from our PRC operations in those operations and we do not plan to repatriate such funds to the United States.
We invested RMB 5.0 million, or approximately $688,000, in a 5% note due June 25, 2024 issued by Qingdao Xiaohuangbei Technology Co., Ltd. (“Qingdao”), a PRC-based company. The initial maturity date was extended initially to December 25, 2024 and further subsequently extended to December 31, 2025. All of the extensions were at the request of the respective makers of the notes. The note was paid in December 2025 and January 2026.
Borrowings and Stock Issuances
At June 30, 2026, our current liabilities included secured convertible notes in the principal amount of $14.2 million and secured notes to related parties of $6.5 million.
In January 2026, we issued 166,667 shares of common stock, at a discount of 25% from the market price on the date of the investment, at a price of $6.576. Under the Nasdaq regulations, we may not be able to raise any significant funding from the sale of common stock at a discount from market in the near future without stockholder approval.
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EB-5 Loans
On January 3, 2012, CEF entered into a loan agreement with SREP, one of our United States subsidiaries, pursuant to which CEF advanced $45.0 million. On August 26, 2014, CEF II entered into a loan agreement with LED, another United States subsidiary, for up to $13.0 million. CEF II advanced $10.5 million pursuant to the agreement. The loans from CEF and CEF II bear interest at 3% per annum. The loans are secured by a security interest in the accounts and inventory of the borrowing subsidiary. CEF and CEF II are limited partnerships, the general partner of which is Inland Empire Renewable Energy Regional Center, a related party. The limited partners of both CEF and CEF II are investors who are not related parties who made a capital contribution to CEF or CEF II pursuant to the United States EB-5 immigration program. The EB-5 immigrant investor visa is a federal program that grants green cards and a path to citizenship to foreign investors who invest at least $500,000 toward job-creating projects. Under this program, which is administered by the United States Customs and Immigration Service, entrepreneurs (and their spouses and unmarried children under 21) are eligible to apply for a green card (permanent residence) if they make the necessary investment in a commercial enterprise in the United States and plan to create or preserve ten permanent full-time jobs for qualified United States workers. We are a commercial enterprise that creates permanent full-time jobs in the United States.
The loans from CEF and CEF II become due, as to the investment of each limited partner, four years from the date of the loan and may be extended as may be necessary to meet applicable USCIS immigrant investor visa requirements, which will be the date that the limited partner is eligible for a green card. Under the limited partnership agreements for CEF and CEF II, the limited partners have the right to demand repayment of their capital account when the petition is approved, which demand may trigger a maturity of the loan from CEF or CEF II in the amount of the limited partner’s investment. The initial four-year term of notes in the principal amount of $55.5 million, which were issued to CEF and CEF II, and had expired prior to December 31, 2023 and are on extension until the limited partners meet applicable immigrant investor visa requirements. We cannot determine the period of the extensions. As of June 30, 2026, limited partners whose capital contributions funded loans of $43.5 million had received their green card approval and their extensions expired and one limited partner whose capital contribution funded $500,000 had withdrawn from CEF II and the limited partner’s capital contribution was returned. The petitions of limited partners of CEF whose capital contribution funded loans of $8.0 million are pending.
As the loans matured and the limited partners requested return of their capital contribution, we offered the limited partners, in lieu of the payment by the limited partnership, a convertible note with a term of five years, with 20% of the principal amount being due on each of the first, second, third, fourth and fifth anniversaries of the date of issuance. The notes are secured by the same assets that secured the notes issued to CEF. As of June 30, 2026, we had issued convertible notes in the principal amount of $44.0 million to former limited partners of CEF and CEF II, of which principal payments of $25.0 million had been made on the anniversary of the respective dates of issuance, and convertible notes in the principal amount of $3.0 million had been purchased by us for $2.1 million, leaving convertible notes in the principal amount of $16.1 million outstanding at June 30, 2026. As of June 30, 2026, notes to CEF and CEF II in the aggregate principal amount of $8.5 million were outstanding and convertible notes in the principal amount of $16.1 million were outstanding. The Company is in default in the payment of principal and interest on convertible notes in the principal amount of $13.7 million at June 30, 2026, and the holders of these notes have the right to demand prepayment and exercise their rights with respect to the collateral. See the paragraph Event of Default on Convertible Notes in Note 14 of Notes to Consolidated Financial Statements.
Convertible Notes
We have issued 4% secured subordinated convertible notes to former limited partners of CEF and CEF II, pursuant to exchange agreements with the limited partners. The limited partners accepted the notes in lieu of cash payments of their capital contribution which resulted in a reduction of SREP’s and LED’s notes to CEF and CEF II, respectively, in the same amount, reducing the outstanding EB-5 loan balance. Payment of the notes is secured by a security interest in SREP’s and LED’s accounts and inventory, which are the same assets as secure the original note to CEF and CEF II. The convertible notes are payable in equal installments on the first, second, third, fourth and fifth anniversaries of the date of issuance. The convertible notes made prior to, or on or about the date of, our initial public offering are convertible into common stock at a conversion price of $38.40, which is 80% of our initial public offering price of $48.00 per share. The convertible notes made after our initial public offering are convertible into common stock at a conversion price equal to 80% of the average closing price of our common stock for the ten trading days preceding the date of the exchange agreement with the limited partner which conversion prices range from $6.06 to $108.84, with an average conversion price of $39.54. The convertible notes may be converted into common stock at the first, second, third, fourth and fifth anniversaries of the date of issuance, but not earlier than six months from the date of our initial public offering or for convertible notes issued after the initial public offering, six months after the issuance of the notes.
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All convertible notes issued contained redemption put features that allow the holders of the convertible notes the right to receive, for each conversion share that would have been issuable upon conversion immediately prior to the occurrence of an effective change in control event defined as a fundamental transaction, the number of shares of common stock of the successor or acquiring corporation or of ours, if it is the surviving corporation, and any additional consideration receivable as a result of such fundamental transaction by a holder of the number of shares of common stock for which these convertible notes are convertible immediately prior to such fundamental transaction. We evaluated the redemption put feature contained in the convertible notes under the guidance of ASC 815 and concluded that the requirements for contingent exercise provisions as well as the settlement provision for scope exception in ASC 815-10-15-74 has been meet. Accordingly, the redemption put features contained in the convertible notes were not bifurcated and accounted for as freestanding derivative instruments.
During the three months ended June 30, 2026, the Company recognized a gain on debt of extinguishment in the amount of approximately $13,000, relating to the issuance of convertible note in the principal amount of $500,000 to former limited partners of CEF I and II in exchange for a $500,000 reduction of the note from CEF I and II. No gain or loss on debt extinguishment was recognized for the three months ended June 30, 2025 as there was no issuance of convertible notes in exchange for a reduction of the note from CEF I and II.
During six months ended June 30, 2026, the Company recognized a gain on debt of extinguishment in the amount of approximately $54,000, relating to the issuance of convertible note in the principal amount of $2.0 million to former limited partners of CEF I and II in exchange for a $2.0 million reduction of the note from CEF I and II. No gain or loss on debt extinguishment was recognized for the six months ended June 30, 2025 as there was no issuance of convertible notes in exchange for a reduction of the note from CEF I and II.
Default Event and Remedies Upon Event of Default
From April 2023 through June 30, 2026, we did not pay annual principal installment payments and related quarterly interest payments which is an event of default on convertible notes. As of June 30, 2026 and December 31, 2025, the aggregate principal amount of the notes in default was $13.7 million and $14.3 million, respectively. The default provisions of the notes provide that if an event of default occurs the outstanding principal amount of this note, plus accrued but unpaid interest and other amounts owing in respect thereof through the date of acceleration, shall become, at the noteholder’s election, immediately due and payable in cash, and commencing five days after occurrence of any event of default that results in the eventual acceleration of the note, the interest rate on the note shall accrue at an interest rate of 12% per annum. Further, if an event of default occurs, the noteholders, together have rights to foreclose on the collateral securing the notes.
We accrued interest at the rate of 4% per annum since no noteholder has taken action to accelerate payment of principal and interest. Since we have accrued interest at 4% per annum on the outstanding notes, in the aggregate principal amount of $13.7 million, with respect to which there is an event of default but with respect to which the noteholders did not demand acceleration. Such accrued interest was approximately $350,387 at June 30, 2026. In the event that the holders of all of these note demand acceleration, the amount of interest on those at 12% would be approximately $2.2 million. The difference between the interest at 12% and the accrued interest at 4% as of June 30, 2026, together with any additional interest due subsequent to June 30, 2026 is a contingent liability of the Company. If any noteholders exercise their right to accelerate, the accrued interest at the default rate of 12% will be reflected as an interest expense in the period the note is accelerated.
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Contractual Obligations
Borrowings
Principal maturities for the financing arrangements as of June 30, 2026 are as follows (dollars in thousands):
For the year ending December 31, |
| EB5 Related Party Loans |
|
| Convertible Notes |
|
| Total |
| |||
2026 (remainder of) |
| $ | 3,500 |
|
| $ | 13,750 |
|
| $ | 17,250 |
|
2027 |
|
| 3,000 |
|
|
| 500 |
|
|
| 3,500 |
|
2028 |
|
| 2,000 |
|
|
| 500 |
|
|
| 2,500 |
|
2029 |
|
| - |
|
|
| 500 |
|
|
| 500 |
|
2030 |
|
| - |
|
|
| 500 |
|
|
| 500 |
|
2031 |
|
| - |
|
|
| 300 |
|
|
| 300 |
|
Total |
| $ | 8,500 |
|
| $ | 16,050 |
|
| $ | 24,550 |
|
Operating Leases
On January 28, 2026, we entered into an amendment to the lease for our facilities at 3080 12th Street, Riverside, California. The amendment extends the expiration date of the lease from December 31, 2026 to December 31, 2033. The annual base rent during the term, as extended is $1,855,566 for 2026 and it increases annually until $2,282,112 for 2033. We will also pay certain operating expenses in the same manner as with the prior lease. The amendment provides for certain construction expenses, a portion of which are payable by the landlord and a portion of which are payable by us.
Future minimum lease commitments for office facilities and equipment for each of the next five years as of June 30, 2026, are as follows (dollars in thousands):
For the year ending December 31, |
| Total |
| |
2026 (remainder of) |
| $ | 970 |
|
2027 |
|
| 1,857 |
|
2028 |
|
| 2,032 |
|
2029 |
|
| 2,081 |
|
2030 |
|
| 2,142 |
|
Thereafter |
|
| 6,649 |
|
Total |
| $ | 15,731 |
|
Employment Agreements
On October 7, 2016, we entered into an employment agreement with our chief executive officer, David Hsu, for a five-year term commencing January 1, 2017 and continuing on a year-to-year basis unless terminated by us or Mr. Hsu on not less than 90 days’ notice prior to the expiration of the initial term or any one-year extension. The agreements provide for an annual salary with an increase of not less than 3% and an annual bonus in restricted stock and cash equal to a specified percentage of consolidated revenues for each year. Mr. Hsu’s annual salary for 2025 was at the annual rate of $760,065, and his annual salary for 2026 is at the annual rate of $782,867. We also owed Mr. Hsu $675,000 as the cash payment in connection with his exchange of 1,348,213 restricted shares of common stock for options to purchase 1,428,432 shares of common stock at $5.01 per share and a cash payment of $675,000, which was initially payable by December 15, 2019 and was extended on December 31, 2025 and would be paid in twelve equal monthly installments. As of June 30, 2026, the full amount of $675,000 had been paid. In addition, at December 31, 2025, we owed Mr. Hsu $1,818,282, representing deferred salary from 2019, 2020, 2021, 2022, 2023, and 2024 and cash bonuses deferred from 2017 and 2018. Mr. Hsu waived his bonus for 2019, 2020, 2021, 2022, and 2023 as part of the suspension of incentive programs for key employees, and he agreed that the $1,818,282 deferred salary and bonus be paid in twelve equal monthly installments with the first payment becoming due on December 31, 2025. As of June 30, 2026, the remaining balance to be paid on Mr. Hsu's deferred compensation was $1,766,075.
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Cash Requirements
We require substantial funds for our business, and we believe that the cash and cash equivalents and short-term investment, together with cash generated by our operations should enable us to meet our cash requirements for at least the twelve months from the date of this report. During the year ended December 31, 2025 and the six months ended June 30, 2026, we raised a total of approximately $7.7 million and $1.1 million, respectively, from the sale of common stock at a 25% discount from market. Under the Nasdaq regulations, the Company may not be able to raise any significant funding from the sale of common stock at a discount from market in the near future without stockholder approval. However, we cannot assure you that we will not require additional funds to meet our commitments or that funds will be available on reasonable terms, if at all. We have significant debt obligations which mature or may mature during the next year. With respect to the loans made under the EB-5 program, as described above, we are seeking to refinance the loans through the issuance of secured subordinated convertible notes to the limited partners of the lenders. The proposed convertible notes would have a conversion price of 80% of the market price at the date of issuance of the convertible note. We also have obligations to Mr. Hsu described above, of which approximately $1.8 million is left to be paid . We cannot assure you that we will be able to negotiate extensions to our loans or refinancing of our EB-5 debt. The willingness of the limited partners of CEF and CEF II to accept convertible notes rather than a cash payment of their investment in the limited partnership may be affected by our default on other convertible notes in the principal amount of $13.7 million at June 30, 2026, their perception of our performance and the performance of our common stock, including our low stock price and the possibility of our being delisted from Nasdaq, as well as their perception that they could get a more favorable result with litigation. We cannot assure you that such financing will be available on acceptable, if any terms, which would impair our ability to develop our business and pay our obligations. The low price of our common stock may make it difficult for us to issue convertible notes that are convertible at a discount from the market price of our common stock. Our financial statements for the six months ended June 30, 2026 has a going concern paragraph.
Critical Accounting Estimates and Policies
The accounting policies described below are considered critical to obtaining an understanding of our consolidated financial statements because their application requires the use of significant estimates and judgments by management in preparing the consolidated financial statements. Management estimates and judgments are inherently uncertain and may differ significantly from actual results achieved. Management considers an accounting estimate to be critical if the estimate requires significant assumptions and changes in the estimate or, the use of alternative estimates, could have a material impact on our results of operations or financial position. For more information on our accounting policies, see “Notes to Consolidated Financial Statements—Note 2. Basis of Presentation and Summary of Significant Accounting Policies.”
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Revenue Recognition on Large-scale EPC Contracts
Nature of Estimates Required
A significant portion of our revenue is generated from large-scale EPC contracts. Revenue recognition for these contracts requires management to make significant estimates and judgments regarding the transaction price, the identification and combination of performance obligations, the estimated costs to complete the contracts and the measure of progress toward completion.
For large-scale EPC contracts that qualify for cost-to-cost input method under ASC 606, the percentage of completion is determined based on costs incurred to date relative to total estimated costs at completion. Revenue recognized in the reporting period is based on the resulting measure of progress and the estimated transaction price for the performance obligation.
Key Assumptions and Approach Used
The most significant judgment involved in recognizing revenue under the cost-to-cost method is the estimate of total costs required to complete the performance obligation. These estimates include expected equipment and material costs, subcontractor costs, labor costs, construction costs, engineering costs, commissioning costs, tariffs and other costs necessary to complete the project. We update our estimates of costs to complete throughout the construction period based on actual costs incurred, vendor and subcontractor information, project status, expected changes in scope, schedule and other available information.
Because revenue is recognized based on the estimated percentage of completion, changes in estimated costs to complete can have a significant effect on the amount of revenue and gross profit recognized in the current period. An increase in estimated costs to complete generally reduces the percentage of completion and expected gross profit and may result in a cumulative catch-up adjustment to revenue and gross profit. Conversely, a reduction in estimated costs to complete may increase the amount of revenue and gross profit recognized in the current period.
Our estimates are particularly sensitive for fixed-price EPC contracts because we generally bear the risk that actual costs may exceed the amounts contemplated in the contract price. The Longfellow Contract expressly provides that the turnkey work is a fixed-price obligation, subject to specified contractual adjustments and change orders.
In addition to estimated costs to complete, management is required to exercise judgment in evaluating potential changes in the transaction price, including approved and unapproved change orders, claims, liquidated damages, performance incentives and other contractual adjustments. Such amounts are included in the transaction price only when the applicable requirements of ASC 606 have been satisfied.
We also evaluate whether contractual payment terms contain a significant financing component. The determination of the financing component affects both the amount and timing of revenue and interest income that we recognize. Changes in the estimated timing of project completion, commercial operation or receipt of deferred payments, or changes in the applicable interest rate, could affect the amount of revenue and interest income recognized in future periods.
As of June 30, 2026, we had recognized an adjustment to the contractual consideration for the Longfellow Contract to reflect the significant financing component. The amount attributable to financing is not included in EPC revenue and is recognized as interest income over the applicable financing period.
Effect if Different Assumptions Used
We believe that the estimates and judgments described above are reasonable based on information available at the reporting date. However, because of the long-term nature and complexity of EPC projects, actual results may differ from management's estimates. Material changes in estimated costs, contract revenue or other assumptions could result in significant changes in revenue, gross profit and net income in the period in which the estimates are revised.
Allowance for credit and loan losses
Nature of Estimates Required
In adopting ASU 2016-13, we are required to estimate credit and loan losses based on a forward-looking methodology and, if needed, record a reserve for each of the following assets: accounts receivable, customer loans receivable and certain contract assets.
Key Assumptions and Approach Used
In determining the expected loss, we make assumptions based on historical collection experience, current and forecasted economic and business conditions, and a review of the status of each customer’s financial asset account. Specifically, we estimate loss reserve based on the aging of the financial asset balances and the financial condition of customers and provide for specific allowance amounts for those customers that have a higher probability of default. With respect to our China operations, we review China’s current and future economic conditions along with its political landscape, and how these factors may affect our receivable from SPIC, a state-owned entity. We regularly monitor collection status of these financial assets through account reconciliation, payment tracking, customer’s financial condition and macroeconomics conditions.
Effect if Different Assumptions Used
We believe that assumptions not based on the use of historical collection experience, current and forecasted economic, political (China operations) and business conditions, and a review of the status of each customer’s financial asset account would be contra to the requirements of ASU 2016-13 and a departure from GAAP.
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Income Taxes
Nature of Estimates Required
As part of the process of preparing our consolidated financial statements, we are required to estimate income taxes for each jurisdiction in which we operate. This process involves estimating actual current period tax expense together with assessing temporary differences resulting from differing treatment of items, such as depreciation, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our balance sheets, including net operating loss and tax credit carryforwards. Certain estimates and assumptions are required to determine whether deferred tax assets can and will be utilized in future periods.
We take certain tax positions we believe are in accordance with the applicable tax laws. However, these tax positions are subject to interpretation by the Internal Revenue Service, state tax authorities, foreign tax authorities and the courts. We determine uncertain tax positions in accordance with the authoritative guidance.
Key Assumptions and Approach Used
In determining whether it is more likely than not that all or some portion of net operating loss and tax credit carryforwards can be utilized, we analyze the trend of GAAP earnings and then estimates the impact of future taxable income, reversing temporary differences and available prudent and feasible tax planning strategies based on currently enacted tax laws.
Accounting for tax obligations requires management judgment. We use judgment in determining whether the evidence indicates it is more likely than not, based solely on the technical merits, that a tax position will be sustained, and to determine the amount of tax benefits to be recognized. Judgment is also used in determining the likelihood a tax position will be settled and possible settlement outcomes. In assessing uncertain tax positions we consider, among others, the following factors: the facts and circumstances of the position, regulations, rulings, and case law, opinions or views of legal counsel and other advisers, and the experience gained from similar tax positions. We evaluate uncertain tax positions at the end of each reporting period and make adjustments when warranted based on changes in fact or law.
Effect if Different Assumptions Used
Should a change in facts or circumstances, including a change in enacted tax legislation, lead to a change in judgment about the ultimate realizability of a deferred tax asset, we would record or adjust the related valuation allowance in the period that the change in facts and circumstances occurs, along with a corresponding increase or decrease in the provision for income taxes.
Actual income taxes may differ from the estimated amounts which could have a significant impact on the liabilities, revenue and expenses recorded in the financial statements. Significant judgment is required to determine the tax treatment of particular tax positions that involve interpretations of complex tax laws. Such liabilities are based on judgment and a final determination could take many years from the time the liability is recorded. Furthermore, settlement of tax positions included in open tax years may be resolved by compromises of tax positions based on current factors and business considerations that may result in material adjustments to income taxes previously estimated. For a discussion of current and deferred taxes, net operating losses and tax credit carryforwards, accounting for uncertainty in income taxes, unrecognized tax benefits, and tax disputes, see Note 22 of “Notes to Consolidated Financial Statements.”
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarterly period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
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Part II - Other Information
Item 1. Legal Proceedings
Farmland Occupation Tax Litigation
We are involved in various legal proceedings with SPIC in the PRC that includes matters related to additional assessments of farmland occupation taxes associated with four photovoltaic projects completed by one of our subsidiaries in 2020 and 2021 and owned by SPIC. The matters relate to disputes regarding the additional taxes paid by SPIC on which SPIC sought reimbursement from our subsidiary and the basis for the assessment by Chinese tax authorities.
In June and August 2026, three adverse judgments were issued by a Chinese court, which determined that our subsidiary is responsible for the additional farmland occupation taxes under its contractual arrangements. As of September 30, 2026, we are awaiting the court ruling for the last farmland occupation tax case; however, we believe the ruling will be consistent with the other three rulings.
Based on the judgments and other information available as of September 30, 2026, we determined that a loss contingency was probable and reasonably estimable at June 30, 2026, and recorded an accrual of RMB 29.3 million for the four cases, or approximately $4.3 million, to accrued expenses and other payables, representing our estimated liability associated with the matters. We recorded the corresponding expense to China legal judgment, which is a non-recurring expense.
For additional information regarding the accounting treatment and financial statement impact of these matters, see Note 19, "Commitments and Contingencies," to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
From January to September 2026, we issued convertible notes in the principal amount of $2.5 million to limited partners of CEF I and CEF II, which resulted in a reduction of $2.5 million in the principal amount of the related party notes to CEF I and CEF II. The convertible notes are convertible into common stock at a conversion price equal to 80% of the average price of our common stock for the ten trading days preceding the date of the exchange agreement with the limited partners, which conversion prices range from $1.74 to $8.55, with an average conversion price of $6.52. No brokers were involved in the issuances of the convertible notes. The issuance of the convertible notes were exempt from registration pursuant to Section 4(a)(2) of the Securities Act as a transaction not involving a public offering.
Item 5. Other Information
During the six months ended June 30, 2026, no officer or director adopted or terminated any contract, instruction or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement.
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Item 6. Exhibits
31.1 |
| Certification of chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 |
| Certification of chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 |
| Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.INS |
| Inline XBRL Instance Document. |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document. |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SOLARMAX TECHNOLOGY, INC |
| |
|
|
|
|
Date: October 7, 2026 | By: | /s/ David Hsu |
|
|
| David Hsu, Chief Executive Officer |
|
|
| (Principal Executive Officer) |
|
|
|
|
|
| By: | /s/ Stephen Brown |
|
|
| Stephen Brown, Chief financial Officer |
|
|
| (Principal Financial Officer) |
|
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