SUNation Energy, Inc.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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REPORT OF MANAGEMENT

The management of SUNation Energy, Inc. and its subsidiary companies is responsible for the integrity and objectivity of the financial statements and other financial information contained in the annual report. The financial statements and related information were prepared in accordance with accounting principles generally accepted in the United States of America and include amounts that are based on management’s informed judgments and estimates.

In fulfilling its responsibilities for the integrity of financial information, management maintains accounting systems and related controls. These controls provide reasonable assurance, at appropriate costs, that assets are safeguarded against losses and that financial records are reliable for use in preparing financial statements. Management recognizes its responsibility for conducting the Company’s affairs according to the highest standards of personal and corporate conduct.

The Audit and Finance Committee of the Board of Directors, comprised solely of independent, non-employee directors, meets with the independent auditors and management periodically to review accounting, auditing, financial reporting and internal control matters. The independent auditors have free access to this committee, without management present, to discuss the results of their audit work and their opinion on the adequacy of internal financial controls and the quality of financial reporting.

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To the Stockholders and Board of Directors of

SUNation Energy, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of SUNation Energy, Inc. (the “Company”) as of December 31, 2025, the related consolidated statements of operations, comprehensive income (if required), stockholders’ equity and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, based on our audit, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 15, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 15. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Explanatory Paragraph –Retrospective Adjustment for Reverse Stock Splits

As discussed in Note 1 to the consolidated financial statements, the Company effected a reverse stock split on April 21, 2025, which has been retrospectively applied to all periods presented. The financial statements for the years ended December 31, 2024, before the retrospective adjustment for the reverse stock split described in Note 1, were audited by other auditors whose report dated April 15, 2025 expressed an unmodified opinion on those statements. We audited the adjustments described in Note 1 that were applied to retrospectively recast the financial statements. In our opinion, such retrospective adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2024 consolidated financial statements of the Company other than with respect to these retrospective adjustments for the reverse stock splits and, accordingly, we do not express an opinion or any other form of assurance on the 2024 consolidated financial statements taken as a whole.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter - Goodwill Impairment

At December 31, 2025, the Company’s goodwill totaled $17,443,869, allocated between the HEC ($6,727,231) and SUNation ($10,716,638) reporting units. As described in Notes 2 and 7 to the consolidated financial statements, management evaluates goodwill impairment at the reporting unit level annually or when events indicate possible impairment. A quantitative analysis was conducted as of September 30, 2025, using a combination of income and market approaches to estimate fair value, assisted by a third-party specialist. Management concluded that the fair values of both reporting units exceeded their carrying values and no impairment charge was recognized.

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

How the Critical Audit Matter Was Addressed in Our Audit

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

Assessing the inputs to the valuation model for significance

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

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

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

Testing the mathematical accuracy of managements fair value calculations.

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

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

Critical Audit Matter – Derivative Liabilities

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As described in Notes 2 and 11 to the consolidated financial statements, the Company entered into a securities purchase agreement in the first quarter of 2025 involving common stock, pre-funded warrants, and, contingent on shareholder approval, additional common stock or warrants and Series A and B warrants. The contingent forward contract for the second closing and the Series A and B warrants were accounted for as derivative liabilities at fair value, with changes in fair value recognized through earnings. Upon shareholder approval in the second quarter of 2025, the contingent forward contract was derecognized, and the Series B warrants were derecognized upon exercise. The fair value measurement of these instruments required significant management judgment, use of complex models, and involved unobservable inputs and the selection of comparable companies to estimate expected stock price volatility. The Company engaged a third-party specialist to assist with the fair value analysis.

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

How the Critical Audit Matter Was Addressed in Our Audit

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

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

Determining the significant inputs to the warrant valuation model

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

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

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

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

Recalculating the dilutive price per share

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

‎/s/CBIZ CPAs P.C.

CBIZ CPAs P.C.

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

Melville, NY

‎March 20, 2026

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