SUNation Energy, Inc.

Previous wording

our growth strategy depends on the continued origination of solar installation agreements;

Current wording

our continuing and potential growth strategy depends on the continued origination of solar installation agreements;

Previous wording

we need to raise additional capital to fund our operations and repay our obligations, which funding may not be available on favorable terms or at all and may lead to substantial dilution to our existing shareholders. Further, there is substantial doubt about our ability to continue as a going concern, which conditions may adversely affect our stock price and our ability to raise capital;

Current wording

we need to raise additional capital to fund our operations and repay our obligations, which funding may not be available on favorable terms or at all and may lead to substantial dilution to our existing shareholders;

Previous wording

technical and regulatory limitations regarding the interconnection of solar energy systems to the electrical grid may significantly delay interconnections and customer in-service dates, harming our growth rate and customer satisfaction; and

Current wording

technical and regulatory limitations regarding the interconnection of solar energy systems to the electrical grid may significantly delay interconnections and customer in-service dates, harming our growth rate and customer satisfaction;

Previous wording

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

Current wording

SUNation Energy Inc.(herein referred to as “SUNation Energy,” “SUNE,” “our,” “we” or the “Company”)is a Delaware corporation, whose shares of Common Stock are listed on the Nasdaq Stock Market under its trading symbol “SUNE”.

Previous wording

For a more complete description of the Company, see Note 1, Nature of Operations, to the Condensed Consolidated Financial Statements included in this report, as well as a more comprehensive description of the recent history of the Company’s 2024 and 2025 reverse stock splits. The effects of the June 2024 Reverse Stock Split, October 2024 Reverse Stock Split, and April 2025 Reverse Stock Split (collectively, the “Reverse Stock Splits”) have been applied retroactively and are reflected in this Quarterly Report on Form 10-Q for all periods presented. Following each of the Reverse Stock Splits, the number of shares of common stock available for issuance under the Company's equity compensation plans were automatically reduced in proportion to the Reverse Stock Splits ratio. Upon effectiveness, the Reverse Stock Splits also resulted in reductions in the number of shares of common stock issuable upon exercise or vesting of equity awards in proportion to the Reverse Stock Splits ratios and caused a proportionate increase in exercise price or share-based performance criteria, if any, applicable to such awards.

Current wording

The effect of the April Reverse Stock Split has been applied retroactively and is reflected in this Quarterly Report on Form 10-Q for all periods presented.

Previous wording

Consolidated sales increased $4,275,250, or 29.0% to $18,993,636 in the third quarter of 2025 from $14,718,386 in the third quarter of 2024, with a 54% increase within residential contract revenue and a 72% increase in service revenue, partially offset by a 43% decrease in commercial revenue. On a consolidated basis, overall kilowatts installed on residential projects increased 52%, revenue per residential installation increased 25% and the overall price per watt on residential projects increased slightly at 2% in the third quarter of 2025 as compared to the third quarter of 2024. The overall increase in residential revenue is driven by increased customer demand to install solar systems prior to the expiration of federal tax credits at December 31, 2025 under the passing of the One Big Beautiful Bill Act.

Current wording

Consolidated sales decreased $5,442,189, or 43.1% to $7,194,449 in the first quarter of 2026 from $12,636,638 in the first quarter of 2025, with a 53% decrease within residential contract revenue and a 3% decrease in service revenue, partially offset by a 15% increase in commercial revenue. On a consolidated basis, overall kilowatts installed on residential projects decreased 52%, revenue per residential installation increased 2% and the overall price per watt on residential projects decreased 6% in the first quarter of 2026 as compared to the first quarter of 2025. The overall decrease in residential revenue is driven by decreased customer demand due to the expiration of federal tax credits at December 31, 2025 under the passing of the One Big Beautiful Bill Act.

Previous wording

Consolidated operating loss in the third quarter of 2025 was $245,731 as compared to $1,606,737 in the third quarter of 2024. Net loss in the third quarter of 2025 was $392,975, or $(0.12) per diluted share, compared to net loss attributable to shareholders(after taking into effect $264,482 in deemed dividends) of $3,563,091, or $(2,350.12) per diluted share, in the third quarter of 2024.

Current wording

Consolidated operating loss in the first quarter of 2026 was $4,329,550 as compared to $2,167,348 in the first quarter of 2025. Net loss in the first quarter of 2026 was $4,090,614, or $ (1.20) per diluted share, compared to net loss of $3,496,432, or $(106.71) per diluted share, in the first quarter of 2025.

Previous wording

SUNation NY revenue increased 22% or $2,375,056, to $13,014,951 in the third quarter of 2025 as compared to $10,639,895 in third quarter of 2024. Revenue in the third quarters of 2025 and 2024 by type were as follows:

Current wording

SUNation NY revenue decreased 46% or $4,390,712, to $5,153,843 in the first quarter of 2026 as compared to $9,544,554 in first quarter of 2025. Revenue in the first quarters of 2026 and 2025 by type were as follows:

Previous wording

Selling, general and administrative expenses increased 22% or $751,986 to $4,211,881 in 2025 (32% as a percentage of sales) as compared to $3,459,895 in 2024 (33% as a percentage of sales), due primarily to an increase in selling and marketing expenses on higher residential contract revenue. Amortization expense remained flat at $203,125 in 2025 as compared to 2024.

Current wording

Selling, general and administrative expenses decreased 27% or $1,050,229 to $2,797,271 in 2026 (54% as a percentage of sales) as compared to $3,847,500 in 2025 (40% as a percentage of sales), due primarily to decrease in selling and marketing expenses on lower residential contract revenue. Amortization expense remained flat at $203,125 in 2026 as compared to 2025.

Previous wording

HEC sales increased 47% or $1,900,194, to $5,978,685 in the third quarter of 2025 as compared to $4,078,491 in the third quarter of 2024. Sales in 2025 and 2024 by type were as follows:

Current wording

HEC sales decreased 34%, or $1,051,478, to $2,040,606 in the first quarter of 2026 as compared to $3,092,084 in the first quarter of 2025. Sales in 2026 and 2025 by type were as follows:

Previous wording

Residential contract sales increased $2,125,428, or 59%, due to a 20% increase in kilowatts installed and a 139% increase in battery capacity installed, which is driving a 61% increase in average revenue per system installed. In May 2025, Hawaii implemented a new Bring Your Own Device Plus (“BYOD Plus”) program. The impact of this new program was realized in third quarter installations. Under this program, customers were paid a cash incentive and provided energy bill credits to add energy storage to an existing or new rooftop solar system. Service revenue increased $96,819, or 67%, due to an increase in repair and replacement installations.

Current wording

Residential contract sales decreased $1,114,423, or 41%, due to a 38% decrease in kilowatts installed, a 54% decrease in installations, partially offset by a 46% increase in battery attachment rates, which is driving a 27% increase in average revenue per system installed. In May 2025, Hawaii implemented a new Bring Your Own Device Plus (“BYOD Plus”) program. Under this program, customers were paid a cash incentive and provided energy bill credits to add energy storage to an existing or new rooftop solar system. The overall decrease in residential installations is due to the expiration of federal tax credits at December 31, 2025 under the passage of the One Big Beautiful Bill Act. Service revenue decreased $63,191, or 18%, due to a decrease in repair and replacement installations.

Previous wording

Gross profit increased 60% to $1,920,433 in the third quarter of 2025 as compared to gross profit of $1,201,425 in the third quarter of 2024 due primarily to the increase in revenue and improvement in gross margin. Gross margin increased to 32.1% in the third quarter of 2025 compared to 29.5% in the third quarter of 2024, driven by a decrease in labor and overhead costs as a percentage of revenue.

Current wording

Gross profit decreased 57% to $323,518 in the first quarter of 2026 as compared to gross profit of $758,743 in the first quarter of 2025 due primarily to the decrease in revenue and decrease in gross margin. Gross margin decreased to 15.9% in the first quarter of 2026 compared to 24.5% in the first quarter of 2025, driven by an increase in labor and overhead costs as a percentage of revenue.

Previous wording

As of September 30, 2025, the Company had $5,703,539 in cash, restricted cash and cash equivalents. Of this amount, $883,328 was invested in short-term money market funds that are not considered to be bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or other government agency. These money market funds seek to preserve the value of the investment at $1.00 per share; however, it is possible to lose money investing in these funds. The remainder in cash and cash equivalents is operating cash.

Current wording

As of March 31, 2026, the Company had $1,686,605 in cash, restricted cash and cash equivalents. Of this amount, $670,409 was invested in short-term money market funds that are not considered to be bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or other government agency. These money market funds seek to preserve the value of the investment at $1.00 per share; however, it is possible to lose money investing in these funds. The remainder in cash and cash equivalents is operating cash.

Previous wording

The Company had working capital deficit of $(1,848,119) at September 30, 2025, consisting of current assets of $17,186,329 and current liabilities of $19,034,448 compared to working capital deficit of $(16,051,658) at December 31, 2024.

Current wording

The Company had working capital deficit of $(3,509,756) at March 31, 2026, consisting of current assets of $9,049,534 and current liabilities of $12,559,290 compared to working capital of $1,066,408 at December 31, 2025.

Previous wording

Cash used in operating activities was $1,146,338 in the first nine months of 2025 as compared to $4,393,846 in the same period of 2024. The decrease in negative cash flow from operations is primarily driven by the increase in the net loss and an increase in payments against accounts payable, partially offset by an increase in customer deposits. Significant working capital changes in the nine months ended September 30, 2025 included a decrease of other assets of $1,145,270, a decrease in accrued interest of $677,582, an increase in customer deposits of $2,461,077, and an increase in other accrued expenses of $1,700,111.

Current wording

Cash used in operating activities was $5,164,097 in the first three months of 2026 as compared to $3,403,349 in the same period of 2025. The increase in negative cash flow from operations is primarily driven by the increase in the net loss and an increase in payments against accounts payable. Significant working capital changes in the three months ended March 31, 2026 included a decrease of accounts payable of $2,782,565, an decrease in other assets of $1,273,206, and a decrease in accounts receivable of $942,875.

Previous wording

Net cash provided by financing activities was $5,716,316 in the first nine months of 2025 compared to $1,183,220 in the same period of 2024. Net cash provided by financing activities in the first nine months of 2025 was due to $17,871,964 in net proceeds from the issuance of common stock under a registered direct offering and $351,372 in proceeds from the issuance of common stock under the at-the-market offering, partially offset by $9,765,760 in payments against loans payable, $2,500,000 in payments of contingent consideration, and $267,391 in payments for the termination of warrants. Net cash provided by financing activities in the first nine months of 2024 was due to $1,000,000 in proceeds from the issuance of common stock under a registered direct offering and $1,604,000 in borrowings from Conduit Capital US Holdings LLC (“Conduit”) and MBB Energy, LLC (“MBB”), partially offset by equity issuance costs and payments against loans payable.

Current wording

Net cash used in financing activities was $334,342 in the first three months of 2026 compared to $3,992,231 provided by in the same period of 2025. Net cash used in financing activities in the first three months of 2026 was related to $1,134,342 in payments against loans payable and related party loans payable, including the settlement of the debt with a former SUNation NY shareholder, partially offset by $800,000 in borrowings against the related party line of credit. Net cash provided by financing activities in the first three months of 2025 wasdue to $13,431,902 in net proceeds from the issuance of common stock under a registered direct offering and $351,372 in proceeds from the issuance of common stock under the at-the-market offering, partially offset by $9,401,939 in payments against loans payable and $389,104 in payments of contingent consideration.

Previous wording

In connection with the SUNation NY acquisition, on November 9, 2022, the Company issued a $5,486,000 Long-Term Promissory Note(the “Long-Term Note”). The Long-Term Note was unsecured and matured on November 9, 2025. It carried an annual interest rate of 4% until the first anniversary of issuance, then 8% thereafter until the Long-Term Note was paid in full. The Company was required to make a principal payment of $2.74 million on the second anniversary of the Long-Term Note. The Long-Term Note may be prepaid at our option at any time without penalty. On April 10, 2025, the Long-Term Note was amended and restated whereby the principal amount of $5,486,000 previously due and payable under the original Long-Term Note, together with all accrued and unpaid interest owing thereunder, shall be due and payable on May 1, 2028, and such amended note became a senior secured instrument. Principal and interest payments under the amended Long-Term Note are payable monthly on the first day of each month commencing on June 1, 2025 for thirty-six consecutive months thereafter. Additionally, pursuant to the terms of that certain Senior Secured Contingent Note Instrument, entered into on April 10, 2025, the unearned 2024 earnout was rescheduled and is based on the earnout terms set forth therein pursuant to the financial conditions and terms covering each of fiscal years 2024 and 2025 and, if attained, shall be payable in fiscal year 2026, which payment is further conditioned on the continued employment of the note holders at the time of such earnout payment trigger date.

Current wording

In connection with the SUNation NY acquisition, on November 9, 2022, the Company issued a $5,486,000 Long-Term Promissory Note(the “Long-Term Note”). The Long-Term Note was unsecured and matured on November 9, 2025. It carried an annual interest rate of 4% until the first anniversary of issuance, then 8% thereafter until the Long-Term Note was paid in full. The Company was required to make a principal payment of $2.74 million on the second anniversary of the Long-Term Note. The Long-Term Note may be prepaid at our option at any time without penalty. On April 10, 2025, the Long-Term Note was amended and restated whereby the principal amount of $5,486,000 previously due and payable under the original Long-Term Note, together with all accrued and unpaid interest owing thereunder, shall be due and payable on May 1, 2028, and such amended note became a senior secured instrument. Principal and interest payments under the amended Long-Term Note are payable monthly on the first day of each month commencing on June 1, 2025 for thirty-six consecutive months thereafter. Additionally, pursuant to the terms of that certain Senior Secured Contingent Note Instrument, entered into on April 10, 2025, the unearned 2024 earnout was rescheduled and is based on the earnout terms set forth therein pursuant to the financial conditions and terms covering each of fiscal years 2024 and 2025 and, if attained, shall be payable in fiscal year 2026, which payment is further conditioned on the continued employment of the note holders at the time of such earnout payment trigger date. See also Note 14, Subsequent Events, related to the conversion of $1,200,000 of debt into equity in April 2026, which reduced the Long-Term Note obligations thereunder.

Previous wording

Based on the Company’s current financial position, which includes approximately $0.3 million of restricted cash, cash equivalents and investments that are restricted under the CVR agreement and cannot be used by the Company for its own working capital needs, and the Company’s forecasted future cash flows for twelve months beyond the date of issuance of these financial statements, substantial doubt exists around the Company’s ability to continue as a going concern for a reasonable period of time. As noted in Notes 6, 9 and 14, the Company raised capital and satisfied certain outstanding debt obligations during 2025, however there remains uncertainty related to our future cash flows as it relies on the ability to generate enough cash flow from its operating segments to cover the Company’s corporate overhead costs.

Current wording

Based on the Company’s current financial position, and the Company’s forecasted future cash flows for twelve months beyond the date of issuance of these financial statements, substantial doubt exists around the Company’s ability to continue as a going concern for a reasonable period of time. As noted in Notes 6, 9 and 14, the Company raised capital and satisfied and reduced certain outstanding debt obligations during 2025 and 2026; however, there remains uncertainty related to our future cash flows as it relies on the ability to generate enough cash flow from its operating segments to cover the Company’s corporate overhead costs.

Previous wording

As a result, the Company requires additional funding and seeks to raise capital through sources that may include public or private equity offerings, debt financings and/or strategic alliances. On February 27, 2025, the Company entered into a securities purchase agreement with certain institutional investors for the purchase and sale of an aggregate of $20.0 million in securities, with $15.0 million in gross proceeds in the first closing on February 27, 2025 and $5.0 million in gross proceeds in the second closing on April 7, 2025. While the Company was able to use the proceeds to pay off approximately $12.6 million in outstanding debt and contingent liability obligations, it was not sufficient to cover all of the Company’s current and future obligations. Additional funding may not be available on terms acceptable to the Company, or at all. If the Company is unable to raise additional funds, it would have a negative impact on the Company’s business, results of operations and financial condition. To the extent that additional funds are raised through the sale of equity or securities convertible into or exercisable for equity securities, the issuance of securities will result in dilution to the Company’s shareholders.

Current wording

As a result, the Company requires additional funding and seeks to raise capital through sources that may include public or private equity offerings, debt financings and/or strategic alliances. On February 27, 2025, the Company entered into a securities purchase agreement with certain institutional investors for the purchase and sale of an aggregate of $20.0 million in securities, with $15.0 million in gross proceeds in the first closing on February 27, 2025 and $5.0 million in gross proceeds in the second closing on April 7, 2025. The Company was able to use the proceeds to pay off approximately $12.6 million in 2025 in outstanding debt and contingent liability obligations and since April 2025, the Company has further reduced certain debt obligations. However, it has not been sufficient to cover all of the Company’s current and future obligations. Additional funding or other financing structures may not be available on terms acceptable to the Company, or at all. If the Company is unable to raise additional funds, or further restructure remaining debt obligations, it would have a negative impact on the Company’s business, results of operations and financial condition. To the extent that additional funds are raised through the sale of equity or securities convertible into or exercisable for equity securities, the issuance of securities will result in dilution to the Company’s shareholders.

Previous wording

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Generally, we base our estimates on historical experience and on various other assumptions in accordance with GAAP that we believe to be reasonable under the circumstances. Actual results may differ from these estimates and such differences could be material to our financial position and results of operations. Critical accounting estimates are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations. For additional information, please see the discussion of our critical accounting estimates in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no changes to our critical accounting estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2024, except as set forth below.

Current wording

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Generally, we base our estimates on historical experience and on various other assumptions in accordance with GAAP that we believe to be reasonable under the circumstances. Actual results may differ from these estimates and such differences could be material to our financial position and results of operations. Critical accounting estimates are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations. For additional information, please see the discussion of our critical accounting estimates in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no changes to our critical accounting estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2025.