SPRUCE POWER HOLDING CORP

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as “controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.” The Company’s disclosure controls and procedures are designed to ensure that material information relating to the Company and its consolidated subsidiaries is accumulated and communicated to its management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of its disclosure controls and procedures as of June 30, 2024. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of that date, due to the material weaknesses in internal control over financial reporting described below.

Material Weaknesses in Internal Control over Financial Reporting

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the financial statements would not be prevented or detected on a timely basis. These deficiencies could result in misstatements to the Company's condensed consolidated financial statements that would be material and would not be prevented or detected on a timely basis.

As previously disclosed under “Item 9A – Controls and Procedures” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, management concluded that the Company did not maintain an effective control environment based on the criteria established in the Committee of Sponsoring Organizations (“COSO”) Framework, and its relevant components, which resulted in deficiencies that constitute material weaknesses, either individually or in the aggregate.

Control Environment

The Company failed to maintain a sufficient complement of qualified personnel to perform control activities. The lack of sufficient appropriately qualified personnel contributed to our failure to: (i) design and implement certain risk-mitigating internal controls; and (ii) consistently operate our internal controls. The control environment material weaknesses contributed to material weaknesses within our system of internal control over financial reporting in the Control Activities component of the Committee of Sponsoring Organizations (“COSO”) Framework.

Control Activities

The Company did not maintain effective control activities based on the criteria established in the COSO Framework and identified the following control deficiencies that constitute material weaknesses from the lack of effectively designed and implemented controls, either individually or in the aggregate:

•review and approval of manual journal entries, including implementing appropriate segregation of duties;

•complex transactions, inclusive of accounting for business combinations and the Company’s investment related to the SEMTH Master Lease Agreement and the related interest income; and

•revenue recognition, including the review of the contracts upon inception and/or acquisition and the accounting for revenue recognition under ASC 606, Revenue from Contracts with Customers.

These deficiencies in control activities contributed to the potential for there to have been material accounting errors in multiple financial statement account balances and disclosures that would not have been prevented or detected timely.

However, after giving full consideration to these material weaknesses, and the additional analyses and other procedures that were performed to ensure that the Company’s unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q were prepared in accordance with GAAP, management has concluded that our unaudited condensed consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows as of and for the periods disclosed in conformity with GAAP.

Remediation Plan

The Company is committed to maintaining strong internal control over financial reporting. In response to the material weaknesses described above, management, with the oversight of the Audit Committee, has taken and is taking comprehensive actions to remediate the above material weaknesses. The remediation plan includes the following:

•developed and presented a training program educating control owners concerning financial statement risk and the principles of the Internal Control - Integrated Framework issued by COSO;

•implemented a formal journal entry review policy to govern the process by which all manual journal entry approvers would adhere to;

•implemented a system-based journal entry approval workflow to ensure manual journal entries have proper segregation of duties between journal entry creators and approvers;

•hiring professionals with the appropriate skills to perform control activities, including those involving complex and/or non-routine transactions;

•designing and implementing additional and/or enhanced controls in the areas of account reconciliations, contract accounting, revenue recognition, and financial statement analysis prepared in conformity with GAAP, and manual journal entries; and

•designing and implementing controls to address the identification, accounting, review and reporting of complex and/or non-routine transactions.

While management believes that these efforts will improve the Company's internal control over financial reporting, the implementation of these measures is ongoing and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles.

Management believes the Company is making progress toward achieving the effectiveness of its internal controls and disclosure controls. The actions that management is taking are subject to ongoing management review, as well as Audit Committee oversight. Management will continue to assess the effectiveness of the Company’s internal control over financial reporting and take steps to remediate the known material weaknesses expeditiously.

Changes in Internal Control Over Financial Reporting

Other than described above, there were no changes in the Company's internal control over financial reporting during the quarter ended June 30, 2024, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.