SolarMax Technology, Inc.

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our 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. All amounts in this report are in U.S. dollars, unless otherwise noted.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our 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, 2024. All amounts in this report are in U.S. dollars, unless otherwise noted.

Previous wording

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 2025. For the six months ended June 30, 2025, the tariffs did not have material effects on our cost of revenue.

Current wording

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 2025. For the nine months ended September 30, 2025, the tariffs did not have material effects on our cost of revenue.

Previous wording

The federal residential solar tax credit, officially known as the Residential Clean Energy Credit, is set to expire on December 31, 2025. This means that homeowners who have solar energy systems installed and placed into service by this date will still qualify for a 30% federal tax credit on the cost of the system. After December 31, 2025, there will be 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.

Current wording

The federal residential solar tax credit, officially known as the Residential Clean Energy Credit, is set to expire on December 31, 2025. This means that homeowners who have 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 will be 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.

Previous wording

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 which are also impacted by the effects of NEM 3.0.

Current wording

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 which are also impacted by the effects of NEM 3.0 and the elimination of the federal residential tax credit at December 31, 2025.

Previous wording

Compensation costs per employee, excluding stock-based compensation, for sales, marketing and administrative personnel in our United States segment decreased approximately 11% for the six months ended June 30, 2025 compared to the same period in 2024. The decrease in 2025 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.

Current wording

Compensation costs per employee, excluding stock-based compensation, for sales, marketing and administrative personnel in our United States segment decreased approximately 5% for the nine months ended September 30, 2025 compared to the same period in 2024. The decrease in 2025 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.

Previous wording

During the years 2015 to 2019, we granted shares of restricted stock and incentive stock options to employees and consultants, of which 264,650 shares of restricted stock and incentive stock options to purchase 5,898,137 shares were outstanding at the date of our initial public offering. Under the terms of the restricted stock and incentive stock options, the restricted stock and options became vested and non-forfeitable upon the completion of our initial public offering, which occurred on February 12, 2024, the effective date of the registration statement relating to our initial public offering. Under GAAP, upon the completion of the initial public offering, the value of the restricted stock and the incentive stock options is treated as compensation expense in the period in which the restricted stock and incentive stock options become non-forfeitable and are deemed to have met the performance-based indicator (i.e., the completion of the initial public offering). Using the Black Scholes valuation method, the fair value of the incentive stock options at the time of the Company’s initial public offering was approximately $18.5 million, which is stock-based compensation that does not reflect a cash expense, of which approximately $1.3 million is included in cost of revenues and $15.9 million is included in general and administrative expense in the six months ended June 30, 2024.

Current wording

During the years 2015 to 2019, we granted shares of restricted stock and stock options to employees and consultants, of which 264,650 shares of restricted stock and stock options to purchase 5,898,137 shares were outstanding at the date of our initial public offering. Under the terms of the restricted stock and stock options, the restricted stock and options became vested and non-forfeitable upon the completion of our initial public offering, which occurred on February 12, 2024, the effective date of the registration statement relating to our initial public offering. Under GAAP, upon the completion of the initial public offering, the value of the restricted stock and the incentive stock options is treated as compensation expense in the period in which the restricted stock and incentive stock options become non-forfeitable and are deemed to have met the performance-based indicator (i.e., the completion of the initial public offering). Using the Black Scholes valuation method, the fair value of the stock options at the time of the Company’s initial public offering was approximately $18.5 million, which is stock-based compensation that does not reflect a cash expense, of which approximately $1.3 million is included in cost of revenues and $15.9 million is included in general and administrative expense in the nine months ended September 30, 2024.

Previous wording

In February 2025, we entered into a contract with a California homebuilder pursuant to which we will have the right to design and install solar energy systems in a new home project consisting of a proposed 146 new residential homes at a fixed price. Any installations will be made pursuant to contracts with the home owners, and we will pay the homebuilder a commission on the transaction.

Current wording

In February 2025, we entered into a contract with a California homebuilder pursuant to which we have the right to design and install solar energy systems in a new home project consisting of a proposed 146 new residential homes at a fixed price. Any installations will be made pursuant to contracts with the home owners, and we will pay the homebuilder a commission on the transaction.

Previous wording

On July 31, 2025, we entered into an engineering, procurement and construction agreement (the “EPC Contract”) with Longfellow BESS I LLC (“Longfellow”), a Texas limited liability company, to develop a battery energy storage system (“BESS”) facility. The contract is expected to generate revenues of approximately $127.3 million. 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. Completion of the BESS facility is targeted for June 2026, although we cannot assure you that this completion date will be met. To the extent that our costs for the project increase as a result of tariffs, 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 will have an 8% membership interest in Longfellow. Our capital contribution in the amount of $5,000,000 is due no later than December 31, 2025.

Current wording

On July 31, 2025, we entered into an engineering, procurement and construction agreement (the “Longfellow Contract”) with Longfellow BESS I LLC (“Longfellow”), a Texas limited liability company, to develop a battery energy storage system (“BESS”) facility. Based on the contract terms, the contract is expected to generate revenues of approximately $127.3 million. 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. Completion of the BESS facility is targeted for June 2026, although we cannot assure you that this completion date will be met. To the extent that our costs for the project increase as a result of tariffs, 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 will own an 8% membership interest in Longfellow. Our capital contribution in the amount of $5,000,000 is due no later than December 31, 2025. As of the date of this quarterly report, we do not have any other contract for industrial EPC projects, and we cannot assure you that we will be able to develop this business.

Previous wording

Although we had nominal sales through the dealer network prior to 2024, during the six months ended June 30, 2025 and 2024, approximately 48% and 11%, respectively, of our revenues were generated through the dealer network program. We believe that our participation in the dealer network enhances our ability to attract customers.

Current wording

Although we had nominal sales through the dealer network prior to 2024, during the nine months ended September 30, 2025 and 2024, approximately 52% and 27%, respectively, of our revenues from residential solar and battery contracts, and 19% and 16% 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.

Previous wording

The following tables set forth information relating to our operating results for the three and six months ended June 30, 2025 and 2024 (dollars in thousands) and as a percentage of revenue:

Current wording

The following tables set forth information relating to our operating results for the three and nine months ended September 30, 2025 and 2024 (dollars in thousands) and as a percentage of revenue:

Previous wording

The following table set forth information relating to our revenue and gross profit results for the three and six months ended June 30, 2025 and 2024 (dollars in thousands):

Current wording

The following table set forth information relating to our revenue and gross profit results for the three and nine months ended September 30, 2025 and 2024 (dollars in thousands):

Previous wording

Revenues for the three months ended June 30, 2025 were $6.9 million, an increase of $2.4 million or 54.5%% from $4.5 million in the three months ended June 30, 2024. The increase resulted from a $2.8 million increase in solar energy and battery sales, offset by a $319,000 decrease in LED sales and a $12,000 decrease in financing revenue. Our revenue from solar systems increased from $3.1 million for the three months ended June 30, 2024 to $5.9 million for the three months ended June 30, 2025, a 88.2% increase. The increase in solar energy sales over the prior period is primarily attributed to sale resulting from our dealer network program that commenced in or about October 2024. This increase covered both the solar energy systems and sales of batteries separate from solar systems. The increase in the solar energy and battery sales in the three months ended June 30, 2025 reflects a 90.1% increase in the number of systems completed and a 65.1% increase in the wattages deployed. During the three months ended June 30, 2025 and 2024, our battery sales were $864,000 and $374,000, respectively. Battery sales refer to the sale of batteries sold other than as a part of a solar system.

Current wording

Revenues for the three months ended September 30, 2025 were $30.6 million, an increase of $24.3 million or 383.3% from $6.3 million in the three months ended September 30, 2024. The increase resulted from revenue of $24.1 from a new industrial EPC contract with Longfellow to develop a battery energy storage system (“BESS”) facility in the United States, a $442,000 increase in LED sales, offset by $202,000 decrease in solar energy and battery sales, and a $19,000 decrease in financing revenue. We did not have any industrial EPC sales prior to the third quarter of 2025. Our revenue from residential and commercial solar energy and battery sales decreased from $5.1 million for the three months ended September 30, 2024 to $4.9 million for the three months ended September 30, 2025, a 3.9% decrease. The decrease in the solar energy and battery sales in the three months ended September 30, 2025 reflects a 13.0% decrease in the number of systems completed and a 10.8% decrease in the wattages deployed. During the three months ended September 30, 2025 and 2024, our battery sales were $126,000 and $208,000, respectively. Battery sales refer to the sale of batteries sold other than as a part of a solar system.

Previous wording

Revenues for the six months ended June 30, 2025 were $13.8 million, an increase of $3.6 million or 35.2% from $10.2 million in the six months ended June 30, 2024. The increase resulted from a $3.9 million increase in solar energy and battery sales, offset by a 267,000 decrease in LED sales and a $42,000 decrease in financing revenue. Our revenue from solar systems increased from $7.8 million for the six months ended June 30, 2024 to $11.7 million for the six months ended June 30, 2025, a 50.3% increase. Our revenues in the six months ended June 30, 2024 were negatively impacted by unusually frequent and heavy rains in California in the first quarter of 2024, which affected our ability to complete the installation of solar systems as well as the effect of the adoption of NEM 3.0 in April 2024, which resulted in a temporary surge resulting in an increase in solar revenue in 2023 as homeowners purchased solar systems prior to the effectiveness of NEM 3.0. We did not experience the level of rainfalls in the first quarter of 2025, coupled with our ability to increase solar revenue from our dealer network program, which resulted in the increase in sales of both the solar energy systems and batteries. The increase in the solar energy and battery sales in the six months ended June 30, 2025 reflects a 48.2% increase in the number of systems completed and a 37.8% increase in the wattages deployed. During the six months ended June 30, 2025 and 2024, our battery sales were $1.2 million and $608,000, respectively. Battery sales refer to the sale of batteries sold other than as a part of a solar system.

Current wording

Revenues for the nine months ended September 30, 2025 were $44.4 million, an increase of $27.9 million or 168.4% from $16.5 million in the nine months ended September 30, 2024. The increase resulted from revenue of $24.1 from a new industrial EPC contract with Longfellow to develop a battery energy storage system (“BESS”) facility in the United States, a $3.7 million increase in solar energy and battery sales, a $163,000 increase in LED sales and a $61,000 decrease in financing revenue. Our revenue from residential and commercial solar systems increased from $12.9 million for the nine months ended September 30, 2024 to $16.6 million for the nine months ended September 30, 2025, a 28.7% increase. Our revenues in the nine months ended September 30, 2024 were negatively impacted by unusually frequent and heavy rains in California in the first quarter of 2024, which affected our ability to complete the installation of solar systems as well as the effect of the adoption of NEM 3.0 in April 2024, which resulted in a temporary surge resulting in an increase in solar revenue in 2023 as homeowners purchased solar systems prior to the effectiveness of NEM 3.0. We did not experience similar level of rainfall in the first quarter of 2025, and coupled with our ability to increase solar revenue from our dealer network program, resulted in the increase in sales of both the residential and commercial solar energy systems and batteries. The increase in the solar energy and battery sales in the nine months ended September 30, 2025 reflects a 24.9% increase in the number of systems completed and a 18.5% increase in the wattages deployed. During the nine months ended September 30, 2025 and 2024, our battery sales were $1.3 million and $816,000, respectively. Battery sales refer to the sale of batteries sold other than either as a part of a solar system or as part of an industrial project.

Previous wording

As a result of the continued high interest rate environment and the anticipated expiration of the federal residential solar tax credit on December 31, 2025, we expect the revenue from our residential sales to grow modestly in 2025 through our expansion of the dealer network program compared to the prior period. We are also looking to offset the potential residential sales decrease with commercial sales and sales of industrial scale projects. On July 31, 2025, we entered into an EPC Contract with Longfellow to develop a battery energy storage system (“BESS”) facility. The contract is expected to generate revenues of approximately $127.3 million for us and is expected to be completed by June 2026.

Current wording

As a result of the continued relatively high interest rate environment and the anticipated expiration of the federal residential solar tax credit on December 31, 2025, we expect the revenue from our residential sales to grow modestly in 2025 through our expansion of the dealer network program compared to the prior period. We are also looking to offset the potential residential sales decrease with commercial sales and sales of industrial scale projects. On July 31, 2025, we entered into the Longfellow Contract to develop a battery energy storage system (“BESS”) facility. Based on terms of the agreement, the contract is expected to generate revenues of approximately $127.3 million for us, and we expect to complete the work by June 2026. During the three and nine months ended September 30, 2025, we recognized $24.1 million in revenues related to this project.

Previous wording

Our LED revenue decreased by $319,000 or 25.9% to $911,000 for the three months ended June 30, 2025 from $1.2 million for the three months ended June 30, 2024, and by $278,000, or 12.4%, to $2.0 million for the six months ended June 30, 2025 from $2.2 million for the six months ended June 30, 2024, primarily resulting from the decrease in the number of LED projects with a higher 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 tends to fluctuate period to period.

Current wording

Our LED revenue increased by $442,000 or 39.8% to $1.6 million for the three months ended September 30, 2025 from $1.1 million for the three months ended September 30, 2024, and by $163,000, or 4.9%, to $3.5 million for the nine months ended September 30, 2025 from $3.4 million for the nine months ended September 30, 2024, primarily resulting from the increase in the number of LED projects with a higher 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 tends to fluctuate period to period.

Previous wording

We have not originated any loans to our solar customers since early 2020. As a result, our finance revenue for the three months ended June 30, 2025 and 2024 was $81,000 and $93,000, respectively, and for the six months ended June 30, 2025 and 2024 was $153,000 and $195,000, respectively, from our portfolio of solar loans. Finance revenue decreases as loans in our portfolio are paid and not replaced by new loans.

Current wording

We have not originated any loans to our solar customers since early 2020. As a result, our finance revenue for the three months ended September 30, 2025 and 2024 was $70,000 and $89,000, respectively, and for the nine months ended September 30, 2025 and 2024 was $223,000 and $284,000, respectively, from our portfolio of solar loans. Finance revenue decreases as loans in our portfolio are paid and not replaced by new loans.

Previous wording

Our cost of revenue for the three months ended June 30, 2025 was $6.3 million, a increase of $2.4 million, or 62.4% from $3.9 million for the three months ended June 30, 2024. Our cost of revenue for the six months ended June 30, 2025 was $11.8 million, an increase of $1.7 million, or 16.8% from $10.1 million for the six months ended June 30, 2024. During the six months ended June 30, 2024, we recognized a one-time non-cash stock-based compensation expense of approximately $1.3 million in cost of revenue as a result of performance options vesting upon our initial public offering in the first quarter of 2024. Excluding this one-time stock-based compensation expense, our cost of revenue increased 33.5% from $8.8 million in the six months ended June 30, 2024 to $11.8 million in the six months ended June 30, 2025, primarily driven by the corresponding increase in sales revenue of 24%.

Current wording

Our cost of revenue for the three months ended September 30, 2025 was $29.6 million, an increase of $24.6 million, or 484.2% from $5.1 million for the three months ended September 30, 2024. The increase in cost of revenue was primarily driven by the Longfellow Contract. Our cost of revenue for the nine months ended September 30, 2025 was $41.4 million, an increase of $26.3 million, or 173.1% from $15.2 million for the nine months ended September 30, 2024. During the nine months ended September 30, 2024, we recognized a one-time non-cash stock-based compensation expense of approximately $1.3 million in cost of revenue as a result of performance options vesting upon our initial public offering in the first quarter of 2024. Excluding this one-time stock-based compensation expense, our cost of revenue increased 197.4% from $13.9 million in the nine months ended September 30, 2024 to $41.4 million in the nine months ended September 30, 2025, primarily driven by the corresponding increase in sales revenue of 168.4% related to the new EPC contract entered into in July 2025 with Longfellow.

Previous wording

The overall gross margin decreased to 8.8% for the three months ended June 30, 2025 from 13.2% in the three months ended June 30, 2024, and increased to 14.7% for the six months ended June 30, 2025 from 1.2% in the six months ended June 30, 2024. The increase in gross profit and the percentage increase in gross profit in the six months ended June 30, 2025 from the comparable period of 2024 reflect the effect of the $1.3 million non-cash compensation in the first quarter of 2024. Excluding the effect of $1.3 million of the stock-based compensation expense recognized in the three months ended March 31, 2024, our overall gross margin increased to 14.7% for the six months ended June 30, 2025 from 13.6% in the six months ended June 30, 2024. The increase in gross margin was due to lower unit cost in our solar business. This increase in gross margin was partially offset by a decrease in the gross margin of our LED operation resulting from an increase in tariffs for imported items, a fee charged to us by a logistics company who provides financing for one of our suppliers and arranges their shipments to our warehouse, and a lower volume of higher margin LED products. We have no cost of revenue with respect to interest income on customer loans.

Current wording

The overall gross margin decreased to 3.1% for the three months ended September 30, 2025 from 19.9% in the three months ended September 30, 2024, and decreased to 6.7% for the nine months ended September 30, 2025 from 8.3% in the nine months ended September 30, 2024. The decrease in gross profit and the percentage decrease in gross profit in the nine months ended September 30, 2025 from the comparable period of 2024 reflect the effect of the $1.3 million non-cash compensation in the first quarter of 2024. Excluding the effect of $78,000 of the stock-based compensation expense recognized in the three months ended September 30, 2025, and $1.3 million of the stock-based compensation expense recognized in the three months ended March 31, 2024, our overall gross margin decreased to 6.9% for the nine months ended September 30, 2025 from 16.0% in the nine months ended September 30, 2024. The decrease in gross margin was largely due to the costs recognized related to the new EPC contract with Longfellow, in addition to higher unit costs in our solar business. Our revenue recognition for Longfellow contract requires us to recognize revenue, but not profit, on uninstalled materials. The revenue on uninstalled materials was recognized by us when the control was transferred equal to the cost of the uninstalled materials. This decrease in gross margin was partially offset by an increase in the gross margin of our LED operation due to higher volume of higher margin LED products. We have no cost of revenue with respect to interest income on customer loans.

Previous wording

Sales and marketing expenses for the three months ended June 30, 2025 decreased to $70,691, a decrease of $16,000 or 18.7% from $87,000 in the comparable period of 2024. Sales and marketing expenses were 1.0% of revenue for the three months ended June 30, 2025 compared to 2.0% for the three months ended June 30, 2024. Sales and marketing expenses for the six months ended June 30, 2025 decreased to $150,000, a decrease of $102,000, or 40.6%, from $252,000 in the comparable period of 2024. Sales and marketing expenses in the United States were 1.1% of revenue for the six months ended June 30, 2025 compared to 2.5% for the six months ended June 30, 2024. Our sales and marketing expenses in the United States fluctuate based on the types of marketing and promotion initiatives we deploy. We expect to continue to be selective in our sales and marketing spends for the remainder of 2025. Our China segment did not incur sales and marketing expenses for the six months ended June 30, 2025 and 2024.

Current wording

Sales and marketing expenses for the three months ended September 30, 2025 increased to $146,157, an increase of $6,000 or 4.4% from $140,000 in the comparable period of 2024. Sales and marketing expenses were 0.5% of revenue for the three months ended September 30, 2025 compared to 2.2% for the three months ended September 30, 2024. Sales and marketing expenses for the nine months ended September 30, 2025 decreased to $296,000, a decrease of $96,000, or 24.6%, from $392,000 in the comparable period of 2024. Sales and marketing expenses in the United States were 0.6% of revenue for the nine months ended September 30, 2025 compared to 2.4% for the nine months ended September 30, 2024. Our sales and marketing expenses in the United States fluctuate based on the types of marketing and promotion initiatives we deploy. We expect to continue to be selective in our sales and marketing spends for the remainder of 2025. Our China segment did not incur sales and marketing expenses for the nine months ended September 30, 2025 and 2024.

Previous wording

General and administration expenses for the United States segment for the three months ended June 30, 2025 decreased $589,000 million or 21.6%, to $2.1 million compared to $2.7 million for the three months ended June 30, 2024, representing 31.0% of revenue for the three months ended June 30, 2025 compared to 61.2% of revenue for the three months ended June 30, 2024. General and administration expenses for the United States segment for the six months ended June 30, 2025 decreased $16.2 million or 78.1%, to $4.5 million compared to $20.7 million for the six months ended June 30, 2024, representing 32.9% of revenue for the six months ended June 30, 2025 compared to 202.8% of revenue for the six months ended June 30, 2024. The decrease during the six months ended June 30, 2025 is principally attributed to the $15.9 million stock compensation expense recognized in the six months ended June 30, 2024 as a result of performance options vesting upon our initial public offering in the first quarter of 2024. Our general increase, excluding the stock compensation expense, in general and administrative expenses in 2025 reflects the cost of compliance and other regulatory costs associated with being a public reporting company which is expected to continue for us all. All of our corporate overhead, other than overhead directly related to the China segment, is allocated to the United States segment.

Current wording

General and administration expenses for the United States segment for the three months ended September 30, 2025 decreased $764,000 million or 21.7%, to $2.8 million compared to $3.5 million for the three months ended September 30, 2024, representing 9.0% of revenue for the three months ended September 30, 2025 compared to 55.6% of revenue for the three months ended September 30, 2024. General and administration expenses for the United States segment for the nine months ended September 30, 2025 decreased $17.0 million or 69.9%, to $7.3 million compared to $24.2 million for the nine months ended September 30, 2024, representing 16.4% of revenue for the nine months ended September 30, 2025 compared to 146.5% of revenue for the nine months ended September 30, 2024. The decrease during the nine months ended September 30, 2025 is principally attributed to the $17.3 million stock compensation expense recognized in the nine months ended September 30, 2024 as a result of performance options vesting upon our initial public offering in the first quarter of 2024. Our general increase, excluding the stock compensation expense, in general and administrative expenses in 2025 reflects the cost of compliance and other regulatory costs associated with being a public reporting company which is expected to continue for us all. All of our corporate overhead, other than overhead directly related to the China segment, is allocated to the United States segment. The decrease in the percentage of both sales and marketing and general and administrative expenses as a percentage of revenue in both the three and nine months ended September 30, 2025 reflects revenue of approximately $24.1 million from the Longfellow Contract, on which revenue commenced in the third quarter.

Previous wording

General and administrative expenses relating to the China segment were $166,000 in the three months ended June 30, 2025 compared to $175,000 in the three months ended June 30, 2024, and $261,000 in the six months ended June 30, 2025, as compared with $427,000 in the six months ended June 30, 2024. During the six months ended June 30, 2024, we had a $1.1 million recovery of previously reserved receivable on one of our projects for SPIC as a result of the settlement of a legal proceeding.

Current wording

General and administrative expenses relating to the China segment were $165,000 in the three months ended September 30, 2025 compared to $164,000 in the three months ended September 30, 2024, and $426,000 in the nine months ended September 30, 2025, as compared with $591,000 in the nine months ended September 30, 2024. During the nine months ended September 30, 2024, we had a $1.1 million recovery of previously reserved receivable on one of our projects for SPIC as a result of an arbitration ruling.

Previous wording

As a result of the factors described above, our loss from operations for the United States segment was $1.6 million for the three months ended June 30, 2025, compared to loss from operations of $2.2 million in the three months ended June 30, 2024, and a loss from operations of $2.7 million for the six months ended June 30, 2025, compared to loss from operations of $20.9 million in the six months ended June 30, 2024. Excluding the effect of stock compensation expense recognized in the three months ended March 31, 2024, our loss from operations in the United States segment was $2.7 million for the six months ended June 30, 2025 compared to a loss from operations of $3.6 million for the six months ended June 30, 2024. Our loss from operations for the China segment was $166,000 for the three months ended June 30, 2025, compared to a loss from operations of $175,000 in the three months ended June 30, 2024, and a loss from operations of $261,000 for the six months ended June 30, 2025, compared to a loss from operations of $427,000 in the six months ended June 30, 2024.

Current wording

As a result of the factors described above, our loss from operations for the United States segment was $1.9 million for the three months ended September 30, 2025, compared to loss from operations of $2.4 million in the three months ended September 30, 2024, and a loss from operations of $4.6 million for the nine months ended September 30, 2025, compared to loss from operations of $23.3 million in the nine months ended September 30, 2024. Excluding the effect of stock compensation expense recognized in the three months ended March 31, 2024, our loss from operations in the United States segment was $4.6 million for the nine months ended September 30, 2025 compared to a loss from operations of $6.0 million for the nine months ended September 30, 2024. Our loss from operations for the China segment was $165,000 for the three months ended September 30, 2025, compared to a loss from operations of $7.6 million in the three months ended September 30, 2024, and a loss from operations of $426,000 for the nine months ended September 30, 2025, compared to a loss from operations of $8.1 million in the nine months ended September 30, 2024.

Previous wording

The consolidated loss from operations was $1.8 million for the three months ended June 30, 2025 compared to a consolidated loss from operations of $2.4 million for the three months ended June 30, 2024, and a consolidated loss from operations of $2.9 million for the six months ended June 30, 2025 compared to a consolidated loss from operations for $21.3 million for the six months ended June 30, 2024. Excluding the effect of stock compensation expense recognized in the three months ended March 31, 2024, our consolidated loss from operations was $2.9 million for the six months ended June 30, 2025 compared to the consolidated loss from operations of $4.1 million for the six months ended June 30, 2024.

Current wording

The consolidated loss from operations was $2.1 million for the three months ended September 30, 2025 compared to a consolidated loss from operations of $10.0 million for the three months ended September 30, 2024, and a consolidated loss from operations of $5.0 million for the nine months ended September 30, 2025 compared to a consolidated loss from operations for $31.3 million for the nine months ended September 30, 2024. Excluding the effect of stock compensation expense recognized in the three months ended March 31, 2024, and the China goodwill impairment loss of $7.5 million recognized in the three months ended September 30, 2024, our consolidated loss from operations was $5.0 million for the nine months ended September 30, 2025 compared to the consolidated loss from operations of $6.0 million for the nine months ended September 30, 2024. We believe that comparing loss from operations excluding the stock compensation expense is useful for management in evaluating our cash requirements, since the stock compensation expense in the three and nine months ended September 30, 2024 was unusual because it resulted from the recognition of compensation for options and restricted granted years before which became vested as a result of the completion of our public offering.

Previous wording

Equity in income from unconsolidated entities relates to our China segment and comprises the equity in income from three unconsolidated project companies in which we have a non-controlling 30% interest. The equity in income for the three months ended June 30, 2025 was income of $144,000 compared to income of $239,000 in the three months ended June 30, 2024, a decrease of $95,000 or 39.7%. The equity in income for the six months ended June 30, 2025 was income of $130,000 compared to income of $299,000 in the six months ended June 30, 2024, a decrease of $169,000 or 56.6%. The decline in income in the current period is attributed to insufficient sunlight, cloudy and frequent rain in the Guizhou region leading to a decline in the power production relative to the prior period which contributed to lower revenues.

Current wording

Equity in income from unconsolidated entities relates to our China segment and comprises the equity in income from three unconsolidated project companies in which we have a non-controlling 30% interest. The equity in income for the three months ended September 30, 2025 was income of $169,000 compared to income of $254,000 in the three months ended September 30, 2024, a decrease of $85,000 or 33.3%. The equity in income for the nine months ended September 30, 2025 was income of $299,000 compared to income of $553,000 in the nine months ended September 30, 2024, a decrease of $254,000 or 45.9%. The decline revenue and in income in the current period resulted from insufficient sunlight, cloudy skies and frequent rain in the Guizhou region leading to a decline in the power production relative to the prior period.

Previous wording

No EB-5 notes were exchanged during the three and six months ended June 30, 2025. The gain on debt extinguishment for the three months ended June 30, 2024 was $222,000 and for the six months ended June 30, 2024 was $276,000. The gain on debt extinguishment related to the exchange of 3% notes to a related party for secured convertible 4% notes to limited partners of the related party. The limited partners are not related parties.

Current wording

One EB-5 note was exchanged during the three and nine months ended September 30, 2025. The gain on debt extinguishment for the three and nine months ended September 30, 2025 was $13,000. The gain on debt extinguishment for the three months ended September 30, 2024 was $13,000 and for the nine months ended September 30, 2024 was $289,000. The gain on debt extinguishment related to the exchange of 3% notes to a related party for secured convertible 4% notes to limited partners of the related party. The limited partners are not related parties.

Previous wording

Interest expense, net, for the three months ended June 30, 2025 was $136,000, a decrease of $108,000, or 44.2%, from the three months ended June 30, 2024. Interest expense, net, for the six months ended June 30, 2025 was $385,000, a decrease of $227,000, or 37.1%, from the six months ended June 30, 2024. 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 principals payments were made. Our interest expense in the six months ended June 30, 2025 primarily includes interest at 3% on two EB-5 loans from related parties in the United States with a total principal balance of $11.0 million at June 30, 2025, interest at 4% on convertible notes issued to former limited partners of CEF in transactions in which the former limited partners of CEF accepted 4% convertible notes issued by SolarMax and the subsidiary that borrowed the funds from CEF with an aggregate principal balance of $16.3 million at June 30, 2025, interest at 8% on promissory notes issued to SMX Property (a related party) due in October 2025 with a principal balance of $1.4 million at June 30, 2025, and interest at 8% on a promissory note issued to an unrelated individual due on June 30, 2025 with a principal balance of $2.0 million at June 30, 2025. 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. Our interest income for the three and six months ended June 30, 2025 includes interest earned on promissory notes receivable at 8.0% in the United States segment due December 31, 2025 with a principal balance of $5.7 million at June 30, 2025, and interest earned on a promissory notes receivable at 5% in the China segment due September 30, 2025 with a principal balance of RMB 3,607,000 ($503,000) at June 30, 2025, which notes are reflected as short-term investments. See Note 5 of Notes to Condensed Consolidated Financial Statements.

Current wording

Interest expense, net, for the three months ended September 30, 2025 was $236,000, a decrease of $43,000, or 22.1%, from the three months ended September 30, 2024. Interest expense, net, for the nine months ended September 30, 2025 was $621,000, a decrease of $184,000, or 22.9%, from the nine months ended September 30, 2024. 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 nine months ended September 30, 2025 primarily includes interest at 3% on two EB-5 loans from related parties in the United States with a total principal balance of $10.5 million at September 30, 2025, interest at 4% on convertible notes issued to former limited partners of CEF in transactions in which the former limited partners of CEF accepted 4% convertible notes issued by SolarMax and the subsidiary that borrowed the funds from CEF with an aggregate principal balance of $15.9 million at September 30, 2025, interest at 8% on promissory notes issued to SMX Property (a related party) of which the principal balance an all accrued interest were fully paid off in September 2025, and interest at 8% on a promissory note issued to an unrelated individual due on June 30, 2025, the principal balance of which was exchanged for common stock in July 2025. 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. Our interest income for the three and nine months ended September 30, 2025 includes interest earned on promissory notes receivable at 8.0% in the United States segment due December 31, 2025 with a principal balance of $5.2 million at September 30, 2025, and interest earned on a promissory notes receivable at 5% in the China segment due December 31, 2025 with a principal balance of RMB 3,656,000 ($513,000) at September 30, 2025, which notes are reflected as held to maturity debt investments. See Note 6 of Notes to Condensed Consolidated Financial Statements.

Previous wording

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 segment intercompany receivable denominated in the Chinese currency, offset with a loss on a solar asset disposal in the United States segment of $65,000 During the three months ended June 30, 2024, other expense was $97,000 consisting of $66,000 of foreign currency transaction loss for our United States segment intercompany receivable denominated in the Chinese currency, and a $30,000 loss associated with the write-off of legal settlement receivable as a result of the debtor's bankruptcy.

Current wording

During the three months ended September 30, 2025, other income was $63,000 consisting primarily of foreign currency transaction gains for our United States segment intercompany receivable denominated in the Chinese currency. During the three months ended September 30, 2024, other income was $387,000 consisting primarily of $371,000 of foreign currency transaction gains for our United States segment intercompany receivable denominated in the Chinese currency.

Previous wording

During the six months ended June 30, 2025, other income, net was $129,000 consisting primarily of $228,000 foreign currency transaction gains for our United States segment intercompany receivable denominated in the Chinese currency, 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. During the six months ended June 30, 2024, other expense was $306,000, consisting of $291,000 of foreign currency transaction loss for our United States segment intercompany receivable denominated in the Chinese currency, a $30,000 loss associated with the write-off of legal settlement receivable as a result of the debtor's bankruptcy, and a gain on disposal of property in the amount of $14,000.

Current wording

During the nine months ended September 30, 2025, other income, net was $192,000 consisting primarily of $254,000 foreign currency transaction gains for our United States segment intercompany receivable denominated in the Chinese currency, offset with a loss on a solar asset disposal in the United States segment of $65,000. During the nine months ended September 30, 2024, other income was $81,000, consisting of $85,000 of foreign currency transaction loss for our United States segment intercompany receivable denominated in the Chinese currency, a $30,000 loss associated with the write-off of legal settlement receivable as a result of the debtor’s bankruptcy, and a gain on disposal of property in the amount of $14,000.

Previous wording

For the three months ended June 30, 2025 and 2024, our United States segment reported an income tax expense of $0 and $0, respectively, attributable to minimum state tax liabilities. For the six months ended June 30, 2025 and 2024, our United States segment reported an income tax expense of $6,000 and $6,000, respectively, attributable to minimum state tax liabilities.

Current wording

For the three months ended September 30, 2025 and 2024, our United States segment reported an income tax expense of $11,000 and $0, respectively, attributable to minimum state tax liabilities. For the nine months ended September 30, 2025 and 2024, our United States segment reported an income tax expense of $17,000 and $6,000, respectively, attributable to the Texas franchise tax and minimum state tax liabilities.

Previous wording

For the China segment, income tax benefit of approximately $106,000 and $115,000 was reported for the three months ended June 30, 2025 and 2024, respectively. For the China segment, income tax benefit of approximately $176,000 and $116,000 was reported for the six months ended June 30, 2025 and 2024, respectively. The increase in income tax benefit for our China segment in the six months ended June 30, 2025 was driven by the reduction in the net receivable balance resulting from the reserve taken at December 31, 2024 and the net losses in our China segment.

Current wording

For the China segment, an income tax benefit of approximately $527,000 and $57,000 was reported for the three months ended September 30, 2025 and 2024, respectively. For the China segment, an income tax benefit of approximately $703,000 and $59,000 was reported for the nine months ended September 30, 2025 and 2024, respectively, arising from a decrease in the valuation allowance against deferred tax assets and a decrease in deferred tax liabilities as of September 30, 2025.

Previous wording

As a result of the foregoing, we had consolidated net loss of $1.9 million, or $(0.04) per share (basic and diluted), for the three months ended June 30, 2025, compared with a consolidated net loss of $2.2 million, or $(0.05) per share (basic and diluted), for the three months ended June 30, 2024.

Current wording

As a result of the foregoing, we had consolidated net loss of $2.3 million, or $(0.05) per share (basic and diluted), for the three months ended September 30, 2025, compared with a consolidated net loss of $9.6 million, or $(0.21) per share (basic and diluted), for the three months ended September 30, 2024.

Previous wording

As a result of the foregoing, we had consolidated net loss of $3.2 million, or $(0.07) per share (basic and diluted), for the six months ended June 30, 2025, compared with a consolidated net loss of $21.4 million, or $(0.50) per share (basic and diluted), for the six months ended June 30, 2024.

Current wording

As a result of the foregoing, we had consolidated net loss of $5.5 million, or $(0.11) per share (basic and diluted), for the nine months ended September 30, 2025, compared with a consolidated net loss of $31.1 million, or $(0.71) per share (basic and diluted), for the nine months ended September 30, 2024.

Previous wording

As a result of foreign currency translations, we reported net foreign currency translation gains (losses) of $3,000 and $(65,000) for the three months ended June 30, 2025 and 2024, respectively, and $3,000 and $(273,000) for the six months ended June 30, 2025 and 2024, respectively.

Current wording

As a result of foreign currency translations, we reported net foreign currency translation gains (losses) of $9,000 and $173,000 for the three months ended September 30, 2025 and 2024, respectively, and $12,000 and $(99,000) for the nine months ended September 30, 2025 and 2024, respectively.

Previous wording

The following tables show consolidated cash flow information for the six months ended June 30, 2025 and 2024 (dollars in thousands):

Current wording

The following tables show consolidated cash flow information for the nine months ended September 30, 2025 and 2024 (dollars in thousands):

Previous wording

Net cash used in operating activities for the six months ended June 30, 2025 was $380,000, compared to net cash used by operating activities for the six months ended June 30, 2024 of $8.0 million. The cash used in operations for the six months ended June 30, 2025, resulting from our net loss of $3.2 million, decreases in non-cash expense of $16.8 million related primarily to the $17.2 million stock-based compensation expenses in the six months ended June 30, 2024 as described in “Elimination of Forfeiture Provisions of Options and Stock Grants,” and an increase of $6.0 million in cash from our operating assets and liabilities. During the six months ended June 30, 2025, our operating assets and liabilities used $1.8 million in cash, compared to $4.3 million of cash used in the six months ended June 30, 2024.

Current wording

Net cash provided by operating activities for the nine months ended September 30, 2025 was $3.0 million, compared to net cash used by operating activities for the nine months ended September 30, 2024 of $7.8 million. The cash provided by operations for the nine months ended September 30, 2025, resulting from our net loss of $5.5 million, decreases in non-cash expense of $24.8 million related primarily to the $18.0 million stock-based compensation expenses and $7.5 million in goodwill impairment recognized in the nine months ended September 30, 2024 as described in “Elimination of Forfeiture Provisions of Options and Stock Grants,” and an increase of $10.1 million in cash from our operating assets and liabilities. During the nine months ended September 30, 2025, our operating assets and liabilities used $6.6 million in cash, compared to $3.5 million of cash used in the nine months ended September 30, 2024

Previous wording

Net cash used by operations for the six months ended June 30, 2024 of $8.0 million resulted from net loss of $21.4 million, non-cash expense of $17.8 million, and $4.3 million of cash used in our operating assets and liabilities.

Current wording

Net cash used by operations for the nine months ended September 30, 2024 of $7.8 million resulted from net loss of $31.1 million, non-cash expense of $26.8 million, and $3.5 million of cash used in our operating assets and liabilities.

Previous wording

Non-cash adjustments changes for the six months ended June 30, 2025:

Current wording

Non-cash adjustments changes for the nine months ended September 30, 2025 primarily reflected:

Previous wording

Changes in operating assets and liabilities for the six months ended June 30, 2025:

Current wording

Changes in operating assets and liabilities for the nine months ended September 30, 2025:

Previous wording

Net cash provided by investment activities for the six months ended June 30, 2025 was $138,000 consisting of the partial principal repayment on the short term loan investments in China. Net cash used by investing activities for the six months ended June 30, 2024 was approximately $7.7 million, consisting of $7.7 million short-term investment in two promissory notes, offset by $14,000 of cash proceeds received from disposal of property and equipment.

Current wording

Net cash provided by investment activities for the nine months ended September 30, 2025 was $638,000 consisting of the partial principal repayment received on our short term loan investments. Net cash used by investing activities for the nine months ended September 30, 2024 was approximately $7.7 million, consisting of $7.7 million short-term investment in two promissory notes, offset by $21,000 of cash proceeds received from disposal of property and equipment.

Previous wording

Net cash provided by financing activities for the six months ended June 30, 2025 was $1.6 million, consisting primarily of $2.0 million of cash proceeds from the issuance of shares of common stock, offset by $250,000 principal payments on convertible notes, $138,000 payment of accrued legal settlement, and $9,000 payment on equipment leases.

Current wording

Net cash provided by financing activities for the nine months ended September 30, 2025 was $1.5 million, consisting primarily of $4.3 million of cash proceeds from the issuance of shares of common stock, offset by $2,559,000 principal payments on convertible notes, $276,000 payment of accrued legal settlement, and $13,000 payment on equipment leases.