SolarMax Technology, Inc.
For the period ended Mar 31, 2026. Filed May 15, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 15, 2026
SMXT$3.80+0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-14.
0001640334-25-002119
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-15.
0001640334-26-000909
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 122 previous paragraphs and 119 current paragraphs.
52 unchanged; 42 reworded; 23 added; 27 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 8 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
On December 31, 2025, we entered into three EPC agreements for large scale BESS systems, two in Puerto Rico and one in Corpus Christi, Texas. Pursuant to an EPC agreement with Naguabo BESS LLC, a Texas limited liability company (“Naguabo”), we will develop a BESS facility in Ceiba Municipality, Puerto Rico. The contract is expected to generate revenues of approximately $122.3 million. Naguabo will own and operate the facility, which is expected to have a storage capacity of 320 megawatt-hours. We are to have a 9% membership interest in Naguabo. Pursuant to an EPC agreement with Yabucoa BESS LLC, a Texas limited liability company (“Yabucoa”), we will develop a BESS facility in Humacao Municipality, Puerto Rico. The contract is expected to generate revenues of approximately $35.9 million. Yabucoa will own and operate the facility, which is expected to have a storage capacity of 80 megawatt-hours. We are to have a 9% membership interest in Yabucoa. Pursuant to an EPC agreement with Navboot Holdco, LLC, a Delaware limited liability company (“Navboot”), we will develop a BESS facility in Corpus Christi, Texas. The contract is expected to generate revenues of approximately $258.1 million. Navboot will own and operate the facility, which is expected to have a storage capacity of 600 megawatt-hours. Cash flow from long-term EPC projects is dependent upon the timing of payments from project owners which may be affected by the owners’ debt and equity financing for the project.
Current report
In 2024 and 2025, the California Public Utilities Commission (CPUC) launched a $280 million statewide initiative called the Self-Generation Incentive Program (“SGIP”) to help California’s low-income utility customers install battery storage and solar panel systems. We began participating in SGIP as an installer in 2025. In February 2026, SGIP administrators temporarily paused payments to installers and in May 2026 resumed the payments with a ruling to impose strict cost documentation requirements and review. As a result, we experienced a delay in collecting receivables on SGIP installations during the three months ended March 31, 2026. In the three months ended March 31, 2025, revenues from SGIP projects were approximately $2.9 million, or 49% of our solar energy sales and 41% of our total revenues. In the three months ended March 31, 2026, revenues from SGIP installations were approximately $6.5 million, or 80% of solar energy sales and 44% of our total revenues. At March 31, 2026, SGIP installations account for approximately $2.3 million of our accounts receivable. Our sales for the SGIP were made primarily through our dealer network.
Current report
We plan to launch an initiative to address the need for commercial solar powered EV charging stations in California. We believe that there is a significant market for EV charging stations in California. As of the date of this quarterly report, we have not taken any steps other than an evaluation of the market for charging stations in California. Before we can commence this business, we will need to obtain financing for the projects. If we do enter this business, we may either construct EV stations for our own account or perform the EPC services for a third party pursuant an agreement with the third party. We cannot give any assurance that we will commence the business of constructing and/or operating EV stations, that, if we seek to enter this business, we will obtain any necessary financing, that we will price any EPC services we may perform in a manner to enable us to generate a gross profit from the services or that we can or will operate this business profitably. If we enter this business and cannot operate it profitably our business will be materially and adversely affected.
Current report
Our cost of revenue for the three months ended March 31, 2026 was $11.8 million, an increase of $6.3 million, or 113.9% from $5.5 million for the three months ended March 31, 2025. The increase in cost of revenue was largely driven by the EPC revenue from EPC services pursuant to the Longfellow contract. The remaining increase in cost of revenue was the result of the increased sales in the residential and commercial solar energy systems and LED sales.
Current report
General and administrative expenses relating to the China operations were $267,000 in the three months ended March 31, 2026 compared to $95,000 in the three months ended March 31, 2025, an increase of $173,000 or 182%. Such increase during the three months ended March 31, 2026 is attributed to the court costs and legal fees associated with the ongoing litigation with SPIC to enforce the collection of the remaining receivable from SPIC.
Current report
As a result of the factors described above, our income from operations in the United States was $363,000 for the three months ended March 31, 2026, compared to a loss from operations of $1.1 million in the three months ended March 31, 2025, which is primarily attributed to the increase in our revenues and the related gross profit. Our loss from operations for our China operations was $267,000 for the three months ended March 31, 2026, compared to a loss from operations of $95,000 in the three months ended March 31, 2025.
Current report
For the three months ended March 31, 2026, our gain on debt extinguishment was $40,000 related to the exchange of $1.5 million of secured EB-5 notes payable to a related party for 4% convertible notes in the same principal amount. No EB-5 notes were exchanged during the three months ended March 31, 2025.
Current report
Net cash provided by investment activities for the three months ended March 31, 2026 was $548,000 consisting of debt repayments received on our held to maturity debt investments. Net cash used by investing activities for the three months ended March 31, 2025 was approximately $93,000, consisting of debt repayments received on our held to maturity debt investments.
Current report
Net cash used in financing activities for the three months ended March 31, 2026 was $8,000, consisting of $1.1 million of cash proceeds from the issuance of shares of common stock in private offerings, offset by $1.1 million principal payments on convertible notes, and $4,000 payment on equipment leases.
Current report
Convertible Notes
Current report
We have issued 4% secured subordinated convertible notes to former limited partners of CEF and CEF II, pursuant to exchange agreements with the limited partners. The limited partners accepted the notes in lieu of cash payments of their capital contribution which resulted in a reduction of SREP’s and LED’s notes to CEF and CEF II, respectively, in the same amount, reducing the outstanding EB-5 loan balance. Payment of the notes is secured by a security interest in SREP’s and LED’s accounts and inventory, which are the same assets as secure the original note to CEF and CEF II. The convertible notes are payable in equal installments on the first, second, third, fourth and fifth anniversaries of the date of issuance. The convertible notes made prior to, or on or about the date of, our initial public offering are convertible into common stock at a conversion price of $3.20, which is 80% of our initial public offering price of $4.00 per share. The convertible notes made after our initial public offering are convertible into common stock at a conversion price equal to 80% of the average closing price of our common stock for the ten trading days preceding the date of the exchange agreement with the limited partner which conversion prices range from $0.65 to $9.07, with an average conversion price of $1.58. The convertible notes may be converted into common stock at the first, second, third, fourth and fifth anniversaries of the date of issuance, but not earlier than six months from the date of our initial public offering or for convertible notes issued after the initial public offering, six months after the issuance of the notes.
Current report
All convertible notes issued contained redemption put features that allow the holders of the convertible notes the right to receive, for each conversion share that would have been issuable upon conversion immediately prior to the occurrence of an effective change in control event defined as a fundamental transaction, the number of shares of common stock of the successor or acquiring corporation or of ours, if it is the surviving corporation, and any additional consideration receivable as a result of such fundamental transaction by a holder of the number of shares of common stock for which these convertible notes are convertible immediately prior to such fundamental transaction. We evaluated the redemption put feature contained in the convertible notes under the guidance of ASC 815 and concluded that the requirements for contingent exercise provisions as well as the settlement provision for scope exception in ASC 815-10-15-74 has been meet. Accordingly, the redemption put features contained in the convertible notes were not bifurcated and accounted for as freestanding derivative instruments.
Current report
During the three months ended March 31, 2026, we recognized a gain on debt of extinguishment in the amount of approximately $40,000, relating to the issuance of convertible note in the principal amount of $1.5 million to former limited partners of CEF I and II in exchange for a $1.5 million reduction of the note from CEF I and II. No gain or loss on debt extinguishment was recognized for the three months ended March 31, 2025 as there was no issuance of convertible notes in exchange for a reduction of the note from CEF I and II.
Current report
Default Event and Remedies Upon Event of Default
Current report
From April 2023 through March 31, 2026, we did not pay annual principal installment payments and related quarterly interest payments which is an event of default on convertible notes. As of March 31, 2026 and December 31, 2025, the aggregate principal amount of the notes in default was $13.7 million and $14.3 million, respectively. The default provisions of the notes provide that if an event of default occurs the outstanding principal amount of this note, plus accrued but unpaid interest and other amounts owing in respect thereof through the date of acceleration, shall become, at the noteholder’s election, immediately due and payable in cash, and commencing five days after occurrence of any event of default that results in the eventual acceleration of the note, the interest rate on the note shall accrue at an interest rate of 12% per annum. Further, if an event of default occurs, the noteholders, together have rights to foreclose on the collateral securing the notes.
Current report
We accrued interest at the rate of 4% per annum since no noteholder has taken action to accelerate payment of principal and interest. Since we have accrued interest at 4% per annum on the outstanding notes, in the aggregate principal amount of $13.7 million, with respect to which there is an event of default but with respect to which the noteholders did not demand acceleration. Such accrued interest was approximately $136,500 at March 31, 2026. In the event that the holders of all of these note demand acceleration, the amount of interest on those at 12% would be approximately $1.8 million. The difference between the interest at 12% and the accrued interest at 4% as of March 31, 2026, together with any additional interest due subsequent to March 31, 2026 is a contingent liability of the Company. If any noteholders exercise their right to accelerate, the accrued interest at the default rate of 12% will be reflected as an interest expense in the period the note is accelerated.
Current report
On January 28, 2026, we entered into an amendment to the lease for our facilities at 3080 12th Street, Riverside, California. The amendment extends the expiration date of the lease from December 31, 2026 to December 31, 2033. The annual base rent during the term, as extended is $1,855,566 for 2026 and it increases annually until $2,282,112 for 2033. We will also pay certain operating expenses in the same manner as with the prior lease. The amendment provides for certain construction expenses, a portion of which are payable by the landlord and a portion of which are payable by us.
Current report
Nature of Estimates Required
Current report
Key Assumptions and Approach Used
Current report
Effect if Different Assumptions Used
Current report
Nature of Estimates Required
Current report
Key Assumptions and Approach Used
Current report
Effect if Different Assumptions Used
Removed paragraphs (27)
Previous report
Elimination of Forfeiture Provisions of Options and Stock Grants
Previous report
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 report
We are seeking to offset our decline in residential solar sales in California for the year ended December 31, 2024 as compared with the year ended December 31, 2023 and the anticipated continued decline as a result of expiration of the federal residential solar tax credit on December 31, 2025 by marketing commercial sales of larger systems to commercial users both in California and in other states; however, we cannot assure you that we will be successful in marketing to commercial users.
Previous report
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 report
Three and Nine Months Ended September 30, 2025 and 2024
Previous report
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 report
During the three months ended September 30, 2025 and continuing through the date of this quarterly report, we did not generate any revenue in the China segment because there are no projects under construction and we have not been able to negotiate new contracts with SPIC or any other Chinese potential customer since the last project, which was completed in June 2021. As a result of the ongoing geopolitical conditions and economic downturn in China and the deterioration of trade relations between the United States and China, we do not expect to be in the position to negotiate any new projects with SPIC or with any new customers for the remainder of 2025. In the event that we believe that we will not be able to operate profitably in China, we may find it necessary to discontinue our China segment.
Previous report
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 report
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 report
Impairment of China Segment Goodwill
Previous report
During the quarter ended September 30, 2024, we performed a goodwill impairment assessment with respect to our China segment considering various factors and based primarily on the continued economic downturn in China that directly impacts our ability to generate new businesses in the foreseeable future and the absence of any agreements or negotiations for agreements at September 30, 2024, We recognized an impairment charge for the entire balance of the goodwill of $7.5 million for the three and nine months ended September 30, 2024. We can give no assurance as to our ability to generate revenue from our China operations.
Previous report
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 report
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 report
For the three months ended September 30, 2025, our loss on debt extinguishment was $662,000 and primarily results from the exchange of a $2.0 million unsecured loan for shares of our common stock at a discount from the market price. For the nine months ended September 30, 2025, our loss on debt extinguishment was $976,000 and primarily results from the exchange of the $2.9 million unsecured loans for shares of our common stock at a discount from the market price of our common stock.
Previous report
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 report
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 report
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 report
Net cash provided by financing activities for the nine months ended September 30, 2024 was $13.9 million, consisting of $18.6 million of net cash proceeds from our initial public offering in March 2024, $900,000 loan proceeds from a new short term borrowing, offset by $5.3 million principal payments on convertible notes, and $276,000 payment of accrued legal settlement.
Previous report
Contemporaneously with the execution of our lease with 3080 Landlord and the termination of our former lease with SMXP, a related party, we issued two two-year 8% notes to SMXP in the aggregate principal amount of $1,358,658. These notes provide for quarterly payments of interest during the term with the principal being initially due at maturity. The initial maturity date in October 2024 was extended to October 10, 2025. The notes were paid during quarter ended September 30, 2025.
Previous report
On June 10, 2024, we borrowed $900,000 from an unrelated investment company and issued our one-year 12% promissory note in the principal amount of $900,000.
Previous report
Other Debt Obligations
Previous report
We have a loan for $2.0 million from an unrelated party bearing interest rate at 6% per annum which became due at June 30, 2025. This loan had been extended periodically since the original maturity date of April 30, 2021. On July 31, 2025 this loan was exchanged for 2,702,703 shares of common stock in a private placement offering at a discounted per share price of $0.74 per share. In connection with this exchange, we recognized a loss on debt extinguishment of approximately $676,000 in July 2025 based on the fair value of our common stock relative to the discount sale price of the common stock. The issuance of the shares is part of the equity financing during the nine months ended September 30, 2025, described above in the fourth paragraph under “Borrowings and Stock Issuances.”
Previous report
Impairment assessment of goodwill
Previous report
We assess the carrying value of our long-lived assets and related intangibles for impairment at least annually and also whenever events or changes in circumstances indicate that the carrying value of the long-lived asset, or group of assets, may not be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the long-lived assets to the respective estimated future undiscounted cash flows. The estimated future undiscounted cash flows are calculated utilizing the lowest level of identifiable cash flows that are largely independent of the cash flows of other assets and liabilities. If our analysis indicates that the carrying value of the long-lived assets is not recoverable on an undiscounted cash flow basis, it recognizes an impairment charge for the amount by which the carrying value exceeds the fair value of the long-lived asset.
Previous report
At September 30, 2025 and December 31, 2024 we had no goodwill. All of our goodwill was related to our PRC segment and was written off in full at September 30, 2024.
Previous report
Because of the COVID restrictions, we were not able to complete negotiation for new projects with SPIC and with one other potential customer. In China, in order for us both to generate business and collect receivables, we need to have face-to-face meetings with the representatives of SPIC or any other potential customers rather than remote meetings such as Zoom. These negotiations were initially deferred from late 2021 until 2022 and further deferred to 2023 as a result of COVID restrictions. At December 31, 2024 we increased our bad debt reserve relating to this receivable as a result of initial arbitration meetings during 2024. The arbitration concluded in our favor in April 2025 and a payment plan was agreed to with SPIC on all four projects in May 2025 and subsequently we received payments from SPIC in June and July totalling RMB 28.2 million (approximately $3.9 million). Additional payments are scheduled to be received during the remainder of 2025 and into 2026. As of September 30, 2025 and the date of this report we do not have any agreement with respect to any projects in China and we are not engaged in any negotiations with respect to any project. If we determine that we will not be able to generate any significant business in China, we may discontinue our China operations.
Previous report
Under different assumptions, there could be a likelihood that the fair value of our China segment is less than its carrying value and would require an impairment.
Reworded paragraphs (42)
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 for the year ended December 31, 2024. 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 condensed consolidated financial statements and the related notes appearing elsewhere in this report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements.” Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in “Risk Factors” included in our annual report on Form 10-K for the year ended December 31, 2025. All amounts in this report are in U.S. dollars, unless otherwise noted.
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 nine months ended September 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 2026. For the three months ended March 31, 2026, 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 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, expired on December 31, 2025. This means that homeowners who had solar energy systems installed and placed into service by this date will qualify for a 30% federal tax credit on the cost of the system. After December 31, 2025, there is no federal tax credit available for new residential solar installations. This represents a significant change from the previous plan laid out in the Inflation Reduction Act, which would have seen the credit gradually phase out until it expired in 2034. This change in the tax law may significantly reduce the incentive of residential users to install solar systems.
Previous wording
With the recent inflationary pressures combined with the world-wide supply chain issues, which have been impacted from the recent tariffs, our business is subject to the inflationary pressure and we were subject to supply chain issues that are affecting many domestic and foreign companies, and we expect that the inflationary pressures will continue to affect our ability to sell our products, the price at which can sell products and our gross margin. To the extent that we are not able to raise our prices or to the extent that we cannot accurately project our costs when we set our prices, our gross margin and the results of our operations will be impacted.
Current wording
With the recent inflationary pressures combined with the world-wide supply chain issues, which have been accentuated by the war with Iran and the closing of the Strait of Hormuz, which severely reduced the worldwide flow of oil and increased the price of fuel, fertilizer and other products which resulted in inflationary pressures and supply chain issuer, that are affecting many domestic and foreign companies, and we expect that the inflationary pressures and supply chain issues will continue to affect our ability to sell our products, the price at which can sell products and our gross margin. To the extent that we are not able to raise our prices or to the extent that we cannot accurately project our costs when we set our prices, our gross margin and the results of our operations will be impacted.
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 and the elimination of the federal residential tax credit at December 31, 2025.
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 and potential BESS customers which are also impacted by the effects of NEM 3.0 and the elimination of the federal residential tax credit at December 31, 2025.
Previous 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.
Current wording
Compensation costs per employee, excluding stock-based compensation, for sales, marketing and administrative personnel in our United States operations decreased approximately 4% for the three months ended March 31, 2026 compared to the same period in 2025. The decrease in 2026 reflected the lay-off of a portion of our employees resulting from a slowdown after we had completed installation of the increased 2023 backlog resulting orders placed in 2023 in advance of NEM 3.0 becoming effective in April 2023, as discussed below under “Effects of NEM 3.0.” The increase in 2023 also reflected the increased cost of retaining and attracting talent, and such costs may continue to increase as labor costs in California continue to increase as a result of the inflationary pressures. In addition, to the extent that inflationary pressure affects our cost of revenue and general overhead, we may face the choice of raising prices to try and maintain our margins or reduce or maintain our price structure to meet competition which would result in a lower gross margin and a drop in operating income. Supply chain issues have caused us to periodically stock up on components such as solar panels and battery systems to ensure an adequate supply to meet expected demand, putting pressure on our cash flow. We do not believe that the supply chain issues that affected our operations in prior periods are currently affecting us. We cannot assure you that such delays and increased costs will not affect our business in the future.
Previous 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.
Current wording
Since the third quarter of 2025, our principal business was EPC services in connection with the construction of BESS systems. On July 31, 2025, we entered into an EPC agreement with Longfellow, to develop a BESS facility. Based on the contract terms, the contract is expected to generate revenues of approximately $120.1 million and interest income of $7.2 million from a financing component related to milestone payments that extend beyond the project completion date. Longfellow will own and operate the facility, which will be located in Pecos County, Texas and is expected to have a storage capacity of 430 megawatt-hours. Completion of the BESS facility is expected to be completed by December 2027 as a result of various design changes, although we cannot assure you that this completion date will be met. These design changes, which are being finalized, may affect the price of the project and our costs. To the extent that our costs for the project increase as a result of tariffs, the war with Iran, supply chain issues or other factors, any change in the price of the project would be subject to the approval of Longfellow. To the extent that we cannot adjust our prices to reflect such additional costs, our gross margin on the project will be impacted. We have committed to make a $5.0 million capital contribution to Longfellow, in which we have an 8% equity interest. Our capital contribution for this equity interest is $5.0, which was due no later than December 31, 2025. Longfellow agreed to defer our payment obligation, but has not agreed to a specific date by which we must make payment to obtain our equity interest. Our cash flow from the project and the timing of our work on the project is affected by the timing of payments from Longfellow, which is affected by Longfellow’s funding for the project. Accounts receivable from Longfellow were $9.4 million at both March 31, 2026 and December 31, 2025.
Previous wording
In the fourth quarter of 2023, we began to work with several independent dealers which form our dealer network. Our dealer network is comprised of independent licensed sales companies that sell our products pursuant to non-exclusive agreement. The dealers sell our products as well as products sold by our competitors. The dealer handles the sales process, and once the sales agreement with the customer is signed, we install the solar system pursuant to an installation agreement with customer. The dealers earn a commission which is included in cost of revenue.
Current wording
In the fourth quarter of 2023, we began to work with several independent dealers which form our dealer network. Our dealer network is comprised of independent licensed sales companies that sell our products pursuant to non-exclusive agreement. The dealers sell our products as well as products sold by our competitors. The dealer handles the sales process, and once the sales agreement with the customer is signed, we install the solar system pursuant to an installation agreement with customer. The dealers earn a commission which is included in cost of revenue. Our increase in revenues from solar systems in the first quarter of 2026 over the first quarter of 2025 results from sales through our dealer network.
Previous 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.
Current wording
During the three months ended March 31, 2026 and 2025, approximately 74% and 67%, respectively, of our revenues from residential solar and battery contracts, and 40% and 55% 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 nine months ended September 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 months ended March 31, 2026 and 2025 (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 nine months ended September 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 months ended March 31, 2026 and 2025 (dollars in thousands):
Previous 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.
Current wording
Revenues for the three months ended March 31, 2026 were $14.8 million, an increase of $7.9 million or 114.1% from $6.9 million in the three months ended March 31, 2025. The increase resulted from revenue of $5.2 million from the large-scale EPC contract with Longfellow to develop a battery energy storage system (“BESS”) facility in Texas, a $2.3 million increase in solar energy and battery sales, a $424,000 increase in LED sales, offset by a $18,000 decrease in financing revenue. We did not have any large-scale EPC sales prior to the third quarter of 2025. Our revenue from residential and commercial solar energy and battery sales increased from $5.8 million for the three months ended March 31, 2025 to $8.1 million for the three months ended March 31, 2026, a 39.6% increase, primarily as a result of the sale growth from the dealer network program. The increase in the solar energy and battery sales in the three months ended March 31, 2026 reflects a 30.4% increase in the number of systems completed and a 25.5% increase in the wattages deployed. During the three months ended March 31, 2026 and 2025, our battery only sales were $178,000 and $328,000, respectively. Battery sales refer to the sale of batteries sold other than as a part of a solar system.
Previous 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.
Current wording
As a result of the continued relatively high interest rate environment and the expiration of the federal residential solar tax credit on December 31, 2025, we expect the revenue growth from our residential sales to level off in 2026 compared to the prior period. We are also looking to offset the potential residential sales decrease with commercial sales and sales of large-scale EPC projects. On July 31, 2025, we entered into an EPC contract with Longfellow to develop a battery energy storage system (“BESS”) facility. Based on terms of the agreement, the contract is expected to generate revenues and finance income of approximately $127.3 million for us and we expect to complete the work by December 2027. During the three months ended March 31, 2026, we recognized $5.2 million in revenues related to this project. Total revenue recognized on the Longfellow contract from the project inception through March 31, 2026 was $65.4 million, and we expect to recognize approximately $54.6 million of revenue on Longfellow for the remainder of 2026 and 2027.
Previous 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.
Current wording
Our LED revenue increased by $424,000 or 40.0% to $1.5 million for the three months ended March 31, 2026 from $1.1 million for the three months ended March 31, 2025, primarily resulting from the increase in the number of LED projects with a higher average sales price. LED revenues include LED product sales and LED consulting revenues which are expected to continue to fluctuate based on the number of LED projects awarded which is based on the bidding process and specific customer purchase requirements and timing. Revenue from our LED business fluctuates period to period.
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 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.
Current wording
We have not originated any loans to our solar customers since 2022. As a result, our finance revenue for the three months ended March 31, 2026 and 2025 was $54,000 and $72,000, respectively, from our portfolio of solar loans. Finance revenue decreases as loans in our portfolio are paid since we are not making any new loans.
Previous 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.
Current wording
The overall gross margin was 20.5% for the three months ended March 31, 2026 which is at the consistent level as the gross margin in the three months ended March 31, 2025. During the three months ended March 31, 2026, our gross margin from the sale of residential and commercial solar energy systems as well as from our LED sales improved which offsets the decrease in the gross margin from the EPC contract. The current lower gross margin from the EPC contract was primarily due to the costs recognized related to the Longfellow project. We recognize revenue, but not profit, on uninstalled materials. The revenue on uninstalled materials is recognized by us when the control is transferred equal to the cost of the uninstalled materials. This decrease in gross margin on the Longfellow contract was partially offset by an increase in the gross margin from our sales of solar energy systems as well as from LED sales. We have no cost of revenue with respect to interest income on customer loans.
Previous 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.
Current wording
Sales and marketing expenses for the three months ended March 31, 2026 decreased to $43,000, a decrease of $36,000 or 46.0% from $79,000 in the comparable period of 2025. Sales and marketing expenses were 0.3% of revenue for the three months ended March 31, 2026 compared to 1.1% for the three months ended March 31, 2025. Our sales and marketing expenses fluctuate based on the types of marketing and promotion initiatives we deploy. Our dealer network enables us to reduce our sales and marketing costs. We expect to continue to be selective in our sales and marketing expenses for the remainder of 2026.
Previous 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.
Current wording
General and administration expenses for the United States operations for the three months ended March 31, 2026 increased $239,000 or 10.0%, to $2.6 million compared to $2.4 million for the three months ended March 31, 2025, representing 17.8% of revenue for the three months ended March 31, 2026 compared to 34.7% of revenue for the three months ended March 31, 2025. The increase during the three months ended March 31, 2026 is attributed to the increase in rent expense associated with our lease amendment for our Riverside office beginning on January 1, 2026, and the additional expense related to our investor relations advertising campaign. Our general increase, in general and administrative expenses in 2026 reflects the cost of compliance and other regulatory costs associated with being a public reporting company which is expected to continue for us. The decrease in the percentage of both sales and marketing and general and administrative expenses as a percentage of revenue in the three months ended March 31, 2026 reflects revenue of approximately $5.2 million from the Longfellow EPC contract.
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 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.
Current wording
Equity in income (loss) from unconsolidated entities relates to our China operations and comprises the equity in income (loss) from three unconsolidated project companies in which we have a non-controlling 30% interest. The equity in income (loss) for the three months ended March 31, 2026 was a loss of $240,000 compared to a loss of $14,000 in the three months ended March 31, 2025. The decline in revenue and in income in the current period was attributed to the interruption caused by the major overhaul of the local power grid resulting in the inability for the power generated to be calculated for the electricity generation.
Previous 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.
Current wording
Interest expense, net, for the three months ended March 31, 2026 was $287,000, a decrease of $38,000, or 15.2%, from the three months ended March 31, 2025. Total interest income declined $109,000 as a result of the payoff of held to maturity debt investments, whereas the total interest expense declined by $71,000. The overall decline in interest expense corresponds to the decline in the two related party EB-5 loan balances as well as the decline in the convertible note balances as scheduled annual principal payments were made. Our interest expense in the three months ended March 31, 2026 primarily includes interest at 3% on two EB-5 loans from related parties in the United States with a total principal balance of $9.0 million at March 31, 2026, interest at 4% on convertible notes issued to former limited partners of CEF and CEF II in transactions in which former limited partners of CEF and CEF II accepted 4% convertible notes issued by SolarMax and the subsidiary that borrowed the funds from CEF with an aggregate principal balance of $15.6 million at March 31, 2026. The convertible notes issued to the former limited partners of CEF were issued as payment of the former limited partner’s capital account in CEF and were issued in connection with cancellation of debt to CEF of an equal amount. The convertible notes are secured by the same collateral as the notes to CEF. Interest was recognized at the stated interest rate of 4%. Because the Company is in default in the payment of principal and interest on convertible notes in the principal amount of $13.7 million at March 31, 2026, if the holders of the notes exercise their rights to demand prepayment, interest at 12% per annum will be due. See the paragraph Event of Default on Convertible Notes in Note 14 to Consolidated Financial Statements.
Previous 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.
Current wording
During the three months ended March 31, 2026, other income was $77,000 consisting primarily of foreign currency transaction gains for our United States operations intercompany receivable denominated in RMB. During the three months ended March 31, 2025, other income was $59,000 consisting primarily of $97,000 of foreign currency transaction gains for our United States operations intercompany receivable denominated in RMB.
Previous 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.
Current wording
For the three months ended March 31, 2026 and 2025, our United States operations reported an income tax expense of $16,728 and $6,000, respectively, attributable to the Texas franchise tax and other minimum state tax liabilities.
Previous 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.
Current wording
For our China operations, an income tax benefit of approximately $23,000 and $70,000 was reported for the three months ended March 31, 2026 and 2025, respectively, arising from a decrease in the valuation allowance against deferred tax assets and a decrease in deferred tax liabilities as of March 31, 2026.
Previous 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.
Current wording
As a result of the foregoing, we had a consolidated net loss of $0.3 million, or $(0.01) per share (basic and diluted), for the three months ended March 31, 2026, compared with a consolidated net loss of $1.3 million, or $(0.03) per share (basic and diluted), for the three months ended March 31, 2025.
Previous 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.
Current wording
As a result of foreign currency translations, we reported net foreign currency translation gains (losses) of $13,000 and $1,000 for the three months ended March 31, 2026 and 2025, respectively.
Previous wording
The following tables show consolidated cash flow information for the nine months ended September 30, 2025 and 2024 (dollars in thousands):
Current wording
The following tables show consolidated cash flow information for the three months ended March 31, 2026 and 2025 (dollars in thousands):
Previous 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
Current wording
Net cash used in operating activities for the three months ended March 31, 2026 was $4.2 million, compared to net cash used in operating activities for the three months ended March 31, 2025 of $601,000. The cash used by operations for the three months ended March 31, 2026, resulting from our net loss of $307,000, increases in non-cash expense of $36,000, and a net decrease of $4.6 million in cash from our operating assets and liabilities. During the three months ended March 31, 2026, our operating assets and liabilities used $4.4 million in cash, compared to $195,000 of cash used in the three months ended March 31, 2025.
Previous 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.
Current wording
Net cash used by operations for the three months ended March 31, 2025 of $601,000 resulted from net loss of $1.3 million, non-cash expense of $500,000, and $195,000 of cash used in our operating assets and liabilities.
Previous wording
Non-cash adjustments changes for the nine months ended September 30, 2025 primarily reflected:
Current wording
Non-cash adjustments changes for the three months ended March 31, 2026 primarily reflected:
Previous wording
Changes in operating assets and liabilities for the nine months ended September 30, 2025:
Current wording
Changes in operating assets and liabilities for the three months ended March 31, 2026:
Previous 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.
Current wording
Net cash provided by financing activities for the three months ended March 31, 2025 was $377,000, consisting of $500,000 of cash proceeds from the issuance of shares of common stock in private offerings, offset by $50,000 principal payments on convertible notes, $69,000 payment of accrued legal settlement, and $4,400 payment on equipment leases.
Previous wording
The following table sets forth, our cash and cash equivalents and restricted cash held by our United States and China segments at September 30, 2025 and December 31, 2024 (dollars in thousands):
Current wording
The following table sets forth, our cash and cash equivalents and restricted cash held by our United States and China operations at March 31, 2026 and December 31, 2025 (dollars in thousands):
Previous wording
We currently do not plan to repatriate any cash or earnings from any of our non-United States operations because we presently intend to utilize such funds to expand our China operations. Therefore, we do not accrue any China exit taxes related to the repatriation. However, in the event that we terminate our China segment and repatriate the cash to the United States, we will owe such taxes.
Current wording
We currently do not plan to repatriate any cash or earnings from any of our non-United States operations because we presently intend to utilize such funds within China as well as to pay China suppliers from whom we acquire materials we require for our U.S. operations. Therefore, we do not accrue any China exit taxes related to the repatriation. However, in the event that we terminate our China operations and repatriate the cash to the United States, we will owe such taxes.
Previous wording
We invested $7,000,000 from the proceeds of our initial public offering in an 8% promissory note issued by Webao Limited, a Hong Kong based social media company. The initial maturity was June 1, 2024 and it was extended to December 31, 2024 and further extended to December 31, 2025. As of November 1, 2025, the Company received payments of $4.1 million leaving a balance of $2.9 million. Our China segment invested RMB 5,000,000, or approximately $688,000, in a 5% note due June 25, 2024 issued by Qingdao Xiaohuangbei Technology Co., Ltd. (“Qingdao”), a PRC-based company. The initial maturity date was extended initially to December 25, 2024 and further subsequently extended to December 31, 2025. All of the extensions were at the request of the respective makers of the notes. As of November 1, 2025, we had received payments of RMB 1,344,475, or approximately $186,000, on account of the Qingdao note. These notes are shown on our balance sheet as short-term investments. Maintaining any significant portion of our cash in non-financial institutions, particularly companies in Hong Kong and China, which do not have any of the protections provided by United States banks, is subject to adverse conditions in the Chinese financial and credit markets, which could impact access to our invested cash and could adversely impact our operating liquidity and financial performance.
Current wording
We invested $7.0 million from the proceeds of our initial public offering in an 8% promissory note issued by Webao Limited, a Hong Kong based social media company. The initial maturity was June 1, 2024 and it was extended to December 31, 2024 and further extended to December 31, 2025. The note was paid during 2025. We invested RMB 5.0 million, or approximately $688,000, in a 5% note due June 25, 2024 issued by Qingdao Xiaohuangbei Technology Co., Ltd. (“Qingdao”), a PRC-based company. The initial maturity date was extended initially to December 25, 2024 and further subsequently extended to December 31, 2025. All of the extensions were at the request of the respective makers of the notes. The note was paid in December 2025 and January 2026.
Previous wording
At September 30, 2025, our current liabilities included secured convertible notes in the principal amount of $11.0 million and secured notes to related parties of $5.5 million.
Current wording
At March 31, 2026, our current liabilities included secured convertible notes in the principal amount of $14.1 million and secured notes to related parties of $4.0 million.
Previous wording
During the nine months ended September 30, 2025, we issued 9,032,090 shares of common stock at a discount of 25% from the market price on the date of the investment, which prices ranged from $0.74 to $0.90, with an average purchase price of $0.82. Two of the investors were the beneficial owners of the investment company that made the $900,000 loan to us and made an additional $100,000 investment and assigned the investment company’s interest in the note and the additional investment to the beneficial owners. Under the Nasdaq regulations, we may not be able to raise any significant funding from the sale of common stock at a discount from market in the near future without stockholder approval.
Current wording
During the three months ended March 31, 2026, we issued 2,000,000 shares of common stock, at a discount of 25% from the market price on the date of the investment, at a price of $0.55. Under the Nasdaq regulations, we may not be able to raise any significant funding from the sale of common stock at a discount from market in the near future without stockholder approval.
Previous wording
The loans from CEF and CEF II become due, as to the investment of each limited partner, four years from the date of the loan and may be extended as may be necessary to meet applicable USCIS immigrant investor visa requirements, which will be the date that the limited partner is eligible for a green card. Under the limited partnership agreements for CEF and CEF II, the limited partners have the right to demand repayment of their capital account when the petition is approved, which demand may trigger a maturity of the loan from CEF or CEF II in the amount of the limited partner’s investment. The initial four-year term of notes in the principal amount of $55.5 million, which were issued to CEF and CEF II, and had expired prior to December 31, 2023 and are on extension until the limited partners meet applicable immigrant investor visa requirements. We cannot determine the period of the extensions. As of September 30, 2025, limited partners whose capital contributions funded loans of $42.0 million had received their green card approval and their extensions expired and one limited partner whose capital contribution funded $500,000 had withdrawn from CEF II and the limited partner’s capital contribution was returned. The petitions of limited partners of CEF whose capital contribution funded loans of $3.5 million are pending.
Current wording
The loans from CEF and CEF II become due, as to the investment of each limited partner, four years from the date of the loan and may be extended as may be necessary to meet applicable USCIS immigrant investor visa requirements, which will be the date that the limited partner is eligible for a green card. Under the limited partnership agreements for CEF and CEF II, the limited partners have the right to demand repayment of their capital account when the petition is approved, which demand may trigger a maturity of the loan from CEF or CEF II in the amount of the limited partner’s investment. The initial four-year term of notes in the principal amount of $55.5 million, which were issued to CEF and CEF II, and had expired prior to December 31, 2023 and are on extension until the limited partners meet applicable immigrant investor visa requirements. We cannot determine the period of the extensions. As of March 31, 2026, limited partners whose capital contributions funded loans of $43.5 million had received their green card approval and their extensions expired and one limited partner whose capital contribution funded $500,000 had withdrawn from CEF II and the limited partner’s capital contribution was returned. The petitions of limited partners of CEF whose capital contribution funded loans of $8.0 million are pending.
Previous wording
As the loans matured and the limited partners requested return of their capital contribution, we offered the limited partners, in lieu of the payment by the limited partnership, a convertible note with a term of five years, with 20% of the principal amount being due on each of the first, second, third, fourth and fifth anniversaries of the date of issuance. The notes are secured by the same assets that secured the notes issued to CEF. As of September 30, 2025, we had issued convertible notes in the principal amount of $42.0 million to former limited partners of CEF, of which principal payments of $23.1 million had been made on the anniversary of the respective dates of issuance, and convertible notes in the principal amount of $3.0 million had been purchased by us for $2.1 million, leaving convertible notes in the principal amount of $15.9 million outstanding at September 30, 2025. As of September 30, 2025, notes to CEF and CEF II in the aggregate principal amount of $10.5 million were outstanding and convertible notes in the principal amount of $15.9 million were outstanding.
Current wording
As the loans matured and the limited partners requested return of their capital contribution, we offered the limited partners, in lieu of the payment by the limited partnership, a convertible note with a term of five years, with 20% of the principal amount being due on each of the first, second, third, fourth and fifth anniversaries of the date of issuance. The notes are secured by the same assets that secured the notes issued to CEF. As of March 31, 2026, we had issued convertible notes in the principal amount of $43.5 million to former limited partners of CEF and CEF II, of which principal payments of $25.0 million had been made on the anniversary of the respective dates of issuance, and convertible notes in the principal amount of $3.0 million had been purchased by us for $2.1 million, leaving convertible notes in the principal amount of $15.6 million outstanding at March 31, 2026. As of March 31, 2026, notes to CEF and CEF II in the aggregate principal amount of $9.0 million were outstanding and convertible notes in the principal amount of $15.6 million were outstanding. The Company is in default in the payment of principal and interest on convertible notes in the principal amount of $13.7 million at March 31, 2026, and the holders of these notes have the right to demand prepayment and exercise their rights with respect to the collateral. See the paragraph Event of Default on Convertible Notes in Note 14 of Notes to Consolidated Financial Statements.
Previous wording
We require substantial funds for our business, and we believe that the cash and cash equivalents and short-term investment, together with cash generated by our operations should enable us to meet our cash requirements for at least the twelve months from the date of this report. During the nine months ended September 30, 2025, the Company raised a total of approximately $7.2 million from the sale of common stock at a 25% discount from market. Under the Nasdaq regulations, the Company may not be able to raise any significant funding from the sale of common stock at a discount from market in the near future without stockholder approval. However, we cannot assure you that we will not require additional funds to meet our commitments or that funds will be available on reasonable terms, if at all. We have significant debt obligations which mature or may mature during the next year. With respect to the loans made under the EB-5 program, as described above, we are seeking to refinance the loans through the issuance of secured subordinated convertible notes to the limited partners of the lenders. The proposed convertible notes would have a conversion price of 80% of the market price at the date of issuance of the convertible note. We also have obligations to Mr. Hsu described above, approximately $2.5 million of which will be paid in twelve equal monthly installments with the first payment becoming due on February 27, 2025. We cannot assure you that we will be able to negotiate extensions to our loans or refinancing of our EB-5 debt. The willingness of the limited partners of CEF and CEF II to accept convertible notes rather than a cash payment of their investment in the limited partnership may be affected by their perception of our performance and the performance of our common stock, including our low stock price and the possibility of our being delisted from Nasdaq, as well as their perception that they could get a more favorable result with litigation. We cannot assure you that such financing will be available on acceptable, if any terms, which would impair our ability to develop our business. The low price of our common stock may make it difficult for us to issue convertible notes that are convertible at a discount from the market price of our common stock. Our financial statements for the nine months ended September 30, 2025 and 2024 have a going concern paragraph.
Current wording
We require substantial funds for our business, and we believe that the cash and cash equivalents and short-term investment, together with cash generated by our operations should enable us to meet our cash requirements for at least the twelve months from the date of this report. During the year ended December 31, 2025 and the three months ended March 31, 2026, we raised a total of approximately $7.7 million and $1.1 million, respectively, from the sale of common stock at a 25% discount from market. Under the Nasdaq regulations, the Company may not be able to raise any significant funding from the sale of common stock at a discount from market in the near future without stockholder approval. However, we cannot assure you that we will not require additional funds to meet our commitments or that funds will be available on reasonable terms, if at all. We have significant debt obligations which mature or may mature during the next year. With respect to the loans made under the EB-5 program, as described above, we are seeking to refinance the loans through the issuance of secured subordinated convertible notes to the limited partners of the lenders. The proposed convertible notes would have a conversion price of 80% of the market price at the date of issuance of the convertible note. We also have obligations to Mr. Hsu described above, approximately $2.5 million of which will be paid in twelve equal monthly installments with the first payment becoming due on February 27, 2025. We cannot assure you that we will be able to negotiate extensions to our loans or refinancing of our EB-5 debt. The willingness of the limited partners of CEF and CEF II to accept convertible notes rather than a cash payment of their investment in the limited partnership may be affected by our default on other convertible notes in the principal amount of $13.7 million at March 31, 2026, their perception of our performance and the performance of our common stock, including our low stock price and the possibility of our being delisted from Nasdaq, as well as their perception that they could get a more favorable result with litigation. We cannot assure you that such financing will be available on acceptable, if any terms, which would impair our ability to develop our business and pay our obligations. The low price of our common stock may make it difficult for us to issue convertible notes that are convertible at a discount from the market price of our common stock. Our financial statements for the three months ended March 31, 2026 has a going concern paragraph.
Previous wording
In determining the expected loss, we make assumptions based on historical collection experience, current and forecasted economic and business conditions, and a review of the status of each customer’s financial asset account. Specifically, we estimate loss reserve based on the aging of the financial asset balances and the financial condition of customers and provide for specific allowance amounts for those customers that have a higher probability of default. With respect to our China segment, we review China’s current and future economic conditions along with its political landscape, and how these factors may affect our receivable from SPIC, a state-owned entity. We regularly monitor collection status of these financial assets through account reconciliation, payment tracking, customer’s financial condition and macroeconomics conditions.
Current wording
In determining the expected loss, we make assumptions based on historical collection experience, current and forecasted economic and business conditions, and a review of the status of each customer’s financial asset account. Specifically, we estimate loss reserve based on the aging of the financial asset balances and the financial condition of customers and provide for specific allowance amounts for those customers that have a higher probability of default. With respect to our China operations, we review China’s current and future economic conditions along with its political landscape, and how these factors may affect our receivable from SPIC, a state-owned entity. We regularly monitor collection status of these financial assets through account reconciliation, payment tracking, customer’s financial condition and macroeconomics conditions.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current report — wording carried from elsewhere
Three Months Ended March 31, 2026*** and 2025***
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
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.