[{"_1":2,"_3":-5,"_4":-5},"loaderData",{"_5":6,"_7":8},"actionData","errors","root",{"_102":103},"en-item",{"_9":10,"_10":11},"kind","item",{"_12":13,"_14":15,"_16":17,"_18":19,"_20":21,"_22":23,"_24":25,"_26":27,"_28":29,"_30":31,"_32":31,"_33":34,"_35":36,"_37":38,"_39":40,"_41":42,"_43":44,"_45":46,"_47":-5,"_48":49,"_50":-5,"_51":-5,"_52":53,"_54":55,"_56":57,"_58":42,"_59":42,"_60":61,"_62":42,"_63":64},"id","vd0barcmvd6teo55x6voi9lhb","revision",2,"title","SolarMax Technology 2026年上半年净亏损496万美元，面临流动性风险","originalTitle","10-Q - SolarMax Technology, Inc. (0001519472) (Filer)","summary","SolarMax Technology报告2026年上半年净亏损496万美元，营收2507万美元，现金及现金等价物降至216万美元。公司面临1370万美元可转换票据违约风险，流动性紧张，且因未付本金和利息而违约。公司正寻求将短期债务转换为五年期可转换票据，但面临纳斯达克退市风险。","reason","SolarMax Technology报告了2026年上半年的财务数据，净亏损496万美元，现金流紧张，面临重大流动性风险和债务违约问题。","source",{"_12":93,"_94":95,"_9":96,"_97":42,"_98":99,"_100":101},"links",{"_90":91,"_78":92},"publishedAt","2026-10-07T22:50:54.000Z","discoveredAt","2026-10-08T10:08:28.242Z","timelineAt","category","ai-products","tags",[84,85,86,87,88,89],"stockSymbols",[83],"score",75,"selected",true,"channel","news","story",{"_73":74,"_16":75},"x","readingMode","full","author","language","body",{"_64":77,"_78":-5,"_79":80,"_81":82},"outline",[],"relatedStories",[76],"indexable","markdownAvailable","group",{"_65":66,"_45":67,"_68":69,"_70":71,"_72":71},"hasTranslation","bodyLanguage","zh","factId","f_kyc6kuxemc",{"_73":74,"_16":75},"reportCount",1,"additionalSourceCount",0,"developmentCount","publicId","822946fd-2bef-4dde-bb54-b18d20809229","SolarMax Technology财务困境与债务风险",{"_73":74,"_16":75},"

美国

证券交易委员会

华盛顿特区 20549

_________________________

表格 10-Q

_________________________

(选择一项)

☒	根据《1934 年证券交易法》第 13 或 15(d) 条的季度报告

截至2026 年 6 月 30 日的季度

或

☐	根据《1934 年证券交易法》第 13 或 15(d) 条的过渡报告

委员会文件编号001-41959

_________________________

SolarMax Technology, Inc.

(注册人章程中指定的名称)

_________________________

内华达州		26-2028786
(州或其他司法管辖区) 成立或组织)		(I.R.S. 雇主识别号码)

3080 12 街河滨，加利福尼亚州		92507
(主要执行办公室地址)		(邮政编码)

(951) 300-0788

注册人的电话号码，包括地区代码

根据法案第 12(b) 条注册的证券：

每类证券的名称		交易符号		在各交易所的名称
普通股，每股面值0.001美元		SMXT		纳斯达克股票市场有限责任公司

通过勾选方框表明，注册人（1）是否在过去12个月（或注册人需提交此类报告的较短期间）内提交了根据《1934年证券交易法》第13条或第15(d)条要求提交的所有报告，以及（2）是否在过去90天内受到此类提交要求的约束。是 ☒ 否 ☐

通过勾选方框表明，注册人是否在过去12个月（或注册人需提交此类文件的较短期间）内通过电子方式提交了根据S-T条例第405条（本章第232.405条）要求提交的每个互动数据文件。是 ☒ 否 ☐

通过勾选方框表明，注册人是大型加速申报者、加速申报者、非加速申报者、较小报告公司，还是新兴成长公司。请参见《交易法》第12b-2条中“大型加速申报者”、“加速申报者”、“较小报告公司”和“新兴成长公司”的定义。

大型加速申报者	☐	加速申报者	☐
非加速申报者	☒	较小报告公司	☒
		新兴成长公司	☒

如果为新兴成长公司，请通过勾选方框表明注册人是否选择不使用根据《交易法》第13(a)条提供的任何新修订的财务会计标准的延长过渡期。 ☐

通过勾选方框表明注册人是否为壳公司（根据《法案》第12b-2条定义）。是 ☐ 否 ☒

仅适用于涉及破产的注册人

前五年期间的程序：

通过勾选方框表明，注册人是否已提交根据《1934年证券交易法》第12、13或15(d)条在法院确认证券分发计划后应提交的所有文件和报告。

是 ☐ 否 ☐

（仅适用于公司注册人）

截至2026年9月30日，注册人的普通股流通股数量为4,742,167股。

			页码
第一部分：财务信息
第1项。	合并财务报表索引		4
	截至2026年6月30日未经审计的合并资产负债表及2025年12月31日		4
	截至2026年6月30日的三个月及六个月未经审计的合并损益表和2025年同期		5
	截至2026年6月30日的三个月及六个月未经审计的合并综合收益（亏损）表和2025年同期		6
	截至2026年6月30日的三个月及六个月未经审计的合并股东权益（赤字）变动表和2025年同期		7
	截至2026年6月30日的六个月未经审计的合并现金流量表和2025年同期		9
第2项。	管理层讨论与分析		46
第3项。	关于市场风险的定量和定性披露		64
第4项。	内部控制和程序		64

第二部分其他信息
第1项。	法律诉讼		65
第2项。	未注册的股权证券销售及资金使用		65
第5项。	其他信息		65
第6项。	附录		66

签名		67

前瞻性声明

本报告包含有关我们业务、财务状况、经营成果和前景的前瞻性声明。诸如“预期”、“预计”、“意图”、“计划”、“相信”、“寻求”、“估计”等词语以及这些词语的类似表达或变化形式旨在识别前瞻性声明，但并不被视为本报告中所指的前瞻性声明的全面识别方式。此外，关于未来事项的陈述均为前瞻性声明。

尽管本报告中的前瞻性声明反映了我们管理层的善意判断，但此类声明只能基于我们目前掌握的事实和因素。因此，前瞻性声明本质上受风险和不确定性的制约，实际结果和成果可能与前瞻性声明中讨论或预期的结果和成果有重大差异。可能导致或促成结果和成果差异的因素包括但不限于我们在年度报告10-K中“前瞻性声明”、“第1A项。风险因素”和“第7项。管理层讨论与分析财务状况和经营成果”下特别提到的因素，以及本10-Q中的“管理层讨论与分析财务状况和经营成果”和其他我们向证券交易委员会（SEC）提交的报告中提到的因素。我们敦促您不要过度依赖这些前瞻性声明，这些声明仅反映本报告发布之日的情况。

我们向证券交易委员会（SEC）提交报告。证券交易委员会维护一个网站（www.sec.gov），其中包含提交电子文件的发行人有关的报告、代理和信息声明以及其他信息，包括我们。您也可以在证券交易委员会的公众查阅室（位于华盛顿特区东北部F街100号，邮编20549）查阅和复制我们提交给证券交易委员会的任何材料。您可以通过致电1-800-SEC-0330向证券交易委员会咨询公众查阅室的运营情况。

我们不承担在本报告发布日期之后，为反映可能发生的任何事件或情况而修订或更新任何前瞻性声明的义务，除非法律另有要求。我们敦促读者仔细阅读并考虑本季度报告中所做的各种披露，这些披露旨在告知相关方可能影响我们业务、财务状况、经营成果和前景的风险和因素。

反向股票拆分

2026年8月13日，我们实施了每股12股的反向拆分。参见《合并中期财务报表附注》第1号。本10-Q表格中所有关于普通股股份数量和每股价格的引用均对反向拆分具有追溯效力。

第一部分 - 财务信息

第1项 - 未经审计的财务报表

SolarMax Technology, Inc.及子公司

合并中期资产负债表

截至2026年6月30日及2025年12月31日

	2026年6月30日 2026			2025年12月31日 2025
	(未经审计)
资产
流动资产：
现金及现金等价物	$	2,158,233			$	7,966,797
应收账款，净额		17,759,110				12,939,589
持有至到期债务投资		-				522,599
合同资产，净额		17,878,271				46,107,784
来自SPIC的应收款，净额		1,037,334				1,007,229
客户贷款应收款，流动，净额		779,497				874,617
存货，净额		1,617,269				2,061,558
递延项目成本		3,337,490				2,168,725
其他应收款和流动资产，净额		3,745,223				1,700,215
流动资产合计		48,312,427				75,349,113
固定资产，净额		114,349				138,890
经营租赁使用权资产		11,504,826				1,638,649
对未合并公司的投资		10,750,264				10,714,811
客户贷款应收款，非流动，净额		1,769,537				2,256,366
非流动受限现金		280,998				280,016
合同资产，非流动，净额		36,850,757				-
其他资产		923,515				909,209
资产总计	$	110,506,673			$	91,287,054

负债和股东权益
流动负债：
应付账款	$	8,652,834			$	59,565,812
经营租赁负债，流动		1,022,681				1,712,329
来自关联方的担保贷款，流动		6,500,000				5,500,000
担保可转换票据，流动		14,150,000				14,650,000
应计费用和其他应付款		19,180,482				14,282,578
流动负债合计		49,505,997				95,710,719
经营租赁负债，非流动		10,629,549				-
来自关联方的担保贷款，非流动，扣除债务折扣和发行费用		2,000,000				5,000,000
担保可转换票据，非流动，扣除债务折扣和发行费用		1,729,217				339,882
递延税负债		202,543				251,807
大规模EPC应付款，非流动		60,434,004				-
其他负债		2,103,498				2,194,744
负债总计		126,604,808				103,497,152
承诺和或有事项（附注19）
股东权益：
优先股，面值每股0.001美元；授权15,000,000股，截至2026年6月30日和2025年12月31日均未发行和流通		-				-
普通股，面值每股0.001美元；授权24,768,750股，截至2026年6月30日和2025年12月31日分别发行4,847,292股和4,680,672股，截至2026年6月30日和2025年12月31日分别流通4,742,167股和4,575,548股		4,847				4,681
额外实收资本		102,189,887				101,094,053
库存股，按成本计算，截至2026年6月30日和2025年12月31日为105,125股		(1,979,294	)			(1,979,294	)
累计亏损		(114,874,056	)			(109,911,673	)
累计其他综合损失		(1,439,519	)			(1,417,865	)
股东权益总计		(16,098,135	)			(12,210,098	)
负债和股东权益总计	$	110,506,673			$	91,287,054

参见合并中期财务报表的附注。

SolarMax Technology, Inc.及子公司

未经审计的合并中期利润表

截至2026年6月30日的三个月及六个月

	截至2026年6月30日的三个月			截至2026年6月30日的六个月
	2026			2025			2026		2025
	（未经审计）			（未经审计）
收入	$	10,243,612			$	6,883,004		$	25,074,229		$	13,810,473
销售成本		7,829,737				6,278,443			19,613,786			11,786,841
毛利		2,413,875				604,561			5,460,443			2,023,632
运营费用：
一般及行政费用		2,558,923				2,302,564			5,466,668			4,798,127
销售及市场费用		49,566				70,691			92,193			149,703
中国法律判决（注释15）		4,264,102				-			4,264,102			-
总运营费用		6,872,591				2,373,255			9,822,963			4,947,830
运营收入（亏损）		(4,458,716	)			(1,768,694	)		(4,362,520	)		(2,924,198	)
其他收入（支出）：
利息收入		8,555				226,664			19,502			346,869
利息支出		(248,922	)			(362,637	)		(546,987	)		(732,040	)
中国太阳能项目公司的权益收入（亏损）		(42,097	)			144,006			(281,747	)		129,746
债务注销收益（亏损）		13,411				(313,953	)		53,642			(313,953	)
其他收入（支出），净额		46,031				69,620			123,367			128,706
总其他收入（支出）		(223,022	)			(236,300	)		(632,223	)		(440,672	)
税前收入（亏损）		(4,681,738	)			(2,004,994	)		(4,994,743	)		(3,364,870	)
所得税拨备（收益）		(26,039	)			(106,217	)		(32,360	)		(169,851	)
净收入（亏损）	$	(4,655,699	)		$	(1,898,777	)	$	(4,962,383	)	$	(3,195,019	)
每股净收入（亏损）
基本	$	(0.98	)		$	(0.50	)	$	(1.05	)	$	(0.85	)
稀释	$	(0.98	)		$	(0.50	)	$	(1.05	)	$	(0.85	)
计算每股净收入（亏损）所用的加权平均股数
基本		4,742,167				3,818,671			4,712,240			3,780,834
稀释		4,742,167				3,818,671			4,712,240			3,780,834

参见附注中的简要合并财务报表。

SolarMax Technology, Inc.及子公司

未经审计的简要合并全面收益（亏损）表

截至2026年6月30日的三个月及六个月

	截至2026年6月30日的三个月			截至2026年6月30日的六个月
	2026			2025			2026		2025
	（未经审计）			（未经审计）
净收入（亏损）	$	(4,655,699	)		$	(1,898,777	)	$	(4,962,383	)	$	(3,195,019	)
其他全面收益（亏损）
外币折算调整		(34,460	)			2,629			(21,654	)		3,408
全面收益（亏损）总计	$	(4,690,159	)		$	(1,896,148	)	$	(4,984,037	)	$	(3,191,611	)

参见附注中的简要合并财务报表。

SolarMax Technology, Inc.及子公司

未经审计的简要合并股东权益变动表

截至2026年6月30日的三个月

	优先股		普通股			额外实缴	库藏股		累计		累计其他综合
	股数		金额			股数	金额		资本		股数			金额	亏损		损失			总计
2026年3月31日余额		-		$	-		4,847,339		$	4,847		$	102,189,887		(105,125	)	$	(1,979,294	)		$	(110,218,357	)	$	(1,405,059	)	$	(11,407,976	)
反向拆股四舍五入		-			-		(47	)		-			-		-			-				-			-			-
净收入（亏损）		-			-		-			-			-		-			-				(4,655,699	)		-			(4,655,699	)
货币折算调整		-			-		-			-			-		-			-				-			(34,460	)		(34,460	)
2026年6月30日余额		-		$	-		4,847,292		$	4,847		$	102,189,887		(105,125	)	$	(1,979,294	)		$	(114,874,056	)	$	(1,439,519	)	$	(16,098,135	)

	优先股		普通股			额外实缴-入	库藏股	累计		累计其他综合
	股数		金额			股数	金额	资本		股数			金额	亏损		损失			总计
2025年3月31日余额		-		$	-		3,924,513	$	3,925		$	92,431,924		(105,125	)	$	(1,979,294	)		$	(104,882,547	)	$	(1,448,413	)	$	(15,874,405	)
私募发行的股份		-			-		229,823		230			2,663,723		-			-				-			-			2,663,953
净收入（亏损）		-			-		-		-			-		-			-				(1,898,777	)		-			(1,898,777	)
货币折算调整		-			-		-		-			-		-			-				-			2,629			2,629
2025年6月30日余额		-		$	-		4,154,336	$	4,155		$	95,095,647		(105,125	)	$	(1,979,294	)		$	(106,781,324	)	$	(1,445,784	)	$	(15,106,600	)

SolarMax Technology, Inc.及子公司

未经审计的简要合并股东权益变动表

截至2026年6月30日的六个月

	优先股		普通股			额外实缴-入	库藏股		累计		累计其他全面的
	股份		金额			股份	金额		资本		股份			金额	赤字		损失			总计
2025年12月31日的余额		-		$	-		4,680,672		$	4,681		$	101,094,053		(105,125	)	$	(1,979,294	)		$	(109,911,673	)	$	(1,417,865	)	$	(12,210,098	)
私募发行的股份		-			-		166,667			166			1,095,834		-			-				-			-			1,096,000
反向拆股四舍五入		-			-		(47	)		-			-		-			-				-			-			-
净收益（损失）		-			-		-			-			-		-			-				(4,962,383	)		-			(4,962,383	)
货币折算调整		-			-		-			-			-		-			-				-			(21,654	)		(21,654	)
2026年6月30日的余额		-		$	-		4,847,292		$	4,847		$	102,189,887		(105,125	)	$	(1,979,294	)		$	(114,874,056	)	$	(1,439,519	)	$	(16,098,135	)

	优先股		普通股			额外支付-入	库藏股	累计		累计其他全面的
	股份		金额			股份	金额	资本		股份			金额	赤字		损失			总计
2024年12月31日的余额		-		$	-		3,877,696	$	3,878		$	91,931,971		(105,125	)	$	(1,979,294	)		$	(103,586,305	)	$	(1,449,192	)	$	(15,078,942	)
私募发行的股份		-			-		276,640		277			3,163,676		-			-				-			-			3,163,953
净收益（损失）		-			-		-		-			-		-			-				(3,195,019	)		-			(3,195,019	)
货币折算调整		-			-		-		-			-		-			-				-			3,408			3,408
2025年6月30日的余额		-		$	-		4,154,336	$	4,155		$	95,095,647		(105,125	)	$	(1,979,294	)		$	(106,781,324	)	$	(1,445,784	)	$	(15,106,600	)

参见附注中的简明合并财务报表。

SolarMax Technology, Inc.及子公司

未经审计的简明合并现金流量表

截至2026年6月30日的六个月及2025年6月30日的六个月

	截至2026年6月30日的六个月
	2026			2025

经营活动
净收益（损失）	$	(4,962,383	)		$	(3,195,019	)
调整以将净收益（损失）调节为经营活动产生的净现金：
折旧和摊销费用		24,586				35,800
可转换票据折扣和债务发行费用的摊销		42,977				56,143
经营租赁使用权资产的摊销		559,235				758,465
信用损失和贷款损失的拨备（回收）		(76,255	)			(38,517	)
存货过剩和滞销的拨备		-				3,500
保修和生产担保的拨备		252,009				106,492
投资中损失（收益）超过已收到分配的部分		281,747				(129,746	)
递延所得税拨备		(56,182	)			(188,733	)
处置固定资产的（收益）损失		-				65,143
债务清偿的（收益）损失		(53,642	)			313,953
经营性资产和负债的变化：
应收账款		(4,836,132	)			818,816
合同资产		(8,621,243	)			(38,263	)
来自SPIC和项目公司的应收款		-				208,521
客户贷款应收款		674,815				686,330
存货		444,289				(287,426	)
其他应收款和流动资产		(2,211,285	)			(335,418	)
其他资产		(14,306	)			8,756
应付账款		9,521,026				1,178,687
经营租赁负债		(485,511	)			(769,551	)
应计费用和其他应付款		4,695,667				910,591
其他负债		(335,817	)			(548,956	)
经营活动产生的净现金		(5,156,405	)			(380,432	)

投资活动
债务投资本金偿还		548,438				137,509
短期预付款的发行		(2,374,712	)			-
短期预付款的本金偿还		1,356,861				-
投资活动产生的净现金		(469,413	)			137,509
筹资活动
累计法律和解费用		-				(138,134	)
私募发行普通股所得		1,096,000				1,950,000
可转换债券本金支付		(1,100,000	)			(250,000	)
设备融资租赁的偿还		(7,436	)			(8,810	)
筹资活动产生的净现金		(11,436	)			1,553,056
汇率的影响		(170,328	)			(179,004	)
现金、现金等价物和受限现金的净增加（减少）		(5,807,582	)			1,131,129
期初现金、现金等价物和受限现金		8,246,813				1,063,077
期末现金、现金等价物和受限现金	$	2,439,231			$	2,194,206

现金流量信息的补充披露：
支付的利息	$	265,505			$	362,193
支付的所得税	$	63,505			$	14,230

投资和筹资活动的非现金活动：
以经营租赁负债换取的使用权资产	$	10,425,412			$	-
将无担保贷款兑换为普通股	$	-			$	900,000
与EB-5贷款取消相关的向非关联方发行可转换债券	$	2,000,000			$	-

参见附注中的合并简要财务报表。

SolarMax Technology, Inc. 和子公司

未经审计的合并简要现金流量表

截至 2026 年 6 月 30 日和 2025 年 6 月 30 日的六个月

	截至 2026 年 6 月 30 日
	2026		2025

期初现金余额：
现金及现金等价物	$	7,966,797		$	786,333
受限现金，非流动		280,016			276,744
	$	8,246,813		$	1,063,077

期末现金余额：
现金及现金等价物	$	2,158,233		$	1,915,639
受限现金，非流动		280,998			278,567
	$	2,439,231		$	2,194,206

参见附注中的合并简要财务报表。

SolarMax Technology, Inc. 和子公司

未经审计的合并简要财务报表附注

截至 2026 年 6 月 30 日和 2025 年 6 月 30 日的六个月

1. 业务描述

SolarMax Technology, Inc. 及其子公司（“公司”）是一家综合太阳能和可再生能源公司。太阳能系统从太阳获取直流电（DC）并将其转换为交流电（AC），可用于为住宅和商业客户提供电力。太阳能业务的基础是太阳能系统用户相比从当地电力公司购买的电力，可以节省能源成本并减少碳足迹。公司成立于 2008 年，旨在在美国开展太阳能业务。

自 2025 年第三季度以来，公司的主要业务是就太阳能电池储能系统（“BESS”）商业系统进行合同谈判并提供工程、采购和施工（“EPC”）服务。截至 2025 年 12 月 31 日，公司根据 2025 年 7 月 31 日与 Longfellow BESS I, LLC，一家得克萨斯州有限责任公司（“Longfellow”）签订的协议，已开始在得克萨斯州开展 430 MWh 电池储能项目，该协议称为 Longfellow 合同。截至 2025 年 12 月 31 日，公司已签订三项大型 BES 系统的 EPC 合同，其中两项在波多黎各，一项在得克萨斯州科珀斯克里斯蒂，尽管截至这些财务报表的日期，这些项目尚未开始施工。

在 2025 年第三季度之前，公司的主要业务是向住宅和商业客户提供光伏和电池备用系统的销售和安装，向政府和商业用户销售 LED 系统和服务。公司继续开发该业务，但由于加利福尼亚州法律的变化，该部分业务发展较为缓慢。公司还通过融资销售光伏和电池备用系统获得收入。自 2022 年以来，公司已停止向太阳能客户发放贷款，且公司预计不会再次开展此类活动。公司的融资收入反映的是其当前投资组合的收入，自 2022 年以来未新增任何贷款。

2015年，公司开始在中国开展业务，并通过2021年在中国开展业务。2021年和2020年的大部分中国收入来自于为国家电力投资集团贵州金源威宁能源有限公司（“SPIC”）的四个项目，SPIC是受中国政府管理的一家大型国有企业。自2021年12月31日及本季度报告发布之日以来，公司未从中国获得收入，公司未与SPIC或任何其他潜在客户进行任何谈判，也未进行任何营销活动。如果公司不寻求重新在中国开展业务，可能会停止其在中国的业务。

反向股票分割

2026年8月4日，公司通过向内华达州州务卿提交变更证书，修订了修订和重述的公司章程，以实现一股对十二股的反向股票分割，该分割于2026年8月13日生效，并将授权的普通股数量从297,225,000股按比例减少至24,768,750股，即之前授权股数的1/12。

由于反向分割，流通股数量从56,906,572股减少至4,742,167股普通股。除因零碎股导致的变化外，每位股东的持股比例保持不变。对已发行期权可兑换的普通股数量以及可转换债券的转换数量进行了成比例的调整，同时对适用的行权或转换价格也进行了调整。

SolarMax Technology, Inc.及子公司

未审合并财务报表附注

截至2026年6月30日止六个月及2025年同期

反向股票分割支持了公司重新符合纳斯达克资本市场上市要求的最低出价要求的努力。2026年3月3日，公司收到纳斯达克的通知，称公司未能满足纳斯达克持续上市要求，即公司必须保持每股1.00美元的最低出价。纳斯达克规则规定，公司有180个日历日的合规期以重新符合要求。该期限于2026年8月31日到期。在2026年8月31日之前，公司普通股的收盘出价至少连续10个交易日达到每股1.00美元。

随附的未审合并财务报表及附注已追溯修订，以反映该反向股票分割及减少的授权股票，如同这些变化于2025年1月1日发生一样。所有股份和每股金额均已相应修订。

纳斯达克通知

2026年6月22日，公司收到纳斯达克的通知，称公司未达到持续上市要求，即公司必须保持上市证券的最低市值为3500万美元。纳斯达克规则规定，公司有180个日历天的合规期以重新符合要求。该期限将于2026年12月21日到期。纳斯达克通过将最近的总流通股数乘以普通股的收盘买价来计算上市证券的市值。如果公司在合规期到期前未能重新符合该规则，公司将收到书面通知，称其证券可能被退市。反向拆股并不能解决上市证券的最低市值问题。

2. 报告基础和重要会计政策摘要

会计基础

公司附带的未经审计的合并财务报表是根据美国通用会计原则（“美国GAAP”）以及证券交易委员会（“SEC”）关于中期财务报告的相关规则和法规编制的。根据这些SEC规则和法规，某些通常包含在按照GAAP编制的财务报表中的信息和注释披露已被简化或省略。因此，这些未经审计的合并财务报表应与截至2025年12月31日止年度的审计合并财务报表及附注一并阅读。未经审计的合并财务报表是按照与审计合并财务报表相同的基准编制的，在管理层看来，这些报表已反映所有必要的调整（所有调整均被认为属于正常经常性性质），以公允地反映公司的财务状况。截至2026年6月30日的三个月和六个月的财务结果不一定代表截至2026年12月31日止年度或其他任何中期期间或未来年度的预期结果。

合并原则

合并财务报表包括公司及其子公司的财务报表。公司与其子公司之间的所有内部交易和余额在合并时予以抵销。合并财务报表中报告的金额以美元计价，除非另有说明。公司在中国人民共和国（“中国”）的子公司的功能货币是人民币（“RMB”）。这些交易在报告期间内或在报告期末按汇率从当地货币折算为美元。

重分类

以前期间财务报表中的某些金额可能根据当前期间财务报表的披露进行重分类。如果在以前期间进行了这些重分类，将不会对以前报告的净亏损产生影响。在截至2026年6月30日止的六个月期间，未发生此类重分类。

估计的使用

按照美国通用会计准则编制财务报表需要管理层做出估计和假设，这些估计和假设会影响合并财务报表中资产和负债的报告金额以及或有资产和负债的披露金额，以及报告期间内收入和费用的报告金额。公司合并财务报表中反映的重要会计估计包括：基于成本的输入值以估计建筑合同的收入、应收账款的可收回性、来自国家电力投资集团（SPIC）的应收款和贷款应收款、对未合并的太阳能项目公司的投资价值、固定资产的使用寿命和减值、授予的股票期权的公允价值和基于股票的薪酬费用、保修和客户服务储备、递延税资产的估值、存货和所得税准备金。实际结果可能与这些估计有重大差异。

SolarMax Technology, Inc.及其子公司

未审合并财务报表附注

截至2026年6月30日及2025年6月30日的六个月期间

流动性与持续经营

随附的合并财务报表已按照美国通用会计准则编制，该准则假设公司作为持续经营实体继续运营。公司历史上存在净亏损和经营活动产生的现金流量为负，包括截至2026年6月30日的三个月和六个月的净亏损，以及累积亏损和股东权益的增加，自2023年以来，截至2026年6月30日，公司未能支付面值为1370万美元的可转换票据的本金和利息，以及由于公司普通股股价低迷，且公司普通股的市值低于纳斯达克上市要求的3500万美元，使得公司持续经营的能力受到严重质疑。由于公司未能满足每股1.00美元的最低出价价格要求，公司于2026年8月13日实施了1比12的反向股票分割。在2026年8月31日之前，公司普通股的收盘出价至少连续10个交易日达到每股1.00美元。反向股票分割不会影响公司满足3500万美元上市证券市值要求的能力。公司普通股市值的任何下跌都将对上市证券的市值产生不利影响。

截至2026年6月30日，公司报告称营运资金赤字约为120万美元。此外，公司累计赤字约为1.149亿美元，股东权益赤字约为1610万美元，且截至2026年6月30日，公司因可转换债务义务违约的总额约为1370万美元。公司营运资金赤字的改善主要是由于与Longfellow项目相关的流动负债在2026年6月30日因时间推移转为非流动负债。此外，截至2026年6月30日，公司约1610万美元（占90.0%）的应收账款出现了收款延迟，其中940万美元与与Longfellow的大规模EPC项目有关，670万美元与来自加州自发电激励计划（“SGIP”）的销售有关，该计划在下一段中有所描述。就这些简要合并财务报表而言，管理层评估了是否存在总体上可能对公司在财务报表发布日后一年内履行到期义务的能力产生重大疑虑的条件和事件。管理层认为存在此类条件和事件，包括持续的经营亏损历史、经营活动产生的现金流量持续为负以及重大流动债务，包括已违约的债务。

2024年，加州公共事业委员会（CPUC）启动了一项价值2.8亿美元的全州计划，称为自发电激励计划（“SGIP”），以帮助加州低收入公用事业客户安装电池储能和太阳能板系统。公司于2025年作为安装商参与了SGIP。2026年2月，SGIP管理员暂时暂停向安装商支付款项，并于2026年5月在裁定中要求实施严格的成本文件要求和审查后恢复付款。因此，公司在截至2026年6月30日的六个月期间经历了SGIP安装的应收账款收款延迟。截至2026年6月30日，SGIP应收账款余额约为670万美元，占公司应收账款的37.2%。2026年8月和9月，公司收到了与截至2026年6月30日的SGIP应收账款余额670万美元相关的约490万美元。

截至2026年6月30日，公司的主要流动性来源包括约220万美元的现金及现金等价物、出售普通股的收益以及公司运营产生的现金。截至2026年6月30日，公司的流动性受到上述提到的Longfellow和SGIP的应收账款的影响而受到负面影响。公司认为其当前的现金余额、对与Longfellow和SGIP相关的应收账款的大部分进行回收，以及预期的运营产生的现金将足以满足公司至少一年的营运资金需求，但不包括约2070万美元的债务，这些债务将在未来十二个月内到期，公司正在寻求将其转换为五年期可转换债券，尽管公司可能因未能在纳斯达克上市以及大量未偿可转换债券的违约而面临退市风险，这可能使公司通过发行可转换债券来偿还债务变得更加困难。管理层专注于扩大公司的业务及其客户群，以拓展其在美国的商业太阳能安装市场。公司继续寻求与约650万美元的长期关联方贷款的当前部分进行交换，以转换为到期时间超过一年的可转换债券。公司无法预测其在这些努力中是否能够成功，或是否需要更改任何此类交换的拟议条款。在截至2026年6月30日的六个月期间，公司通过以市场价25%的折扣出售普通股筹集了约110万美元。根据纳斯达克的规定，公司在未来不久内如果没有股东批准，可能无法以市场价折扣出售普通股来筹集任何重大资金。

SolarMax Technology, Inc. 和子公司

未审合并财务报表附注

截至2026年6月30日及2025年6月30日的六个月

由于上述原因，对于该公司在财务报表发布日期起一年内持续经营的能力存在重大疑虑。该公司无法保证其能够偿还或再融资其现有债务，包括本金金额为1420万美元的可转换票据，其中该公司在总计本金金额为1370万美元的可转换票据上已违约，可能增加其现金余额或限制其现金消耗，或获得其现有债务转换为担保可转换债务，从而为其计划的运营保持足够的现金余额。未来业务需求可能导致现金使用量高于最近经历的水平。如果该公司无法偿还或再融资其现有债务义务，包括本金金额为1420万美元的可转换票据（截至2026年6月30日，该公司在总计本金金额为1370万美元的可转换票据上已违约，债权人有权加速本金和利息的支付），或无法为其业务筹集所需资金，它可能无法继续经营。如果该公司寻求为其中国业务创造业务，且无法保证其在这些努力中会成功，由于太阳能项目的时机以及中国业务的重大资金需求，特别是当项目几乎没有或没有收入或现金流时，该公司中国业务的任何收入和现金流都将是不规则的。截至2026年6月30日，该公司在中国业务方面没有任何协议，并且未就任何协议进行谈判。如果该公司无法在中国开展业务，该公司可能会终止其中国业务。

现金及现金等价物

现金及现金等价物包括存款账户和原始到期日为三个月或更短的高流动性投资。美国非利息交易账户的标准保险覆盖金额为每位存款人250,000美元，根据联邦存款保险公司的一般存款保险规则。中国非利息交易账户的标准保险覆盖金额为每位存款人每家银行500,000人民币（约69,000美元），根据适用的中国一般存款保险规则。

持有至到期债务投资

截至2025年12月31日的持有至到期债务投资包括原始到期日为12个月或更短的应收票据，并按摊销成本计量。截至2026年6月30日，持有至到期的债务已全部偿还。

受限现金

受限现金包括用于担保ACH交易和未结信用卡借款设施的现金。

截至2026年6月30日和2025年12月31日的受限现金包括：

2026年6月30日

2026

2025年12月31日

2025

由美国金融机构持有的存款，作为ACH交易和商业信用卡的担保 – 美国

280,998

280,016

SolarMax Technology, Inc.及子公司

未审合并财务报表附注

截至2026年6月30日及2025年6月30日的六个月

应收账款

应收账款按客户应支付的未偿本金余额报告。在美国，应收账款主要包括大规模EPC项目的客户账单、根据SGIP签订的住宅太阳能和电池系统项目的客户账单，以及LED产品和服务的销售账单。在公司的中国业务中，应收账款代表了与国家电力投资集团（SPIC）签订的合同中已开票但尚未收回的已完成施工合同的金额。应收账款按可变现净值记录。

公司为相关部分的应收款（包括应收账款、政府补贴应收款和其他应收款）计提准备金，这些准备金代表公司在资产负债表日对应收账款中固有的预期损失的估计。信用损失准备的充分性每季度进行评估，建立准备金所使用的假设和模型也会定期进行评估。由于信用损失可能随时间大幅波动，估计信用损失需要对一些不确定事项做出若干假设。一旦某项应收款被认定为无法收回，就会根据准备金进行核销。与补贴应收款相关的费用记录为收入的抵减项。

合同余额

合同资产主要指公司在报告日已完成工作但尚未开具账单的收款权利，主要针对太阳能系统销售。当收款权利变为无条件时（即获得运营许可时），合同资产会转入应收账款。对于大规模EPC合同，合同资产代表未完成合同中超过已开票金额的成本和预计收益。合同资产分为流动或非流动。流动合同资产是指预计在报告日一年内收回的资产。非流动合同资产是指预计在报告日一年后收回的资产。

合同负债主要指公司因美国太阳能系统销售而提前收到的客户款项，但所有权尚未转移。对于大规模EPC合同，合同负债代表未完成合同中超过成本和预计收益的已开票金额。

根据《ASC 606，与客户合同的收入》（“ASC 606”）第340-40-25-4段中提到的实务便捷做法，如果公司本应确认的资产的摊销期为一年或更短，公司在发生时将获得合同的增量成本（即佣金费用）计入营业收入。这些成本包含在营业收入中。

项目递延成本

项目递延成本指公司发生的成本，但相应的收入尚未确认。项目递延成本作为流动资产在资产负债表中列示，并在相应项目的收入确认时确认为营业收入。

客户贷款应收款

2021年之前，该公司向符合其信用资格标准的客户提供通过其全资子公司SolarMax Financial, Inc.提供的分期贷款购买太阳能能源系统的选项。所有贷款均以正在融资的太阳能能源系统或其他项目作为担保。未偿还的客户贷款应收款余额已扣除了贷款损失准备金。贷款损失准备金的计提金额足以维持贷款损失准备金在足以覆盖客户贷款预期信用损失的水平。在确定预期信用损失时，公司考虑其历史信用损失水平、当前经济趋势以及影响未来现金流可收回性的合理且有依据的预测。以低于市场利率的促销利率提供的贷款被记为贷款折扣，并在贷款期限内按有效利率法摊销至利息收入。自2022年以来，公司未签订任何新的贷款协议，其来自现有贷款组合的融资收入，公司目前无意重新内部融资其系统的销售。

SolarMax Technology, Inc.及子公司

未审合并财务报表附注

截至2026年6月30日及2025年6月30日的六个月

存货

存货包括（a）在住房开发项目和未售出项目中进行中的太阳能系统；以及（b）主要由光伏组件、逆变器、建筑和其他材料以及LED产品组成，所有存货均按先进先出法确定的成本或可变现净值的较低者进行计价。公司定期审查存货，以确定是否存在过剩或过时情况，从而判断是否需要计提准备金。

过剩和过时存货的估计基于历史销售和使用经验，以及对现有存货当前状况的审查。

固定资产

固定资产按成本减累计折旧和摊销列示。新增和改良的成本予以资本化，而维修和维护费用则在发生时计入运营费用。折旧按直线法计算，按资产的预计使用寿命计提。租入改良和租给客户的太阳能系统按直线法摊销，摊销期限为租约期限或资产预计使用寿命中的较短者。

主要固定资产类别的预计使用寿命如下：

汽车		4-5年
家具和设备		3-10年
租入改良		资产使用寿命或租约期限中的较短者
租给客户的太阳能系统		租约期限，10-20年

长期资产减值

公司的长期资产包括固定资产，其中包括租给客户的太阳能能源系统。

根据ASC主题360《物业、厂房和设备》，当事件或情况变化表明长期资产或资产组的账面价值可能无法收回时，公司会评估长期资产的减值。如果从长期资产的使用和最终处置中预期产生的未折现未来净现金流量小于其账面价值，则公司会根据账面价值超过公允价值的差额确认减值损失。

截至2026年6月30日及2025年6月30日的三个月和六个月期间，公司物业和设备未发生减值损失。

租赁

公司在根据ASC 842确定租赁安排时，会判断该安排是否为租赁。经营租赁包含在合并资产负债表中的经营租赁使用权（\"ROU\"）资产、应计负债和长期经营租赁负债中。

ROU资产代表公司在租赁期内使用底层资产的权利，租赁负债代表公司因租赁而产生的租赁付款义务。经营租赁的ROU资产和负债在租赁开始日根据租赁期内租赁付款的现值确认。

SolarMax Technology, Inc.和子公司

未审合并财务报表附注

截至2026年6月30日及2025年6月30日的六个月

由于租赁中隐含的利率通常不易确定，公司在确定租赁付款的现值时使用其在租赁开始日的增量借款利率。租赁期限包括在合理确定公司将行使这些选项时的续租或终止租赁的选项。

经营租赁的租赁费用在租赁期内按直线法确认。可变租赁付款在产生相关付款义务的期间确认为租赁费用。

公司选择不在合并资产负债表中确认初始期限为12个月或更短的租赁。短期租赁费用在租赁期内按直线法确认。

公司对某些类别的底层资产的租赁和非租赁组成部分进行合并。

对未合并公司的投资

公司在美国的未合并投资直接由公司以及通过其子公司SMX Capital持有，包括对美国基于太阳能的有限责任公司的投资：Alliance Solar Capital 1, LLC（\"A#1\"）、Alliance Solar Capital 2, LLC（\"A#2\"）和Alliance Solar Capital 3, LLC（\"A#3\"）。公司还对一家位于中国（PRC）的面板制造商常州鸿毅新能源技术有限公司（\"常州\"）拥有少数股权投资。

截至2026年6月30日和2025年12月31日，公司在中国（PRC）有三项未合并投资，代表其对三家项目公司的30%非控制性权益，公司于2021年将这三家项目公司70%的权益转让给了SPIC，SPIC负责运营这些项目公司。

对于这些投资，公司不拥有控制权，并且根据各自的操作协议，具有对被投资方运营和财务决策的重大影响的合同能力。在每一项投资中，被投资方也为每个投资者设立单独的资本账户，因此，公司也在每个被投资方设立单独的资本账户。由于公司能够对被投资方施加重大影响，因此公司采用权益法对这些投资进行核算，在此方法下，公司根据规定的损益百分比记录其在被投资方利润或损失中的比例份额。从权益法投资方收到的分配被记为投资回报，并归类为经营活动的现金流入，除非公司累计收到的分配少于以前期间确定为投资回报的分配，超过公司累计确认的权益收益。当出现这种超额时，本年度的分配至该超额部分将被视为投资回报，并归类为投资活动的现金流入。

由于公司的投资包括没有公开市场价格的私营公司，因此使用成本法结合其他内部信息来评估投资的公允价值。如果在任何报告期末，投资的账面价值高于其公允价值，则会对该投资进行审查，以确定减值是否为非暂时性的。当公允价值的下降被判断为非暂时性时，该投资被视为减值。一旦确定公允价值的下降为非暂时性，将记录减值损失，并建立该投资的新成本基础。公司定期监控其对未合并实体的投资是否存在减值。在截至2026年6月30日和2025年6月30日的六个月期间，未发现减值迹象，也未记录任何减值损失。

SolarMax Technology, Inc. 和子公司

未审合并财务报表附注

截至2026年6月30日和2025年6月30日的六个月

保修

工艺保修

在美国销售太阳能和电池系统时，公司提供25年的工艺保修，以覆盖公司安装的质量。该保修旨在覆盖安装缺陷以及由公司安装太阳能系统和电池存储系统导致的客户财产损坏，这些通常在安装后2-3年内未被发现。25年的保修期与竞争对手提供的条款一致，公司提供该保修以保持市场竞争力。工艺保修不包括组件的保修，例如面板和逆变器，这些组件由制造商直接提供保修，通常面板和逆变器的保修期为25年，而能源存储系统的保修期为10年。公司确定其针对太阳能系统的25年工艺保修属于保证型保修，应继续按照ASC第460条《担保》进行核算，而不是按第606条作为收入成本进行核算的服务型保修。

EPC服务的保修

对于公司以前的中国业务，公司通常在项目完成后提供一年的施工质量保修。客户通常会保留合同价格的3-5%，在保修期满后才会支付给公司，公司将其作为保留金应收款进行核算。截至2026年6月30日和2025年12月31日，公司根据其中国业务的项目收入的名义百分比为这类潜在负债计提了约259,000美元和251,000美元的准备金，该准备金包含在应计费用和其他负债中。到目前为止，公司尚未发生重大质量保修索赔。由于与国家电力投资集团（SPIC）的持续法律纠纷（参见第19章《承诺和或有事项》下的法律诉讼），该负债仍被保留，并将在法律纠纷解决后予以冲销。

对于美国业务，项目完成后公司提供三年的工艺保修。设备由制造商提供十年的保修。公司目前根据当期确认的项目收入的名义百分比计提保修准备金，并计入其他负债。

产能保证

对于在美国销售的太阳能系统，公司还保证，按照约定规格安装的组件在第一年内的发电量至少达到其标称功率输出的98%，在大约10年的产能保证期内，每年的保修覆盖范围将减少0.5%。在处理产能保证下的索赔时，公司通常会向每年声称发电量不足的客户支付现金。公司目前按总太阳能收入的1.0%计提产能保证的准备金。产能保证独立于任何非由客户原因导致的可用阳光减少的因素。

LED保修

公司的LED产品和服务的保修期从1年（人工）到某些销售给政府市政部门的产品的7年不等。公司目前根据LED收入的1.0%为LED销售提供保修准备金。

公允价值计量

主题820，公允价值计量和披露（“ASC 820”），定义了确定公允价值的框架，建立了用于计量公允价值的信息层次结构，并增强了关于公允价值计量的披露信息。ASC 820规定应使用“退出价格”来计量资产或负债的价值，即在计量日有序过程中可以出售资产或转让负债的价格，而不是强制清算或困境销售。ASC 820还规定，应使用相关市场数据（如果可用且不是内部生成或实体特定的信息）来确定公允价值。

SolarMax Technology, Inc.和子公司

未审计的合并财务报表附注

截至2026年6月30日和2025年6月30日的六个月

ASC 820要求公司根据以下三层结构估算并披露公允价值，该结构优先考虑市场输入。

Level 1:	活跃市场中相同资产或负债的报价。
Level 2:	除Level 1以外的可观测输入，无论是直接还是间接的，例如类似资产或负债的报价；非活跃市场的报价；或可以由可观测市场数据证实的其他输入，这些输入适用于资产或负债的实质性全部期限。
Level 3:	由很少或没有市场活动支持的不可观测输入，且对资产或负债的公允价值至关重要。

现金及现金等价物、应收账款、存货、其他流动资产、应付账款、存款、应缴税款、保修负债和应计工资及费用的账面金额近似等于公允价值，因为这些工具的期限较短。

下表显示了截至2026年6月30日公司现金等价物、应收款和借款的公允价值和账面价值：

	公允价值		账面
	Level 1		Level 2			Level 3		价值
资产
现金等价物	$	2,158,233		$	-		$	-	$	2,158,233
客户应收款		-			-			2,776,351		2,549,034
负债
来自关联方的担保贷款		-			-			8,095,676		8,500,000
担保可转换债务		-			-			15,779,685		15,879,217

下表显示了截至2025年12月31日公司现金等价物、应收款和借款的公允价值和账面价值：

	Fair Value		Carrying
	Level 1		Level 2			Level 3		Value
Assets
Cash equivalents	$	280,016		$	-		$	-	$	280,016
Customer loans receivable		-			-			3,439,868		3,130,983
Held to maturity debt investments		-			522,599			-		522,599
Liabilities
Secured loans from related parties		-			-			9,897,955		10,500,000
Secured convertible debt		-			-			15,083,327		14,989,882

Cash equivalents – Cash equivalents consist of money market accounts and are carried at their fair value.

Customer loans receivable – The fair value of customer loans receivable is calculated based on the carrying value and unobservable inputs which include the credit risks of the customers, the market interest rates and the contractual terms. The Company’s underwriting policies for the customer loans receivable have not changed significantly since the origination of these loans. The overall credit risk of the portfolio also has not significantly fluctuated as evidenced by the minimal historical write-offs, and lastly the market interest rates have remained relatively consistent since the origination of the loans.

Table of Contents

SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

Held to maturity debt investments - Held to maturity debt investments consist of short-term note receivables with maturities of 12 months or less. Accordingly, their carrying values approximate their fair value. At June 30, 2026, all held to maturity debt instruments had been paid.

Bank and other loans – The fair value of such loans payable had been determined based on the variable nature of the interest rates and the proximity to the issuance date.

Secured loans from related parties – The related party loans were issued at the fixed annual interest rates of 3.0% in the U.S., and the fair value of the loans has been estimated by applying the prevailing borrowing annual interest rates for a comparable loan term which the Company estimated to be 9.0% to the estimated cash flows through the maturities of the loans.

Secured convertible debt – The secured convertible debt was issued at the fixed annual interest rates of 4.0% in the U.S., and the fair value of the loans was determined based on the proximity to the issuance date.

Revenue Recognition

The Company recognizes revenue from EPC contracts in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers.

Revenue from Large-scale EPC Contracts

The Company’s EPC contracts generally require the Company to provide a combination of engineering, design, procurement, equipment supply, construction, installation, testing, start-up and commissioning services that are highly interrelated and collectively comprise a single integrated output. For the Longfellow Contract, the Company is responsible for the turnkey design, engineering, procurement, installation, construction, testing, start-up and commissioning of a fully integrated battery energy storage system and related substation. These activities are highly interdependent and are performed to produce a single integrated BESS for the customer. Accordingly, because the promised goods and services are not separately identifiable within the context of the Longfellow Contract, the Company has determined that the EPC services represent a single performance obligation.

The Company recognizes revenue over time when the criteria for over-time recognition under ASC 606 are met. For the Longfellow Contract, the Company has determined that its performance obligation is satisfied over time because the Company’s performance creates or enhances an asset that is controlled by the customer as the asset is constructed and/or the Company does not create an asset with an alternative use and has an enforceable right to payment for performance completed to date.

Revenue recognized over time is measured using an input method based on the ratio of costs incurred to date to the Company’s estimate of total costs required to satisfy the performance obligation. The Company believes that the cost-to-cost method faithfully depicts the transfer of control of the BESS to the customer because the Company's engineering, procurement, equipment, construction, installation and commissioning activities are performed continuously and the costs incurred are generally representative of the Company's progress toward satisfying the performance obligation.

Under the cost-to-cost method, revenue recognized through a reporting date is generally determined by multiplying the contract transaction price by the ratio of cumulative costs, excluding the cost of inventory, incurred to date to total estimated costs, excluding the cost of inventory, at completion, subject to adjustments for changes in transaction price and other applicable provisions of ASC 606. Costs included in the measure of progress generally include labor, subcontractor costs and other costs directly attributable to satisfying the performance obligation. For inventory, the Company recognizes revenue equal to the cost of the inventory delivered to the job site but not yet installed.

Based on the current progress of the Longfellow EPC project which comprises substantially of uninstalled materials which were delivered but not yet installed, the Company recognizes revenue, but not gross profit, on uninstalled materials on Longfellow EPC project. The revenue and cost of revenue on uninstalled materials are recognized when the control is transferred.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

The contractual payment milestones are not, in themselves, used as the measure of progress for revenue recognition. Under the Longfellow Contract, invoices are generally triggered upon achievement of specified progress milestones; therefore, amounts billed may differ from revenue recognized based on the Company's measure of progress. Amounts recognized as revenue in excess of amounts billed are recorded as contract assets, while amounts billed in excess of revenue recognized are recorded as contract liabilities, as applicable. The Agreement requires payment upon achievement of specified Progress Milestones and provides for additional payments following Final Completion.

The Company updates its estimates of total contract revenue, total costs to complete and expected contract profitability throughout the performance period. Changes in estimates are reflected in the period in which the estimates are revised. When a change in estimate affects progress toward completion, the cumulative effect of the change is recognized as a cumulative catch-up adjustment to revenue in the period of the change.

If estimates indicate that the total costs expected to be incurred on an unsatisfied performance obligation will exceed the related transaction price, the Company recognizes the estimated loss in full in the period in which the loss becomes probable and reasonably estimable.

The Company also evaluates contract modifications, claims, change orders, liquidated damages, performance incentives and other forms of variable consideration to determine whether they should be included in the transaction price and, if so, when inclusion is appropriate under ASC 606.

Certain of the Company’s EPC contracts contain payment terms that result in a significant financing component when consideration is deferred beyond the period in which the related performance obligations are substantially satisfied. The Longfellow Contract provides for payment of the remaining unpaid portion of the contract price in installments following the Company's billing of Longfellow on the first, second and third anniversaries of commercial operation. Accordingly, the Company determined that the Agreement contains a significant financing component and adjusts the transaction price to reflect the effects of financing in accordance with ASC 606. The portion of the contractual consideration attributable to financing is excluded from revenue and is recognized separately as interest income over the financing period using the effective interest method. In determining the financing component, the Company considers the timing and amount of payments relative to the transfer of goods and services, prevailing market interest rates and other relevant factors, and reassesses the estimate as appropriate based on changes in the expected timing of performance and payment.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

Solar Energy and Battery Storage Systems and Components Sales

Revenue recognition associated with sales of solar energy systems, battery storage systems, and other products is recognized over time as the Company’s performance creates or enhances the property controlled by the customer, i.e., the asset is being constructed on a customer’s premises that the customer controls.

The Company’s principal performance obligation is to design and install a solar energy system that is interconnected to the local power grid and for which permission to operate has been granted by a utility company to the customer. The Company recognizes revenue over time as control of the solar energy system transfers to the customer which begins at installation and concludes when the utility company has granted the permission to operate.

All costs to obtain and fulfil contracts associated with system sales and other product sales are expensed to cost of revenue when the corresponding revenue is recognized.

For solar energy and battery storage system sales, the Company recognizes revenue using a cost-based input method that recognizes revenue and gross profit as work is performed based on the relationship between actual costs incurred compared to the total estimated cost of the contract. In applying cost-based input methods of revenue recognition, the Company uses the actual costs incurred for installation and obtaining the permission to operate, each relative to the total estimated cost of the solar energy and battery storage system, to determine the Company’s progress towards contract completion and to calculate the corresponding amount of revenue and gross profit to recognize. Cost‑based input methods of revenue recognition are considered a faithful depiction of the Company’s efforts to satisfy solar energy and battery system contracts and therefore reflect the transfer of goods to a customer under such contracts. Costs incurred towards contract completion may include costs associated with solar modules, battery components, direct materials, labor, subcontractors, and other indirect costs related to contract performance.

The Company sells solar energy and battery storage systems to residential and commercial customers and recognizes revenue net of sales taxes. Cash sales include direct payments from the customer (including financing obtained directly by the customer), third-party financing arranged by the Company for the customer, and leasing arranged by the Company for the customer through a third party leasing company.

Direct payments are made by the customer as stipulated in the underlying home improvement or commercial contract which generally includes an upfront down payment at contract signing, payments at delivery of materials and installation ranging from 70% to 85% of the contract price, and the payment of the final balance at the time of the city signoff or when the permission to operate the solar system is granted by a utility company.

For third-party financing arranged by the Company for the customer, direct payments are made by the financing company to the Company based on an agreement between the financing company and the Company, with the majority of the payments made by the time of completion of installation but not later than the date on which the permission to operate the solar system is granted by the utility company.

For a lease through the third party leasing company, direct payments are made by the leasing company to the Company based on an agreement between the leasing company and the Company, which is generally 80% upon the completion of installation and 20% when permission to operate is granted.

LED Product Sales and Service Sales

For product sales, the Company recognizes revenue at a point in time following the transfer of control of the products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. For contracts involving both products and services (i.e., multiple performance obligations), the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product is transferred to the customer, in satisfaction of the corresponding performance obligations. Revenue from services is recognized when services are completed which is upon acceptance by the customer. The standalone selling price of the warranty is not material and, therefore, the Company has not allocated any portion of the transaction price to any performance obligation associated with the warranty.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

Payment for products is generally made upon delivery or with a 30-day term. Extended payment terms are provided on a limited basis not to exceed twelve months. Payment for services is due when the services are completed and accepted by the customer. For certain LED product sales, the Company provides the customers with a right of return subject to restocking fees. The Company assessed such rights of return as variable consideration and recognizes revenue based on the amount of consideration the Company expects to receive after returns are made. Based on the Company’s historical experience, the Company has determined the likelihood and magnitude of a future returns to be immaterial and currently has not provided for a liability for such returns on the LED product sales.

For contracts where the Company agreed to provide the customer with rooftop solar energy systems (including design, materials, and installation of the system) in addition to providing LED products and LED installation, these agreements may contain multiple performance obligations: 1) the combined performance obligation to design and install rooftop solar energy system; 2) the performance obligation to deliver the LED products; and 3) the performance obligation to install the LED products. Topic 606 permits goods and services that are deemed to be immaterial in the context of a contract to be disregarded when considering performance obligations within an agreement. The Company will compare the standalone selling price of the installations and products to the total contract value to determine whether the value of these installations and products is quantitatively immaterial within the context of the contract. Similarly, these services may be qualitatively immaterial in the eyes of the customer. While the customer ordered these products and has received a separate quote for them, they may not be a material driving factor within the agreement for a solar energy system. Further, a reasonable person may not consider providing and installing LED products to be a material part of the arrangement to design and construct a large solar facility. If these products and services are determined to be immaterial within the context of the contract, they will be combined with the performance obligation to design and install the rooftop solar energy system. If management determines that the products and services are determined to be material to the overall project, they would represent a separate performance obligation.

Solar Leases and Solar Power Purchase Agreements (PPAs) in the U.S.

The Company has entered into long-term solar leases as well as the sale of energy generated by PV solar power systems under PPAs that do not meet the criteria for recognition under ASC 842, either because the agreements are not deemed to contain a lease, or the agreements qualify for the short-term lease exemption. These systems were installed on the customers’ properties but are owned by the Company.

Loan Interest Income

In the past, the Company provided installment financing to qualified customers in the U.S. to purchase residential or commercial photovoltaic systems, energy storage systems, as well as LED products and services, and some of these loans remain outstanding. The Company has not entered into new loans since 2022, and its revenues are from financing related to its existing loan portfolio. Customer loans receivable are classified as held-for-investment based on management’s intent and ability to hold the loans for the foreseeable future or to maturity. Loans held-for-investment are carried at amortized cost and are reduced by an allowance for estimated credit losses as necessary. The Company recognizes interest income on loans, including the amortization of discounts and premiums, using the interest method. The interest method is applied on a loan-by-loan basis when collectability of the future payments is reasonably assured. Interest on loans generally continues to accrue until the loans are charged off. Premiums and discounts are recognized as yield adjustments over the term of the related loans. Loans are transferred from held-for-investment to held-for-sale when management’s intent is not to hold the loans for the foreseeable future. Loans held-for-sale are recorded at the lower of cost or fair value. There were no loans held-for-sale at June 30, 2026 and December 31, 2025.

Advertising Costs

The Company charges advertising and marketing costs related to radio, internet and print advertising to operations as incurred. Advertising and marketing costs for the three months ended June 30, 2026 and 2025 were approximately $50,000 and $71,000, respectively. Advertising costs for the six months ended June 30, 2026 and 2025 were approximately $92,000 and $150,000, respectively.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

Income Taxes

The Company accounts for income taxes pursuant to the FASB ASC Topic 740, Income Taxes (“ASC 740”). The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. The Company accounts for the investment tax credits under the flow-through method which treats the credits as a reduction of federal income taxes of the year in which the credit arises or is utilized. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. The Company has determined it is more likely than not that its deferred tax assets will not be realizable and has recorded a full valuation allowance against its deferred tax assets. In the event the Company is able to realize such deferred income tax assets in the future in excess of the net recorded amount, the Company would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.

Topic 740-10 clarifies the accounting for uncertainty in income taxes recognized in the Company’s condensed consolidated financial statements in accordance with U.S. GAAP. The calculation of the Company’s tax provision involves the application of complex tax rules and regulations within multiple jurisdictions. The Company’s tax liabilities include estimates for all income-related taxes that the Company believes are probable and that can be reasonably estimated. To the extent that the Company’s estimates are understated, additional charges to the provision for income taxes would be recorded in the period in which the Company determines such understatement. If the Company’s income tax estimates are overstated, income tax benefits will be recognized when realized.

The Company recognizes interest and penalties related to unrecognized tax positions as income tax expense. For the six months ended June 30, 2026 and 2025, the Company did not incur any related interest and penalties.

The Company does not record U.S. income taxes on the undistributed earnings of its foreign subsidiaries based upon the Company’s intention to permanently reinvest undistributed earnings to ensure sufficient working capital and further expansion of existing operations outside the U.S. As of June 30, 2026 and December 31, 2025, the Company’s foreign subsidiaries operated at a cumulative deficit for U.S. earnings and profit purposes.

The Company determined that the annual effective tax rate (“AETR”) method is not appropriate for interim tax reporting because it is unable to reliably estimate annual pretax income for its China operations. The China operations represent a significant component of the Company's foreign income, and the inherent difficulty in forecasting that jurisdiction's full-year results cause the estimated AETR to be highly sensitive to changes in assumptions. Accordingly, the Company applied the cutoff method, treating each interim period as a discrete annual period for purposes of computing the tax provision.

Comprehensive Income (Loss)

The Company accounts for comprehensive income (loss) in accordance with ASC 220, Income Statement – Reporting Comprehensive Income (“ASC 220”). Under ASC 220, the Company is required to report comprehensive income (loss), which includes net income (loss) as well as other comprehensive income (loss). The only significant component of accumulated other comprehensive income (loss) as of June 30, 2026 and December 31, 2025 is the currency translation adjustment.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

Net Income (Loss) Per Share

The Company calculates net income (loss) per share by dividing income or losses by the weighted average number of shares of common stock outstanding for the period. Diluted weighted average shares is computed using basic weighted average shares plus any potentially dilutive securities outstanding during the period using the treasury-stock-type method and the if-converted method, except when their effect is anti-dilutive. Potentially dilutive securities are excluded from the computation of diluted earnings per share for the three and six months ended June 30, 2026 and 2025 because the effect would be antidilutive.

Stock-Based Compensation

The Company accounts for stock-based compensation costs under the provisions of ASC Topic 718, Compensation – Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest for both employees and non-employees. Stock-based compensation expense includes the compensation cost for all share-based payments granted to employees and non-employees, net of estimated forfeitures, over the employee requisite service period or the non-employee performance period based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, extended, repurchased, or cancelled during the periods reported.

Foreign Currency

Amounts reported in the condensed consolidated financial statements are stated in U.S. dollars. The Company’s subsidiaries in the PRC use the Chinese RMB as their functional currency and all other subsidiaries use the U.S. dollar as their functional currency.

In accordance with ASC 830, Foreign Currency Matters (“ASC 830”), the Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from RMB into U.S. dollar are recorded in stockholders’ equity (deficit) as part of accumulated other comprehensive income (loss). Further, foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency. Income (loss) on those foreign currency transactions of approximately $35,000 and $134,000 for the three months ended June 30, 2026 and 2025, respectively, are included in other income (expense), net for the period in which exchange rates change. Income (loss) on those foreign currency transactions of approximately $113,000 and $192,000 for the six months ended June 30, 2026 and 2025, respectively, are included in other income (expense), net for the period in which exchange rates change.

Segment Information

Operating segments are defined as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the chief executive officer. Based on the financial information presented to and reviewed by the chief operating decision maker in deciding how to allocate the resources and in assessing the performance of the Company, the Company has determined that since January 1, 2024, it has one operating segment which is the operations in the United States. Prior to January 1, 2024, the Company considered its operation in China a reporting segment. However, because the operation in China has had no significant revenues since 2022, the Company no longer considers its operations in China to be either a reporting segment or an operating segment.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

Recently Issued Accounting Pronouncements

As an emerging growth company, the Company has elected to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Securities and Exchange Act of 1934.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This update requires that at each interim and annual reporting period public entities disclose (1) the amounts of purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions; (2) certain amounts that are already required to be disclosed under current GAAP in the same disclosure as the other disaggregation requirements; (3) a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively; and (4) the total amount of selling expenses and, in annual reporting periods, the definition of selling expenses. In January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This update clarifies that ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact on its financial statements of adopting this guidance.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025-05 is intended to improve the estimation of expected credit losses for contracts arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers. The amendments in this ASU were adopted effectively January 1, 2026 and were applied prospectively, and they do not have a material effect on the Company's financial statements.

The Company has reviewed all other recently issued accounting pronouncements and concluded they were either not applicable or not expected to have a material impact on the Company’s consolidated financial statements.

3. Disaggregation of Revenue

The following table summarizes the Company’s revenue by product line for the three and six months ended June 30, 2026 and 2025:

	Three Months Ended June 30,		Six Months Ended June 30,
	2026		2025			2026		2025

Solar energy and battery storage systems
Large-scale EPC contracts	$	809,154		$	-		$	6,009,606	$	-
Sales on non-installment basis		5,637,986			5,453,069			12,848,350		8,510,959
Third-party leasing arrangements		1,611,482			418,621			2,478,285		3,139,403
Solar lease revenues		15,073			15,273			28,545		30,945
Solar power purchase agreement revenues		8,032			3,958			10,873		5,992
Total solar energy and battery storage systems		8,081,727			5,890,921			21,375,659		11,687,299
LED projects		2,125,371			911,092			3,608,317		1,970,277
Financing revenue		36,514			80,991			90,253		152,897
Total revenues	$	10,243,612		$	6,883,004		$	25,074,229	$	13,810,473

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

4. Cash, Cash Equivalents and Restricted Cash

As of June 30, 2026 and December 31, 2025, insured and uninsured cash including the balance classified as restricted cash were as follows:

	June 30, 2026		December 31, 2025

U.S.
Insured cash	$	403,613		$	909,229
Uninsured cash		301,787			1,898,809
		705,400			2,808,038
China
Insured cash		233,420			309,048
Uninsured cash		1,500,411			5,129,727
		1,733,831			5,438,775
Total cash and cash equivalents and restricted cash		2,439,231			8,246,813
Less: Cash and cash equivalents		2,158,233			7,966,797
Restricted cash	$	280,998		$	280,016

5. Accounts Receivable, Net

The activity of the allowance for credit losses for accounts receivable for the six months ended June 30, 2026 and 2025 is as follows:

	Six Months Ended June 30,
	2026		2025

Balance – beginning of period	$	30,499		$	40,826
Provision for credit losses		16,611			15,743
Balance – end of period	$	47,110		$	56,569

At June 30, 2026, based on its qualitative and quantitative analysis of Longfellow and its members, the Company determined that credit loss exposure is insignificant and did not provide for an allowance for credit losses related to the $9.4 million accounts receivable from Longfellow.

At June 30, 2026, the Company did not provide for an allowance for credit losses related to the $6.7 million accounts receivable related to the SGIP installations, as a result of the circumstances described under \"Liquidity and Going Concern\" in Note 2. In August and September 2026, the Company received a total of approximately $4.9 million related to its June 30, 2026 SGIP accounts receivable balance of $6.7 million. The Company believes the issues related to the delayed payments have been substantially resolved.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

6. Held to maturity debt investments

In March 2024, the Company made an investment of RMB 5.0 million (approximately $688,000) in a 5% promissory note due June 25, 2024 issued by Qingdao Xiaohuangbei Technology Co., Ltd., an unrelated party based in PRC. The maturity date of the note has been extended on two occasions at the request of the maker to December 31, 2025. In February 2026, the outstanding balance of RMB 3,655,525 (approximately $522,000) was paid.

7. Receivable from SPIC, Net

The Company had previously initiated arbitration proceedings against SPIC, related to the receivable balances of several photovoltaic EPC projects that the Company completed in 2020 and 2021. In April 2025, the arbitration tribunal issued awards in favor of the Company and subsequently the Company collected approximately RMB 42.5 million ($6.0 million) of the receivable balance. At December 31, 2025 and June 30, 2026, the unpaid receivable balance was RMB 7.0 million ($1.0 million) and no additional payments were received since. Accordingly, the Company initiated another enforcement proceeding to collect the balance of the arbitration awards. In connection with the enforcement actions, the court has frozen certain bank accounts and real estate assets of the related SPIC subsidiaries and has issued enforcement notices requiring a power supply bureau that owed money to SPIC to withhold electricity sales proceeds generated by the photovoltaic power plants. As of June 30, 2026, no cash recoveries had been received. Based on discussions with legal counsel and the enforcement court, management expects that collections will occur through the withholding of electricity revenues generated by the projects. While management believes recovery is probable, the timing and amount of collections remain subject to enforcement procedures and operating performance of the power plants. The Company continues to monitor the status of the enforcement proceedings and will update its assessment of collectability as additional information becomes available. See additional discussion under Note 19. Commitments and Contingencies under Legal Proceedings.

8. Large-scale EPC Contracts

On July 31, 2025, SREP, entered into the Longfellow Contract for an industrial project to develop a BESS facility. Based on the initial terms of the contract, the contract is expected to generate revenues of approximately $120.1 million and financing income of $7.2 million 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. Due to a change order being discussed but still not approved, the BESS facility is expected to be completed by March 2028. One of Longfellow’s members is a stockholder of the Company with 2.3% interest at December 31, 2025 and June 30, 2026. The member acquired its interest in the Company as part of the Company’s private placement in 2025 on the same terms as other investors, which was at a 25% discount from the market price at the date of the purchase agreement.

The Company has committed to make a $5.0 million contribution to capital in Longfellow for an 8% equity interest. This capital contribution was due the earlier of December 31, 2025 or when the board of managers determines such contributions are necessary to meet Longfellow’s obligations under the Longfellow Contract for which the Company is the EPC contractor (see Note 8). At December 31, 2025, June 30, 2026 and on the date of the issuance of these financial statements, the Company has not made such contribution and has not recorded the investment. The Company has obtained the consent from Longfellow for the Company to defer its capital commitment to a later date, which has not been determined. The Company’s chief executive officer, who is representing the Company, is one of the five members of Longfellow’s board of managers, which collectively manages the affairs of Longfellow.

The Longfellow Contract is a fixed-price contract consisting of battery inventories of $75.3 million and non-inventory services of $52.0 million. During the three and six months ended June 30, 2026, battery inventories of $828,000 and $5.8 million, respectively, were procured and delivered to the customer’s premises but have not been installed, resulting in revenues related to battery inventories being reported at the Company’s cost. Additionally, the Company completed engineering and pre-construction services under the contract totaling $159,000, which is included in cost of revenue for the six months ended June 30, 2026, representing 0.5% of the estimated services. During the three months ended June 30, 2026, the Company recorded revenues of $809,000 and cost of revenues of $756,000, and during the six months ended June 30, 2026, the Company recorded revenues of $6.0 million and cost of revenues of $6.0 million. Since project inception through June 30, 2026, the Company recorded revenues of $66.2 million and cost of revenues of $65.8 million. As of June 30, 2026, accounts receivable from Longfellow were $9.4 million, contract asset, current was $15.0 million, and contract asset, noncurrent was $36.9 million. As of June 30, 2026, approximately $61.1 million of contractual value remained under the Longfellow Contract. The remaining contractual value represents future consideration expected to be received for performance of the remaining performance obligation under the Longfellow Contract.

On December 31, 2025, the Company entered into three EPC contracts for large-scale BESS systems, two in Puerto Rico and one in Corpus Christi, Texas. Pursuant to an EPC contract with Naguabo BESS, LLC, a Texas limited liability company (“Naguabo”), the Company will develop a BESS facility in Ceiba Municipality, Puerto Rico. The contract value is approximately $122.3 million. Naguabo will own and operate the facility, which is expected to have a storage capacity of 320 megawatt-hours. The Company is to have a 9% membership interest in Naguabo. Pursuant to an EPC contract with Yabucoa BESS, LLC, a Texas limited liability company (“Yabucoa”), the Company will develop a BESS facility in Humacao Municipality, Puerto Rico. The contract value is approximately $35.9 million. Yabucoa will own and operate the facility, which is expected to have a storage capacity of 80 megawatt-hours. The Company will have a 9% membership interest in Yabucoa. Pursuant to an EPC contract with Navboot Holdco, LLC, a Delaware limited liability company (“Navboot”), the Company will develop a BESS facility in Corpus Christi, Texas. The contract value is approximately $258.1 million. Navboot will own and operate the facility, which is expected to have a storage capacity of 600 megawatt-hours. As of June 30, 2026, the Company has not started work on these three projects and certain agreements affecting the three customers which are necessary to be completed before the Company can commence work on the projects have not been completed.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

9. Customer Loans Receivable

Prior to 2023, the Company provided financing to qualified customers to purchase residential or commercial photovoltaic systems, as well as other products the Company offered in the U.S. Depending on the credit rating of customers, the interest rate generally ranges from 0.00% to 10.99% per annum with financing terms ranging from one to fifteen years. At June 30, 2026 and December 31, 2025, the percentage of the Company’s loan portfolio with a 0% interest rate is 0.2% and 0.4%, respectively.

The customer gives the Company a security interest in the photovoltaic systems and other products financed.

The following tables summarize the Company’s customer loan receivables by credit rating, determined at origination, for each vintage of the customer loan receivable portfolio at June 30, 2026:

									June 30, 2026
	2023		2022			2021		Prior	Total		%
Prime - FICO score 680 and greater	$	-		$	-		$	-	$	2,374,047		$	2,374,047		88.7	%
Near-prime - FICO score 620 to 679		-			-			-		250,685			250,685		9.3	%
Sub-prime - FICO score less than 620		-			-			-		52,955			52,955		2.0	%
Business entity — FICO not available		-			-			-		-			-	-	%
Total Customer Loan Receivables, gross	$	-		$	-		$	-	$	2,677,687		$	2,677,687		100.0	%

The following tables summarize the Company’s customer loan receivables by credit rating, determined at origination, for each vintage of the customer loan receivable portfolio at December 31, 2025:

								December 31, 2025
	2022		2021			Prior		Total	%
Prime - FICO score 680 and greater	$	-		$	-		$	2,950,941	$	2,950,941	88.5	%
Near-prime - FICO score 620 to 679		122			-			251,723		251,845	7.5	%
Sub-prime - FICO score less than 620		-			-			124,373		124,373	3.7	%
Business entity — FICO not available		-			10,303			-		10,303	0.3	%
Total Customer Loan Receivables, gross	$	122		$	10,303		$	3,327,037	$	3,337,462	100.0	%

Customer loans receivable consist of the following as of June 30, 2026 and December 31, 2025:

	June 30, 2026			December 31, 2025

Customer loans receivable, gross	$	2,677,687			$	3,337,462
Allowance for loan losses		(128,653	)			(206,479	)
Customer loans receivable, net		2,549,034				3,130,983
Less: Current portion		779,497				874,617
Non-current portion	$	1,769,537			$	2,256,366

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

Principal maturities of the customer loans receivable at June 30, 2026 are summarized as follows:

For the year ending December 31,	Amount
2026 (remainder of)	$	394,017
2027		753,804
2028		607,474
2029		427,803
2030		264,724
Thereafter		229,865
Total customer loans receivable	$	2,677,687

The Company is exposed to credit risk on the customer loans receivable. Credit risk is the risk of loss arising from the failure of customers to meet the terms of their contracts with the Company or otherwise fail to perform as agreed.

The activity in the allowance for loan losses for customer loans receivable for the six months ended June 30, 2026 and 2025 is as follows:

	Six Months Ended June 30,
	2026			2025

Balance – beginning of period	$	206,479			$	280,082
Provision (recovery) for loan losses		(92,866	)			(54,261	)
Adjustments		15,040				7,487
Balance – end of period	$	128,653			$	233,308

Total interest income on the customer loans receivable included in revenues was approximately $32,000 and $80,000 for the three months ended June 30, 2026 and 2025, respectively, and approximately $85,000 and $151,000 for the six months ended June 30, 2026 and 2025, respectively.

10. Inventories, Net

The activity in the reserve for excess and obsolete inventories for the six months ended June 30, 2026 and 2025 is as follows:

	Six Months Ended June 30,
	2026		2025

Balance – beginning of period	$	715,998		$	642,297
Provision for excess and obsolete inventories		-			3,500
Balance – end of period	$	715,998		$	645,797

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

Inventories consisted of the following as of June 30, 2026 and December 31, 2025:

	June 30, 2026			December 31, 2025

Solar panels, inverters, battery storage and components	$	1,409,754			$	1,753,458
LED lights		923,513				1,024,098
Total inventories, gross		2,333,267				2,777,556
Less: reserve for excess and obsolete inventories		(715,998	)			(715,998	)
Total inventories, net	$	1,617,269			$	2,061,558

11. Other Receivables and Current Assets, Net

Other receivables and current assets, net consisted of the following at June 30, 2026 and December 31, 2025:

	June 30, 2026		December 31, 2025

Receivable from seller (Uonone Group - Note 17)	$	441,703		$	428,885
Prepaid expenses and other current assets		651,264			949,803
Other receivable		1,030,304			-
Advances to suppliers		1,618,159			281,439
Accrued interest on held to maturity debt investment		-			18,971
Accrued interest on customer loans receivable		3,793			21,117
Total other receivables and current assets	$	3,745,223		$	1,700,215

At June 30, 2026 and December 31, 2025 advances to suppliers include advances for material costs related to the Longfellow project of approximately $1.0 million and $281,000, respectively. The amount also includes an advance to suppliers of $602,402 related to the new transformer sale agreement that the Company entered into in June 2026 with another Longfellow entity, Longfellow Solar I LLC.

Other receivable at June 30, 2026 relates to amounts the Company advanced to one of its suppliers in RMB during the three months ended June 30, 2026, for which the supplier will repay the Company in U.S. dollars. The advances are short-term in nature and typically collected in 180 days. The supplier has made $410,000 in payments subsequent to June 30, 2026. Based on the short-term nature of the advances and the history of payments made by the supplier, the Company believes that an allowance for credit losses at June 30, 2026 is not required.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

12. Property and Equipment, Net

Components of property and equipment, net are as follows:

	June 30, 2026			December 31, 2025

Automobiles	$	730,677			$	727,756
Furniture and equipment		1,385,186				1,381,185
Solar systems leased to customers		1,261,703				1,261,703
Leasehold improvements		2,300,011				2,294,833
Total property and equipment, gross		5,677,577				5,665,477
Less: accumulated depreciation and amortization		(5,563,228	)			(5,526,587	)
Total property and equipment, net	$	114,349			$	138,890

Depreciation expense for the three months ended June 30, 2026 and 2025 were approximately $12,000 and $17,000, respectively, and for the six months ended June 30, 2026 and 2025, were approximately $25,000 and $36,000, respectively.

13. Investments in Unconsolidated Companies

At June 30, 2026 and December 31, 2025, the Company has a 30% non-controlling interest in three PRC companies. These PRC companies were project subsidiaries previously owned by the Company that previously performed EPC services for three projects pursuant to agreement with SPIC. The project subsidiaries are the entities that hold the ownership and operate the solar farms. When the projects were completed in 2020, the customer, SPIC, purchased a 70% equity interest in these project subsidiaries. The Company accounts for its 30% equity interest using the equity method. Activity in the Company’s 30% non-controlling investments in these entities for the six months ended June 30, 2026 and 2025 is reflected in the following tables:

Investee	Investment Balance at December 31, 2025		Share of Investee’s Net Income (Loss)			Effect of Exchange Rate		Investment Balance at June 30, 2026
Yilong #2	$	4,612,189		$	(239,436	)	$	135,260	$	4,508,013
Xingren		2,201,835			16,587			65,990		2,284,412
Ancha		3,900,787			(58,898	)		115,950		3,957,839
Total	$	10,714,811		$	(281,747	)	$	317,200	$	10,750,264

Investee	Investment Balance at December 31, 2024		Share of Investee’s Net Income (Loss)			Effect of Exchange Rate		Investment Balance at June 30, 2025
Yilong #2	$	4,345,909		$	53,167		$	79,866	$	4,478,942
Xingren		2,070,551			28,094			38,084		2,136,729
Ancha		3,604,428			48,485			66,292		3,719,205
Total	$	10,020,888		$	129,746		$	184,242	$	10,334,876

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

The following tables present the summary of the unaudited combined financial statements of the three solar project companies in which the Company has a 30% equity interest as of June 30, 2026 and December 31, 2025, and for the six months ended June 30, 2026 and 2025:

	June 30, 2026		December 31, 2025

Current assets	$	20,451,897		$	18,213,527
Non-current assets		70,113,421			73,173,887
Total assets	$	90,565,318		$	91,387,414

Current liabilities	$	3,186,776		$	1,727,555
Noncurrent liabilities		51,285,786			53,339,576
Members’ capital		36,092,756			36,320,283
Total liabilities and members’ capital	$	90,565,318		$	91,387,414

	Six Months Ended June 30,
	2026			2025

Revenue	$	2,877,067			$	4,004,050
Gross profit (loss)	$	(55,030	)		$	1,605,279
Net income (loss)	$	(939,158	)		$	432,488

Revenue of these project companies is generated from the power purchase agreements with the PRC utility companies as well as government subsidies.

On April 29, 2025, Longfellow was formed as a Texas limited liability company and commenced its business on the same date. Longfellow is a special purpose company created to own and operate a new battery storage system located in Pecos County, Texas. Pursuant to the LLC agreement, the Company owns an 8% interest percentage and was to make a contribution of $5.0 million the earlier of December 31, 2025 or when the board of managers determines such contributions are necessary to meet Longfellow’s obligations under the Longfellow Contract pursuant to which the Company is the EPC contractor (see Note 8). Longfellow’s business is managed by the board of managers comprising of five managers, one of whom is the Company’s chief executive officer who is representing the Company on the board of managers. The Company’s interest in Longfellow is effective in June 2025, even though its capital contribution was not due until December 31, 2025 pursuant to the LLC agreement. At June 30, 2026 and December 31, 2025, the Company had not paid its $5.0 million capital contribution and accordingly, has not recorded its $5.0 million investment. The Company has the consent from Longfellow to defer the date of the Company’s capital contribution to a later date, which has not been determined.

The Company has determined that Longfellow is a variable interest entity (“VIE”) in which the Company has an 8% equity interest. Additionally, the Company has an EPC contract with Longfellow which contains a $42.0 million payment milestone pursuant to a tax equity transaction and a deferred payment of $17.0 million annually over three years after the completion of the EPC project which is to be paid from the project’s operational revenues. The amounts of the tax equity transaction and the deferred payments are uncertain and therefore represent variable interest assumed by the Company.

Although Longfellow is a VIE, the Company has determined that it is not the primary beneficiary of Longfellow because it does not have both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. Accordingly, the Company does not consolidate Longfellow in its consolidated financial statements.

The carrying amount of the Company’s equity interest in Longfellow was zero as of June 30, 2026. As of June 30, 2026, the Company had accounts receivable of $9.4 million and total current and noncurrent contract assets of $51.9 million related to the Longfellow Contract. The Company also had prepaid inventory of $285,000 related to the Longfellow Contract, primarily representing amounts billed by suppliers.

The Company’s maximum exposure to loss related to its involvement with Longfellow was approximately $61.6 million as of June 30, 2026. The maximum exposure to loss consists primarily of accounts receivable of $9.4 million, total current and noncurrent contract assets of $51.9 million and prepaid inventory of $285,000. The Company’s 8% equity interest had a carrying amount of zero as of June 30, 2026. The Company’s maximum exposure to loss does not reflect the probability of loss or the likelihood that the Company will be required to fund such amounts.

As of June 30, 2026, approximately $61.1 million of contractual value remained under the Longfellow Contract. The remaining contractual value represents future consideration expected to be received for performance of the remaining performance obligation under the Longfellow Contract and is not included in the Company’s maximum exposure to loss.

The following table presents the carrying amounts of the Company’s assets related to Longfellow and the Company’s maximum exposure to loss:

	Carrying value at June 30, 2026

Assets
Accounts receivable	$	9,431,157
Contract assets		51,850,757
Prepaid inventory		284,595
Total assets related to Longfellow	$	61,566,509

Maximum exposure to loss	$	61,566,509

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

14. Financing Arrangements

As of June 30, 2026 and December 31, 2025, the Company had the following borrowings:

	June 30, 2026			December 31, 2025

Secured convertible notes payable at 4.0% per annum, due various dates through April 2031	$	16,050,000			$	15,150,000
EB-5 loans - see details below		8,500,000				10,500,000
Total		24,550,000				25,650,000
Less: debt discount and debt issuance costs		(170,783	)			(160,118	)
Current portion		(20,650,000	)			(20,150,000	)
Noncurrent portion	$	3,729,217			$	5,339,882

Related party EB-5 financings

The Company’s borrowings under the EB-5 program from related parties consisted of the following as of June 30, 2026 and December 31, 2025:

	June 30, 2026			December 31, 2025

Loan from Clean Energy Funding, LP	$	2,000,000			$	3,500,000
Loan from Clean Energy Funding II, LP		6,500,000				7,000,000
Total		8,500,000				10,500,000
Less: current portion		(6,500,000	)			(5,500,000	)
Noncurrent portion	$	2,000,000			$	5,000,000

On January 3, 2012, Clean Energy Fund, LP (“CEF”) entered into a secured loan agreement with SREP, a wholly owned subsidiary of the Company. Under the secured loan agreement, CEF agreed to make loans to SREP in an amount not to exceed $45.0 million, to be used to finance the installment purchases for customers of the solar energy systems. A total of $45.0 million was lent. The loan accrues interest at 3% per annum, payable quarterly in arrears. Each advanced principal amount is due and payable 48 months from the advance date or the U.S. Immigration Form I-829 approval date of the CEF limited partner who made the investment in CEF, if later. The I-829 petition includes evidence that the immigrant investors successfully met all U.S. Citizenship and Immigration Services requirements of the EB‑5 program. As of June 30, 2026 and December 31, 2025, the principal loan balance was $2.0 million and $3.5 million, respectively.

On August 26, 2014, Clean Energy Funding II, LP (“CEF II”) entered into a secured loan agreement with LED, a wholly-owned subsidiary of the Company, for up to $13.0 million. A total of $10.5 million was lent. The proceeds of the loan were used by LED for its operations. The loan accrues interest at fixed interest rate of 3.0% per annum, payable quarterly in arrears. Each advance of principal is due and payable in 48 months or the U.S. Immigration Form I-829 approval date of the CEF II limited partner who made the investment in CEF II, if longer. As of June 30, 2026 and December 31, 2025, the principal loan balance was $6.5 million and $7.0 million, respectively.

The general partner of CEF and CEF II is Inland Empire Renewable Energy Regional Center (“IERE”). The principal owners and managers of IERE consist of the Company’s chief executive officer and its former executive vice president, who is a 5% stockholder.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

Convertible Notes

The Company has 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 to CEF or CEF II, 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. The convertible notes are payable in five 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, the Company’s initial public offering are convertible into common stock at a conversion price of $38.40, which is 80% of the $48.00 public stock price of the Company’s common stock. The convertible notes made after the Company’s initial public offering are convertible into common stock at a conversion price equal to 80% of the average closing price of the Company’s common stock for the ten trading days preceding the date of the exchange agreement with the limited partner, which ranged from $6.06 per share to $108.84 per share. The convertible notes may be converted into common stock at the first, second, third, fourth and fifth anniversaries of the date of issuance.

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 the Company, 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. The Company 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 are accounted for as freestanding derivative instruments.

During the three months ended June 30, 2026, the Company recognized a gain on debt of extinguishment in the amount of approximately $13,000, relating to the issuance of a convertible note in the principal amount of $500,000 to a former limited partner of CEF I in exchange for a $500,000 reduction of the note from CEF I. During the three months ended June 30, 2025 as there were no issuances of convertible notes in exchange for a reduction of the note from CEF I or II.

During six months ended June 30, 2026, the Company recognized a gain on debt of extinguishment in the amount of approximately $54,000, relating to the issuance of convertible notes in the principal amount of $2.0 million to former limited partners of CEF I and II in exchange for a $2.0 million reduction of the notes from CEF I and II. During the six months ended June 30, 2025 there was no issuance of convertible notes in exchange for a reduction of the note from CEF I or II.

Event of Default on Convertible Notes

From April 2023 through June 30, 2026, the Company did not pay certain annual principal installment payments and related quarterly interest payments which is an event of default on convertible notes. As of June 30, 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 the 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.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

The Company accrued interest at the rate of 4% per annum since no noteholder has taken action to accelerate payment of principal and interest. Since the Company has 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 $350,387 at June 30, 2026. In the event that the holders of all of these notes demand acceleration, the amount of accrued interest on those at 12% would be approximately $2.2 million at June 30, 2026. The difference between the interest at 12% and the accrued interest at 4% as of June 30, 2026, together with any additional interest due subsequent to June 30, 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.

Interest Expense

For the three months ended June 30, 2026 and 2025, interest expense incurred on the long-term EB‑5 related party loans was approximately $64,000 and $82,000, respectively. For the six months ended June 30, 2026 and 2025, interest expense incurred on the long-term EB‑5 related party loans was approximately $134,000 and $164,000, respectively.

Total interest expense incurred (including interest on long-term related party EB-5 loans) was approximately $249,000 and $363,000 for the three months ended June 30, 2026 and 2025, respectively, and approximately $547,000 and $732,000 for the six months ended June 30, 2026 and 2025, respectively. The weighted average interest rate on loans outstanding was 3.8% and 4.0% as of June 30, 2026 and December 31, 2025.

Principal stated maturities for the financing arrangements as of June 30, 2026 are as follows:

For the year ending December 31,	EB-5 Loans - Related Party		Convertible Notes *			Total
2026 (remainder of)	$	3,500,000		$	13,750,000		$	17,250,000
2027		3,000,000			500,000			3,500,000
2028		2,000,000			500,000			2,500,000
2029		-			500,000			500,000
2030		-			500,000			500,000
2031		-			300,000			300,000
Total	$	8,500,000		$	16,050,000		$	24,550,000

*The principal amount of the convertible notes that are in default are treated as current liabilities, due in 2026.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

15. Accrued Expenses and Other Payables

Accrued expenses and other payables consisted of the following as of June 30, 2026 and December 31, 2025:

	June 30, 2026		December 31, 2025

Customer deposits	$	4,632,460		$	3,020,272
Accrued operating and project payables		1,693,758			2,086,146
China legal judgment		4,310,260			-
Payable to Uonone (See Note 17)		2,655,859			2,578,783
Accrued compensation expenses		2,532,211			3,270,154
Retainage payable to vendors		582,601			580,750
China preacquisition liability		1,579,737			1,533,891
Accrued warranty expense		558,677			551,170
VAT taxes payable		384,103			298,598
Income taxes payable		236,093			348,518
Refundable vendor bid deposits		14,723			14,296
Total accrued expenses and other payables	$	19,180,482		$	14,282,578

Accrued Compensation

Accrued compensation includes compensation to the Company’s chief executive officer in connection with his $1.8 million of accrued but unpaid compensation pursuant to his employment agreement, which included $675,000 of accrued compensation related to the previously cancelled restricted stock grant for which the amount was paid during the six months ended June 30, 2026.

Customer Deposits

Customer deposits represent customer down payments and progress payments received prior to the completion of the Company’s earnings process. The amounts paid by customers are refundable during the period which, under applicable state and federal law, the customer’s order may be cancelled and the deposit refunded. Once the cancellation period has expired, the customer still may cancel the project but the Company is entitled to retain the deposit payments for work that was completed and materials that were delivered.

China Preacquisition Liability

China preacquisition liability relates to liabilities incurred by the Company's PRC subsidiary prior to the Company’s business combination transaction completed in April 2015, which were related to EPC projects completed prior to the business combination. The Company assumed these contingent obligations in connection with the acquisition. To date, the Company has not received any claims related to these liabilities. See Note 17.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

China Legal Judgment

As a result of the legal proceeding that began in February 2026 and the court judgments received in June and August 2026, the Company's China subsidiary is responsible for additional farmland occupation taxes on four photovoltaic projects that were completed in 2020 and 2021 totaling RMB 29,274,811 (approximately $4.3 million). Such taxes were paid by SPIC and the Company expects to offset this amount with future recovery from SPIC on the project receivable and equity buyout, when it occurs (see legal proceedings and loss contingency in Note 19).

Accrued Warranty Liability

The activity of the warranty liability (included in other liabilities) for the six months ended June 30, 2026 and 2025 is as follows:

	Six Months Ended June 30,
	2026			2025

Balance – beginning of period	$	2,367,120			$	2,146,522
Provision for warranty liability		252,009				106,492
Expenditures and adjustments		(299,205	)			(180,491	)
Effect of exchange rate		7,507				4,390
Balance – end of period		2,327,431				2,076,913
Less: current portion (accrued expenses and other payables)		(558,677	)			(545,146	)
Non-current portion (other liabilities)	$	1,768,754			$	1,531,767

16. Concentrations

Concentration Risks

Major Customers

For the three months ended June 30, 2026 and 2025, there were no customers that accounted for 10% or more of the Company’s revenues or accounts receivable.

For the six months ended June 30, 2026 one customer, Longfellow, accounted for $6.0 million, or 24.0%, of the revenues, $9.4 million, or 52.5%, of accounts receivable, and $51.9 million, or 94.7% of total current and noncurrent contract assets (see Note 8). For the six months ended June 30, 2025, there were no customers that accounted for 10% or more of the Company’s revenues or accounts receivable.

Major Suppliers

During the three months ended June 30, 2026, Supplier A accounted for purchases of $828,000, or 18.1%, of the Company’s purchases, and $56.4 million, or 89%, of total current and noncurrent accounts payable at June 30, 2026. Supplier A is the supplier for materials required for the Longfellow EPC project. During the three months ended June 30, 2026, Supplier B accounted for purchases of $2.4 million, or 54.0%, of purchases, and $2.5 million, or 3.9%, of accounts payable at June 30, 2026.

During the six months ended June 30, 2026, Supplier A accounted for purchases of $5.8 million, or 38.1%, of the Company’s purchases, and $56.4 million, or 89%, of total current and noncurrent accounts payable at June 30, 2026. Supplier A is the supplier for materials required for the Longfellow EPC project. During the six months ended June 30, 2026, Supplier B accounted for purchases of $4.8 million, or 31.9%, of purchases, and $2.5 million, or 3.9%, of accounts payable at June 30, 2026.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

During the three months ended June 30, 2025, Supplier B accounted for purchases of $1.9 million, or 53.0%, of purchases, and $1.8 million, or 45.8%, of accounts payable at June 30, 2025, and Supplier C accounted for purchases of $1.2 million, or 33.0%, of purchases. The Company did not have an accounts payable balance owed to Supplier C at June 30, 2025.

During the six months ended June 30, 2025, Supplier B accounted for purchases of $4.2 million, or 23.0%, of purchases, and $1.8 million, or 45.8%, of accounts payable at June 30, 2025.

17. Acquisition Contingencies and Other Payable to Uonone Group

Effective on May 12, 2016, one of the Company’s PRC subsidiaries entered into a debt settlement agreement (the “Debt Settlement Agreement”) with one of the former owners of the subsidiary, Uonone Group Co., Ltd., (“Uonone Group”), pursuant to which the subsidiary and Uonone Group agreed to settle a list of pending business transactions from December 31, 2012 to December 31, 2015, pursuant to which Uonone Group agreed and had paid the subsidiary a total amount of RMB 8,009,716. An additional contingent liability related to estimated costs of a project known as Ningxia project completed by the subsidiary prior to the Company’s acquisition of the subsidiary of approximately RMB 3.0 million (or approximately $435,000) was also included as a receivable from Uonone Group (see Note 11 – Other Receivables and Current Assets, Net) with the corresponding liability recognized by the Company on the date of acquisition.

As of December 31, 2021, Uonone Group had repaid all the amounts agreed to under the debt settlement agreement except for the RMB 3.0 million contingent receivable from Uonone Group discussed above. Uonone Group’s obligation on the contingent receivable does not arise until and unless the Company becomes obligated to pay the contingent liability. At June 30, 2026 and December 31, 2025, the Company had no payment obligations with respect to the assumed contingent liability and accordingly, Uonone Group had no obligation to the Company with respect to the contingent receivable.

Under the debt settlement agreement, any legal settlement proceeds, less fees and expenses, received by the subsidiary related to the projects completed prior to the April 2015 acquisition of the subsidiary would be repaid to the Uonone Group. During the year ended December 31, 2025 and the six months ended June 30, 2026, the Company did not receive any additional legal settlement proceeds, nor did the Company make any payments to Uonone.

At both June 30, 2026 and December 31, 2025, the amount payable to Uonone, was approximately RMB 18.0 million ($2.7 million) (see Note 15).

18. Related Party Transactions

See Note 14 for related party financing arrangements and Note 8 for investment in a large-scale EPC customer.

19. Commitments and Contingencies

Purchase Commitment

In June 2026, the Company entered into an amended purchase agreement with D Volt Co., a Texas corporation to purchase equipment and services for approximately $5.3 million. At the execution of the agreement, the Company paid the initial deposit payment of $602,402 which was recorded in vendor advances. The agreement requires milestone payments through manufacturing, testing, shipment, and commissioning. Title and risk of loss transfer upon delivery to the Company’s designated carrier in Shanghai, China.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

Operating Leases

The Company leases office space, equipment, and vehicles under non-cancellable operating lease agreements. Lease terms range from one to seven years, with certain leases including options to extend or terminate at the Company’s discretion. These options are included in the lease term when it is reasonably certain that the Company will exercise the option. The Company’s leases do not contain material residual value guarantees or restrictive covenants.

On January 28, 2026, the Company entered into an amendment to the lease for its headquarters facility 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 increases annually until $2,282,112 for 2033. The Company also pays certain operating expenses in the same manner as with the lease prior to the amendment. The amendment provides for certain construction expenses, a portion of which are payable by the landlord and a portion of which are payable by the Company.

The Company evaluated the amendments in accordance with ASC 842 and determined the modifications did not result in separate contracts. Accordingly, the Company remeasured the related lease liabilities using an updated incremental borrowing rate as of the modification effective date, with a corresponding adjustment to the related ROU assets.

As a result of the lease modifications, the Company recorded the following adjustments during the six months ended June 30, 2026:

Increase in operating lease ROU assets		$	10,425,412
Increase in operating lease liabilities		$	10,425,412

The discount rate applied to the modified lease was 8%.

Future minimum lease commitments for offices, warehouse facilities and equipment as of June 30, 2026, are as follows:

For the year ending December 31,	Total
2026 (remainder of)	$	969,528
2027		1,857,448
2028		2,031,884
2029		2,081,136
2030		2,141,965
Thereafter		6,648,863
Total	$	15,730,824

Rent expense for offices, warehouse facilities and equipment for the three months ended June 30, 2026 and 2025 was approximately $501,000 and $434,000, respectively, and for the six months ended June 30, 2026 and 2025, was approximately $1.0 million and $867,000, respectively. These amounts include short-term leases and variable lease costs, which are immaterial.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

As of June 30, 2026, the maturities of the Company’s operating lease liabilities (excluding short-term leases) are as follows:

For the year ending December 31,	Total
2026 (remainder of)	$	962,991
2027		1,841,107
2028		2,022,079
2029		2,081,136
2030		2,141,965
Thereafter		6,648,863
Total minimum lease payments		15,698,141
Less: Interest		(4,045,911	)
Present value of lease obligations		11,652,230
Less: current portion		(1,022,681	)
Noncurrent portion	$	10,629,549

Other information related to leases is as follows:

As of

June 30, 2026

Weighted average remaining lease term (in years)

7.48

Weighted average discount rate

8.00

Total sublease income recognized for the three months ended June 30, 2026 and 2025, was approximately $235,000 and $254,000, respectively, and for the six months ended June 30, 2026 and 2025, was approximately $487,000 and $509,000, respectively. The sublease income is recognized as an offset to operating lease costs reported in general and administrative expenses. At June 30, 2026, the Company has two tenants and both are on a month-to-month lease. At June 30, 2026, the Company holds security deposits of approximately $102,000.

The following table summarizes the Company’s operating lease cost for the three and six months ended June 30, 2026 and 2025:

	Three Months Ended June 30,			Six Months Ended June 30,
	2026			2025			2026		2025

Operating lease cost	$	494,169			$	423,702		$	1,036,716		$	847,404
Short-term lease cost		6,575				10,121			13,111			19,853
Less: Sublease income		(234,982	)			(254,446	)		(486,836	)		(508,892	)
Operating lease cost, net	$	265,762			$	179,377		$	562,991		$	358,365

Employment Agreements

On October 7, 2016, the Company entered into an employment agreement with its chief executive officer for a five-year term commencing on January 1, 2017 and continuing on a year-to-year basis unless terminated by the Company or the executive on not less than 90 days’ notice prior to the expiration of the initial term or any one-year extension. The agreement provides for an initial annual salary of $600,000, with an increase of not less than 3% on January 1st of each year, commencing January 1, 2018, and an annual bonus payable in restricted stock and cash, commencing with the year ending December 31, 2017, equal to a specified percentage of consolidated revenues for each year. The bonus is based on a percentage of consolidated revenue in excess of $30 million, ranging from $250,000 and $200,000, respectively, for revenue in excess of $30 million but less than $50 million, to 1.0% and 0.9%, respectively, of revenue in excess of $300 million. In connection with the suspension of the Company’s incentive bonuses to key employees that started in 2019, the Company’s chief executive officer has agreed to waive his bonuses since 2019. The agreement also provides for severance payments equal to one or two times, depending on the nature of the termination, of the highest annual total compensation of the three years preceding the year of termination, multiplied by the number of whole years the executive has been employed by the Company, which commenced in February 2008. The annual salary for the chief executive officer was $760,065 for 2025 and is $782,867 for 2026.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

Legal Proceedings and Loss Contingency

The Company is involved in various legal proceedings with SPIC in the PRC which includes cases related to additional assessments of farmland occupation taxes associated with four photovoltaic projects completed by a subsidiary of the Company in 2020 and 2021 and owned by SPIC. The matters relate to disputes regarding the additional taxes paid by SPIC on which SPIC sought reimbursement from the Company’s subsidiary and the basis for the assessment by Chinese tax authorities.

In June and August 2026, three adverse judgments were issued by a Chinese court, which determined that the Company's subsidiary is responsible for the additional farmland occupation taxes under its contractual arrangements. As of September 30, 2026, the Company is awaiting the court ruling for the last farmland occupation tax case; however, the Company believes the ruling will be consistent with the other three rulings.

Based on the judgments and other information available as of September 30, 2026, the Company determined that a loss contingency was probable and reasonably estimable at June 30, 2026, and recorded an accrual of RMB 29.3 million for the four cases, or approximately $4.3 million, to accrued expenses and other payables, representing the Company's estimated liability associated with the matters. The Company recorded the corresponding expense to China legal judgment, which is a non-recurring expense.

The other legal proceedings with SPIC are still underway and the Company does not believe these pending legal proceedings will have a material impact on the Company’s financial position and the results of operations.

Additionally, in the ordinary course of the Company’s business in the United States, the Company is involved in various legal proceedings involving contractual relationships, product liability claims, and a variety of other matters. The Company believes that such legal proceedings are a normal part of its business and does not believe such pending legal proceedings will have a material impact on the Company’s financial position and the results of operations.

20. Stockholders’ Equity (Deficit)

Reverse Stock Split

On August 4, 2026, the Company amended its Amended and Restated Articles of Incorporation by filing a Certificate of Change with the Secretary of State of Nevada to effect a one-for-12 reverse stock split of the common stock, which became effective on August 13, 2026 and to effect a proportionate reduction of its authorized common stock from 297,225,000 shares to 24,768,750 shares, which is 1/12 of the number of previously authorized shares.

As a result of the reverse split, the number of outstanding shares of common stock was reduced from 56,906,572 shares to 4,742,167 shares of common stock. The ownership percentage of each stockholder remains unchanged other than as a result of fractional shares. Proportional adjustments are made to both the number of shares of common stock issuable upon exercise of outstanding options or the conversion of outstanding convertible notes, as well as to the applicable exercise or conversion price.

The reverse split was adopted to support the Company’s effort to regain compliance with the minimum bid price requirement for maintaining the listing of its common stock on the Nasdaq Capital Market. On March 3, 2026, the Company received a notice from Nasdaq that the Company does not meet Nasdaq’s continued listing requirement that the Company maintain a minimum bid price of $1.00 per share. The Nasdaq rules provide that the Company has a compliance period of 180 calendar days to regain compliance. This period expired on August 31, 2026. The closing bid price of the Company’s common stock was at least $1.00 per share for ten consecutive business days prior to August 31, 2026.

The accompanying unaudited condensed consolidated financial statements and accompanying notes have been retroactively revised to reflect such reverse stock split as if it had occurred on January 1, 2025. All shares and per share amounts have been revised accordingly.

Issuance of Common Stock in Private Placement

In January 2026, the Company issued a total of 166,667 shares of common stock for a total consideration of $1,096,000, at an average price of $6.60. The purchase price was 75% of the market price on the date of the respective agreements. 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.

Stock Options

From time to time, the Company granted non-qualified stock options to its employees and consultants for their services. Option awards are generally granted with an exercise price equal to the estimated fair value of the Company’s stock at the date of grant; those option awards generally vest between 18 months and 36 months of continuous service and have contractual terms of seven to ten years. The vested options are exercisable for six months after the termination date unless (i) termination is due to optionee’s death or disability, in which case the option shall be exercisable for 12 months after the termination date, or (ii) the optionee is terminated for cause, in which case the option will immediately terminate.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

A summary of option activity is as follows:

	Number of Options			Weighted Average Exercise Price			Weighted Average Remaining Contractual (years)	Aggregate Intrinsic Value
Outstanding at December 31, 2025		515,836			$	59.68		3.1	-
Exercisable as of December 31, 2025		515,836			$	59.68		3.1	-
Granted		-				-		-	-
Exchanged		-				-		-	-
Exercised		-				-		-	-
Cancelled or forfeited		(501	)					-	-
Outstanding at June 30, 2026		515,335			$	59.68		2.6	-

Forfeitures are accounted for as actual forfeitures occur.

On August 29, 2025, the Company’s board of directors approved a 3-year extension for all previously granted options that will be expiring through August 31, 2028.

21. Income Taxes

The components of the Company’s income (loss) before income taxes and income (loss) from operations for the three and six months ended June 30, 2026 and 2025 are as follows:

	Three Months Ended June 30,			Six Months Ended June 30,
	2026			2025			2026		2025
				(Unaudited)
Domestic (U.S.)	$	(130,283	)		$	(2,024,052	)	$	56,076		$	(3,242,880	)
Foreign (PRC)		(4,551,455	)			19,058			(5,050,819	)		(121,990	)
Income (loss) before income taxes		(4,681,738	)			(2,004,994	)		(4,994,743	)		(3,364,870	)
Income tax expense (benefit)		(26,039	)			(106,217	)		(32,360	)		(169,851	)
Income (loss) from operations	$	(4,655,699	)		$	(1,898,777	)	$	(4,962,383	)	$	(3,195,019	)
Effective tax rate		0.6	%			5.3	%		0.6	%		5.0	%

The Company is subject to taxation in the U.S. and various states jurisdictions. The Company is also subject to taxation in China. The Company’s effective tax rate is determined quarterly, reflecting actual activities and various tax-related items.

The Company’s effective income tax rate for the three months ended June 30, 2026 and 2025 was 0.6% and 5.3%, respectively. The Company’s effective income tax rate for the six months ended June 30, 2026 and 2025 was 0.6% and 5.0%, respectively. The variance from the U.S. federal statutory rate of 21% for the six months ended June 30, 2026 was primarily attributable to losses not benefitted for U.S. federal and state income tax purposes. Also, the Company used foreign net operating losses to partially offset foreign taxable income. The decrease in the effective income tax rate for the six months ended June 30, 2026, compared with the corresponding period in 2025 primarily reflected a valuation allowance true-up recorded in the prior-year period that did not recur in the current year. In 2026, the Company's net deferred tax liability position did not change materially.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

As of June 30, 2026, the Company determined that, based on an evaluation of its history of net losses and all available evidence, both positive and negative, including the Company’s latest forecasts and cumulative losses in recent years, it was more likely than not that all or substantially all of its deferred tax assets would not be realized and, therefore, the Company continued to record a valuation allowance on against U.S. federal and state net deferred tax assets and a partial valuation allowance against foreign deferred tax assets.

22. Net Income (Loss) Per Share

The following table presents the calculation of the Company’s basic and diluted net income (loss) per share for the three and six months ended June 30, 2026 and 2025:

	Three Months Ended June 30,			Six Months Ended June 30,
	2026			2025			2026		2025
Numerator
Net income (loss)	$	(4,655,699	)		$	(1,898,777	)	$	(4,962,383	)	$	(3,195,019	)

Denominator
Weighted average shares used to compute net loss per share, basic		4,742,167				3,818,671			4,712,240			3,780,834
Weighted average shares used to compute net loss per share, diluted		4,742,167				3,818,671			4,712,240			3,780,834
Basic net income (loss) per share	$	(0.98	)		$	(0.50	)	$	(1.05	)	$	(0.85	)
Diluted net income (loss) per share	$	(0.98	)		$	(0.50	)	$	(1.05	)	$	(0.85	)

For the six months ended June 30, 2026, outstanding options to purchase 515,335 shares and 724,802 shares issuable upon conversion of convertible notes were excluded from the computation of diluted earnings per share as the impact of including those option shares would be anti-dilutive.

For the six months ended June 30, 2025, outstanding options to purchase 515,836 shares of common stock and 489,406 shares issuable upon conversion of convertible notes were excluded from the computation of diluted earnings per share as the impact of including those option shares would be anti-dilutive.

23. Segment Reporting

The chief operating decision maker (“CODM”) is the Chief Executive Officer. As of January 1, 2024, the Company has determined that it has one reporting segment which is solar energy systems, which includes BESS systems, and LED lighting in the United States. The Company has not generated any revenue from its China operations since 2021, it does not have any contracts for services in China, it does not have any marketing activities in China and its China operations is no longer considered a reporting segment. The CODM regularly reviews operations and financial performance at the consolidated level and uses net income (loss) to allocate resources (including labor, technology and capital resources) for the single reporting segment to make decisions regarding annual budget, entering new markets, marketing decisions, pursuing new business, and driving the Company’s mission.

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SolarMax Technology, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2026 and 2025

The following table shows the operations of the Company’s reporting segment for the three and six months ended June 30, 2026 and 2025:

	Three Months Ended June 30,			Six Months Ended June 30,
	2026			2025			2026		2025
Segment revenue
Large-scale EPC contracts	$	809,154			$	-		$	6,009,606		$	-
Solar energy systems		7,068,394				5,006,963			14,967,616			10,458,002
Battery only sales		181,065				864,327			359,019			1,192,360
LED operations		2,125,371				911,092			3,608,317			1,970,277
		10,183,984				6,782,382			24,944,558			13,620,639
Reconciliation of revenue
Finance revenue		32,498				80,991			86,237			152,897
Other non-core revenue		27,130				19,631			43,434			36,937
		10,243,612				6,883,004			25,074,229			13,810,473
Less
Direct and indirect costs		5,669,098				3,541,003			15,113,397			6,156,930
China legal judgment		4,264,102				-			4,264,102			-
Subcontractor costs		1,018,436				798,596			2,057,659			1,517,624
Commissions and lender fees		352,097				1,190,589			902,668			2,432,893
Compensation and benefits		1,745,535				1,803,711			3,415,231			3,747,394
Leasing and rental expense		259,526				169,460			550,682			379,152
Insurance expense		301,200				312,771			656,143			617,540
Selling and marketing expense		49,566				70,691			92,193			149,703
Professional services		521,233				333,338			1,283,715			812,024
		(3,937,181	)			(1,337,155	)		(3,261,561	)		(2,002,787	)
Reconciliation of segment profit or loss
Other corporate overhead expense		233,602				249,618			477,314			521,370
Provision for various reserves		35,008				5,627			103,333			129,048
Interest expense, net		248,057				548,779			545,306			804,457
Other (gains) and other (income), net		254,855				(153,784	)		137,369			(251,439	)
China other expenses		287,353				19,926			786,717			121,990
Elimination adjustment		(314,318	)			(2,327	)		(316,857	)		36,657
Income (loss) before income taxes	$	(4,681,738	)		$	(2,004,994	)	$	(4,994,743	)	$	(3,364,870	)

24. Subsequent Events

The Company has evaluated subsequent events through the date of October 7, 2026, the date the condensed consolidated financial statements were issued, and no other events require disclosure in the condensed consolidated financial statements.

See Note 1 with respect to the one-for-12 reverse split of the Company's common stock and the reduction in authorized shares of common stock.

In September 2026, the Company issued a convertible note in the principal amount of $500,000 to a limited partner of CEF I, which resulted in a reduction of $500,000 in the principal amount of the related party notes to CEF I.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

Reverse Stock Split

As a result of the reverse split, the number of outstanding shares of common stock was reduced from 56,906,572 shares to 4,742,167 shares of common stock. The ownership percentage of each stockholder will remain unchanged other than as a result of fractional shares. Proportional adjustments are made to both the number of shares of common stock issuable upon exercise of outstanding options or the conversion of outstanding convertible notes, as well as to the applicable exercise or conversion price.

The reverse split supported the Company’s effort to regain compliance with the minimum bid price requirement for maintaining the listing of its common stock on the Nasdaq Capital Market. On March 3, 2026, the Company received a notice from Nasdaq that the Company does not meet Nasdaq’s continued listing requirement that the Company maintain a minimum bid price of $1.00 per share. The Nasdaq rules provide that the Company has a compliance period of 180 calendar days to regain compliance. This period expired on August 31, 2026. The closing bid price of the Company’s common stock was at least $1.00 per share for ten consecutive business days prior to August 31, 2026.

Share and per share information in this Form 10-Q has been retroactively revised to reflect the reverse stock split as if it had occurred on January 1, 2025.

Nasdaq Notice

On June 22, 2026, the Company received a notice from Nasdaq that the Company does not meet the continued listing requirement that the Company maintain a minimum market value of listed securities of $35.0 million. The Nasdaq rule provides that the Company has a compliance period of 180 calendar days to regain compliance. This period expires on December 21, 2026. Nasdaq calculates the market value of listed securities by multiplying the most recent total shares outstanding by the closing bid price of the common stock. In the event the Company does not regain compliance with this rule prior to the expiration of the compliance period, it will receive written notification that its securities are subject to delisting. The reverse split does not address the minimum market value of listed securities. In the event that the Company does not meet the minimum market value of listed securities, the common stock will be delisted from Nasdaq and it will be traded on the Over-the Counter Market. If the Company’s common stock is traded on the over-the-counter market, as an OTC traded stock, it will be less attractive to investors than a Nasdaq listed security, which means it will be more difficult for the Company to raise money. Many brokerage firms prefer not to deal with OTC traded securities. As a result, it is likely to be more difficult for the Company to enter into major EPC projects, and it may affect the willingness of Companies who have entered into EPC contracts with the Company to proceed with the projects.

Impact of Tariffs and Trade Policy

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 six months ended June 30, 2026, the tariffs did not have material effects on our cost of revenue.

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To the extent that the United States government imposes tariffs on products imported from China or any other foreign country and we are not able to obtain comparable products at a lower cost from domestic suppliers, our costs of these products may increase, and, depending on the tariff, such increase may be substantial. Such increases may impact both our ability to sell our systems and the price we are able to charge for systems which we sell, which could impair our margins.

We continue to monitor developments in international trade policy and may further seek to adjust our supply chain and sourcing strategies in response to evolving conditions.

Regulatory Changes, Inflation and Supply Chain Issues

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.

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.

Polysilicon is an essential raw material in the production of solar power products, principally solar panels. The costs of silicon wafers and other silicon-based raw materials have accounted for a large portion of the costs associated with solar panels. Although the price of silicon had declined in recent years, increases in the price of polysilicon have resulted in increases in the price of wafers, leading to increases in our costs. Due to the volatile market prices, we cannot assure you that the price of polysilicon will remain at its current levels particularly in view of inflationary pressures, especially if the global solar power market gains its growth momentum. Moreover, in the event of an industry-wide shortage of polysilicon, we may experience late or non-delivery from suppliers, and it may be necessary for us to purchase silicon raw materials of lower quality that may result in lower efficiencies and reduce its average selling prices and revenues. We currently are able to obtain the raw material we request, although the prices pay are increasing as a result of the inflationary pressures.

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.

Compensation costs per employee, excluding stock-based compensation, for sales, marketing and administrative personnel in our United States operations decreased approximately 6.7% for the six months ended June 30, 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.

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We are seeking to address the inflationary pressures by seeking to cut overhead expenses where possible and raising prices to levels that we believe are both competitive and attractive to customers in view of the increases in utility prices in California and maintaining an inventory of raw materials to enable us to better price our products and by marketing effort directed at commercial sales. We believe that our available cash and cash equivalents and short-term investments will enable us in dealing with the effects of inflation on our business.

Effects of NEM 3.0

Net metering is a billing mechanism that credits solar energy system owners for the electricity that they add to the electricity grid. If the owner of a solar system generates more electricity than it consumes, the excess electricity is sold back to the grid. The California Public Utilities Commission has adopted the current net metering regulations, known as NEM 3.0, which became effective in April 2023. NEM 3.0 features a 75% reduction in export rates (the value of excess electricity pushed onto the grid by solar systems) from the rate set forth in the previous net metering regulations, NEM 2.0, thereby reducing the overall savings and increasing the payback period of home solar installations. The changes under NEM 3.0, which are likely to result in reduced benefits for most residential solar users, could alter the return on investment for solar customers.

In January 2024, we laid off a portion of our employees associated with the design and installation of residential solar systems in response to a slowdown in demand after NEM 3.0 took effect in April 2023. The layoff represented approximately 25% of our residential solar system design and installation team. Approximately half of the employees who were laid off had been hired in late 2022 to help install our growing backlog of residential solar systems under contract in anticipation of NEM 3.0, and the contracts representing that backlog were completed during 2023. We may need to revise our pricing metrics to reflect the change resulting from NEM 3.0 in order for the purchase of a solar system to be economically attractive to the customer, which may result in lower prices and reduced margins. Although we anticipate the near-term impact of NEM 3.0 on residential solar contracts will be offset by commercial solar contracts for which we use third-party subcontractors to complete the installations, we cannot assure you that our overall business will not be impacted by the effects of NEM 3.0. Our decrease in revenue for solar sales in the year ended December 31, 2024 from the year ended December 31, 2023 reflects both a surge in 2023 revenue in anticipation of the effectiveness of NEM 3.0 in April 2023 and a sharp decline in 2024 revenue resulting from the effectiveness of NEM 3.0.

Overview

We are an integrated solar and renewable energy company. A solar energy system retains the direct current (DC) electricity from the sun and converts it to alternating current (AC) electricity that can be used to power residential homes and commercial businesses. The solar business is based on the ability of the users of solar energy systems to save on energy costs and reduce their carbon imprint as compared with power purchased from the local electricity utility company. We were founded in 2008 to engage in the solar business in the United States, where our business is primarily conducted. Our primary business consists of the sale and installation of photovoltaic and battery backup systems for residential and commercial customers and sales of LED systems and services to government and commercial users.

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 the Longfellow Contract 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. Due to a change order being discussed but still not approved, the BESS facility is expected to be completed by March 2028, although we cannot assure you that this completion date will be met or that the costs will not be greater than we anticipate. The change order, which is 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 million, 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 June 30, 2026 and December 31, 2025.

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On December 31, 2025, we entered into three EPC contracts for large-scale BESS systems, two in Puerto Rico and one in Corpus Christi, Texas. Pursuant to an EPC contract 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 contract 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 contract 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. We have not commenced work on any of these projects and we cannot assure you as to whether or when we will begin to perform these services.

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 for the six months ended June 30, 2026 over the comparable period in 2025 was primarily from sales through our dealer network.

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 six months ended June 30, 2026. In the six months ended June 30, 2026, revenues from SGIP projects were approximately $7.1 million, or 47.7% of our solar energy sales and 28.4% of our total revenues. At June 30, 2026, receivables from SGIP installations accounted for approximately $6.7 million, or 37.2%, of our accounts receivable. Our sales for the SGIP were made primarily through our dealer network.

During the six months ended June 30, 2026 and 2025, approximately 75% and 58%, respectively, of our revenues from residential solar and battery contracts, and 45% and 48% 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.

In June 2026, we entered into a transformer sale agreement with Longfellow Solar I LLC (“LF Solar”) for the supply, delivery, testing and commissioning of two main power transformers for a solar project owned by LF Solar, and received the initial deposit payment of $602,402. The fixed contract value for equipment and services is approximately $6.0 million, excluding shipping, customs duties, tariffs and other import-related costs. The transformers are custom-manufactured equipment with delivery expected during 2027.

In June 2026, we entered into an amended purchase agreement with D Volt Co., a Texas corporation to purchase equipment and services for approximately $5.3 million. At the execution of the agreement, we paid the initial deposit payment of $602,402. The agreement requires milestone payments through manufacturing, testing, shipment, and commissioning. Title and risk of loss transfer upon delivery to our designated carrier in Shanghai, China.

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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.

Results of Operations

The following tables set forth information relating to our operating results for the three and six months ended June 30, 2026 and 2025 (dollars in thousands) and as a percentage of revenue:

	Three Months Ended June 30,			Six Months Ended June 30,
	2026			2025		2026		2025
	Dollars			%		Dollars		%		Dollars			%			Dollars	%
Revenues:
Large-scale EPC contracts (U.S.)	$	809			7.9	%	$	-			0.0	%		$	6,010		24.0	%	$	-		0.0	%
Solar energy sales		7,273			71.0	%		5,891			85.6	%			15,366		61.3	%		11,687		84.6	%
LED sales		2,125			20.7	%		911			13.2	%			3,608		14.4	%		1,970		14.3	%
Financing		37			0.4	%		81			1.2	%			90		0.3	%		153		1.1	%
Total revenues		10,244			100.0	%		6,883			100.0	%			25,074		100.0	%		13,810		100.0	%
Cost of revenues:
Large-scale EPC contracts (U.S.)		756			7.4	%		-			0.0	%			6,007		24.0	%		-		0.0	%
Solar energy sales		5,268			51.4	%		5,528			80.3	%			10,531		41.9	%		10,043		72.7	%
LED sales		1,806			17.6	%		750			10.9	%			3,076		12.3	%		1,744		12.6	%
Total cost of revenues		7,830			76.4	%		6,278			91.2	%			19,614		78.2	%		11,787		85.3	%
Gross profit		2,414			23.6	%		605			8.8	%			5,460		21.8	%		2,023		14.7	%
Operating expenses:
Sales and marketing (US)		50			0.5	%		71			1.0	%			92		0.4	%		150		1.1	%
General and administrative (US)		2,306			22.5	%		2,136			31.0	%			4,946		19.7	%		4,537		32.9	%
General and administrative (China)		253			2.5	%		166			2.4	%			520		2.1	%		261		1.9	%
China legal judgment		4,264			41.6	%		-			0.0	%			4,264		17.0	%		-		0.0	%
Total operating expenses		6,873			67.1	%		2,373			34.4	%			9,822		39.2	%		4,948		35.9	%

Income (loss) from operations (US)		58			0.6	%		(1,602	)		(23.3	)%			422		1.7	%		(2,664	)	(19.3	)%
Income (loss) from operations (China)		(4,517	)		(44.1	)%		(166	)		(2.4	)%			(4,784	)	(19.1	)%		(261	)	(1.9	)%
Equity in income (loss) of solar project companies		(42	)		(0.4	)%		144			2.1	%			(282	)	(1.1	)%		130		0.9	%
Gain on debt extinguishment		13			0.1	%		(314	)		(4.6	)%			54		0.2	%		(314	)	(2.3	)%
Interest income		9			0.1	%		227			3.3	%			20		0.1	%		347		2.5	%
Interest expense		(249	)		(2.5	)%		(363	)		(5.3	)%			(547	)	(2.2	)%		(732	)	(5.3	)%
Other income (loss), net		46			0.5	%		70			1.1	%			123		0.5	%		129		1.0	%
Income (loss) before income taxes		(4,682	)		(45.7	)%		(2,004	)		(29.1	)%			(4,994	)	(19.9	)%		(3,365	)	(24.4	)%
Income tax provision (benefit)		(26	)		(0.3	)%		(106	)		(1.5	)%			(32	)	(0.1	)%		(170	)	(1.2	)%
Net income (loss)		(4,656	)		(45.4	)%		(1,898	)		(27.6	)%			(4,962	)	(19.8	)%		(3,195	)	(23.2	)%
Currency translation adjustment		(34	)		(0.4	)%		3			0.1	%			(22	)	(0.1	)%		3		0.1	%
Comprehensive income (loss)	$	(4,690	)		(45.8	)%	$	(1,895	)		(27.5	)%		$	(4,984	)	(19.9	)%	$	(3,192	)	(23.1	)%

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Three and Six Months Ended June 30, 2026 and 2025

The following table set forth information relating to our revenue and gross profit results for the three and six months ended June 30, 2026 and 2025 (dollars in thousands):

	Three Months Ended June 30,					%		Six Months Ended June 30,					%
	2026		2025			Change		Change		2026			2025			Change			Change
Revenue:
Large-scale EPC contracts (U.S.)	$	809		$	-		$	809		-	%		$	6,010			$	-		$	6,010			-	%
Solar energy sales (US)		7,273			5,891		$	1,382			23.5	%			15,366				11,687			3,679				31.5	%
LED sales (US)		2,125			911			1,214			133.3	%			3,608				1,970			1,638				83.1	%
Financing (US)		37			81			(44	)		(54.3	)%			90				153			(63	)			(41.2	)%
Total revenues		10,244			6,883			3,361			48.8	%			25,074				13,810			11,264				81.6	%
Cost of revenue:
Large-scale EPC contracts (U.S.)		756			-			756		-	%			6,007				-			6,007			-	%
Solar energy sales		5,268			5,528			(260	)		(4.7	)%			10,531				10,043			488				4.9	%
LED sales		1,806			750			1,056			140.8	%			3,076				1,744			1,332				76.4	%
Total cost of revenues		7,830			6,278			1,552			24.7	%			19,614				11,787			7,827				66.4	%
Gross profit	$	2,414		$	605		$	1,809			299.0	%		$	5,460			$	2,023		$	3,437				169.9	%

Revenues

Revenues for the three months ended June 30, 2026 were $10.2 million, an increase of $3.4 million or 48.8% from $6.9 million in the three months ended June 30, 2025. The increase resulted from revenue of $809,000 from the Longfellow Contract to develop a battery energy storage system (“BESS”) facility in Texas, a $1.4 million increase in solar energy and battery sales, a $1.2 million increase in LED sales, offset by a $44,000 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 $5.9 million for the three months ended June 30, 2025 to $7.3 million for the three months ended June 30, 2026, a 23.5% increase, primarily as a result of the sales growth related to the SGIP program for low income residential homeowners that began in the latter half of 2025. The increase in the solar energy and battery sales in the three months ended June 30, 2026 reflects a 13.7% increase in the number of systems completed and a 53.8% increase in the wattages deployed. During the three months ended June 30, 2026 and 2025, our battery only sales were $181,000 and $864,000, respectively. Battery sales refer to the sale of batteries sold other than as a part of a solar system.

Revenues for the six months ended June 30, 2026 were $25.1 million, an increase of $11.3 million or 81.6% from $13.8 million in the six months ended June 30, 2025. The increase resulted from revenue of $6.0 million from the large-scale EPC contract with Longfellow to develop a BESS facility in Texas, a $3.7 million increase in solar energy and battery sales, a $1.6 million increase in LED sales, offset by a $63,000 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 $11.7 million for the six months ended June 30, 2025 to $15.4 million for the six months ended June 30, 2026, a 31.5% increase, primarily as a result of the sales growth related to the SGIP program for low income residential homeowners that began in the latter half of 2025. The increase in the solar energy and battery sales in the six months ended June 30, 2026 reflects a 29.8% increase in the number of systems completed and a 38.5% increase in the wattages deployed. During the six months ended June 30, 2026 and 2025, our battery only sales were $359,000 and $1.2 million, respectively. Battery sales refer to the sale of batteries sold other than as a part of a solar system.

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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. However, given the launch of the SGIP program for qualifying low-income households that began in June 2025, we were able to offset a significant portion of the decline of revenue growth from our residential sales in 2026 with residential sales that participated in the SGIP program, though we expect this will level off in 2026. 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 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 March 2028. During the three months ended June 30, 2026, we recognized $809,000 in revenues related to this project. Total revenue recognized on the Longfellow Contract from the project inception through June 30, 2026 was $66.2 million, and we expect to recognize approximately $54.0 million of revenue on Longfellow for the remainder of 2026 and 2027.

Our LED revenue increased by $1.2 million or 133.3% to $2.1 million for the three months ended June 30, 2026 from $911,000 for the three months ended June 30, 2025, and increased $1.6 million or 83.1% to $3.6 million for the six months ended June 30, 2026 from $2.0 million for the six months ended June 30, 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.

We have not originated any loans to our solar customers since 2022. As a result, our finance revenue for the three months ended June 30, 2026 and 2025 was $37,000 and $81,000, respectively, and for the six months ended June 30, 2026 and 2025 was $90,000 and $153,000, 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.

Cost of revenue and gross profit

Our cost of revenue for the three months ended June 30, 2026 was $7.8 million, an increase of $1.6 million, or 24.7% from $6.3 million for the three months ended June 30, 2025. Our cost of revenue for the six months ended June 30, 2026 was $19.6 million, an increase of $7.8 million, or 66.4% from $11.8 million for the six months ended June 30, 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.

The overall gross margin increased to 23.6% for the three months ended June 30, 2026 from 8.8% for the three months ended June 30, 2025, and increased to 21.8% for the six months ended June 30, 2026 from 14.7% in the six months ended June 30, 2025. During the three months ended June 30, 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 related to the Longfellow Contract. The current lower gross margin from the Longfellow 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.

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Operating expenses

Sales and marketing expenses for the three months ended June 30, 2026 decreased to $50,000, a decrease of $21,000 or 29.9% from $71,000 in the comparable period of 2025. Sales and marketing expenses were 0.5% of revenue for the three months ended June 30, 2026 compared to 1.0% for the three months ended June 30, 2025. Sales and marketing expenses for the six months ended June 30, 2026 decreased to $92,000, a decrease of $58,000 or 38.4% from $150,000 in the comparable period of 2025. Sales and marketing expenses were 0.4% of revenue for the six months ended June 30, 2026 compared to 1.1% for the six months ended June 30, 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.

General and administration expenses for the United States operations for the three months ended June 30, 2026 increased $170,000 or 8.0%, to $2.3 million compared to $2.1 million for the three months ended June 30, 2025, representing 22.5% of revenue for the three months ended June 30, 2026 compared to 31.0% of revenue for the three months ended June 30, 2025. General and administration expenses for the United States operations for the six months ended June 30, 2026 increased $409,000 or 9.0%, to $4.9 million compared to $4.5 million for the six months ended June 30, 2025, representing 19.7% of revenue for the six months ended June 30, 2026 compared to 32.9% of revenue for the six months ended June 30, 2025. The increase during the six months ended June 30, 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 six months ended June 30, 2026 reflects revenue of approximately $6.0 million from the Longfellow Contract.

General and administrative expenses relating to the China operations were $253,000 in the three months ended June 30, 2026 compared to $166,000 in the three months ended June 30, 2025, an increase of $86,000 or 51.9%. General and administrative expenses relating to the China operations were $520,000 in the six months ended June 30, 2026 compared to $261,000 in the six months ended June 30, 2025, an increase of 259,000 or 99.2%. Such increase during the three and six months ended June 30, 2026 is attributed to the court costs, travel costs, and legal fees associated with the ongoing litigation with SPIC to enforce the collection of the remaining receivable from SPIC.

China legal judgment

Our expenses in China for the three and six months ended June 30, 2026 reflected a charge of approximately $4.3 million related to farmland occupation tax litigation in the PRC for four photovoltaic projects completed in 2020 and 2021. The charge resulted from three adverse court judgments issued in June and August 2026 that determined that our subsidiary is responsible for the additional farmland occupation taxes.

We recorded the charge of $4.3 million because, as of June 30, 2026, management determined, based on court rulings in June and August 2026, that a loss was probable and reasonably estimable based on the judgments and other information available at that date. See Part II, Item 1. Legal Proceedings for discussion of the litigation.

Income (loss) from operations

As a result of the factors described above, our income from operations in the United States was $58,000 for the three months ended June 30, 2026, compared to a loss from operations of $1.6 million in the three months ended June 30, 2025, and income from operations of $422,000 for the six months ended June 30, 2026, compared to loss from operations of $2.7 million in the six months ended June 30, 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 $4.5 million for the three months ended June 30, 2026, compared to a loss from operations of $166,000 in the three months ended June 30, 2025. Our loss from operations for our China operations was $4.8 million for the six months ended June 30, 2026, compared to a loss from operations of 261,000 in the six months ended June 30, 2025.

Equity in income (loss) from unconsolidated entities

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 June 30, 2026 was a loss of $42,000 compared to an income of $144,000 in the three months ended June 30, 2025. The equity in income (loss) for the six months ended June 30, 2026 was a loss of $282,000 compared to an income of $130,000 in the six months ended June 30, 2025. The change from income in the three and six months ended June 30, 2025 to a loss in the same periods in 2026 results from lower revenue of the unconsolidated entities attributable to a change in electricity rate from a fixed rate to a variable rate.

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Gain (loss) on debt extinguishment

For the three months ended June 30, 2026, our gain on debt extinguishment was $13,000 related to the exchange of $500,000 of secured EB-5 notes payable to a related party for 4% convertible notes in the same principal amount. For the six months ended June 30, 2026, our gain on debt extinguishment was $54,000 related to the exchange of $2.0 million of secured EB-5 notes payable to a related party for 4% convertible notes in the same principal amount.

For the three and six months ended June 30, 2025, our loss on debt extinguishment was $314,000 and relates to the exchange of the $900,000 unsecured loan to shares of our common stock because the purchase price for the shares is less than its fair market value

Interest expense, net

Interest expense, net, for the three months ended June 30, 2026 was $240,000, an increase of $104,000, or 76.8%, from the three months ended June 30, 2025. Interest expense, net, for the six months ended June 30, 2026 was $527,000, an increase of $142,000, or 36.9%, from the six months ended June 30, 2025. For the three months ended June 30, 2026, total interest income declined $218,000 as a result of the payoff of held to maturity debt investments, whereas the total interest expense decreased by $114,000. For the six months ended June 30, 2026, total interest income declined $327,000 as a result of the payoff of held to maturity debt investments, whereas the total interest expense decreased by $185,000. 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 six months ended June 30, 2026 primarily includes interest at 3% on two EB-5 loans from related parties in the United States with a total principal balance of $8.5 million at June 30, 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 $16.1 million at June 30, 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 June 30, 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.

Other income (expenses), net

During the three months ended June 30, 2026, other income was $46,000 consisting primarily of foreign currency transaction gains for our United States operations intercompany receivable denominated in RMB. 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 operations intercompany receivable denominated in RMB, offset with a loss on a solar asset disposal in the United States segment of $65,000.

During the six months ended June 30, 2026, other income was $123,000 consisting primarily of foreign currency transaction gains for our United States operations intercompany receivable denominated in RMB. During the six months ended June 30, 2025, other income was $129,000 consisting primarily of $228,000 of foreign currency transaction gains for our United States operations intercompany receivable denominated in RMB, 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.

Income tax benefit (provision)

For the three months ended June 30, 2026 and 2025, our United States operations reported an income tax expense of $2,000 and $0, respectively, attributable to the Texas franchise tax and other minimum state tax liabilities.

For the six months ended June 30, 2026 and 2025, our United States operations reported an income tax expense of $19,000 and $6,000, respectively, attributable to the Texas franchise tax and other minimum state tax liabilities.

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For our China operations, an income tax benefit of approximately $29,000 and $106,000 was reported for the three months ended June 30, 2026 and 2025, respectively. For our China operations, an income tax benefit of approximately $52,000 and $176,000 was reported for the six months ended June 30, 2026 and 2025, respectively. The decrease in our income tax benefit for the six months ended June 30, 2026, compared with the corresponding period in 2025, was primarily attributable to a valuation allowance true-up recorded in the prior-year period, with no comparable adjustment in the current-year period. The change in our effective income tax rate also reflects changes in pretax book income (loss) between the periods.

Net income (loss)

As a result of the foregoing, we had a consolidated net loss of $4.7 million, or $(0.98) per share (basic and diluted), for the three months ended June 30, 2026, compared with a consolidated net loss of $1.9 million, or $(0.50) per share (basic and diluted), for the three months ended June 30, 2025.

As a result of the foregoing, we had a consolidated net loss of $5.0 million, or $(1.05) per share (basic and diluted), for the six months ended June 30, 2026, compared with a consolidated net loss of $3.2 million, or $(0.85) per share (basic and diluted), for the six months ended June 30, 2025.

Currency translation adjustment

Although our functional currency is the U.S. dollar, the functional currency of our China subsidiaries is the RMB. The financial statements of our subsidiaries are translated to U.S. dollars using period end exchange rates for assets and liabilities, and average exchange rates for the period for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations and reflects changes in the exchange rates between U.S. dollars and RMB.

As a result of foreign currency translations, we reported net foreign currency translation gains (losses) of $(34,000) and $3,000 for the three months ended June 30, 2026 and 2025, respectively, and $(22,000) and $3,000 for the six months ended June 30, 2026 and 2025, respectively.

Liquidity and Capital Resources

The following tables show consolidated cash flow information for the six months ended June 30, 2026 and 2025 (dollars in thousands):

	Six Months Ended June 30,			$ Increase
	2026			2025			(Decrease)
Consolidated cash flow data:
Net cash provided by (used in) operating activities	$	(5,156	)		$	(380	)	$	(4,776	)
Net cash provided by (used in) investing activities		(469	)			138			(607	)
Net cash provided by (used in) financing activities		(11	)			1,553			(1,564	)
Net increase (decrease) in cash and cash equivalents and restricted cash		(5,808	)			1,131			(6,939	)
Net increase (decrease) in cash and cash equivalents and restricted cash excluding foreign exchange effect	$	(5,637	)		$	1,310		$	(6,947	)

Operating Activities

Net cash used in operating activities for the six months ended June 30, 2026 was $5.2 million, compared to net cash used in operating activities for the six months ended June 30, 2025 of $380,000. The cash used by operations for the six months ended June 30, 2026, resulting from our net loss of $5.0 million, non-cash expense of $974,000, and $1.2 million of cash used in our operating assets and liabilities.

Net cash used by operations for the six months ended June 30, 2025 of $380,000 resulted from net loss of $3.2 million, non-cash expense of $983,000, and $1.8 million of cash provided by our operating assets and liabilities.

We expect the fluctuations of working capital over time to vary based on the project status and the related project billings of the projects in progress.

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Non-cash adjustments changes for the six months ended June 30, 2026 primarily reflected:

	●	$411,000 net increase resulting from equity in losses from our equity investments.

	●	$368,000 net decrease related to the gain on debt extinguishment.

	●	$224,000 net decrease in depreciation and amortization expense which includes loan and debt discounts amortization.

	●	$133,000 increase in deferred income taxes.

	●	$104,000 net increase associated with loss provisions for bad debts, loan losses, inventories, warranty, customer care and production guaranty.

	●	$65,000 decrease in loss on disposal of property and equipment

Changes in operating assets and liabilities for the six months ended June 30, 2026:

	●	$8.6 million decrease in cash from a net increase contract assets related to projects for which the performance obligations have not been satisfied.

	●	$7.5 million decrease in cash from a net increase accounts receivable, other receivables and other current assets

	●	$4.0 million increase in cash from a net increase in accrued expenses and other payables and other liabilities.

	●	$8.3 million increase in cash from an increase accounts payable.

	●	$732,000 increase in cash from a decrease in inventories.

	●	$284,000 increase in cash from an increase in operating lease liabilities.

	●	$12,000 decrease in cash from an increase in customer loans receivable.

	●	$23,000 decrease in cash from an increase in other assets

Investing Activities

Net cash used by investment activities for the six months ended June 30, 2026 was $469,000 consisting of short-term advances of $2.4 million, proceeds from repayment of principal on short-term advances of $1.4 million, and debt repayments received on our held to maturity debt investments. Net cash used by investing activities for the six months ended June 30, 2025 was approximately $138,000, consisting of debt repayments received on our held to maturity debt investments.

Financing Activities

Net cash used in financing activities for the six months ended June 30, 2026 was $11,000, 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 $7,000 payment on equipment leases.

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

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Cash and Cash Equivalents and Restricted Cash

The following table sets forth, our cash and cash equivalents and restricted cash held by our United States and China operations at June 30, 2026 and December 31, 2025 (dollars in thousands):

	June 30, 2026		December 31, 2025

U.S. Operations
Insured cash	$	404		$	909
Uninsured cash		302			1,899
		706			2,808
China Operations
Insured cash		233			309
Uninsured cash		1,500			5,130
		1,733			5,439
Total cash and cash equivalents and restricted cash		2,439			8,247
Less: Cash and cash equivalents		2,158			7,967
Restricted cash	$	281		$	280

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.

Under applicable PRC law and regulations, our PRC subsidiaries are required to set aside at least 10% of their respective accumulated after-tax profits, if any, each year, to fund certain reserve funds, until the aggregate amount of such fund reaches 50% of its registered capital before they may pay dividends. We do not believe that this restriction will impair our operations since we do not anticipate that we will use the cash generated from our PRC operations in those operations and we do not plan to repatriate such funds to the United States.

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.

Borrowings and Stock Issuances

At June 30, 2026, our current liabilities included secured convertible notes in the principal amount of $14.2 million and secured notes to related parties of $6.5 million.

In January 2026, we issued 166,667 shares of common stock, at a discount of 25% from the market price on the date of the investment, at a price of $6.576. 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.

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EB-5 Loans

On January 3, 2012, CEF entered into a loan agreement with SREP, one of our United States subsidiaries, pursuant to which CEF advanced $45.0 million. On August 26, 2014, CEF II entered into a loan agreement with LED, another United States subsidiary, for up to $13.0 million. CEF II advanced $10.5 million pursuant to the agreement. The loans from CEF and CEF II bear interest at 3% per annum. The loans are secured by a security interest in the accounts and inventory of the borrowing subsidiary. CEF and CEF II are limited partnerships, the general partner of which is Inland Empire Renewable Energy Regional Center, a related party. The limited partners of both CEF and CEF II are investors who are not related parties who made a capital contribution to CEF or CEF II pursuant to the United States EB-5 immigration program. The EB-5 immigrant investor visa is a federal program that grants green cards and a path to citizenship to foreign investors who invest at least $500,000 toward job-creating projects. Under this program, which is administered by the United States Customs and Immigration Service, entrepreneurs (and their spouses and unmarried children under 21) are eligible to apply for a green card (permanent residence) if they make the necessary investment in a commercial enterprise in the United States and plan to create or preserve ten permanent full-time jobs for qualified United States workers. We are a commercial enterprise that creates permanent full-time jobs in the United States.

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 June 30, 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.

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 June 30, 2026, we had issued convertible notes in the principal amount of $44.0 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 $16.1 million outstanding at June 30, 2026. As of June 30, 2026, notes to CEF and CEF II in the aggregate principal amount of $8.5 million were outstanding and convertible notes in the principal amount of $16.1 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 June 30, 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.

Convertible Notes

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 $38.40, which is 80% of our initial public offering price of $48.00 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 $6.06 to $108.84, with an average conversion price of $39.54. 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.

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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.

During the three months ended June 30, 2026, the Company recognized a gain on debt of extinguishment in the amount of approximately $13,000, relating to the issuance of convertible note in the principal amount of $500,000 to former limited partners of CEF I and II in exchange for a $500,000 reduction of the note from CEF I and II. No gain or loss on debt extinguishment was recognized for the three months ended June 30, 2025 as there was no issuance of convertible notes in exchange for a reduction of the note from CEF I and II.

During six months ended June 30, 2026, the Company recognized a gain on debt of extinguishment in the amount of approximately $54,000, relating to the issuance of convertible note in the principal amount of $2.0 million to former limited partners of CEF I and II in exchange for a $2.0 million reduction of the note from CEF I and II. No gain or loss on debt extinguishment was recognized for the six months ended June 30, 2025 as there was no issuance of convertible notes in exchange for a reduction of the note from CEF I and II.

Default Event and Remedies Upon Event of Default

From April 2023 through June 30, 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 June 30, 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.

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 $350,387 at June 30, 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 $2.2 million. The difference between the interest at 12% and the accrued interest at 4% as of June 30, 2026, together with any additional interest due subsequent to June 30, 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.

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Contractual Obligations

Borrowings

Principal maturities for the financing arrangements as of June 30, 2026 are as follows (dollars in thousands):

For the year ending December 31,	EB5 Related Party Loans		Convertible Notes			Total
2026 (remainder of)	$	3,500		$	13,750		$	17,250
2027		3,000			500			3,500
2028		2,000			500			2,500
2029		-			500			500
2030		-			500			500
2031		-			300			300
Total	$	8,500		$	16,050		$	24,550

Operating Leases

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.

Future minimum lease commitments for office facilities and equipment for each of the next five years as of June 30, 2026, are as follows (dollars in thousands):

For the year ending December 31,	Total
2026 (remainder of)	$	970
2027		1,857
2028		2,032
2029		2,081
2030		2,142
Thereafter		6,649
Total	$	15,731

Employment Agreements

On October 7, 2016, we entered into an employment agreement with our chief executive officer, David Hsu, for a five-year term commencing January 1, 2017 and continuing on a year-to-year basis unless terminated by us or Mr. Hsu on not less than 90 days’ notice prior to the expiration of the initial term or any one-year extension. The agreements provide for an annual salary with an increase of not less than 3% and an annual bonus in restricted stock and cash equal to a specified percentage of consolidated revenues for each year. Mr. Hsu’s annual salary for 2025 was at the annual rate of $760,065, and his annual salary for 2026 is at the annual rate of $782,867. We also owed Mr. Hsu $675,000 as the cash payment in connection with his exchange of 1,348,213 restricted shares of common stock for options to purchase 1,428,432 shares of common stock at $5.01 per share and a cash payment of $675,000, which was initially payable by December 15, 2019 and was extended on December 31, 2025 and would be paid in twelve equal monthly installments. As of June 30, 2026, the full amount of $675,000 had been paid. In addition, at December 31, 2025, we owed Mr. Hsu $1,818,282, representing deferred salary from 2019, 2020, 2021, 2022, 2023, and 2024 and cash bonuses deferred from 2017 and 2018. Mr. Hsu waived his bonus for 2019, 2020, 2021, 2022, and 2023 as part of the suspension of incentive programs for key employees, and he agreed that the $1,818,282 deferred salary and bonus be paid in twelve equal monthly installments with the first payment becoming due on December 31, 2025. As of June 30, 2026, the remaining balance to be paid on Mr. Hsu's deferred compensation was $1,766,075.

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Cash Requirements

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 six months ended June 30, 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, of which approximately $1.8 million is left to be paid . 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 June 30, 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 six months ended June 30, 2026 has a going concern paragraph.

Critical Accounting Estimates and Policies

The accounting policies described below are considered critical to obtaining an understanding of our consolidated financial statements because their application requires the use of significant estimates and judgments by management in preparing the consolidated financial statements. Management estimates and judgments are inherently uncertain and may differ significantly from actual results achieved. Management considers an accounting estimate to be critical if the estimate requires significant assumptions and changes in the estimate or, the use of alternative estimates, could have a material impact on our results of operations or financial position. For more information on our accounting policies, see “Notes to Consolidated Financial Statements—Note 2. Basis of Presentation and Summary of Significant Accounting Policies.”

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Revenue Recognition on Large-scale EPC Contracts

Nature of Estimates Required

A significant portion of our revenue is generated from large-scale EPC contracts. Revenue recognition for these contracts requires management to make significant estimates and judgments regarding the transaction price, the identification and combination of performance obligations, the estimated costs to complete the contracts and the measure of progress toward completion.

For large-scale EPC contracts that qualify for cost-to-cost input method under ASC 606, the percentage of completion is determined based on costs incurred to date relative to total estimated costs at completion. Revenue recognized in the reporting period is based on the resulting measure of progress and the estimated transaction price for the performance obligation.

Key Assumptions and Approach Used

The most significant judgment involved in recognizing revenue under the cost-to-cost method is the estimate of total costs required to complete the performance obligation. These estimates include expected equipment and material costs, subcontractor costs, labor costs, construction costs, engineering costs, commissioning costs, tariffs and other costs necessary to complete the project. We update our estimates of costs to complete throughout the construction period based on actual costs incurred, vendor and subcontractor information, project status, expected changes in scope, schedule and other available information.

Because revenue is recognized based on the estimated percentage of completion, changes in estimated costs to complete can have a significant effect on the amount of revenue and gross profit recognized in the current period. An increase in estimated costs to complete generally reduces the percentage of completion and expected gross profit and may result in a cumulative catch-up adjustment to revenue and gross profit. Conversely, a reduction in estimated costs to complete may increase the amount of revenue and gross profit recognized in the current period.

Our estimates are particularly sensitive for fixed-price EPC contracts because we generally bear the risk that actual costs may exceed the amounts contemplated in the contract price. The Longfellow Contract expressly provides that the turnkey work is a fixed-price obligation, subject to specified contractual adjustments and change orders.

In addition to estimated costs to complete, management is required to exercise judgment in evaluating potential changes in the transaction price, including approved and unapproved change orders, claims, liquidated damages, performance incentives and other contractual adjustments. Such amounts are included in the transaction price only when the applicable requirements of ASC 606 have been satisfied.

We also evaluate whether contractual payment terms contain a significant financing component. The determination of the financing component affects both the amount and timing of revenue and interest income that we recognize. Changes in the estimated timing of project completion, commercial operation or receipt of deferred payments, or changes in the applicable interest rate, could affect the amount of revenue and interest income recognized in future periods.

As of June 30, 2026, we had recognized an adjustment to the contractual consideration for the Longfellow Contract to reflect the significant financing component. The amount attributable to financing is not included in EPC revenue and is recognized as interest income over the applicable financing period.

Effect if Different Assumptions Used

We believe that the estimates and judgments described above are reasonable based on information available at the reporting date. However, because of the long-term nature and complexity of EPC projects, actual results may differ from management's estimates. Material changes in estimated costs, contract revenue or other assumptions could result in significant changes in revenue, gross profit and net income in the period in which the estimates are revised.

Allowance for credit and loan losses

Nature of Estimates Required

In adopting ASU 2016-13, we are required to estimate credit and loan losses based on a forward-looking methodology and, if needed, record a reserve for each of the following assets: accounts receivable, customer loans receivable and certain contract assets.

Key Assumptions and Approach Used

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.

Effect if Different Assumptions Used

We believe that assumptions not based on the use of historical collection experience, current and forecasted economic, political (China operations) and business conditions, and a review of the status of each customer’s financial asset account would be contra to the requirements of ASU 2016-13 and a departure from GAAP.

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Income Taxes

Nature of Estimates Required

As part of the process of preparing our consolidated financial statements, we are required to estimate income taxes for each jurisdiction in which we operate. This process involves estimating actual current period tax expense together with assessing temporary differences resulting from differing treatment of items, such as depreciation, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our balance sheets, including net operating loss and tax credit carryforwards. Certain estimates and assumptions are required to determine whether deferred tax assets can and will be utilized in future periods.

We take certain tax positions we believe are in accordance with the applicable tax laws. However, these tax positions are subject to interpretation by the Internal Revenue Service, state tax authorities, foreign tax authorities and the courts. We determine uncertain tax positions in accordance with the authoritative guidance.

Key Assumptions and Approach Used

In determining whether it is more likely than not that all or some portion of net operating loss and tax credit carryforwards can be utilized, we analyze the trend of GAAP earnings and then estimates the impact of future taxable income, reversing temporary differences and available prudent and feasible tax planning strategies based on currently enacted tax laws.

Accounting for tax obligations requires management judgment. We use judgment in determining whether the evidence indicates it is more likely than not, based solely on the technical merits, that a tax position will be sustained, and to determine the amount of tax benefits to be recognized. Judgment is also used in determining the likelihood a tax position will be settled and possible settlement outcomes. In assessing uncertain tax positions we consider, among others, the following factors: the facts and circumstances of the position, regulations, rulings, and case law, opinions or views of legal counsel and other advisers, and the experience gained from similar tax positions. We evaluate uncertain tax positions at the end of each reporting period and make adjustments when warranted based on changes in fact or law.

Effect if Different Assumptions Used

Should a change in facts or circumstances, including a change in enacted tax legislation, lead to a change in judgment about the ultimate realizability of a deferred tax asset, we would record or adjust the related valuation allowance in the period that the change in facts and circumstances occurs, along with a corresponding increase or decrease in the provision for income taxes.

Actual income taxes may differ from the estimated amounts which could have a significant impact on the liabilities, revenue and expenses recorded in the financial statements. Significant judgment is required to determine the tax treatment of particular tax positions that involve interpretations of complex tax laws. Such liabilities are based on judgment and a final determination could take many years from the time the liability is recorded. Furthermore, settlement of tax positions included in open tax years may be resolved by compromises of tax positions based on current factors and business considerations that may result in material adjustments to income taxes previously estimated. For a discussion of current and deferred taxes, net operating losses and tax credit carryforwards, accounting for uncertainty in income taxes, unrecognized tax benefits, and tax disputes, see Note 22 of “Notes to Consolidated Financial Statements.”

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarterly period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

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Part II - Other Information

Item 1. Legal Proceedings

Farmland Occupation Tax Litigation

We are involved in various legal proceedings with SPIC in the PRC that includes matters related to additional assessments of farmland occupation taxes associated with four photovoltaic projects completed by one of our subsidiaries in 2020 and 2021 and owned by SPIC. The matters relate to disputes regarding the additional taxes paid by SPIC on which SPIC sought reimbursement from our subsidiary and the basis for the assessment by Chinese tax authorities.

In June and August 2026, three adverse judgments were issued by a Chinese court, which determined that our subsidiary is responsible for the additional farmland occupation taxes under its contractual arrangements. As of September 30, 2026, we are awaiting the court ruling for the last farmland occupation tax case; however, we believe the ruling will be consistent with the other three rulings.

Based on the judgments and other information available as of September 30, 2026, we determined that a loss contingency was probable and reasonably estimable at June 30, 2026, and recorded an accrual of RMB 29.3 million for the four cases, or approximately $4.3 million, to accrued expenses and other payables, representing our estimated liability associated with the matters. We recorded the corresponding expense to China legal judgment, which is a non-recurring expense.

For additional information regarding the accounting treatment and financial statement impact of these matters, see Note 19, \"Commitments and Contingencies,\" to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

From January to September 2026, we issued convertible notes in the principal amount of $2.5 million to limited partners of CEF I and CEF II, which resulted in a reduction of $2.5 million in the principal amount of the related party notes to CEF I and CEF II. The convertible notes are convertible into common stock at a conversion price equal to 80% of the average price of our common stock for the ten trading days preceding the date of the exchange agreement with the limited partners, which conversion prices range from $1.74 to $8.55, with an average conversion price of $6.52. No brokers were involved in the issuances of the convertible notes. The issuance of the convertible notes were exempt from registration pursuant to Section 4(a)(2) of the Securities Act as a transaction not involving a public offering.

Item 5. Other Information

During the six months ended June 30, 2026, no officer or director adopted or terminated any contract, instruction or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement.

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Item 6. Exhibits

31.1		Certification of chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SOLARMAX TECHNOLOGY, INC

Date: October 7, 2026	By:	/s/ David Hsu
		David Hsu, Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Stephen Brown
		Stephen Brown, Chief financial Officer
		(Principal Financial Officer)

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