{"url_path":"/sec/smxt/10-q/2026/item-1","section_key":"item-1","section_title":"Item 1 Unaudited Financial Statements**","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1519472/0001640334-26-000909-index.html","accession_number":"0001640334-26-000909","cik":"0001519472","ticker":"SMXT","issuer_name":"SolarMax Technology, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1519472/0001640334-26-000909-index.html","primary_entity_key":"0001519472","primary_entity_name":"SolarMax Technology, Inc."},"word_count":17977,"has_tables":true,"body_markdown":"**Item 1. Unaudited Financial Statements**\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Condensed Consolidated Balance Sheets**\n\n**As of March 31, 2026 and December 31, 2025**\n\n \n\n \n\n \n\n**March 31,**\n\n**2026**\n\n \n\n \n\n**December 31,**\n\n**2025**\n\n \n\n \n\n \n\n**(Unaudited)**\n\n \n\n \n\n \n\n**Assets**\n\n \n\n \n\n \n\n \n\n \n\n \n\nCurrent assets:\n\n \n\n \n\n \n\n \n\n \n\n \n\nCash and cash equivalents\n\n \n$4,307,362\n \n\n \n$7,966,797\n \n\nAccounts receivable, net\n\n \n\n \n12,283,110\n \n\n \n\n \n12,939,589\n \n\nHeld to maturity debt investments\n\n \n\n \n-\n \n\n \n\n \n522,599\n \n\nContract assets, net\n\n \n\n \n53,790,128\n \n\n \n\n \n46,107,784\n \n\nReceivable from SPIC, net\n\n \n\n \n1,020,600\n \n\n \n\n \n1,007,229\n \n\nCustomer loans receivable, current, net\n\n \n\n \n835,994\n \n\n \n\n \n874,617\n \n\nInventories, net\n\n \n\n \n1,717,939\n \n\n \n\n \n2,061,558\n \n\nDeferred project costs\n\n \n\n \n3,460,086\n \n\n \n\n \n2,168,725\n \n\nOther receivables and current assets, net\n\n \n\n \n3,041,054\n \n\n \n\n \n1,700,215\n \n\nTotal current assets\n\n \n\n \n80,456,273\n \n\n \n\n \n75,349,113\n \n\nProperty and equipment, net\n\n \n\n \n125,842\n \n\n \n\n \n138,890\n \n\nOperating lease right-of-use assets\n\n \n\n \n11,800,881\n \n\n \n\n \n1,638,649\n \n\nInvestments in unconsolidated companies\n\n \n\n \n10,616,588\n \n\n \n\n \n10,714,811\n \n\nCustomer loans receivable, noncurrent, net\n\n \n\n \n2,033,274\n \n\n \n\n \n2,256,366\n \n\nRestricted cash, noncurrent\n\n \n\n \n280,524\n \n\n \n\n \n280,016\n \n\nOther assets\n\n \n\n \n880,524\n \n\n \n\n \n909,209\n \n\n**Total assets**\n\n \n$106,193,906\n \n\n \n$91,287,054\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**Liabilities and stockholders’ deficit**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCurrent liabilities:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAccounts payable\n\n \n$60,968,271\n \n\n \n$59,565,812\n \n\nOperating lease liabilities, current\n\n \n\n \n1,023,325\n \n\n \n\n \n1,712,329\n \n\nSecured loans from related parties, current\n\n \n\n \n4,000,000\n \n\n \n\n \n5,500,000\n \n\nSecured convertible notes, current\n\n \n\n \n14,050,000\n \n\n \n\n \n14,650,000\n \n\nAccrued expenses and other payables\n\n \n\n \n17,976,544\n \n\n \n\n \n14,282,578\n \n\n**Total current liabilities**\n\n \n\n \n98,018,140\n \n\n \n\n \n95,710,719\n \n\nOperating lease liabilities, noncurrent\n\n \n\n \n10,874,080\n \n\n \n\n \n-\n \n\nSecured loans from related parties, noncurrent, net of debt discount and issuance costs\n\n \n\n \n5,000,000\n \n\n \n\n \n5,000,000\n \n\nSecured convertible notes, noncurrent, net of debt discount and issuance costs\n\n \n\n \n1,321,979\n \n\n \n\n \n339,882\n \n\nDeferred tax liability\n\n \n\n \n223,591\n \n\n \n\n \n251,807\n \n\nOther liabilities\n\n \n\n \n2,164,092\n \n\n \n\n \n2,194,744\n \n\n**Total liabilities**\n\n \n\n \n117,601,882\n \n\n \n\n \n103,497,152\n \n\n**Commitments and contingencies (Note 18)**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**Stockholders’ deficit:**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nPreferred stock, par value $0.001 per share; 15,000,000 shares authorized, none issued and outstanding as of March 31, 2026 and December 31, 2025\n\n \n\n \n-\n \n\n \n\n \n-\n \n\nCommon stock, par value $0.001 per share; 297,225,000 shares authorized, 58,168,067 and 56,168,067 shares issued as of March 31, 2026 and December 31, 2025, respectively, and 56,906,572 and 54,906,572 shares outstanding as of March 31, 2026 and December 31, 2025, respectively\n\n \n\n \n58,168\n \n\n \n\n \n56,168\n \n\nAdditional paid-in capital\n\n \n\n \n102,136,566\n \n\n \n\n \n101,042,566\n \n\nTreasury stock, at cost,1,261,495 shares at March 31, 2026 and December 31, 2025\n\n \n\n \n(1,979,294)\n \n\n \n(1,979,294)\n\nAccumulated deficit\n\n \n\n \n(110,218,357)\n \n\n \n(109,911,673)\n\nAccumulated other comprehensive loss\n\n \n\n \n(1,405,059)\n \n\n \n(1,417,865)\n\n**Total stockholders’ deficit**\n\n \n\n \n(11,407,976)\n \n\n \n(12,210,098)\n\n**Total liabilities and stockholders’ deficit**\n\n \n$106,193,906\n \n\n \n$91,287,054\n \n\n \n\n*See accompanying notes to condensed consolidated financial statements.*\n\n \n\n \n\n4\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Unaudited Condensed Consolidated Statements of Operations**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\n \n\n**Three Months Ended**\n\n**March 31,**\n\n \n\n \n\n \n\n**2026**\n\n \n\n \n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\nRevenues\n\n \n$14,830,617\n \n\n \n$6,927,469\n \n\nCost of revenues\n\n \n\n \n11,784,049\n \n\n \n\n \n5,508,398\n \n\nGross profit\n\n \n\n \n3,046,568\n \n\n \n\n \n1,419,071\n \n\nOperating expenses:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nGeneral and administrative\n\n \n\n \n2,907,745\n \n\n \n\n \n2,495,563\n \n\nSelling and marketing\n\n \n\n \n42,627\n \n\n \n\n \n79,012\n \n\nTotal operating expense\n\n \n\n \n2,950,372\n \n\n \n\n \n2,574,575\n \n\nOperating income (loss)\n\n \n\n \n96,196\n \n\n \n\n \n(1,155,504)\n\nOther income (expense):\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nInterest income\n\n \n\n \n10,947\n \n\n \n\n \n120,205\n \n\nInterest expense\n\n \n\n \n(298,065)\n \n\n \n(369,403)\n\nEquity in income (loss) of unconsolidated companies\n\n \n\n \n(239,650)\n \n\n \n(14,260)\n\nGain (loss) on debt extinguishment\n\n \n\n \n40,231\n \n\n \n\n \n-\n \n\nOther income (expense), net\n\n \n\n \n77,336\n \n\n \n\n \n59,086\n \n\nTotal other income (expense), net\n\n \n\n \n(409,201)\n \n\n \n(204,372)\n\nIncome (loss) before income taxes\n\n \n\n \n(313,005)\n \n\n \n(1,359,876)\n\nIncome tax provision (benefit)\n\n \n\n \n(6,321)\n \n\n \n(63,634)\n\nNet income (loss)\n\n \n$(306,684)\n \n$(1,296,242)\n\nNet income (loss) per share\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nBasic\n\n \n$(0.01)\n \n$(0.03)\n\nDiluted\n\n \n$(0.01)\n \n$(0.03)\n\n*Weighted average shares used to compute net income (loss) per share*\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nBasic\n\n \n\n \n56,184,348\n \n\n \n\n \n44,417,782\n \n\nDiluted\n\n \n\n \n56,184,348\n \n\n \n\n \n44,417,782\n \n\n \n\n*See accompanying notes to condensed consolidated financial statements.*\n\n \n\n \n\n5\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\n \n\n**Three Months Ended**\n\n**March 31,**\n\n \n\n \n\n \n\n**2026**\n\n \n\n \n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\nNet income (loss)\n\n \n$(306,684)\n \n$(1,296,242)\n\nOther comprehensive income (loss)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nForeign currency translation adjustments\n\n \n\n \n12,806\n \n\n \n\n \n779\n \n\nTotal comprehensive income (loss)\n\n \n$(293,878)\n \n$(1,295,463)\n\n \n\n*See accompanying notes to condensed consolidated financial statements.*\n\n \n\n \n\n6\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\n \n\n**Preferred Stock**\n\n \n\n \n\n**Common Stock**\n\n \n\n \n\n**Additional**\n\n**Paid-****In**\n\n \n\n \n\n**Treasury Stock**\n\n \n\n \n\n**Accumulated**\n\n \n\n \n\n**Accumulated**\n\n**Other**\n\n**Comprehensive**\n\n \n\n \n\n \n\n \n\n \n\n**Shares**\n\n \n\n \n\n**Amount**\n\n \n\n \n\n**Shares**\n\n \n\n \n\n**Amount**\n\n \n\n \n\n**Capital**\n\n \n\n \n\n** ****Shares**\n\n \n\n \n\n **Amount**\n\n \n\n \n\n**Deficit**\n\n \n\n \n\n**Loss**\n\n \n\n \n\n**Total**\n\n \n\nBalance at December 31, 2025\n\n \n\n \n-\n \n\n \n$-\n \n\n \n\n \n56,168,067\n \n\n \n$56,168\n \n\n \n$101,042,566\n \n\n \n\n \n(1,261,495)\n \n$(1,979,294)\n \n$(109,911,673)\n \n$(1,417,865)\n \n$(12,210,098)\n\nShares issued in private placement\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n2,000,000\n \n\n \n\n \n2,000\n \n\n \n\n \n1,094,000\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n1,096,000\n \n\nNet income (loss)\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n(306,684)\n \n\n \n-\n \n\n \n\n \n(306,684)\n\nCurrency translation adjustments\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n12,806\n \n\n \n\n \n12,806\n \n\nBalance at March 31, 2026 (Unaudited)\n\n \n\n \n-\n \n\n \n$-\n \n\n \n\n \n58,168,067\n \n\n \n$58,168\n \n\n \n$102,136,566\n \n\n \n\n \n(1,261,495)\n \n$(1,979,294)\n \n$(110,218,357)\n \n$(1,405,059)\n \n$(11,407,976)\n\n \n\n \n\n \n\n**Preferred Stock**\n\n \n\n \n\n**Common Stock**\n\n \n\n \n\n**Additional**\n\n**Paid-****In**\n\n \n\n \n\n**Treasury Stock**\n\n \n\n \n\n**Accumulated**\n\n \n\n \n\n**Accumulated**\n\n**Other**\n\n**Comprehensive**\n\n \n\n \n\n \n\n \n\n \n\n**Shares**\n\n \n\n \n\n**Amount**\n\n \n\n \n\n**Shares**\n\n \n\n \n\n**Amount**\n\n \n\n \n\n**Capital**\n\n \n\n \n\n**Shares**\n\n \n\n \n\n**Amount**\n\n \n\n \n**Deficit**\n \n\n \n\n**Loss**\n\n \n\n \n\n**Total**\n\n \n\nBalance at December 31, 2024\n\n \n\n \n-\n \n\n \n$-\n \n\n \n\n \n46,532,355\n \n\n \n$46,532\n \n\n \n$91,889,317\n \n\n \n\n \n(1,261,495)\n \n$(1,979,294)\n \n$(103,586,305)\n \n$(1,449,192)\n \n$(15,078,942)\n\nShares issued in private placement\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n561,798\n \n\n \n\n \n562\n \n\n \n\n \n499,438\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n500,000\n \n\nNet income (loss)\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n(1,296,242)\n \n\n \n-\n \n\n \n\n \n(1,296,242)\n\nCurrency translation adjustments\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n779\n \n\n \n\n \n779\n \n\nBalance at March 31, 2025 (Unaudited)\n\n \n\n \n-\n \n\n \n$-\n \n\n \n\n \n47,094,153\n \n\n \n$47,094\n \n\n \n$92,388,755\n \n\n \n\n \n(1,261,495)\n \n$(1,979,294)\n \n$(104,882,547)\n \n$(1,448,413)\n \n$(15,874,405)\n\n \n\n*See accompanying notes to condensed consolidated financial statements.*\n\n \n\n \n\n7\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Unaudited Condensed Consolidated Statements of Cash Flows**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\n \n\n**Three Months Ended**\n\n**March 31,**\n\n \n\n \n\n \n\n**2026**\n\n \n\n \n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**Operating activities**\n\n \n\n \n\n \n\n \n\n \n\n \n\nNet income (loss)\n\n \n$(306,684)\n \n$(1,296,242)\n\nAdjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nDepreciation and amortization expense\n\n \n\n \n13,069\n \n\n \n\n \n18,954\n \n\nAmortization of convertible note discount and debt issuance costs\n\n \n\n \n22,328\n \n\n \n\n \n32,009\n \n\nAmortization of operating lease right-of-use assets\n\n \n\n \n263,180\n \n\n \n\n \n376,354\n \n\nProvision for (recovery of) credit losses and loan losses\n\n \n\n \n(71,996)\n \n\n \n11,683\n \n\nProvision for excess and obsolete inventories\n\n \n\n \n-\n \n\n \n\n \n14,249\n \n\nProvision for warranty and production guaranty\n\n \n\n \n141,846\n \n\n \n\n \n102,165\n \n\nEquity in loss (income) of investment in excess of distribution received\n\n \n\n \n239,650\n \n\n \n\n \n14,260\n \n\nDeferred income tax provision\n\n \n\n \n(31,452)\n \n\n \n(69,633)\n\n(Gain) loss on debt extinguishment\n\n \n\n \n(40,231)\n \n\n \n-\n \n\nChanges in operating assets and liabilities:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAccounts Receivable\n\n \n\n \n657,382\n \n\n \n\n \n(43,997)\n\nContract Assets\n\n \n\n \n(7,682,343)\n \n\n \n(287,671)\n\nCustomer loans receivable\n\n \n\n \n332,808\n \n\n \n\n \n363,206\n \n\nInventories\n\n \n\n \n343,619\n \n\n \n\n \n(1,008,572)\n\nOther receivables and current assets\n\n \n\n \n(2,637,586)\n \n\n \n385,105\n \n\nOther assets\n\n \n\n \n28,685\n \n\n \n\n \n11,135\n \n\nAccounts payable\n\n \n\n \n1,402,459\n \n\n \n\n \n1,280,776\n \n\nOperating lease liabilities\n\n \n\n \n(240,336)\n \n\n \n(381,897)\n\nAccrued expenses and other payables\n\n \n\n \n3,612,303\n \n\n \n\n \n50,798\n \n\nOther liabilities\n\n \n\n \n(233,845)\n \n\n \n(173,816)\n\nNet cash provided by (used in) operating activities\n\n \n\n \n(4,187,144)\n \n\n \n(601,134)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**Investing activities**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nPrincipal repayment on debt investments\n\n \n\n \n548,438\n \n\n \n\n \n93,417\n \n\nNet cash provided by (used in) investing activities\n\n \n\n \n548,438\n \n\n \n\n \n93,417\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**Financing activities**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAccrued legal settlement\n\n \n\n \n-\n \n\n \n\n \n(69,067)\n\nProceeds from private placement sale of common stock\n\n \n\n \n1,096,000\n \n\n \n\n \n500,000\n \n\nPrincipal payment on convertible notes\n\n \n\n \n(1,100,000)\n \n\n \n(50,000)\n\nRepayment on equipment capital lease\n\n \n\n \n(3,699)\n \n\n \n(4,384)\n\nNet cash provided by (used in) financing activities\n\n \n\n \n(7,699)\n \n\n \n376,549\n \n\nEffect of exchange rate\n\n \n\n \n(12,522)\n \n\n \n(57,990)\n\nNet increase (decrease) in cash, cash equivalents, and restricted cash\n\n \n\n \n(3,658,927)\n \n\n \n(189,158)\n\nCash, cash equivalents, and restricted cash, beginning of period\n\n \n\n \n8,246,813\n \n\n \n\n \n1,063,077\n \n\nCash, cash equivalents, and restricted cash, end of period\n\n \n$4,587,886\n \n\n \n$873,919\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**Supplemental disclosures of cash flow information:**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nInterest paid in cash\n\n \n$398,461\n \n\n \n$392,047\n \n\nIncome taxes paid in cash\n\n \n$30,958\n \n\n \n$14,230\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**Non-cash activities for investing and financing activities:**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nConvertible notes issued to non-related parties in connection with cancellation of EB-5 loans\n\n \n$1,500,000\n \n\n \n$-\n \n\n \n\n*See accompanying notes to condensed consolidated financial statements.*\n\n \n\n \n\n8\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Unaudited Consolidated Statements of Cash Flows**\n\n**For the Three Months Ended March 31, 2026 and 2025 (Continued)**\n\n \n\n \n\n \n\n**As of March 31,**\n\n \n\n \n\n \n\n**2026**\n\n \n\n \n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\n**Cash balance at the beginning of the year:**\n\n \n\n \n\n \n\n \n\n \n\n \n\nCash and cash equivalents\n\n \n$7,966,797\n \n\n \n$786,333\n \n\nRestricted cash, noncurrent\n\n \n\n \n280,016\n \n\n \n\n \n276,744\n \n\n \n\n \n$8,246,813\n \n\n \n$1,063,077\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**Cash balance at the end of the year:**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCash and cash equivalents\n\n \n$4,307,362\n \n\n \n$596,251\n \n\nRestricted cash, noncurrent\n\n \n\n \n280,524\n \n\n \n\n \n277,668\n \n\n \n\n \n$4,587,886\n \n\n \n$873,919\n \n\n \n\n*See accompanying notes to condensed consolidated financial statements.*\n\n \n\n \n\n9\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n**1. Description of Business**\n\n \n\nSolarMax Technology, Inc. and subsidiary companies (the “Company”) is 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. The Company was founded in 2008 to engage in the solar business in the United States.\n\n \n\nSince the third quarter of 2025, the Company’s primary business has been negotiating contracts and performing engineering, procurement and construction (“EPC”) services for solar-based battery energy storage systems (“BESS”) commercial systems. As of December 31, 2025, the Company had commenced EPC services on a 430 MWh battery storage project in Texas pursuant to an agreement dated July 31, 2025 with Longfellow BESS I, LLC, Texas limited liability company (“Longfellow”). On December 31, 2025, the Company entered into three EPC agreements for large scale BESS systems, two in Puerto Rico and one in Corpus Christi, Texas.\n\n \n\nPrior to the third quarter of 2025, the Company’s primary business was the sale and installation of photovoltaic and battery backup systems for residential and commercial customers, sales of LED systems and services to government and commercial users. The Company is continuing to develop this business but, because of changes in California law, this part of the Company’s business is developing more slowly. The Company also generates revenue from financing the sale of photovoltaic and battery backup systems. Since 2022, the Company ceased making loans to solar customers, and the Company does not anticipate engaging in such activities. The Company’s finance revenue reflects revenue earned on its current portfolio, with no new loans having been added since 2022.\n\n \n\nIn 2015, the Company commenced operations in China, and the Company engaged in business in China through 2021. Substantially all of the Company’s China revenues for 2021 and 2020 were generated from four projects for State Power Investment Corporation Guizhou Jinyuan Weining Energy Co., Ltd (“SPIC”), which is a large state-owned enterprise under the administration of the Chinese government. Subsequent to December 31, 2021 through the date of this quarterly report, the Company did not generate revenues from China, and the Company is not engaged in any negotiations with SPIC or any other potential customer, and it is not engaged in any marketing activities. In the event that the Company does not seek to recommence operations in China, it may discontinue its China operations.\n\n \n\n**2. Basis of Presentation and Summary of Significant Accounting Policies**\n\n \n\n**Basis of Accounting**\n\n \n\nThe accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such SEC rules and regulations. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2025. The unaudited condensed consolidated financial statements were prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments (all of which were considered of normal recurring nature) considered necessary to present fairly the Company’s financial results. The results of the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the year ending December 31, 2026 and for any other interim period or other future year.\n\n \n\n**Principles of Consolidation**\n\n \n\nThe condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All intercompany transactions and balances between the Company and its subsidiaries are eliminated upon consolidation. Amounts reported in the condensed consolidated financial statements are stated in U.S. dollars, unless stated otherwise. The functional currency of the Company’s PRC subsidiaries is the Chinese renminbi (“RMB”). These transactions are translated from the local currency into U.S. dollars at exchange rates during or at the end of the reporting period.\n\n \n\n \n\n10\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\n**Reclassification**\n\n \n\nCertain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net loss.\n\n \n\n**Use of Estimates**\n\n \n\nThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates reflected in the Company’s condensed consolidated financial statements include the cost-based inputs to estimate revenues on construction contracts, the collectability of accounts receivable, the receivable from SPIC and loans receivable, the value of investments in unconsolidated solar project companies, the useful lives and impairment of property and equipment, the fair value of stock options granted and stock-based compensation expense, warranty and customer care reserve, the valuation of deferred tax assets, inventories and provisions for income taxes. Actual results could differ materially from those estimates.\n\n \n\n**Liquidity and Going Concern**\n\n \n\nThe accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate the continuation of the Company as a going concern. The Company’s history of net losses and negative cash flow from operating activities, including its net loss for the three months ended March 31, 2026, along with its increased accumulated deficit and stockholders’ deficit, its default on payments of principal and interest since 2023 on convertible notes in the principal amount of $13.7 million as of March 31, 2026, the low price of the Company’s common stock, which is below the Nasdaq continued listing requirement of a closing bid price of $1.00 per share and the possibility that the Company may effect a reverse split of its common stock in order to regain compliance with the Nasdaq minimum closing bid price requirement raise substantial doubt about the Company's ability to continue as a going concern.\n\n \n\nAt March 31, 2026, the Company reported a working capital deficit of approximately $17.6 million. In addition, the Company’s accumulated deficit was approximately $110.2 million and the stockholders’ deficit was approximately $11.4 million, and the Company was in default on convertible debt obligations in the aggregate amount of $13.7 million at March 31, 2026. In connection with these condensed consolidated financial statements, management evaluated whether there were conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to meet its obligations as they become due within one year from the date of issuance of these financial statements. Management assessed that there were such conditions and events, including a history of recurring operating losses, a history of negative cash flows from operating activities, and significant current debt, including debt in default.\n\n \n\nAs of March 31, 2026, the Company’s principal sources of liquidity consisted of approximately $4.3 million of cash and cash equivalents, proceeds from the sale of common stock and cash generated by the Company’s operations. The Company believes its current cash balances coupled with anticipated cash generated from operations will be sufficient to meet the Company’s working capital requirements for at least one year from the date of the issuance of the accompanying condensed consolidated financial statements, excluding approximately $18.1 million of debt that is due in the next twelve months which the Company is seeking to have exchanged for five-year convertible notes. Management is focused on expanding the Company’s existing business, as well as its customer base to expand its marketing to commercial solar installations in the United States. The Company is looking to continue to negotiate an exchange of a large portion of the approximately $4.0 million of the current portion of long-term related party loans for convertible notes that mature in periods beyond one year. The Company cannot predict whether it will be successful in these efforts or whether it will be necessary to change the proposed terms of any such exchanges. During the three months ended March 31, 2026, the Company raised a total of approximately $1.1 million from the sale of common stock at a 25% discount from market. Under the Nasdaq regulations, the Company may not be able to raise any significant funding from the sale of common stock at a discount from market in the near future without stockholder approval.\n\n \n\n \n\n11\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\n \n\nAs a result of the above, there is substantial doubt regarding the Company’s ability to continue as a going concern within one year from the date of issuance of these financial statements. The Company cannot give assurance that it will be able to pay or refinance its current debt, including convertible notes in the principal amount of $14.1 million, of which the Company is in default on convertible notes in the aggregate principal amount of $13.7 million, can increase its cash balances or limit its cash consumption, or obtain the exchange of any of its current debt for secured convertible debt and thus maintain sufficient cash balances for its planned operations. Future business demands may lead to cash utilization at levels greater than recently experienced. If the Company cannot refinance or pay its current debt obligations, including convertible notes in the principal amount of $14.1 million, on which the Company is in default on convertible notes in the aggregate principal amount of $13.7 million on March 31, 2026 with respect to which the holders have the right to accelerate payment of principal and interest, or if it cannot raise the funding it requires for its business, it may not be able to continue in business. If the Company seeks to generate business for its China operations, and no assurance can be given that it will be successful in such efforts, any revenue and cash flow from the Company’s China operations would be irregular because of the timing of solar projects and the significant funding requirements for its China operations, particularly during periods when there is little or no revenue or cash flow from projects. As of March 31, 2026, the Company did not have any agreements for its China operations and was not in negotiation with respect to any agreement. In the event that the Company is not able to develop business in China, the Company may terminate its China operations.\n\n \n\nDuring the three months ended March 31, 2026, the Company raised approximately $1.1 million from the private placement of common stock. The Company is likely to require additional capital in the future. Because of Nasdaq regulation, the Company is limited in its ability to continue to raise funds by the private placement of common stock at a discount from market. Further, on March 3, 2026, the Company received notice from Nasdaq that the Company is in violation of the continued listing requirement that the Company maintain a bid price of $1.00 per share. In view of the foregoing and the possibility that the common stock may be delisted from Nasdaq, the Company cannot assure that it will be able to raise additional capital on acceptable terms, if at all.\n\n \n\n**Cash and Cash Equivalents**\n\n \n\nCash and cash equivalents consist of deposit accounts and highly liquid investments purchased with an original maturity of three months or less. The standard insurance coverage for non-interest bearing transaction accounts in the U.S. is $250,000 per depositor under the general deposit insurance rules of the Federal Deposit Insurance Corporation. The standard insurance coverage for non-interest bearing transaction accounts in the PRC is RMB 500,000 (approximately $69,000) per depositor per bank under the applicable Chinese general deposit insurance rules.\n\n \n\n**Held to Maturity Debt Investments**\n\n \n\nHeld to maturity debt investments consist of notes receivables with original maturities of 12 months or less and are accounted for at amortized cost which had been paid as of March 31, 2026.\n\n \n\n**Restricted Cash**\n\n \n\nRestricted cash includes cash held to collateralize ACH transactions and outstanding credit card borrowing facilities.\n\n \n\nRestricted cash at March 31, 2026 and December 31, 2025 consisted of:\n\n \n\n \n\n \n\n**March 31,**\n\n**2026**\n\n \n\n \n\n**December 31,**\n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nDeposit held by a US financial institution as collateral for ACH transactions and business credit cards – U.S.\n\n \n$280,524\n \n\n \n$280,016\n \n\n \n\n**Accounts Receivable**\n\n \n\nAccounts receivable are reported at the outstanding principal balance due from customers. In the U.S., accounts receivable substantially include customer billings for large-scale EPC projects and for the sales of LED products and services. In the Company’s PRC operations, accounts receivable represents the amounts billed under the contracts with SPIC but uncollected on construction contracts that were completed prior to 2022. Accounts receivable are recorded at net realizable value.\n\n \n\nThe Company maintains allowances for the applicable portion of receivables, including accounts receivable, government rebate receivables and other receivables, that represent the Company’s estimate of the current expected loss inherent in accounts receivable as of the balance sheet date. The adequacy of the allowance for credit losses is assessed quarterly and the assumptions and models used in establishing the allowance are evaluated regularly. Because credit losses can vary substantially over time, estimating credit losses requires a number of assumptions about matters that are uncertain. Once a receivable is deemed to be uncollectible, it is written off against the allowance. The expense related to rebates receivable is recorded as a reduction to revenues.\n\n \n\n \n\n12\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\n**Contract Balances**\n\n \n\nThe contract assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date, primarily for the solar energy system sales. The contract assets are transferred to receivables when the rights become unconditional (i.e., when the permission to operate is issued). For large-scale EPC contracts, contract assets represent costs and estimated earnings in excess of billings on uncompleted contracts.\n\n \n\nThe contract liabilities primarily relate to the advance consideration received from customers related to the solar energy system sales in the U.S., for which the transfer of ownership has not occurred. For large-scale EPC contracts, contract liabilities represent billings in excess of costs and estimated earnings on uncompleted contracts.\n\n \n\nApplying the practical expedient in ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), paragraph 340‑40-25-4, the Company recognizes the incremental costs of obtaining contracts (i.e., commission fees) in cost of revenue when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in cost of revenues.\n\n \n\n**Deferred Project Costs**\n\n \n\nDeferred project costs relate to costs incurred by the Company on projects which the corresponding revenue is not recognized. Deferred project costs are presented as a current asset on the balance sheet, and are recognized as cost of revenue when revenue is recognized on the corresponding project.\n\n \n\n**Customer Loans Receivable**\n\n \n\nPrior to 2021, the Company offered its customers who meet the Company’s credit eligibility standards the option to finance the purchase of solar energy systems through installment loans underwritten through its wholly-owned subsidiary, SolarMax Financial, Inc. All loans are secured by the solar energy systems or other projects being financed. The outstanding customer loan receivable balance is presented net of an allowance for loan losses. Provisions for loan losses are charged to operations in amounts sufficient to maintain the allowance for loan losses at levels considered adequate to cover expected credit losses on the customer loans. In determining expected credit losses, the Company considers its historical level of credit losses, current economic trends, and reasonable and supportable forecasts that affect the collectability of the future cash flows. Loans offered at the promotional interest rate below the market interest rate are accounted for as loan discounts and are amortized on an effective interest method to interest income over the terms of the loans. The Company has not entered into any new loan agreements since 2022, and its revenues from financing related to its existing loan portfolio, and the Company does not have any present intention to resume financing the sale of its systems internally.\n\n \n\n**Inventories**\n\n \n\nInventories consist of (a) work in progress on solar systems on housing developments and projects not sold; and (b) components principally consisting of photovoltaic modules, inverters, construction and other materials, and LED products, all of which are stated at the lower of cost or net realizable value under the first-in first-out method. The Company reviews its inventories periodically for possible excess and obsolescence to determine if any reserves are necessary.\n\n \n\nThe estimate for excess and obsolete inventories is based on historical sales and usage experience together with a review of the current status of existing inventories.\n\n \n\n**Property and Equipment**\n\n \n\nProperty and equipment are stated at cost less accumulated depreciation and amortization. The costs of additions and betterments are capitalized and expenditures for repairs and maintenance are charged to operations as incurred. Depreciation is calculated using the straight-line method over the estimated useful life of the asset. Leasehold improvements and solar systems leased to customers are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset.\n\n \n\nThe estimated useful lives of the major classification of property and equipment are as follows:\n\n \n\nAutomobiles\n\n \n\n4-5 years\n\nFurniture and equipment\n\n \n\n3-10 years\n\nLeasehold improvements\n\n \n\nShorter of the asset’s useful life or lease term\n\nSolar systems leased to customers\n\n \n\nLease term, 10-20 years\n\n \n\n \n\n13\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\n**Impairment of Long-Lived Assets**\n\n \n\nThe Company’s long-lived assets include property and equipment which include solar energy systems leased to customers.\n\n \n\nIn accordance with ASC Topic 360, Property, Plant, and Equipment, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of a long-lived asset, or group of assets, as appropriate, may not be recoverable. If the aggregate undiscounted future net cash flows expected to result from the use and the eventual disposition of a long-lived asset is less than its carrying value, then the Company would recognize an impairment loss based on the excess of the carrying value over the fair value.\n\n \n\nThere was no impairment loss on the Company’s property and equipment for the three months ended March 31, 2026 and 2025.\n\n \n\n**Leases**\n\n \n\nThe Company determines whether an arrangement is a lease at inception under ASC 842. Operating leases are included in operating lease right-of-use (“ROU”) assets, accrued liabilities, and long-term operating lease liabilities in the consolidated balance sheets.\n\n \n\nROU assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.\n\n \n\nAs the rate implicit in the lease is generally not readily determinable, the Company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments. The lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.\n\n \n\nLease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease payments are recognized as lease expense in the period in which the obligation for those payments is incurred.\n\n \n\nThe Company has elected not to recognize leases with an initial term of 12 months or less on the consolidated balance sheets. Short-term lease expense is recognized on a straight-line basis over the lease term.\n\n \n\nThe Company combines lease and non-lease components for certain classes of underlying assets.\n\n \n\n**Investments in Unconsolidated Companies**\n\n \n\nThe Company’s unconsolidated investments in the U.S. are held directly by the Company as well as through its subsidiary, SMX Capital, and consist of investments in U.S.-based solar limited liability companies: Alliance Solar Capital 1, LLC (“A#1”), Alliance Solar Capital 2, LLC (“A#2”), and Alliance Solar Capital 3, LLC (“A#3”). The Company also has a minority investment in a PRC-based panel manufacturer, Changzhou Hongyi New Energy Technology Co., Ltd (“Changzhou”).\n\n \n\nAt March 31, 2026 and December 31, 2025, the Company has three unconsolidated investments in the PRC representing its 30% non-controlling interests in three project companies for which it transferred a 70% interest in 2021 to SPIC, which operates the project companies.\n\n \n\nFor these investments, the Company does not have the controlling interests but, with respect to the investments in the U.S., it has the contractual ability to exercise significant influence over the operations and the financial decisions of the investees under the respective operating agreements. In each of the investments, the investee also maintains a separate capital account for each of its investors and accordingly, the Company has a separate capital account at each of the investees. Because the Company has the ability to exercise significant influence over the investees, the Company accounts for each of these investments using the equity method of accounting, under which the Company records its proportionate share of the investee’s profit or loss based on the specified profit and loss percentage. Distributions received from equity method investees are accounted for as returns on investment and classified as cash inflows from operating activities, unless the Company’s cumulative distributions received less distributions received in prior periods that were determined to be returns of investment exceed cumulative equity in earnings recognized by the Company. When such an excess occurs, the current year distribution up to this excess would be considered a return of investment and classified as cash inflows from investing activities.\n\n \n\n \n\n14\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\nBecause the Company’s investments include privately-held companies where quoted market prices are not available and as a result, the cost method, combined with other intrinsic information, is used to assess the fair value of the investment. If the carrying value is above the fair value of an investment at the end of any reporting period, the investment is reviewed to determine if the impairment is other than temporary. Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. The Company monitors its investments in unconsolidated entities periodically for impairment. No impairment indicators were identified and no impairment losses were recorded during the three months ended March 31, 2026 and 2025.\n\n \n\n**Warranties**\n\n \n\nWorkmanship Warranty\n\n \n\nFor the sale of solar and battery systems in the U.S., the Company provides a workmanship warranty for 25 years to cover the quality of the Company’s installation. The warranty is designed to cover installation defects and damages to customer properties caused by the Company’s installation of the solar energy systems and battery storage systems which generally are uncovered within 2-3 years after the installation. The 25-year warranty is consistent with the term provided by competitors and is provided by the Company to remain market competitive. The workmanship warranty does not include the warranties on components, such as panels and inverters which are covered directly by the manufacturers and are, generally provided for 25 years on panels and inverters, and 10 years for energy storage systems. The Company determined that its 25-year workmanship warranty for solar energy systems constitutes an assurance-type warranty and should continue to be accounted for under ASC Topic 460, Guarantees, instead of a service-type warranty which would be accounted for under Topic 606 as a cost of revenues.\n\n \n\nWarranty for EPC Services\n\n \n\nFor the Company’s former PRC operations, the Company provided construction quality warranty on EPC services generally for one year after completion. The customer typically retains 3-5% of the contract price which will not be paid to the Company until the expiration of the warranty period which is accounted by the Company as retainage receivable. The Company currently provides a reserve for such potential liabilities based on a nominal percentage of project revenues for its PRC operations in the approximate amount of $255,000 and $251,000 as of March 31, 2026 and December 31, 2025, respectively, which is included in accrued expenses and other liabilities. To date the Company has not incurred significant claims on the quality warranty. The liability is reversed when the warranty period expires.\n\n \n\nFor the U.S. operations, the Company provides a three-year workmanship warranty after the project is completed. The equipment is covered by the manufacturer warranty for ten years. The Company currently provides a reserve for warranty based on a nominal percentage of project revenues recognized for the period and is included in other liabilities.\n\n \n\nProduction Guaranty\n\n \n\nFor solar systems sold in the U.S., the Company also warrants that modules installed in accordance with agreed-upon specifications will produce at least 98% of their labeled power output rating during the first year, with the warranty coverage reducing by 0.5% every year thereafter throughout the approximate 10-year production guaranty period. In resolving claims under the production guaranty, the Company typically makes cash payments to customers who claim for the production shortfall in power output on an annual basis. The Company currently provides a reserve for the production guaranty at 1.0% of the total solar revenue. The production guaranty is independent of any factors not caused by the customer which reduce the amount of available sunlight.\n\n \n\nLED Warranty\n\n \n\nThe Company’s warranty for LED products and services ranges from one year for labor and up to seven years for certain products sold to governmental municipalities. The Company currently provides a warranty reserve for LED sales based on 1.0% of LED revenue.\n\n \n\n \n\n15\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\n**Fair Value Measurements**\n\n \n\nASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), defines a framework for determining fair value, establishes a hierarchy of information used in measuring fair value, and enhances the disclosure information about fair value measurements. ASC 820 provides that the “exit price” should be used to value an asset or liability, which is the price at which an asset could be sold or a liability could be transferred in an orderly process that is not a forced liquidation or distressed sale at the measurement date. ASC 820 also provides that relevant market data, to the extent available and not internally generated or entity specific information, should be used to determine fair value.\n\n \n\nASC 820 requires the Company to estimate and disclose fair values on the following three-level hierarchy that prioritizes market inputs.\n\n \n\nLevel 1:\n\nQuoted prices in active markets for identical assets or liabilities.\n\nLevel 2:\n\nInputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that can be corroborated by observable market data for substantially the full term of the assets or liabilities.\n\nLevel 3:\n\nUnobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.\n\n \n\nThe carrying amount of cash and cash equivalents, accounts receivable, inventories, other current assets, accounts payable, deposits, taxes payable, warranty liability and accrued payroll and expenses approximates fair value because of the short maturity of these instruments.\n\n \n\nThe following table presents the fair value and carrying value of the Company’s cash equivalents, loans receivable and borrowings as of March 31, 2026:\n\n \n\n \n\n \n\n**Fair Value**\n\n \n\n \n\n**Carrying**\n\n \n\n \n\n \n\n**Level 1**\n\n \n\n \n\n**Level 2**\n\n \n\n \n\n**Level 3**\n\n \n\n \n\n**Value**\n\n \n\n**Assets**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCash equivalents\n\n \n$280,524\n \n\n \n$-\n \n\n \n$-\n \n\n \n$280,524\n \n\nCustomer loans receivable\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n3,113,993\n \n\n \n\n \n2,869,268\n \n\n**Liabilities**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nSecured loans from related parties\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n8,459,687\n \n\n \n\n \n9,000,000\n \n\nSecured convertible debt\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n15,343,705\n \n\n \n\n \n15,371,979\n \n\n \n\nThe following table presents the fair value and carrying value of the Company’s cash equivalents, loans receivable and borrowings as of December 31, 2025:\n\n \n\n \n\n \n\n**Fair Value**\n\n \n\n \n\n**Carrying**\n\n \n\n \n\n \n\n**Level 1**\n\n \n\n \n\n**Level 2**\n\n \n\n \n\n**Level 3**\n\n \n\n \n\n**Value**\n\n \n\n**Assets**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCash equivalents\n\n \n$280,016\n \n\n \n$-\n \n\n \n$-\n \n\n \n$280,016\n \n\nCustomer loans receivable\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n3,439,868\n \n\n \n\n \n3,130,983\n \n\nHeld to maturity debt investments\n\n \n\n \n-\n \n\n \n\n \n522,599\n \n\n \n\n \n-\n \n\n \n\n \n522,599\n \n\n**Liabilities**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nSecured loans from related parties\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n9,897,955\n \n\n \n\n \n10,500,000\n \n\nSecured convertible debt\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n15,083,327\n \n\n \n\n \n14,989,882\n \n\n \n\nCash equivalents – Cash equivalents consist of money market accounts and are carried at their fair value.\n\n \n\nCustomer 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.\n\n \n\n \n\n16\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\nHeld 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.\n\n \n\nBank 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.\n\n \n\nSecured 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.\n\n \n\nSecured 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.\n\n \n\n**Revenue Recognition**\n\n \n\nThe Company recognizes revenue in accordance with Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, and its various updates (“Topic 606”). Revenue is measured based on the considerations specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when the Company satisfies a performance obligation by transferring control over a product or service to a customer.\n\n \n\nTaxes assessed by government authorities that are imposed on, or concurrent with, a specific revenue-producing transaction are collected by the Company from the customer and excluded from revenue.\n\n \n\nThe Company has elected to apply the practical expedient method and does not disclose unsatisfied performance obligations for contracts with an original expected duration of one year or less.\n\n \n\nThe Company’s principal activities from which the Company generates its revenue are described below.\n\n \n\n*Revenue from Large Scale EPC Services*\n\n \n\nFor energy generation assets owned and controlled by the customer, the Company recognizes revenue for sales of EPC services over time as the Company’s performance creates or enhances an energy generation asset controlled by the customer. Furthermore, the sale of EPC services represents a single performance obligation for the development and construction of a single generation asset, which is a complete solar energy project. For such sale arrangements, the Company recognizes revenue using cost-based input methods, which recognize revenue and gross profit as work is performed based on the relationship between actual costs incurred compared to the total estimated costs of the contract after consideration of the customer’s commitment to perform its obligations under the contract, which is typically measured through the receipt of cash deposits or other forms of financial security issued by creditworthy financial institutions or parent entities.\n\n \n\nPayment for EPC services is made by the customer pursuant to the billing schedule stipulated in the EPC contract which is generally based on the progress of the construction. Once the bills are issued to the customer, the customer generally has 30 days to make the payment on the amount billed less a retainage provision which is approximately 3-5%, depending on the contract. The retainage amount is withheld by the customer and is paid at the conclusion of the 12-month warranty period.\n\n \n\nIn applying cost-based input methods of revenue recognition, the Company uses the actual costs incurred relative to the total estimated costs to determine the 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 long-term construction contracts and therefore reflect the transfer of goods to a customer under such contracts. Costs incurred that do not contribute to satisfying the Company’s performance obligations (“inefficient costs”) are excluded from the Company’s input methods of revenue recognition as the amounts are not reflective of the Company’s transferring control of the solar energy system to the customer. Costs incurred towards contract completion may include costs associated with solar modules and batteries, direct materials, labor, subcontractors, and other indirect costs related to contract performance. The Company recognizes the cost of solar modules, batteries, and direct material costs as incurred when such items have been installed in a system.\n\n \n\n \n\n17\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\nFor certain projects, the Company uses the actual installation costs incurred relative to the total estimated installation costs to determine the progress towards contract completion and to calculate the corresponding amount of revenue and gross profit to recognize. The Company recognizes revenue, but not gross profit, on uninstalled materials on large-scale EPC projects. The revenue and cost of revenue on uninstalled materials are recognized when the control is transferred.\n\n \n\nCost-based input methods of revenue recognition require the Company to make estimates of net contract revenues and costs to complete its projects. In making such estimates, significant judgment is required to evaluate assumptions related to the amount of net contract revenues, including the impact of any performance incentives, liquidated damages, and other payments to customers. Significant judgment is also required to evaluate assumptions related to the costs to complete its projects, including materials, labor, contingencies, and other system costs. If the estimated total costs on any contract, including any inefficient costs, are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known. The cumulative effect of revisions to estimates related to net contract revenues or costs to complete contracts are recorded in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated. The effect of the changes on future periods are recognized as if the revised estimates had been used since revenue was initially recognized under the contract. Such revisions could occur in any reporting period, and the effects may be material depending on the size of the contracts or the changes in estimates.\n\n \n\nThe Company’s arrangements may contain clauses such as contingent repurchase options, delay liquidated damages, rebates, penalties or early performance bonus, most favorable pricing or other provisions, if applicable, that can either increase or decrease the transaction price. The Company has historically estimated variable considerations that decrease the transaction price (e.g., penalties) and recorded such amounts as an offset to revenue, consistent with requirements under Topic 606. Under Topic 606, the Company estimates and applies a constraint on variable considerations and includes that amount in the transaction price. Because the Company’s historical policies on estimating variable considerations that would decrease the transaction price have largely mirrored the requirements under Topic 606, and because variable considerations that would increase the transaction price have historically been immaterial or would likely be constrained under Topic 606, there is no cumulative effect adjustment. The Company estimates variable considerations for amounts to which the Company expects to be entitled and for which it is not probable that a significant reversal of cumulative revenue recognized will occur.\n\n \n\nFor energy generation assets not owned and controlled by the customer during the construction, as well as contracts with customers that do not require progress payments during construction and whereby the contracts include restrictive acceptance provisions before any progress payments are made by the customers, the Company recognizes revenues at a point in time when the Company determines it has transferred control to the customer.\n\n \n\n*Solar Energy and Battery Storage Systems and Components Sales*\n\n \n\nRevenue 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.\n\n \n\nThe 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.\n\n \n\nAll 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.\n\n \n\nFor 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.\n\n \n\n \n\n18\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\nThe 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.\n\n \n\nDirect 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.\n\n \n\nFor 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.\n\n \n\nFor 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.\n\n \n\n*LED Product Sales and Service Sales*\n\n \n\nFor 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.\n\n \n\nPayment 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.\n\n \n\nFor 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.\n\n \n\n \n\n19\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n** \n\n*Solar Leases and Solar Power Purchase Agreements (PPAs) in the U.S.*\n\n \n\nThe 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.\n\n \n\n*Loan Interest Income*\n\n \n\nIn 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 March 31, 2026 and December 31, 2025.\n\n \n\n**Advertising Costs**\n\n \n\nThe 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 March 31, 2026 and 2025 were approximately $43,000 and $79,000, respectively.\n\n \n\n**Income Taxes**\n\n \n\nThe 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.\n\n \n\nThe 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.\n\n \n\nTopic 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.\n\n \n\nThe Company recognizes interest and penalties related to unrecognized tax positions as income tax expense. For the three months ended March 31, 2026 and 2025, the Company did not incur any related interest and penalties.\n\n \n\n \n\n20\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\n \n\nThe 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 March 31, 2026 and December 31, 2025, the Company’s foreign subsidiaries operated at a cumulative deficit for U.S. earnings and profit purposes.\n\n \n\nThe 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.\n\n \n\n**Comprehensive Income (Loss)**\n\n \n\nThe 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 March 31, 2026 and December 31, 2025 is the currency translation adjustment.\n\n \n\n**Net Income (Loss) Per Share**\n\n \n\nThe 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 months ended March 31, 2026 and 2025 because the effect would be antidilutive.\n\n \n\n**Stock-Based Compensation**\n\n \n\nThe 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.\n\n \n\n**Foreign Currency**\n\n \n\nAmounts 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.\n\n \n\nIn 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 $13,000 and $1,000 for the three months ended March 31, 2026 and 2025, respectively, are included in other income (expense), net for the period in which exchange rates change.\n\n \n\n**Segment Information**\n\n \n\nOperating 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 in 2026 and 2025 it has one operating segment which is the operations in the United States for the three months ended March 31, 2026. 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 operation in China to be either a reporting segment or an operating segment.\n\n \n\n \n\n21\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\n**Recently Issued Accounting Pronouncements**\n\n \n\nAs 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.\n\n \n\nIn 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.\n\n \n\nIn 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.\n\n \n\nThe 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.\n\n \n\n**3. Disaggregation of Revenue**\n\n \n\nThe following table summarizes the Company’s revenue by product line for the three months ended March 31, 2026 and 2025:\n\n \n\n \n\n \n\n**Three Months Ended**\n\n**March 31,**\n\n \n\n \n\n \n\n**2026**\n\n \n\n \n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nSolar energy and battery storage systems\n\n \n\n \n\n \n\n \n\n \n\n \n\nLarge-scale EPC contracts\n\n \n$5,200,452\n \n\n \n$-\n \n\nSales on non-installment basis\n\n \n\n \n7,210,364\n \n\n \n\n \n3,057,890\n \n\nThird-party leasing arrangements\n\n \n\n \n866,803\n \n\n \n\n \n2,720,782\n \n\nSolar lease revenues\n\n \n\n \n13,472\n \n\n \n\n \n15,672\n \n\nSolar power purchase agreement revenues\n\n \n\n \n2,841\n \n\n \n\n \n2,034\n \n\nTotal solar energy and battery storage systems\n\n \n\n \n13,293,932\n \n\n \n\n \n5,796,378\n \n\nLED projects\n\n \n\n \n1,482,946\n \n\n \n\n \n1,059,185\n \n\nFinancing revenue\n\n \n\n \n53,739\n \n\n \n\n \n71,906\n \n\nTotal revenues\n\n \n$14,830,617\n \n\n \n$6,927,469\n \n\n \n\n \n\n22\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n**4. Cash, Cash Equivalents and Restricted Cash**\n\n \n\nAs of March 31, 2026 and December 31, 2025, insured and uninsured cash including the balance classified as restricted cash were as follows:\n\n \n\n \n\n \n\n**March 31,**\n\n**2026**\n\n \n\n \n\n**December 31,**\n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nU.S.\n\n \n\n \n\n \n\n \n\n \n\n \n\nInsured cash\n\n \n$677,910\n \n\n \n$909,229\n \n\nUninsured cash\n\n \n\n \n283,504\n \n\n \n\n \n1,898,809\n \n\n \n\n \n\n \n961,414\n \n\n \n\n \n2,808,038\n \n\nChina\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nInsured cash\n\n \n\n \n245,162\n \n\n \n\n \n309,048\n \n\nUninsured cash\n\n \n\n \n3,381,310\n \n\n \n\n \n5,129,727\n \n\n \n\n \n\n \n3,626,472\n \n\n \n\n \n5,438,775\n \n\nTotal cash and cash equivalents and restricted cash\n\n \n\n \n4,587,886\n \n\n \n\n \n8,246,813\n \n\nLess: Cash and cash equivalents\n\n \n\n \n4,307,362\n \n\n \n\n \n7,966,797\n \n\nRestricted cash\n\n \n$280,524\n \n\n \n$280,016\n \n\n \n\n**5. Accounts Receivable, Net**\n\n \n\nThe activity of the allowance for credit losses for accounts receivable for the three months ended March 31, 2026 and 2025 is as follows:\n\n \n\n \n\n \n\n**Three Months Ended**\n\n**March 31,**\n\n \n\n \n\n \n\n**2026**\n\n \n\n \n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\nBalance – beginning of period\n\n \n$30,499\n \n\n \n$40,826\n \n\nProvision for credit losses\n\n \n\n \n(903)\n \n\n \n14,306\n \n\nBalance – end of period\n\n \n$29,596\n \n\n \n$55,132\n \n\n \n\n**6. Held to maturity debt investments**\n\n \n\nIn 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 remaining balance of RMB 3,655,525 (approximately $522,000) was paid.\n\n \n\n**7. Receivable from SPIC, Net**\n\n \n\nThe 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 March 31, 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 March 31, 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.\n\n \n\n \n\n23\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n**8. Large-scale EPC Contracts**\n\n \n\nOn July 31, 2025, SREP, entered into an EPC agreement (the “Longfellow Contract”) with Longfellow, 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. As a result of various design changes, the BESS facility is expected to be completed by December 2027. One of Longfellow’s members is a stockholder of the Company with 2.3% interest at December 31, 2025 and March 31, 2026. Such 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.\n\n \n\nThe Company has committed to make a $5.0 million contribution to capital in Longfellow for an 8% equity interest. This capital contribution was due by December 31, 2025. At December 31, 2025, March 31, 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 at December 31, 2025 or March 31, 2026. 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.\n\n \n\nThe EPC Contract with Longfellow is a fixed-price contract consisting of battery inventories of $75.3 million and non-inventory services of $52.0 million. During the three months ended March 31, 2026, battery inventories of $5.0 million 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 $169,000, which is included in cost of revenue for the three months ended March 31, 2026, representing 0.5% of the estimated services. The design changes referred to above affect the estimated completion date, the revenue to be derived from the contract and the Company’s costs.  As of the date of these financial statements, these changes have not been finalized. The Company recorded revenues of $5.2 million and cost of revenues of $5.3 million during the three months ended March 31, 2026. Since project inception through March 31, 2026, the Company recorded revenues of $65.4 million and cost of revenues of $64.9 million. As of March 31, 2026, accounts receivable from Longfellow were $9.4 million, and the contract asset was $51.0 million.\n\n \n\nOn December 31, 2025, the Company entered into three EPC agreements for large scale BESS systems, two in Puerto Rico and one in Corpus Christi, Texas. Pursuant to an EPC agreement with Naguabo BESS, LLC, a Texas limited liability company (“Naguabo”), 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 agreement 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 agreement 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 $258.1 million. Navboot will own and operate the facility, which is expected to have a storage capacity of 600 megawatt-hours. As of March 31, 2026, the Company has not started work on these three projects and certain agreements affecting the three customers which are necessary to be completed before the Company can commence work on the projects have not been completed.\n\n \n\n**9. Customer Loans Receivable**\n\n \n\nPrior to 2023, the Company provided financing to qualified customers to purchase residential or commercial photovoltaic systems, as well as other products the Company offered in the U.S. Depending on the credit rating of customers, the interest rate generally ranges from 0.00% to 10.99% per annum with financing terms ranging from one to fifteen years. At March 31, 2026 and December 31, 2025, the percentage of the Company’s loan portfolio with a 0% interest rate is 0.2% and 0.4%, respectively.\n\n \n\nThe customer gives the Company a security interest in the photovoltaic systems and other products financed.\n\n \n\n \n\n24\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\nThe following tables summarize the Company’s customer loan receivables by credit rating, determined at origination, for each vintage of the customer loan receivable portfolio at March 31, 2026:\n\n \n\n \n\n \n\n \n\n \n\n \n\n**March 31, 2026**\n\n \n\n \n\n \n\n**2023**\n\n \n\n \n\n**2022**\n\n \n\n \n\n**2021**\n\n \n\n \n\n**Prior**\n\n \n\n \n\n**Total**\n\n \n\n \n\n**%**\n\n \n\nPrime - FICO score 680 and greater\n\n \n$-\n \n\n \n$-\n \n\n \n$-\n \n\n \n$2,739,770\n \n\n \n\n \n2,739,770\n \n\n \n\n \n91.0%\n\nNear-prime - FICO score 620 to 679\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n212,160\n \n\n \n\n \n212,160\n \n\n \n\n \n7.0%\n\nSub-prime - FICO score less than 620\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n57,726\n \n\n \n\n \n57,726\n \n\n \n\n \n1.9%\n\nBusiness entity — FICO not available\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n2,690\n \n\n \n\n \n-\n \n\n \n\n \n2,690\n \n\n \n\n \n0.1%\n\nTotal Customer Loan Receivables, gross\n\n \n$-\n \n\n \n$-\n \n\n \n$2,690\n \n\n \n$3,009,656\n \n\n \n$3,012,346\n \n\n \n\n \n100.0%\n\n \n\nThe following tables summarize the Company’s customer loan receivables by credit rating, determined at origination, for each vintage of the customer loan receivable portfolio at December 31, 2025:\n\n \n\n \n\n \n\n \n\n \n\n \n\n**December 31, 2025**\n\n \n\n \n\n \n\n**2022**\n\n \n\n \n\n**2021**\n\n \n\n \n\n**Prior**\n\n \n\n \n\n**Total**\n\n \n\n \n\n**%**\n\n \n\nPrime - FICO score 680 and greater\n\n \n$-\n \n\n \n$-\n \n\n \n$2,950,941\n \n\n \n$2,950,941\n \n\n \n\n \n88.5%\n\nNear-prime - FICO score 620 to 679\n\n \n\n \n122\n \n\n \n\n \n-\n \n\n \n\n \n251,723\n \n\n \n\n \n251,845\n \n\n \n\n \n7.5%\n\nSub-prime - FICO score less than 620\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n124,373\n \n\n \n\n \n124,373\n \n\n \n\n \n3.7%\n\nBusiness entity — FICO not available\n\n \n\n \n-\n \n\n \n\n \n10,303\n \n\n \n\n \n-\n \n\n \n\n \n10,303\n \n\n \n\n \n0.3%\n\nTotal Customer Loan Receivables, gross\n\n \n$122\n \n\n \n$10,303\n \n\n \n$3,327,037\n \n\n \n$3,337,462\n \n\n \n\n \n100.0%\n\n \n\nCustomer loans receivable consist of the following as of March 31, 2026 and December 31, 2025:\n\n \n\n \n\n \n\n**March 31,**\n\n**2026**\n\n \n\n \n\n**December 31,**\n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCustomer loans receivable, gross\n\n \n$3,012,346\n \n\n \n$3,337,462\n \n\nAllowance for loan losses\n\n \n\n \n(143,078)\n \n\n \n(206,479)\n\nCustomer loans receivable, net\n\n \n\n \n2,869,268\n \n\n \n\n \n3,130,983\n \n\nLess: Current portion\n\n \n\n \n835,994\n \n\n \n\n \n874,617\n \n\nNon-current portion\n\n \n$2,033,274\n \n\n \n$2,256,366\n \n\n \n\nPrincipal maturities of the customer loans receivable at March 31, 2026 are summarized as follows:\n\n \n\n**For the year ending December 31,**\n\n \n\n**Amount**\n\n \n\n2026 (remainder of)\n\n \n$630,732\n \n\n2027\n\n \n\n \n733,227\n \n\n2028\n\n \n\n \n632,034\n \n\n2029\n\n \n\n \n447,783\n \n\n2030\n\n \n\n \n270,974\n \n\nThereafter\n\n \n\n \n297,596\n \n\nTotal customer loans receivable\n\n \n$3,012,346\n \n\n \n\nThe 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.\n\n \n\n \n\n25\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\nThe activity in the allowance for loan losses for customer loans receivable for the three months ended March 31, 2026 and 2025 is as follows:\n\n \n\n \n\n \n\n**Three Months Ended**\n\n**March 31,**\n\n \n\n \n\n \n\n**2026**\n\n \n\n \n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\nBalance – beginning of period\n\n \n$206,479\n \n\n \n$280,082\n \n\nProvision (recovery) for loan losses\n\n \n\n \n(71,093)\n \n\n \n(2,623)\n\nChargeoffs and adjustments\n\n \n\n \n7,692\n \n\n \n\n \n941\n \n\nBalance – end of period\n\n \n$143,078\n \n\n \n$278,400\n \n\n \n\nTotal interest income on the customer loans receivable included in revenues was approximately $53,000 and $71,000 for the three months ended March 31, 2026 and 2025, respectively.\n\n \n\n**10. Inventories, Net**\n\n \n\nThe activity in the reserve for excess and obsolete inventories for the three months ended March 31, 2026 and 2025 is as follows:\n\n \n\n \n\n \n\n**Three Months Ended**\n\n**March 31,**\n\n \n\n \n\n \n\n**2026**\n\n \n\n \n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\nBalance – beginning of period\n\n \n$715,998\n \n\n \n$642,297\n \n\nProvision for excess and obsolete inventories\n\n \n\n \n-\n \n\n \n\n \n14,249\n \n\nBalance – end of period\n\n \n$715,998\n \n\n \n$656,546\n \n\n \n\nInventories consisted of the following as of March 31, 2026 and December 31, 2025:\n\n \n\n \n\n \n\n**March 31,**\n\n**2026**\n\n \n\n \n\n**December 31,**\n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nSolar panels, inverters, battery storage and components\n\n \n$1,598,886\n \n\n \n$1,753,458\n \n\nLED lights\n\n \n\n \n835,051\n \n\n \n\n \n1,024,098\n \n\nTotal inventories, gross\n\n \n\n \n2,433,937\n \n\n \n\n \n2,777,556\n \n\nLess: reserve for excess and obsolete inventories\n\n \n\n \n(715,998)\n \n\n \n(715,998)\n\nTotal inventories, net\n\n \n$1,717,939\n \n\n \n$2,061,558\n \n\n \n\n**11. Other Receivables and Current Assets, Net**\n\n \n\nOther receivables and current assets, net consisted of the following at March 31, 2026 and December 31, 2025:\n\n \n\n \n\n \n\n**March 31,**\n\n**2026**\n\n \n\n \n\n**December 31,****2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nReceivable from seller (Uonone Group - Note 17)\n\n \n$434,578\n \n\n \n$428,885\n \n\nPrepaid expenses and other current assets\n\n \n\n \n619,849\n \n\n \n\n \n949,803\n \n\nOther receivable\n\n \n\n \n\n 950,122\n\n \n\n \n\n \n\n -\n\n \n\nAdvances to suppliers\n\n \n\n \n1,015,437\n \n\n \n\n \n281,439\n \n\nAccrued interest on held to maturity debt investment\n\n \n\n \n-\n \n\n \n\n \n18,971\n \n\nAccrued interest on customer loans receivable\n\n \n\n \n21,068\n \n\n \n\n \n21,117\n \n\nTotal other receivables and current assets\n\n \n$3,041,054\n \n\n \n$1,700,215\n \n\n \n\nAt March 31, 2026 and December 31, 2025 advances to suppliers include advances for material costs related to the Longfellow project of approximately $891,000 and $281,000, respectively.\n\n \n\nOther receivable at March 31, 2026 relates to an amount the Company advanced to one of its supplier in RMB for logistic services, for which the supplier will repay the Company in U.S. dollars.\n\n \n\n \n\n26\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n**12. Property and Equipment, Net**\n\n \n\nComponents of property and equipment, net are as follows:\n\n \n\n \n\n \n\n**March 31,**\n\n**2026**\n\n \n\n \n\n**December 31,**\n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAutomobiles\n\n \n$729,053\n \n\n \n$727,756\n \n\nFurniture and equipment\n\n \n\n \n1,382,962\n \n\n \n\n \n1,381,185\n \n\nSolar systems leased to customers\n\n \n\n \n1,261,703\n \n\n \n\n \n1,261,703\n \n\nLeasehold improvements\n\n \n\n \n2,297,133\n \n\n \n\n \n2,294,833\n \n\nTotal property and equipment, gross\n\n \n\n \n5,670,851\n \n\n \n\n \n5,665,477\n \n\nLess: accumulated depreciation and amortization\n\n \n\n \n(5,545,009)\n \n\n \n(5,526,587)\n\nTotal property and equipment, net\n\n \n$125,842\n \n\n \n$138,890\n \n\n \n\nFor the three months ended March 31, 2026 and 2025, depreciation expenses were approximately $13,000 and $19,000, respectively.\n\n \n\n**13. Investments in Unconsolidated Companies**\n\n \n\nAt March 31, 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. Since 2020, the Company has been accounting for its 30% equity interest using the equity method. Activity in the Company’s 30% non-controlling investments in these entities for the three months ended March 31, 2026 and 2025 is reflected in the following tables:\n\n \n\n**Investee**\n\n \n\n**Investment**\n\n**Balance at**\n\n**December 31,**\n\n**2025**\n\n \n\n \n\n**Share of**\n\n**Investee’s Net**\n\n**Income (Loss)**\n\n \n\n \n\n**Effect of**\n\n**Exchange Rate**\n\n \n\n \n\n**Investment**\n\n**Balance at**\n\n**March 31,**\n\n**2026**\n\n \n\nYilong #2\n\n \n$4,612,189\n \n\n \n$(114,728)\n \n$60,838\n \n\n \n$4,558,299\n \n\nXingren\n\n \n\n \n2,201,835\n \n\n \n\n \n(52,538)\n \n\n \n29,052\n \n\n \n\n \n2,178,349\n \n\nAncha\n\n \n\n \n3,900,787\n \n\n \n\n \n(72,384)\n \n\n \n51,537\n \n\n \n\n \n3,879,940\n \n\nTotal\n\n \n$10,714,811\n \n\n \n$(239,650)\n \n$141,427\n \n\n \n$10,616,588\n \n\n \n\n**Investee**\n\n \n\n**Investment**\n\n**Balance at**\n\n**December 31,**\n\n**2024**\n\n \n\n \n\n**Share of**\n\n**Investee’s Net**\n\n**Income (Loss)**\n\n \n\n \n\n**Effect of**\n\n**Exchange Rate**\n\n \n\n \n\n**Investment**\n\n**Balance at**\n\n**March 31,**\n\n**2025**\n\n \n\nYilong #2\n\n \n$4,345,909\n \n\n \n$(7,494)\n \n$24,070\n \n\n \n$4,362,485\n \n\nXingren\n\n \n\n \n2,070,551\n \n\n \n\n \n(9,053)\n \n\n \n11,458\n \n\n \n\n \n2,072,956\n \n\nAncha\n\n \n\n \n3,604,428\n \n\n \n\n \n2,287\n \n\n \n\n \n19,981\n \n\n \n\n \n3,626,696\n \n\nTotal\n\n \n$10,020,888\n \n\n \n$(14,260)\n \n$55,509\n \n\n \n$10,062,137\n \n\n \n\n \n\n27\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\nThe 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 March 31, 2026 and December 31, 2025, and for the three months ended March 31, 2026 and 2025:\n\n \n\n \n\n \n\n**March 31,**\n\n**2026**\n\n \n\n \n\n**December 31,**\n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCurrent assets\n\n \n$18,321,525\n \n\n \n$18,213,527\n \n\nNon-current assets\n\n \n\n \n72,941,434\n \n\n \n\n \n73,173,887\n \n\nTotal assets\n\n \n$91,262,959\n \n\n \n$91,387,414\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCurrent liabilities\n\n \n$2,162,480\n \n\n \n$1,727,555\n \n\nNoncurrent liabilities\n\n \n\n \n53,173,253\n \n\n \n\n \n53,339,576\n \n\nMembers’ capital\n\n \n\n \n35,927,226\n \n\n \n\n \n36,320,283\n \n\nTotal liabilities and members’ capital\n\n \n$91,262,959\n \n\n \n$91,387,414\n \n\n \n\n \n\n \n\n**Three Months Ended**\n\n**March 31,**\n\n \n\n \n\n \n\n**2026**\n\n \n\n \n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\nRevenue\n\n \n$1,025,311\n \n\n \n$1,553,099\n \n\nGross profit (loss)\n\n \n$(356,106)\n \n$395,061\n \n\nNet income (loss)\n\n \n$(798,833)\n \n$(47,533)\n\n \n\nRevenue of these project companies is generated from the power purchase agreements with the PRC utility companies as well as government subsidies.\n\n \n\nOn 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 EPC agreement dated July 2025 for 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. SolarMax’ 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 March 31, 2026 and December 31, 2025, the Company had not paid its $5.0 million contribution and accordingly, has not recorded its $5.0 million investment. The Company has obtained a waiver from Longfellow waiving the due date of the Company’s capital commitment to a later date, such date has not been determined.\n\n \n\n**14. Financing Arrangements**\n\n \n\nAs of March 31, 2026 and December 31, 2025, the Company had the following borrowings:\n\n \n\n \n\n \n\n**March 31,**\n\n**2026**\n\n \n\n \n\n**December 31,**\n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nSecured convertible notes payable at 4.0% per annum, due various dates through February 2031\n\n \n\n$\n15,550,000\n \n\n \n\n$\n15,150,000\n \n\nEB-5 loans -*see details below*\n\n \n\n \n9,000,000\n \n\n \n\n \n10,500,000\n \n\nTotal\n\n \n\n \n24,550,000\n \n\n \n\n \n25,650,000\n \n\nLess: debt discount and debt issuance costs\n\n \n\n \n(178,021)\n \n\n \n(160,118)\n\nCurrent portion\n\n \n\n \n(18,050,000)\n \n\n \n(20,150,000)\n\nNoncurrent portion\n\n \n$6,321,979\n \n\n \n$5,339,882\n \n\n \n\n \n\n28\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\n**Related party EB-5 financings**\n\n \n\nThe Company’s borrowings under the EB-5 program from related parties consisted of the following as of March 31, 2026 and December 31, 2025:\n\n \n\n \n\n \n\n**March 31,**\n\n**2026**\n\n \n\n \n\n**December 31,**\n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nLoan from Clean Energy Funding, LP\n\n \n$2,500,000\n \n\n \n$3,500,000\n \n\nLoan from Clean Energy Funding II, LP\n\n \n\n \n6,500,000\n \n\n \n\n \n7,000,000\n \n\nTotal\n\n \n\n \n9,000,000\n \n\n \n\n \n10,500,000\n \n\nLess: current portion\n\n \n\n \n(4,000,000)\n \n\n \n(5,500,000)\n\nNoncurrent portion\n\n \n$5,000,000\n \n\n \n$5,000,000\n \n\n \n\nOn 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 March 31, 2026 and December 31, 2025, the principal loan balance was $2.5 million and $3.5 million, respectively.\n\n \n\nOn 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 March 31, 2026 and December 31, 2025, the principal loan balance was $6.5 million and $7.0 million, respectively.\n\n \n\nThe 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.\n\n \n\n**Convertible Notes**\n\n \n\nThe 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 $3.20, which is 80% of the $4.00 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 $0.65 per share to $9.07 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.\n\n \n\nAll 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.\n\n \n\n \n\n29\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\nDuring the three months ended March 31, 2026, the Company recognized a gain on debt of extinguishment in the amount of approximately $40,000, relating to the issuance of convertible note in the principal amount of $1.5 million to former limited partners of CEF I and II in exchange for a $1.5 million reduction of the note from CEF I and II. No gain or loss on debt extinguishment was recognized for the three months ended March 31, 2025 as there was no issuance of convertible notes in exchange for a reduction of the note from CEF I and II.\n\n \n\n**Event of Default on Convertible Notes**\n\n \n\nFrom April 2023 through March 31, 2026, the Company did not pay annual principal installment payments and related quarterly interest payments which is an event of default on convertible notes. As of March 31, 2026 and December 31, 2025, the aggregate principal amount of the notes in default was $13.7 million and $14.3 million, respectively. The default provisions of the notes provide that if an event of default occurs the outstanding principal amount of 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.\n\n \n\nThe 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 $136,500 at March 31, 2026. In the event that the holders of all of these note demand acceleration, the amount of accrued interest on those at 12% would be approximately $1.8 million at March 31, 2026. The difference between the interest at 12% and the accrued interest at 4% as of March 31, 2026, together with any additional interest due subsequent to March 31, 2026 is a contingent liability of the Company. If any noteholders exercise their right to accelerate, the accrued interest at the default rate of 12% will be reflected as an interest expense in the period the note is accelerated.\n\n \n\n**Interest Expense**\n\n \n\nFor the three months ended March 31, 2026 and 2025, interest expense incurred on the long-term EB‑5 related party loans was approximately $70,000 and $81,000, respectively.\n\n \n\nTotal interest expense incurred (including interest on long-term related party EB-5 loans) was approximately $298,000 and $369,000 for the three months ended March 31, 2026 and 2025, respectively. The weighted average interest rate on loans outstanding was 3.6% and 4.0% as of March 31, 2026 and December 31, 2025.\n\n \n\nPrincipal stated maturities for the financing arrangements as of March 31, 2026 are as follows:\n\n \n\n**For the year ending December 31,**\n\n \n\n**EB-5 Loans**\n\n**-**\n\n**Related Party**\n\n \n\n \n\n**Convertible**\n\n**Notes**\n\n \n\n \n\n**Total**\n\n \n\n2026 (remainder of)\n\n \n$4,000,000\n \n\n \n$13,750,000\n* \n\n \n$17,750,000\n \n\n2027\n\n \n\n \n3,000,000\n \n\n \n\n \n400,000\n \n\n \n\n \n3,400,000\n \n\n2028\n\n \n\n \n2,000,000\n \n\n \n\n \n400,000\n \n\n \n\n \n2,400,000\n \n\n2029\n\n \n\n \n-\n \n\n \n\n \n400,000\n \n\n \n\n \n400,000\n \n\n2030\n\n \n\n \n-\n \n\n \n\n \n400,000\n \n\n \n\n \n400,000\n \n\n2031\n\n \n\n \n-\n \n\n \n\n \n200,000\n \n\n \n\n \n200,000\n \n\nTotal\n\n \n$9,000,000\n \n\n \n$15,550,000\n \n\n \n$24,550,000\n \n\n \n\n        *The principal amount of the convertible notes that are in default are treated as current liabilities, due in 2026.\n\n \n\n \n\n30\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n**15. Accrued Expenses and Other Payables**\n\n \n\nAccrued expenses and other payables consisted of the following as of March 31, 2026 and December 31, 2025:\n\n \n\n \n\n \n\n**March 31,**\n\n**2026**\n\n \n\n \n\n**December 31,**\n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCustomer deposits\n\n \n$3,058,949\n \n\n \n$3,020,272\n \n\nAccrued operating and project payables\n\n \n\n \n6,227,022\n \n\n \n\n \n2,086,146\n \n\nPayable to Uonone (See Note 17)\n\n \n\n \n2,613,016\n \n\n \n\n \n2,578,783\n \n\nAccrued compensation expenses\n\n \n\n \n2,747,560\n \n\n \n\n \n3,270,154\n \n\nRetainage payable to vendors\n\n \n\n \n573,203\n \n\n \n\n \n580,750\n \n\nPreacquisition liability\n\n \n\n \n1,554,254\n \n\n \n\n \n1,533,891\n \n\nAccrued warranty liability\n\n \n\n \n554,504\n \n\n \n\n \n551,170\n \n\nVAT taxes payable\n\n \n\n \n356,667\n \n\n \n\n \n298,598\n \n\nIncome taxes payable\n\n \n\n \n276,883\n \n\n \n\n \n348,518\n \n\nRefundable vendor bid deposits\n\n \n\n \n14,486\n \n\n \n\n \n14,296\n \n\nTotal accrued expenses and other payables\n\n \n$17,976,544\n \n\n \n$14,282,578\n \n\n \n\n**Accrued Compensation**\n\n \n\nAt March 31, 2026 and December 31, 2025, accrued compensation includes $156,000 and $675,000, respectively, of compensation to the Company’s chief executive officer in connection with the cancellation in March 2019 of restricted stock grants and $1.8 million of accrued but unpaid compensation to the chief executive officer pursuant to his employment agreement. The remaining balance relates to accrued unpaid commissions and accrued paid time off.\n\n \n\n**Customer Deposits**\n\n \n\nCustomer 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.\n\n \n\n**Accrued Warranty Liability**\n\n \n\nThe activity of the warranty liability (included in other liabilities) for the three months ended March 31, 2026 and 2025 is as follows:\n\n \n\n \n\n \n\n**Three Months Ended March 31,**\n\n \n\n \n\n \n\n**2026**\n\n \n\n \n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\nBalance – beginning of period\n\n \n$2,367,120\n \n\n \n$2,146,522\n \n\nProvision for warranty liability\n\n \n\n \n141,846\n \n\n \n\n \n102,165\n \n\nExpenditures and adjustments\n\n \n\n \n(150,495)\n \n\n \n(86,442)\n\nEffect of exchange rate\n\n \n\n \n3,334\n \n\n \n\n \n1,334\n \n\nBalance – end of period\n\n \n\n \n2,361,805\n \n\n \n\n \n2,163,579\n \n\nLess: current portion (accrued expenses and other payables)\n\n \n\n \n(554,504)\n \n\n \n(542,090)\n\nNon-current portion (other liabilities)\n\n \n$1,807,301\n \n\n \n$1,621,489\n \n\n \n\n**16. Concentrations**\n\n \n\n**Concentration Risks**\n\n \n\n*Major Customers*\n\n \n\nFor the three months ended March 31, 2026 one customer, Longfellow, accounted for $5.2 million, or 35.1%, of the revenues, $9.4 million, or 76.5%,of accounts receivable, and $51.0 million, or 94.9% of contract assets (see Note 8). For the three months ended March 31, 2025, there were no customers that accounted for 10% or more of the Company’s revenues or accounts receivable.\n\n \n\n \n\n31\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n** \n\n*Major Suppliers*\n\n \n\nDuring the three months ended March 31, 2026, Supplier A accounted for purchases of $5.0 million, or 53.6%, of purchases, and $56.4 million, or 92.6%, of accounts payable at March 31, 2026. Supplier B accounted for $2.4 million, or 26.2%, of purchases, and $1.4 million, or 2.4%, of accounts payable at March 31, 2026.\n\n \n\nDuring the three months ended March 31, 2025, Supplier B accounted for purchases of $1.6 million, or 25.8%, of purchases, and $1.5 million, or 32.8%, of accounts payable at March 31, 2025.\n\n \n\n**17. Acquisition Contingencies and Other Payable to Uonone Group**\n\n \n\nEffective 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.\n\n \n\nAs 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 March 31, 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.\n\n \n\nUnder 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 three months ended March 31, 2026, the Company did not receive any additional legal settlement proceeds, nor did the Company make any payments to Uonone.\n\n \n\nAt both March 31, 2026 and December 31, 2025, the amount payable to Uonone, was approximately RMB 18.0 million ($2.6 million) (see Note 15).\n\n \n\n**18. Related Party Transactions**\n\n \n\n*See Note 14 for related party financing arrangements.*\n\n \n\n**19. Commitments and Contingencies**\n\n \n\n**Operating Leases**\n\n \n\nThe 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.\n\n \n\nOn 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.\n\n \n\n \n\n32\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\nThe 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.\n\n \n\nAs a result of the lease modifications, the Company recorded the following adjustments during the three months ended March 31, 2026:\n\n \n\nIncrease in operating lease ROU assets\n\n \n$5,800,000\n \n\nIncrease in operating lease liabilities\n\n \n$5,800,000\n \n\n \n\nThe discount rate applied to the modified lease was 8%.\n\n  \n\nFuture minimum lease commitments for offices, warehouse facilities and equipment as of March 31, 2026, are as follows:\n\n \n\n**For the year ending December 31,**\n\n \n\n**Total**\n\n \n\n2026 (remainder of)\n\n \n$1,460,828\n \n\n2027\n\n \n\n \n1,857,448\n \n\n2028\n\n \n\n \n2,031,884\n \n\n2029\n\n \n\n \n2,081,136\n \n\n2030\n\n \n\n \n2,141,965\n \n\nThereafter\n\n \n\n \n6,648,863\n \n\nTotal\n\n \n$16,222,124\n \n\n \n\nFor the three months ended March 31, 2026 and 2025, rent expense for offices, warehouse facilities and equipment, was approximately $549,000 and $433,000, respectively. These amounts include short-term leases and variable lease costs, which are immaterial.\n\n \n\nAs of March 31, 2026, the maturities of the Company’s operating lease liabilities (excluding short-term leases) are as follows:\n\n \n\n**For the year ending December 31,**\n\n \n\n**Total**\n\n \n\n2026 (remainder of)\n\n \n\n \n1,444,487\n \n\n2027\n\n \n\n \n1,841,107\n \n\n2028\n\n \n\n \n2,022,079\n \n\n2029\n\n \n\n \n2,081,136\n \n\n2030\n\n \n\n \n2,141,965\n \n\nThereafter\n\n \n\n \n6,648,863\n \n\nTotal minimum lease payments\n\n \n\n \n16,179,637\n \n\nLess: Interest\n\n \n\n \n(4,282,232)\n\nPresent value of lease obligations\n\n \n\n \n11,897,405\n \n\nLess: current portion\n\n \n\n \n(1,023,325)\n\nNoncurrent portion\n\n \n$10,874,080\n \n\n \n\nOther information related to leases is as follows:\n\n \n\n \n\n \n\n**As of**\n\n**March 31, 2026**\n\n \n\nWeighted average remaining lease term (in years)\n\n \n\n \n7.73\n \n\nWeighted average discount rate\n\n \n\n \n8.00%\n\n \n\nFor the three months ended March 31, 2026 and 2025, the total sublease income recognized was approximately $252,000 and $254,000, respectively. The sublease income is recognized as an offset to operating lease costs reported in general and administrative expenses. At March 31, 2026, the Company has two tenants and both are on a month-to-month lease. At March 31, 2026, the Company holds security deposits of approximately $102,000.\n\n \n\n \n\n33\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n \n\nThe following table summarizes the Company’s operating lease cost for the three months ended March 31, 2026 and 2025:\n\n \n\n \n\n \n\n**Three Months Ended**\n\n**March 31,**\n\n \n\n \n\n \n\n**2026**\n\n \n\n \n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\nOperating lease cost\n\n \n$542,547\n \n\n \n$423,702\n \n\nShort-term lease cost\n\n \n\n \n6,536\n \n\n \n\n \n9,732\n \n\nLess: Sublease income\n\n \n\n \n(251,854)\n \n\n \n(254,446)\n\nOperating lease cost, net\n\n \n$297,229\n \n\n \n$178,988\n \n\n \n\n**Employment Agreements**\n\n \n\nOn 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 $782,867 for 2026.\n\n \n\n**Legal Matters**\n\n \n\nIn the ordinary course of the Company’s business, the Company is involved in various legal proceedings involving contractual relationships, product liability claims, and a variety of other matters. The Company does not believe there are any pending legal proceedings that will have a material impact on the Company’s financial position or results of operations.\n\n \n\nDuring 2024, the Company commenced arbitration procedures in Shanghai with SPIC to collect on the receivables owed by SPIC related to three completed EPC projects as well as other advances and reimbursements totaling approximately RMB 49.5 million ($6.8 million) at December 31, 2024. On April 16, 2025, the Company received the written arbitration award results and subsequently, SPIC entered into a payment agreement with the Company. As of March 31, 2026, the receivable balance has been reduced to RMB 7.0 million ($1.0 million). As of March 31, 2026, the Company is filing a lawsuit against SPIC to recover the remaining receivable balance, as well as other related performance matters on the projects.\n\n \n\n**Default on Convertible Notes**\n\n \n\nSee Note 14 in connection with contingent liabilities resulting from the Company’s default on outstanding convertible notes.\n\n \n\n**20. Stockholders’ Equity (Deficit)**\n\n \n\n**Issuance of Common Stock under Private Placement**\n\n \n\nDuring the three months ended March 31, 2026, the Company issued a total of 2,000,000 shares for a total consideration of $1,096,000, at an average price of $0.55. 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.\n\n \n\n**Stock Options**\n\n \n\nFrom 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.\n\n \n\n \n\n34\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\nA summary of option activity is as follows:\n\n \n\n \n\n \n\n**Number of**\n\n**Options**\n\n \n\n \n\n**Weighted Average Exercise**\n\n**Price**\n\n \n\n \n\n**Weighted Average**\n\n**Remaining Contractual**\n\n**(years)**\n\n \n\n \n\n**Aggregate Intrinsic Value**\n\n \n\nOutstanding at December 31, 2025\n\n \n\n \n6,189,749\n \n\n \n\n \n4.93\n \n\n \n\n \n4.3\n \n\n \n\n \n-\n \n\nExercisable as of December 31, 2025\n\n \n\n \n6,189,749\n \n\n \n\n \n4.93\n \n\n \n\n \n4.3\n \n\n \n\n \n-\n \n\nGranted\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\nExchanged\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\nExercised\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\nCancelled or forfeited\n\n \n\n \n(4,994)\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\nOutstanding at March 31, 2026\n\n \n\n \n6,184,755\n \n\n \n\n \n4.97\n \n\n \n\n \n3.1\n \n\n \n\n \n-\n \n\n \n\nForfeitures are accounted for as actual forfeitures occur.\n\n \n\nOn 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.\n\n \n\n**21. Income Taxes**\n\n \n\nThe components of the Company’s income (loss) before income taxes and income (loss) from operations for the three months ended March 31, 2026 and 2025 are as follows:\n\n \n\n \n\n \n\n**Three Months Ended**\n\n**March 31,**\n\n \n\n \n\n \n\n**2026**\n\n \n\n \n\n**2025**\n\n \n\n \n\n \n\n \n\n \n\n \n\nDomestic (U.S.)\n\n \n\n \n186,359\n \n$(1,218,828)\n\nForeign (PRC)\n\n \n\n \n(499,364)\n \n\n \n(141,048)\n\nIncome (loss) before income taxes\n\n \n\n \n(313,005)\n \n\n \n(1,359,876)\n\nIncome tax expense (benefit)\n\n \n\n \n(6,321)\n \n\n \n(63,634)\n\nIncome (loss) from operations\n\n \n$(306,684)\n \n$(1,296,242)\n\nEffective tax rate\n\n \n\n \n2.0%\n \n\n \n4.7%\n\n \n\nThe 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.\n\n \n\nThe Company’s effective income tax rate for the three months ended March 31, 2026 and 2025 was 2.0% and 4.7%, respectively. The variance from the U.S. federal statutory rate of 21% for the three months ended March 31, 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 lower effective income tax rate for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 is attributable to the unchanged net receivable balance from the December 31, 2025 reserve and a small tax liability in the Company’s China operations mainly due to the Enterprise Income Tax reduction and exemption applicable to Qualified Small and Low-Profit Enterprises.\n\n \n\nAs of March 31, 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.\n\n \n\n \n\n35\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\n**22. Net Income (Loss) Per Share**\n\n \n\nThe following table presents the calculation of the Company’s basic and diluted net income (loss) per share for the three months ended March 31, 2026 and 2025:\n\n \n\n \n\n \n\n**Three Months Ended March 31,**\n\n \n\n \n\n \n\n**2026**\n\n \n\n \n\n**2025**\n\n \n\n**Numerator**\n\n \n\n \n\n \n\n \n\n \n\n \n\nNet income (loss)\n\n \n$(306,684)\n \n$(1,296,242)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**Denominator**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nWeighted average shares used to compute net loss per share, basic\n\n \n\n \n56,184,348\n \n\n \n\n \n44,417,782\n \n\nWeighted average shares used to compute net loss per share, diluted\n\n \n\n \n56,184,348\n \n\n \n\n \n44,417,782\n \n\nBasic net income (loss) per share\n\n \n$(0.01)\n \n$(0.03)\n\nDiluted net income (loss) per share\n\n \n$(0.01)\n \n$(0.03)\n\n \n\nFor the three months ended March 31, 2026, outstanding options to purchase 6,184,755 shares and 7,707,224 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.\n\n \n\nFor the three months ended March 31, 2025, outstanding options to purchase 6,192,746 shares of common stock and 5,934,756 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.\n\n \n\n**23. Segment Reporting**\n\n \n\nThe 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.\n\n \n\n \n\n36\n\n*Table of Contents*\n\n \n\n**SolarMax Technology, Inc. and Subsidiaries**\n\n**Notes to Unaudited Condensed Consolidated Financial Statements**\n\n**For the Three Months Ended March 31, 2026 and 2025**\n\n \n\nThe following table shows the operations of the Company’s reporting segment for the three months ended March 31, 2026 and 2025:\n\n \n\n \n\n \n\n**Three Months Ended**\n\n**March 31,**\n\n \n\n \n\n \n\n**2026**\n\n \n\n \n\n**2025**\n\n \n\nSegment revenue\n\n \n\n \n\n \n\n \n\n \n\n \n\nLarge-scale EPC contracts\n\n \n$5,200,452\n \n\n \n$-\n \n\nSolar energy systems\n\n \n\n \n7,899,222\n \n\n \n\n \n5,451,039\n \n\nBattery only sales\n\n \n\n \n177,954\n \n\n \n\n \n328,033\n \n\nLED operations\n\n \n\n \n1,482,946\n \n\n \n\n \n1,059,185\n \n\n \n\n \n\n \n14,760,574\n \n\n \n\n \n6,838,257\n \n\nReconciliation of revenue\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nFinance revenue\n\n \n\n \n53,739\n \n\n \n\n \n71,906\n \n\nOther non-core revenue\n\n \n\n \n16,304\n \n\n \n\n \n17,306\n \n\n \n\n \n\n \n14,830,617\n \n\n \n\n \n6,927,469\n \n\nLess\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nDirect and indirect costs\n\n \n\n \n9,444,299\n \n\n \n\n \n2,615,927\n \n\nSubcontractor costs\n\n \n\n \n1,039,223\n \n\n \n\n \n719,028\n \n\nCommissions and lender fees\n\n \n\n \n550,571\n \n\n \n\n \n1,242,304\n \n\nCompensation and benefits\n\n \n\n \n1,669,696\n \n\n \n\n \n1,943,683\n \n\nLeasing and rental expense\n\n \n\n \n291,156\n \n\n \n\n \n209,692\n \n\nInsurance expense\n\n \n\n \n354,943\n \n\n \n\n \n304,769\n \n\nSelling and marketing expense\n\n \n\n \n42,627\n \n\n \n\n \n79,012\n \n\nProfessional services\n\n \n\n \n762,482\n \n\n \n\n \n478,686\n \n\n \n\n \n\n \n675,620\n \n\n \n\n \n(665,632)\n\nReconciliation of segment profit or loss\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nOther corporate overhead expense\n\n \n\n \n243,712\n \n\n \n\n \n271,752\n \n\nProvision for various reserves\n\n \n\n \n68,325\n \n\n \n\n \n123,421\n \n\nInterest expense, net\n\n \n\n \n297,249\n \n\n \n\n \n255,678\n \n\nOther (gains) and other (income), net\n\n \n\n \n(117,486\n) \n\n \n\n \n(97,655)\n\nChina other expenses\n\n \n\n \n499,364\n \n\n \n\n \n102,064\n \n\nElimination adjustment\n\n \n\n \n(2,539)\n \n\n \n38,984\n \n\nIncome (loss) before income taxes\n\n \n$(313,005)\n \n$(1,359,876)\n\n \n\n**24. Subsequent Events**\n\n \n\nIn April 2026, the Company issued a convertible note in the principal amount of $500,000 to a limited partner of CEF, which resulted in a reduction of $500,000 in the principal amount of the related party notes to CEF.\n\n \n\nThe Company has evaluated subsequent events through the date of May 15, 2026, the date the condensed consolidated financial statements were issued, and no other events require disclosure in the condensed consolidated financial statements.\n\n \n\n \n\n37\n\n*Table of Contents*"}