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Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025 (the Form 10-K), which could materially affect our business, financial condition or future results.
There have been no material changes in the risk factors disclosed in our Form 10-K filed with the SEC on March 23, 2026, other than as set forth in our quarterly report on Form 10-Q filed on May 15, 2026, and as otherwise set forth below.
We periodically receive proposals to consider expansion, diversification and other forms of strategic transactions, and any such transactions that we may consider or consummate in the future could have negative consequences.
On April 9, 2026, the Company announced that its Board of Directors has a, including with the approval of its Transaction Committee, had authorized the review of a full range of strategic alternatives aimed at increasing shareholder value and best positioning the Company for long-term success, and in connection therewith, the Company hasd engaged Maxim Group, LLC to serve as its MA and financial advisor to assist in this strategic process. The review will considered a broad spectrum of possible actions, including, but not limited to, a potential sale of the Company, strategic merger or other business combinations, acquisitions, divestitures of assets, further optimization of the corporate structure, or other strategic or financial transactions that could enhance shareholder value and further optimize capital resources. Additionally, we have in the past and continue to periodically receive inquiries related to a range of strategic transactions and strategic alternatives, ranging from offers to acquire assets to grow our existing business to expansions to diversify our business and more. Strategic alternatives, if consummated, could take the form of mergers, acquisitions, partnerships, joint ventures, licensing arrangements or other strategic transactions.
We expect to continue to devote substantial time, as well as substantial human and capital resources, to eas we have in this regard to both the prior exploring ation of legitimate strategic options that we believe may ias well as with regard to our recently announced proposed Merger with Suniva Inc. -- in each case with the goal to increase shareholder value. There can be no assurance that any of these proposals ed Suniva Merger will result in a successful consummation, ior such other strategic transaction if pursued in the alternative, or that they such transaction(s) will be completed on attractive terms or at all. Additionally, there can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will lead to increased shareholder value or that it will ultimately result in a successful expansion or diversified business.
The process of evaluating these strategic options may be is very costly, including such as legal and a, financial advisor and accounting fees, expenses and other related charges that would otherwise be committed to operations. In addition, any strategic business combination or other transactions that we may consummate in the future could have a variety of negative consequences and we may implement a course of action or consummate a transaction that yields unexpected results that adversely affect our business and decreases the remaining cash available for use in our business.
Additionally, a number of the foregoing and other significant factors may be beyond our control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction with us, obtaining shareholder approval and the availability of financing to third parties in a potential transaction with us on reasonable terms. Any failure of such potential transaction to achieve the anticipated results could significantly impair our ability to enter into any future strategic transactions and may significantly diminish or delay any future distributions to our shareholders.
If we are not successful in identifyiconsummating a successful strategic alternative, expansion or diversification or if our plans are not executed in a timely fashion, this may cause reputational harm with our shareholders and the value of our common stock shares may be materially adversely impacted. In addition, speculation regarding any developments related to the review ,
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executiof strategic an and changes to the material terms of the proposed Suniva Merger, or of a an alternatives an strategic transaction and/or perceived uncertainties related to the future of our business could cause our share price to fluctuate significantly or result in the total loss of your investment.
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Changes in our business strategy or restructuring of our businesses may increase our costs or otherwise affect our businesses.
We continually review our operations with a view toward reducing our cost structure, including, but not limited to, reducing our labor cost-to-revenue ratio, improving process and system efficiencies and increasing our revenues and operating margins. During the 2026, we have reduced headcount and related personnel costs as we adjust to the reduction in residential solar installation demand following the January 1, 2026 effective date of the loss of certain federal residential tax credits. Despite these efforts, we have needed and may continue to need to adjust our business strategies to meet these changes, or we may otherwise find it necessary to restructure our operations or particular businesses or assets. When these changes or eas certain events occur, we may incur costs to change our business strategy and may need to write down the value of assets or sell certain assets. Additionally, we may seek to sconsider strategically roll up entities that we believe will be revenue accretive, and/or consider strategic transactions that changes to our business that may significantly alter our principal business focus or expand or diversify our business, in each case, such strategic transaction or changes, as the case may be, may result in a need to execute additional financing(s), including potentially significant dilutive financings. Any of these events may increase our operating costs, reduce revenue or have other detrimental effects, and we may have significant charges or losses associated with the write-down or divestiture of assets and our business may be materially and adversely affected.
Risks Relating to the Consummation of the Proposed Suniva Merger and such transactions related thereto
Failure to complete the proposed Suniva Merger and such transactions related thereto could negatively impact the Company.
If the Merger and such other transactions related thereto are not completed for any reason, there may be various adverse consequences, and the Company may experience negative reactions from the financial markets, as well as from its investors, customers and employees. For example, the Companys business may have been adversely impacted by the failure to pursue other beneficial opportunities due to managements focus on the proposed Merger and such other transactions related thereto, without realizing any of the anticipated benefits of completing the proposed Merger and such other transactions related thereto. Additionally, the market price of the Companys Common Stock could decline to the extent that current market prices reflect a market assumption that the proposed Merger and such other transactions related thereto will be completed. The Company could also be subject to litigation related to the failure to consummate the proposed Merger and such other transactions related thereto or to proceedings commenced against the Company to perform its obligations pursuant to the Merger Agreement.
Additionally, the Company has incurred and may continue to incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement, as well as the costs and expenses of preparing, filing, printing, and mailing any necessary joint proxy statement/prospectus, and all filing and other fees paid in connection with the proposed Merger and such other transactions related thereto. If the proposed Merger and such other transactions related thereto are not consummated, the Company would have paid these expenses without realizing the expected benefits of the proposed Merger and such other transactions related thereto.
The Company may not be able to satisfy the requirements for the Closing under the Merger Agreement, which may cause material adverse consequences due to the consequent failure to complete the proposed Merger and such other transactions related thereto.
Consummation of the proposed Merger is subject to certain closing conditions, including, among other things, (a) approval by the Companys stockholders of the matters being put to their vote, (b) approval by the requisite Suniva stockholders of the adoption and approval of the Merger Agreement and the transactions contemplated thereby, (c) Nasdaqs approval of the listing of the shares of the Companys common stock to be issued in connection with the Merger, (d) the effectiveness of the Registration Statement, and (e) the Companys net cash not being less than negative $1,500,000. Each partys obligation to consummate the Merger is also subject to other specified customary conditions, including regarding the accuracy of the representations and warranties of the other party, subject to the applicable
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materiality significantly alter our principtandard, and the performance in all material respects by the other party of its obligations under the Merger Agreement required to be performed on or prior to the date of the closing of the proposed Merger.
The Merger Agreement also contains customary termination rights of each of the Company and Suniva. Upon termination of the Merger Agreement under specified circumstances, the Company may be required to pay Suniva a termination fee of $1,000,000, and Suniva may be required to pay the Company a termination fee of $1,000,000. The Merger Agreement may be terminated if the proposed Merger has not been consummated on or before January 30, 2027, subject to a potential sixty (60)-day extension in certain circumstances, as set forth in the Merger Agreement.
The failure to meet the material conditions requisite to the closing of the proposed Merger may prevent the consummation of the Merger, and the consequent negative effects of such failure to meet these conditions and successfully close the transaction related thereto.
Failure to obtain the Stockholder Approval could result in significant disruption of business focus or expand or diversify our business, in each case, soperations.
If the Company does not obtain the necessary stockholder approval for the proposals related to the proposed Merger as set forth in the Merger Agreement or as otherwise related thereto, then the Company will be required to unwind the proposed Merger transactions. Any such unwinding of the proposed Merger transactions may have significant and adverse effects on the Companys business operations and could result in the loss of key assets and personnel, the threat of litigation over disagreements between the parties on how to implement the unwinding, and many or all of the negative consequences discussed throughout this document that would apply to the Company if it is unable to successfully consummate the proposed Merger and the transactions contemplated thereunder or that may apply regardless of whether the Company is able to successfully consummate the proposed Merger and the transactions contemplated thereby. The inability to secure the requisite stockholder approval could also undermine investor confidence, which may further negatively influence the Companys stock price and market reputation.
The Company and Suniva will incur substantial costs related to the proposed Merger and integration of their businesses.
The Company and Suniva have incurred and expect to incur a number of non-recurring costs in furtherance of the consummation of the proposed Merger and transactions related thereto, including legal, financial advisory, accounting, consulting, and other advisory fees; regulatory filing fees; financial printing and other transaction-related costs. Some of these costs are payable by either the Company or Suniva whether the proposed Merger or the transactions related thereto are completed or not. Additionally, the integration costs following the proposed Mergers completion may be substantial, and may include expenses related to facilities and systems consolidation, employment-related obligations, and efforts to maintain employee morale and retain key personnel. These costs may stem from the complex integration of numerous processes, policies, operations, technologies, and systems across areas such strategic transaction may resas purchasing, accounting, finance, payroll, compliance, treasury and vendor management, risk management, business operations, pricing, and employee benefits.
While the Company and Suniva estimate a certain level of integration costs, many factors beyond their control could increase the total amount and timing of these expenses. Additionally, many of these costs are inherently difficult to estimate with precision. As a result in a ne, assuming that the proposed Merger and related to eransactions are consummated, the combined company may need to take charges against earnings following the Mergers consummation, and the amount and timing of such charges are uncertain. There can be no assurance that the transaction and integration costs will not outweigh any benefits of the consummation of the proposed Merger and related transactions, assuming that they occur.
The Company and Suniva may fail to realize the anticipated benefits of the proposed Merger and any related transactions.
Assuming that the consummation of the proposed Merger occurs, the result will be the combination of companies of significantly differing sizes, geographic bases, and operations. The success of the proposed Merger will depend, in part, on the ability to realize the anticipated benefits from integrating the businesses of the Company and Suniva. To achieve these benefits, the Company and Suniva must effectively merge and align their operations in a manner that permits the realization of those benefits and cost savings without adversely affecting current revenues and future growth. If the Company and Suniva do not successfully integrate their operations, the anticipated benefits of the consummation of the
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Merger may not be realized fully or at all, or they may take longer to realize than execute a fpected. In addition, the actual cost savings achieved could be less than anticipated, and integration may result in additional or unforeseen expenses. An inancing, including pobility to realize the full extent of the anticipated benefits, or any delays in integrating the businesses, could adversely affect the revenues, expense levels, and operating results of the combined company, which may negatively impact the value of the Companys common stock.
It is also possible that combining the two businesses could result in the disruption of ongoing operations or inconsistentially significant dilutive financings. Any cies in standards, controls, procedures, and policies that adversely affect the ability to maintain relationships with customers, clients, and employees, or to achieve the anticipated benefits and cost savings of the proposed Merger. Moreover, integration efforts may divert managements attention and resources, further impacting the combined companys performance both during and after the integration period.
Furthermore, the board of directors and executive leadership of the combined company will consist of individuals from Suniva or at its section, which could require reconciling differing priorities and philosophies from those anticipated or which the Companys employees, key personnel or shareholders are accustomed to. Any difficulties in effectively unifying these teams may also delay or prevent realization of the anticipated benefits of the Merger and any related transactions.
The Proposed Merger transaction is subject to review, clearance and approval of both the Securities and Exchange Commission, as well as the Nasdaq Stock Market.
The completion of the Companys proposed Merger transaction with Suniva is subject to the receipt of necessary consents, clearance, and/or review by the SEC and approval of our application for listing on the Nasdaq Stock Market. We cannot assure you that the SEC will timely clear the Companys filings, including the Registration statement on Form S-4 relating to the Merger, or at all, including the financial statements related thereto and incorporated therein, or that Nasdaq will approve our listing application on a timely basis, or at all.
Upon the Consummation of the proposed Merger, existing holders of the Companys Common Stock will experience substantial dilution of their ownership interest in the Company, which could materially reduce or be perceived to reduce the value of their Company shareholdings.
Assuming that the proposed Merger closing occurs, the Company will issue the shares of these events our costs may increase, aits Common Stock at the Exchange Ratio, which involves a) each then-outstanding share of Suniva capital stock (including shares of Suniva common stock and shares of Suniva preferred stock) will be converted into the right to receive a number of shares of the Companys common stock calculated in accordance with the Merger Agreement; (b) each then-outstanding Suniva warrant will be cancelled at the Effective Time, with each warrantholder entitled to receive for each warrant share a number of shares of the Companys common stock equal to the Exchange Ratio, the per share exercise price of the warrant; and (c) each then-outstanding Suniva restricted stock unit will be fully vested and converted into shares of the Companys common stock at the Exchange Ratio.
Under the Exchange Ratio in the Merger Agreement, upon the closing of the proposed Merger, on a pro forma basis and we may have significant based upon the number of shares of the Companys common stock expected to be issued in the proposed Merger, pre-Merger Suniva stockholders are expected to own approximately 98.2% of the combined company and pre-Merger SUNation stockholders are expected to own approximately 1.8% of the combined company. Therefore, the Exchange Ratio is anticipated to result in an immediate and substantial increase in the number of outstanding shares of Company Common Stock, and substantial dilution of existing Company stockholders ownership of and voting power in the Company. As such, existing Company stockholders should assume that their ownership stake and influence will be severely reduced upon the closing of the proposed Merger based on the Excharges or losses associnge Ratio.
Additionally, if the Company successfully registers the resale of the Company Common Stock issuable pursuant to any existing restricted shares or such future financing involving registration rights or pursuant to an exemption from registration and satisfaction of applicable holding periods related with thereto, a substantial number of additional shares may become freely tradable. The presence of these newly registered or tradeable shares, as wel as the writeperception that they may be sold, could create an overhang in the market. Specifically, if the trading volume of the Companys common stock cannot absorb the sales of these newly registered or tradeable shares, the price per share may decline.
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The future results of the combined company following the consummation of the proposed Merger and such related transactions may suffer if it cannot effectively manage its expanded operations, and the potential need to obtain sufficient capital for the expansion of the combined companys operations.
Assuming that the consummation of the proposed Merger and such related transactions occur, the size of the combined companys business is expected to be significantly greater than the current size of the Companys existing business. The combined companys future success will depend, in part, on its ability to manage these expanded operations, which may pose challenges for management, including challenges related to oversight of new operations and the associated increase in capital financing needs, expenditures and complexity. The combined company may also face heightened scrutiny from governmental and regulatory authorities as a result of its larger scale. However, there can be no assurance that the combined company will be successful or that it will realize the operating efficiencies, revenue enhancements, or other benefits currently anticipated from the consummation of the Merger and such related transactions.
The combined company may be unable to retain the Companys and/or Sunivas personnel after the consummation of the proposed Merger and such related transactions.
Assuming that the consummation of the proposed Merger and such related transactions occurs, their eventual success will depend in-downpart on the combined companys ability to retain the talents and dedication of key employees currently employed by the Company and Suniva. It is possible that these employees may decide not to remain with the Company or divestiturSuniva, as applicable, while the proposed Merger and such related transactions are pending or with the combined company after the propsosed Merger and such related transactions are consummated. If the Company and Suniva are unable to retain key employees, including management, who are critical to the successful integration and future of assets perations of the respective companies, the lines of business conducted by the Company and Suniva prior to the consummation of the proposed Merger and our bsuch related transactions could face disruptions in their operations, loss of existing customers, loss of key information, expertise, or know-how, and unanticipated recruitment costs. In addition, if key employees terminate their employment following the consummation of the proposed Merger and such related transactions, the combined companys business activities may be materially and adverseladversely affected, and managements attention may be diverted from successfully hiring suitable replacements, all of which may cause the combined companys business to suffer. The combined company may be unable to locate or retain suitable replacements for any key employees who leave either company.
The anticipated pro formas of the combined consolidated financial information of the Company affected.
nd Suniva is preliminary and the actual consideration to be issued in the proposed Merger and such related transactions, as well as the actual financial condition and results of operations of the combined company after the proposed Merger, may differ materially.
The anticipated pro formas of the combined consolidated financial information of the Company and Suniva are currently preliminary and indicative and may not necessarily and ultimately prove to be what the combined companys actual financial conditions or results of operations will be in the future. The pro forma combined consolidated financial information will reflect potential adjustments, which are based upon preliminary estimates. Among other things, the actual value of the consideration that the Company receives upon the consummation of the proposed Merger, assuming that it occurs, may vary significantly from the value used in preparing the unaudited pro forma combined consolidated financial information provided in tandem with these risk factors and the SEC filings of which they form a part. Accordingly, the final acquisition accounting adjustments may differ materially from the pro formas and any adjustments which may be reflected in the pro formas combined consolidated financial information.
Sunivas directors, executive officers and principal stockholders will have substantial control over the Company after the consummation of the proposed Merger, which could limit other stockholders ability to influence the outcome of corporate matters and key transactions, including a change of control.
Upon (and assuming) the consummation of the proposed Merger, the Companys executive officers, directors and principal stockholders and their affiliates will own less than 1% of the outstanding shares of the Company Common Stock, after giving effect to the Exchange Ratio related to the proposed Merger, with the Companys existing stockholders owning approximately 1.8% of the outstanding shares of the Company common stock. This significant concentration of ownership may have a negative impact on the trading price of the Companys common stock because investors often
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perceive disadvantages in owning stock in companies with controlling stockholders. In addition, these stockholders will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. They may also have interests that differ from other stockholders of the Company and may vote in a way with which other stockholders of the Company disagree, and which may be adverse to the Companys interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of the Company, could deprive the Companys stockholders of an opportunity to receive a premium for their common stock as part of a sale of the Company and might ultimately affect the market price of the Company Common Stock.
The Company will be subject to business uncertainties and contractual restrictions while the proposed Merger and related transactions are pending.
Uncertainty about the success of consummation and the effect of consummation of the proposed Merger and such related transactions on employees and customers may have an adverse effect on the Company and Suniva. These uncertainties may impair the Companys or Sunivas ability to attract, retain, and motivate key personnel until the proposed Merger and such related transactions are completed, and could cause suppliers, business partners, and other parties that deal with the Company or Suniva to seek to change existing business relationships with the Company or Suniva. In addition, subject to certain exceptions, the Company and Suniva have each agreed to operate their businesses in the ordinary course in all material respects and to refrain from taking certain actions that may adversely affect their ability to consummate the proposed Merger and such related transactions on a timely basis without the consent of the other party. These restrictions may prevent the Company and Suniva from pursuing attractive business opportunities that may arise prior to the completion of the proposed Merger and such related transactions. If any of the aforementioned risks were to materialize, they could lead to significant costs which may negatively impact each partys results of operations and financial condition if the parties are not successful in consummating the proposed Merger and such related transactions, and which may also cause material adverse effects on the Company if the Merger and such related transactions are not consummated.
The market price of the Company Common Stock may be affected by factors different from those currently affecting the shares of the Company Common Stock assuming the consummation of the proposed Merger and such related transactions.
The Companys business differs from that of Suniva, and certain adjustments will be made to the Companys operations assuming that the consummation of the proposed Merger and such related transactions occur. Accordingly, the results of operations of the combined company and the market price of the Companys common stock after the assumed consummation of the proposed Merger and such related transactions may be affected by factors different from those currently affecting the independent results of operations of the Company.
The Companys stockholders will not have appraisal rights or dissenters rights in the Merger.
Appraisal rights (also known as dissenters rights) are statutory rights that, if applicable under law, enable stockholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction.
Under Section 262 of the Delaware General Corporation Law, the Companys stockholders will not be entitled to appraisal rights in connection with the Merger. If the Merger is completed, the Companys stockholders will not receive any consideration, and their shares of the Company Common Stock will remain outstanding and will constitute shares of the Company following the completion of the Merger. Accordingly, the Companys stockholders are not entitled to any appraisal rights in connection with the Merger.
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The absence of appraisal or dissenters rights poses several risks to the stockholders of the Company with respect to the Merger. Specifically, stockholders dissatisfied with the terms of the Merger cannot seek a judicial determination of fair value for their shares, limiting their ability to contest valuation. Without these rights, minority stockholders have fewer legal tools to challenge transactions they perceive as unfair, reducing their recourse in potentially inequitable situations. Additionally, stockholders unable to exercise appraisal or dissenters rights may be forced to sell their shares on the open market, exposing them to potential losses due to market fluctuations.